Ups And Downs of Tourism in Ukraine: The Unobserved Component Model Approach

The paper examines factors that have affected inbound tourist flows and tourism-based profits in Ukraine over the last decade. The present study sheds light on changes taking place in the tourism market of a developing country: Ukraine. The statistical analysis was based on data for oblasts (Ukrainian provinces are referred to as oblasts) from the period 2006-2019 – data in the form of the number of tourists staying at hotels and other accommodation facilities. The unobserved component model (UCM) was used to forecast trends in inbound tourism, excluding the current political conflict. The trend studied herein is based on foreign tourist volume data for Ukraine. Differences in changes in the studied trendline (coefficient of determination) were used in the statistical analysis of variances between different oblasts, with consideration given to mean squared error.

The use of the UCM model enabled an analysis of fluctuations and identification of the year of change in the trendline for inbound tourism in Ukraine due to Russian aggression. Research has also shown that provinces with developed tourism sectors in areas away from the place of conflict are actually beneficiaries of political instability. Disadvantaged are regions that had their tourist flows largely based on the citizens of the aggressor’s country; in this case, the Russian Federation. Regions that were underdeveloped in terms of tourism to begin with did not experience a significant impact of the political instability in eastern Ukraine. The present results support previous findings that political instability reduces tourist traffic over the short term. Moreover, the current global pandemic has severely impacted the Ukrainian economy, devastating the inbound tourism industry. The present study argues that the analysis of past and present trends ought to serve as an objective basis for the implementation of an action plan designed to manage crisis situations. Limitations and also future research directions are discussed as well.