FACULTY OF COMPUTER AND MATHEMATICAL

SCIENCES

INTRODUCTION TO TIME SERIES FORECASTING

STA233 PROJECT REPORT

TOPIC: FORECASTING OF TOURIST ARRIVALS AND TOURIST

RECEIPTS IN MALAYSIA

PREPARED BY:

1 MUHD IRSYAD BIN MAHADI 2016184007

2 SITI FATIMAH BINTI MOHAMED SALLEH 2016569595

PREPARED FOR:

MADAM NOR AKMAL BINTI MD NOH

SUBMISSION DATE: 17TH OF MAY 2019

 TABLE OF CONTENTS

1.0 Introduction ................................................................................................................................ 1

2.0 Problem Statement .................................................................................................................. 1

3.0 Research Objectives ................................................................................................................ 2

4.0 Data Description ....................................................................................................................... 2

5.0 Methodology ............................................................................................................................. 5

6.0 Analysis and Result.................................................................................................................. 7

7.0 Conclusion .............................................................................................................................. 22

8.0 Appendices ................................................................................................................... 23

1.0 INTRODUCTION

The data set used in this project is the number of tourist arrivals in Malaysia. This
variable of interest is a time series data in quarterly from the first quarter of 2004 until the
fourth quarter of 2018. Hence, there are altogether 60 periods of time in the data set. Tourist
arrivals can be regarded as the international tourists that visit Malaysia from their respective
countries, mostly the ASEAN countries. The purpose of their visit would then be of sheer
tourism that contributes to the Malaysian economy while boosting our country’s growth.
Another data set that will be used is the amount of tourist receipts in Malaysia. This data set
however, is only available in the period of a year for 19 periods of time. Hence, yearly tourist
arrivals and receipts data from the year 2000 until 2018 would be used to analyse the
relationship between the two variables and forecast the amount of tourist receipts in this
country.

Tourism industry is the third highest contributor to the Malaysian foreign exchange
receipts, after manufacturing and commodities. Therefore, it is significant to forecast the
number of tourist arrivals and receipts in our country due to its impact to aspects of economy
such as number of hotels provided, development of public amenities, enlarging business
prospects and planning for promotional campaigns involving tourism. Findings of this research
would be important to consider the right implementation of projects and programs that can
further nourish the tourism industry.

2.0 PROBLEM STATEMENT

The problem that is needed to address is forecasting the most reliable and logical value
of projection for the number of tourist arrivals. This has been a prominent issue reported by
the news. As of 2018, Malaysia has recorded an eight-year streak of lower value of actual
tourist arrivals compared to the targets set prior to the respective year. Optimism when it
comes to national issues like this may carry an expensive price if our nation overspend for
tourism expenses while not achieving the projected amount of tourist arrivals and receipts.
Pertaining to this problem, a further investigation is necessary to ensure the forecast
generated is most accurate in order to properly budget our marketing efforts.

3.0 RESEARCH OBJECTIVES

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 This project is implemented mainly to forecast future values of tourist arrivals and
tourist receipts in Malaysia for the year of 2019. Apart from that, the objectives of the research
include:

- to identify the behavioral pattern of data, components involved and their

relationships

- to determine the most suitable mathematical model that fit the data series

- to forecast future values up to four steps ahead for the quarterly tourist arrivals
(Million) which accounts for the total amount of tourist arrivals in all the four quarters
of 2019

- to forecast future value one step ahead for yearly tourist receipts (RM Billion) which
is for the year 2019

4.0 DATA DESCRIPTION

Table 4.1 below shows the recorded number of tourist arrivals in each quarter from the
year 2000 to 2018.The unit that is used to measure the amount of tourist is million. As the
number of years increase, the number of tourist arriving in Malaysia shows significant growth
from around the 10 million mark in 2000 to around 25.8324 million in 2018. The highest number
of tourist arrivals was recorded in 2014 with a tourist arrival of 27.4373 million while the lowest
number of tourist arrivals can be seen in 2000 where only a tourist arrival of 10.2216 million.
There are also certain fluctuations between number of tourist arrivals from year to year. This
is caused by other factors such as holiday season and international events held in Malaysia.

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 Table 4.1: Quarterly Tourist Arrivals in Malaysia (Million)

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 Year Tourist Arrivals (Million) Tourist Receipts (RM Billion)
2000 10.2216 17.3354
2001 12.8751 24.2215
2002 13.31 25.7811
2003 10.5739 21.2911
2004 15.7034 29.6514
2005 16.4311 31.9541
2006 17.5469 36.2717
2007 20.9728 46.07
2008 22.0525 49.5612
2009 23.6462 53.3677
2010 24.5772 56.4925
2011 24.7143 58.3159
2012 25.0327 60.5567
2013 25.7155 65.4433
2014 27.4373 71.9988
2015 25.7213 69.1196
2016 26.7574 82.0982
2017 25.9485 82.165
2018 25.8324 84.1352
Table 4.2: Yearly Tourist Arrivals (Million) and Tourist Receipts (RM Billion) in Malaysia

Table 4.2 on the other hand shows how much is earned in terms of billions from the
tourists over a 19 year-period starting from 2000 to 2018. Both of this data is derived from the
same website which is http://mytourismdata.tourism.gov.my/. The data on tourist arrivals acts
as an independent variable and is assumed to have a positive effect on the tourist receipts in
Malaysia. As the years go on, the amount that is earned increases due to there being an
increase in tourist arrival from 2004 to 2018. The highest earnings that is recorded 84.1352
billion ringgit in 2018 while the lowest value of earnings earned is in 2004 at a value of 17.3354
billion ringgit. The data above clearly shows the correlation between the two variables and
how they are connected.

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5.0 METHODOLOGY

For the data set of this project, there are a few methods that have been proposed to
be applied to them. The nature and methodology of these methods will be further explained
for an in-depth understanding.

5.1 CLASSICAL DECOMPOSITION METHOD

The classical decomposition of time series involves segregating and analyzing the four
components of trend, cyclical, seasonal and irregular in a systematic manner. The symbols
that will be used to represent the respective components include:

• Tt that represents the trend component in time period t,

• Ct that represents the cyclical component in time period t,
• St that represents the seasonal component in time period t,
• It that represents the irregular component in time period t.

The process of generating the forecast values using this methodology is the reverse of
process of decomposing the components. The forecast values generated are the results of
integrating the individual components in the forecast period using past data points. The
application of this method is made on an assumption that the historical patterns of the data
series will be repeated in the future. Initially, the components involved in this data set are
assumed to be related in a multiplicative manner. Hence, the forecast is basically the product
of these component values:

• yt = Tt .St .Ct .It

5.2 UNIVARIATE MODELLING TECHNIQUES

The quarterly data of tourist arrivals will be used in the process of selecting the best
model to generate the forecast values. Up to four steps-ahead forecasts are made at origin
point T, where T = 60 is the last observation of the series. Since

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 Naïve forecast acts as the benchmark model and assumes a strong deterministic
relation that states the current event will determine the future outcome. It is also chosen since
the historical data series shows no discernible pattern that would affect severely the accuracy
of forecast value. The forecast for the following period of the data series is set equals to the
actual value of the same period of the previous year. As in this case, T = 60 and forecasts up
to four steps-ahead are made at this point of origin. Hence, the forecast mathematical relation
can be represented as:

• 𝐹𝑇+1 = 𝑦𝑇−3 for the first quarter of 2019

• 𝐹𝑇+2 = 𝑦𝑇−2 for the second quarter of 2019
• 𝐹𝑇+3 = 𝑦𝑇−1 for the third quarter of 2019
• 𝐹𝑇+4 = 𝑦𝑇 for the fourth quarter of 2019

The Double Exponential Smoothing method is represented by these equations:

• 𝑆𝑡 = 𝛼𝑦𝑡 + (1 − 𝛼)𝑆𝑡−1
• ′
𝑆𝑡′ = 𝛼𝑆𝑡 + (1 − 𝛼)𝑆𝑡−1
• 𝑎𝑡 = 2𝑆𝑡 − 𝑆𝑡′
𝛼
• 𝑏𝑡 = 1− 𝛼
(𝑆𝑡 − 𝑆𝑡′ )

The forecast for the future values by using this method is as follows:

• 𝐹𝑇+1 = 𝑎 𝑇 + 𝑏𝑇 𝑥1
• 𝐹𝑇+2 = 𝑎 𝑇 + 𝑏𝑇 𝑥2
• 𝐹𝑇+3 = 𝑎 𝑇 + 𝑏𝑇 𝑥3
• 𝐹𝑇+4 = 𝑎 𝑇 + 𝑏𝑇 𝑥4

Holt’s method utilizes 2 parameters in 3 equations as represented below:

• 𝑆𝑡 = 𝛼𝑦𝑡 + (1 − 𝛼 )(𝑆𝑡−1 + 𝑇𝑡−1 )

• 𝑇𝑡 = 𝛽(𝑆𝑡 − 𝑆𝑡−1 ) + (1 − 𝛽)𝑇𝑡−1

The forecasts made at time T are given as:

• 𝐹𝑇+1 = 𝑆𝑇 + 𝑇𝑇 𝑥1
• 𝐹𝑇+2 = 𝑆𝑇 + 𝑇𝑇 𝑥2
• 𝐹𝑇+3 = 𝑆𝑇 + 𝑇𝑇 𝑥3
• 𝐹𝑇+4 = 𝑆𝑇 + 𝑇𝑇 𝑥4
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 5.3 SIMPLE LINEAR REGRESSION

Simple linear regression model is a model with a single regressor x that has a relationship with
a response y that is a straight line which can be stated as follows:

𝑌 = 𝛽0 + 𝛽1 𝑋 + 𝜀

Where

• Y = the value of the dependent variable

• X = the value of the independent variable and is a known constant
• 𝛽0 and 𝛽1 are the parameters of the regression line
• 𝜀 is the random error

The above model is subject to the following conditions:

• The relationship between X and Y must be linear

• The error variable must be normally distributed
• The error variance must be constant
• The errors must be independent

6.0 ANALYSIS AND RESULT

6.1 CLASSICAL DECOMPOSITION METHOD

The data used for the forecasting using this method is the quarterly tourist arrivals in
Malaysia from the year 2004 to 2018 as shown in Table 4.1. The data set has been plotted
using a line chart as shown in Figure 6.1.

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 Quarterly Tourist Arrivals (Million)
8 y = -0.0014x2 + 0.136x + 3.4277
R² = 0.9098
7
Tourist Arrivals (Million)

0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Year & Quarter

Tourist Arrivals (Million) Poly. (Tourist Arrivals (Million))

Figure 6.1: Line Chart and Trend of Tourist Arrivals

The first thing that can be analyzed is the trend component in which this component
describes the general upward or downward movement. All business and economic activities
is shown by this movement. In terms of this graph, the general movement can be seen as
upward within the 14 years period which shows positive growth in terms of tourist arrivals.

The next component that should be analyzed is the seasonal component. However the
seasonal component is not present in this data set because there is no regular fluctuations
occurring within a specific period of time. The fluctuations in the graph above are not regular
in a sense that the fluctuations occur differently and at different time periods. So no distinct
seasonal effect can be seen.

The third component is the cyclical component where it shows the rises and falls of the
series over unspecified period of time. Similar to the seasonal component, the cyclical effect
cannot be seen distinctly in this data set. The fluctuations that occur do not repeat themselves
in another period.

The final component is the irregular component. Irregular component is defined as

certain peculiarities exiting in the series that may distort the trend. A few major turning points
can be seen in the trend. Major turning points are points in series where the trend changes its
direction from upward to downward or vice versa.

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 The best fitted trend line has been obtained which is a polynomial trend line. The
estimated polynomial trend line is as follows:

• 𝑇̂𝑡 = −0.0014𝑡 2 + 0.136𝑡 + 3.4277

The generation of estimated trend values for all the years is done with substituting the
respective values of t into the polynomial trend equation and t ranges from 1 to 64 inclusive of
the forecast values. The trend values for this data set are calculated as given in Table 8.1 in
appendix. For instance, the estimated trend value for the four quarters of 2019 is;

• 𝑇̂61 = −0.0014(61)2 + 0.136(61) + 3.4277 = 6.5143 𝑀𝑖𝑙𝑙𝑖𝑜𝑛

• 𝑇̂62 = −0.0014(62)2 + 0.136(62) + 3.4277 = 6.4781 𝑀𝑖𝑙𝑙𝑖𝑜𝑛
• 𝑇̂63 = −0.0014(63)2 + 0.136(63) + 3.4277 = 6.4391 𝑀𝑖𝑙𝑙𝑖𝑜𝑛
• 𝑇̂64 = −0.0014(64)2 + 0.136(64) + 3.4277 = 6.3973 𝑀𝑖𝑙𝑙𝑖𝑜𝑛

Next, the unadjusted seasonal indices have been calculated by dividing the tourist arrivals
with the 4-period moving average calculated earlier on. The resulting 𝑆𝑡 values are multiplied
with 100 so that the figures are in terms of percentage as given in Table 8.2. However, the
unadjusted seasonal indices still contain the random variations or irregular 𝐼𝑡 , thus need to be
eliminated. The adjusted seasonal indices are calculated by multiplying the adjustment value
with the mean values of each quarter. The calculated seasonal indices are shown in Table
8.3. The seasonal indices for quarter 1, 2, 3 and 4 are 99.3077, 98.062, 99.64 and 102.9903
respectively.

The seasonal effect is then removed from the data series as in ‘deseasonalising’ the data.
The deseasonalised data is obtained by dividing the tourist arrivals with the seasonal indices
of each quarter. The actual values, deseasonalized values, trend values along with the
forecast values for each quarter in 2019 are depicted in Table 6.1.

The final step is to incorporate the estimated seasonal components to the projected trend
value, 𝑇̂𝑡 for t = 61, 62, 63 and 64 in the following equation to obtain the forecast values:

• 𝑦̂𝑡 = 𝑇̂𝑡 . 𝑆̂𝑡

• 6.4692 Million for the first quarter of 2019
• 6.3526 Million for the second quarter of 2019
• 6.4159 Million for the third quarter of 2019
• 6.5886 Million for the fourth quarter of 2019

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 Time (t ) Year Quarter Tourist Arrivals (y ) Seasonal Indices (%) Deseasonalised Data Trend (T) Forecast
1 2004 1 3.9785 99.3077 4.0062 3.5623
2 2 3.9109 98.0620 3.9882 3.6941
3 3 3.8218 99.6400 3.8356 3.8231
4 4 3.9922 102.9903 3.8763 3.9493
5 2005 1 4.1599 99.3077 4.1889 4.0727
6 2 4.0079 98.0620 4.0871 4.1933
7 3 4.046 99.6400 4.0606 4.3111
8 4 4.2173 102.9903 4.0949 4.4261
9 2006 1 4.3793 99.3077 4.4098 4.5383
10 2 4.1849 98.0620 4.2676 4.6477
11 3 4.339 99.6400 4.3547 4.7543
12 4 4.6437 102.9903 4.5089 4.8581
13 2007 1 5.2801 99.3077 5.3169 4.9591
14 2 5.4103 98.0620 5.5172 5.0573
15 3 4.9579 99.6400 4.9758 5.1527
16 4 5.3245 102.9903 5.1699 5.2453
17 2008 1 5.3423 99.3077 5.3795 5.3351
18 2 5.6208 98.0620 5.7319 5.4221
19 3 5.3667 99.6400 5.3861 5.5063
20 4 5.7226 102.9903 5.5564 5.5877
21 2009 1 5.4602 99.3077 5.4983 5.6663
22 2 5.8863 98.0620 6.0026 5.7421
23 3 6.0316 99.6400 6.0534 5.8151
24 4 6.2682 102.9903 6.0862 5.8853
25 2010 1 5.7518 99.3077 5.7919 5.9527
26 2 6.1163 98.0620 6.2372 6.0173
27 3 6.367 99.6400 6.3900 6.0791
28 4 6.3421 102.9903 6.1580 6.1381
29 2011 1 5.5404 99.3077 5.5790 6.1943
30 2 5.8225 98.0620 5.9376 6.2477
31 3 6.6671 99.6400 6.6912 6.2983
32 4 6.6843 102.9903 6.4902 6.3461
33 2012 1 5.5625 99.3077 5.6013 6.3911
34 2 6.0699 98.0620 6.1899 6.4333
35 3 6.5212 99.6400 6.5448 6.4727
36 4 6.8791 102.9903 6.6794 6.5093
37 2013 1 6.4494 99.3077 6.4944 6.5431
38 2 6.1033 98.0620 6.2239 6.5741
39 3 6.2037 99.6400 6.2261 6.6023
40 4 6.959 102.9903 6.7570 6.6277
41 2014 1 7.0914 99.3077 7.1408 6.6503
42 2 6.7836 98.0620 6.9177 6.6701
43 3 6.7367 99.6400 6.7610 6.6871
44 4 6.8255 102.9903 6.6273 6.7013
45 2015 1 6.4827 99.3077 6.5279 6.7127
46 2 6.0846 98.0620 6.2048 6.7213
47 3 6.4829 99.6400 6.5063 6.7271
48 4 6.671 102.9903 6.4773 6.7301
49 2016 1 6.666 99.3077 6.7125 6.7303
50 2 6.3668 98.0620 6.4926 6.7277
51 3 6.6972 99.6400 6.7214 6.7223
52 4 7.0275 102.9903 6.8235 6.7141
53 2017 1 6.6317 99.3077 6.6779 6.7031
54 2 6.3194 98.0620 6.4443 6.6893
55 3 6.4849 99.6400 6.5083 6.6727
56 4 6.5125 102.9903 6.3234 6.6533
57 2018 1 6.5202 99.3077 6.5657 6.6311
58 2 6.2102 98.0620 6.3329 6.6061
59 3 6.6557 99.6400 6.6797 6.5783
60 4 6.4462 102.9903 6.2590 6.5477
61 2019 1 99.3077 6.5143 6.4692
62 2 98.0620 6.4781 6.3526
63 3 99.6400 6.4391 6.4159
64 4 102.9903 6.3973 6.5886

Table 6.1: Adjusted Seasonal Indices, Deseasonalised Data, Linear Trend and Forecast Values

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 6.2 UNIVARIATE MODELLING TECHNIQUES

There are three models under univariate modelling that will be used for forecasting the
tourist arrivals in Malaysia and MSE and MAPE will be the error measures used. The models
are Naïve, Double Exponential Smoothing and Holt’s Method. Estimations were done with the
objective of minimising the Mean Squared Error (MSE) and Mean Absolute Percent Error
(MAPE). The observations for the time, t=31 until t=60 are used to evaluate the models. Solver
in Excel will be used to determine the best parameter value in order to have the best fitted
model with the parameter that minimizes the MSE and MAPE. The fitted values of these
models along with the full results of the evaluation will be presented. Forecast values are
estimated up to four steps-ahead.

The Naïve forecast involves no parameter estimation, hence the fitted values are
obtained by the application of the formula to the given data set. The forecast values obtained
for t = 61,62,63,64 are 6.5202, 6.2102, 6.6557 and 6.4462 Million respectively. The
observations are shown in Table 6.2.

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 Table 6.2: Naïve Forecast for Seasonal Data
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 When fitting the Double Exponential Smoothing model, solver was used to locate the
best parameter 𝛼 value. In this case, 𝛼 = 0.1561 is best for the Double Exponential Smoothing
model. The forecasts generated for one, two, three and four steps-ahead are 6.494, 6.4918,
6.4895 and 6.4872 Million respectively. The observations under this model can be represented
in Table 6.3.

Time (t ) Year Quarter Arrivals (y ) S S' a b DES Error, e Error Sq ABS((e/y)*100)

1 2004 1 3.9785 3.9785 3.9785 3.9785 0.0000 3.9785 0.0000 0.0000 0.0000
2 2 3.9109 3.9679 3.9769 3.9590 -0.0016 3.9785 -0.0676 0.0046 1.7285
3 3 3.8218 3.9451 3.9719 3.9184 -0.0050 3.9574 -0.1356 0.0184 3.5478
4 4 3.9922 3.9525 3.9689 3.9361 -0.0030 3.9134 0.0788 0.0062 1.9738
5 2005 1 4.1599 3.9849 3.9714 3.9984 0.0025 3.9331 0.2268 0.0515 5.4532
6 2 4.0079 3.9885 3.9740 4.0029 0.0027 4.0009 0.0070 0.0000 0.1757
7 3 4.0460 3.9974 3.9777 4.0172 0.0037 4.0056 0.0404 0.0016 0.9996
8 4 4.2173 4.0318 3.9861 4.0774 0.0084 4.0209 0.1964 0.0386 4.6581
9 2006 1 4.3793 4.0860 4.0017 4.1703 0.0156 4.0859 0.2934 0.0861 6.7007
10 2 4.1849 4.1015 4.0173 4.1856 0.0156 4.1859 -0.0010 0.0000 0.0247
11 3 4.3390 4.1386 4.0362 4.2409 0.0189 4.2012 0.1378 0.0190 3.1756
12 4 4.6437 4.2174 4.0645 4.3703 0.0283 4.2598 0.3839 0.1474 8.2669

Estimation part
13 2007 1 5.2801 4.3834 4.1143 4.6524 0.0498 4.3986 0.8815 0.7770 16.6943
14 2 5.4103 4.5437 4.1814 4.9060 0.0670 4.7022 0.7081 0.5014 13.0884
15 3 4.9579 4.6084 4.2480 4.9687 0.0667 4.9731 -0.0152 0.0002 0.3063
16 4 5.3245 4.7202 4.3217 5.1186 0.0737 5.0354 0.2891 0.0836 5.4299
17 2008 1 5.3423 4.8173 4.3991 5.2355 0.0774 5.1923 0.1500 0.0225 2.8070
18 2 5.6208 4.9428 4.4840 5.4015 0.0849 5.3129 0.3079 0.0948 5.4780
19 3 5.3667 5.0090 4.5660 5.4520 0.0820 5.4864 -0.1197 0.0143 2.2308
20 4 5.7226 5.1204 4.6525 5.5882 0.0866 5.5339 0.1887 0.0356 3.2971
21 2009 1 5.4602 5.1734 4.7339 5.6130 0.0813 5.6748 -0.2146 0.0461 3.9303
22 2 5.8863 5.2847 4.8199 5.7496 0.0860 5.6944 0.1919 0.0368 3.2609
23 3 6.0316 5.4014 4.9107 5.8920 0.0908 5.8356 0.1960 0.0384 3.2491
24 4 6.2682 5.5367 5.0084 6.0650 0.0977 5.9828 0.2854 0.0814 4.5525
25 2010 1 5.7518 5.5703 5.0961 6.0444 0.0877 6.1627 -0.4109 0.1689 7.1445
26 2 6.1163 5.6555 5.1835 6.1276 0.0873 6.1322 -0.0159 0.0003 0.2593
27 3 6.3670 5.7666 5.2745 6.2587 0.0910 6.2149 0.1521 0.0231 2.3883
28 4 6.3421 5.8565 5.3654 6.3476 0.0909 6.3498 -0.0077 0.0001 0.1208
29 2011 1 5.5404 5.8071 5.4344 6.1799 0.0690 6.4384 -0.8980 0.8064 16.2086
30 2 5.8225 5.8095 5.4929 6.1261 0.0586 6.2489 -0.4264 0.1818 7.3225
31 3 6.6671 5.9434 5.5633 6.3236 0.0703 6.1847 0.4824 0.2327 7.2358
32 4 6.6843 6.0591 5.6407 6.4775 0.0774 6.3939 0.2904 0.0843 4.3444
33 2012 1 5.5625 5.9816 5.6939 6.2692 0.0532 6.5549 -0.9924 0.9849 17.8414
34 2 6.0699 5.9954 5.7410 6.2497 0.0471 6.3224 -0.2525 0.0638 4.1604
35 3 6.5212 6.0775 5.7935 6.3614 0.0525 6.2968 0.2244 0.0504 3.4412
36 4 6.8791 6.2026 5.8574 6.5479 0.0639 6.4139 0.4652 0.2164 6.7620
37 2013 1 6.4494 6.2412 5.9173 6.5650 0.0599 6.6117 -0.1623 0.0264 2.5170
38 2 6.1033 6.2196 5.9645 6.4747 0.0472 6.6249 -0.5216 0.2721 8.5464
39 3 6.2037 6.2171 6.0040 6.4303 0.0394 6.5219 -0.3182 0.1013 5.1300
40 4 6.9590 6.3330 6.0553 6.6106 0.0514 6.4698 0.4892 0.2393 7.0302
41 2014 1 7.0914 6.4514 6.1172 6.7856 0.0618 6.6620 0.4294 0.1844 6.0554
42 2 6.7836 6.5033 6.1775 6.8291 0.0603 6.8475 -0.0639 0.0041 0.9413
Evaluation part
43 3 6.7367 6.5397 6.2340 6.8454 0.0566 6.8894 -0.1527 0.0233 2.2660
44 4 6.8255 6.5843 6.2887 6.8800 0.0547 6.9020 -0.0765 0.0058 1.1203
45 2015 1 6.4827 6.5685 6.3324 6.8045 0.0437 6.9346 -0.4519 0.2043 6.9716
46 2 6.0846 6.4929 6.3575 6.6284 0.0251 6.8482 -0.7636 0.5831 12.5499
47 3 6.4829 6.4914 6.3784 6.6043 0.0209 6.6534 -0.1705 0.0291 2.6305
48 4 6.6710 6.5194 6.4004 6.6384 0.0220 6.6252 0.0458 0.0021 0.6859
49 2016 1 6.6660 6.5423 6.4225 6.6620 0.0222 6.6604 0.0056 0.0000 0.0834
50 2 6.3668 6.5149 6.4370 6.5928 0.0144 6.6842 -0.3174 0.1007 4.9852
51 3 6.6972 6.5434 6.4536 6.6331 0.0166 6.6072 0.0900 0.0081 1.3433
52 4 7.0275 6.6189 6.4794 6.7585 0.0258 6.6497 0.3778 0.1427 5.3753
53 2017 1 6.6317 6.6209 6.5015 6.7404 0.0221 6.7843 -0.1526 0.0233 2.3014
54 2 6.3194 6.5739 6.5128 6.6349 0.0113 6.7625 -0.4431 0.1963 7.0115
55 3 6.4849 6.5600 6.5202 6.5998 0.0074 6.6462 -0.1613 0.0260 2.4876
56 4 6.5125 6.5526 6.5252 6.5799 0.0051 6.6071 -0.0946 0.0090 1.4532
57 2018 1 6.5202 6.5475 6.5287 6.5663 0.0035 6.5850 -0.0648 0.0042 0.9931
58 2 6.2102 6.4948 6.5234 6.4663 -0.0053 6.5698 -0.3596 0.1293 5.7903
59 3 6.6557 6.5200 6.5229 6.5170 -0.0005 6.4610 0.1947 0.0379 2.9256
60 4 6.4462 6.5084 6.5206 6.4963 -0.0023 6.5165 -0.0703 0.0049 1.0906
F (t+1) 6.4940 MSE 0.1330
F (t+2) 6.4918 MAPE 4.5357
F (t+3) 6.4895 Alpha 0.1561
F (t+4) 6.4872

Table 6.3: Fitted Values using Double Exponential Smoothing

13 | F o r e c a s t i n g o f T o u r i s t A r r i v a l s a n d T o u r i s t R e c e i p t s i n M a l a y s i a
 The last model for univariate modelling is the Holt’s method. There are two parameter
values located by using solver for this model. The best value for both 𝛼 and 𝛽 for the Holt’s
method are 0.3983 and 0.8597 respectively. Forecasts made in each quarter of 2019 are
6.3556, 6.2626, 6.1695 and 6.0764 Million respectively. Other observations are depicted in
Table 6.4.

Table 6.4: Fitted Values using Holt’s Model

14 | F o r e c a s t i n g o f T o u r i s t A r r i v a l s a n d T o u r i s t R e c e i p t s i n M a l a y s i a
 For each of the model fitted and evaluated, the values of the MSE and MAPE were
calculated. The following table presents the results of the evaluation done. On the basis of the
size of the MSE and MAPE calculated over the evaluation period, it can be concluded that the
best model is the Holt’s Method with the lowest values of MSE and MAPE.

Model Types MSE MAPE

Naïve 0.1335 4.3584

Double Exponential 0.1330 4.5357

𝛼 = 0.1561

Holt’s Method 0.1095 4.0855

𝛼 = 0.3983, 𝛽 = 0.8597

Table 6.5: Summary of Evaluation using the MSE and MAPE Values

6.3 SIMPLE LINEAR REGRESSION

The simple linear regression technique is used to forecast the tourist receipts in
Malaysia based on the assumption that this variable is influenced by the number of tourist
arrivals in our country. Thus, it is also of our interest to examine if the two variables are strongly
related to each other and develop the most appropriate model that satisfies all the
assumptions of simple linear regression technique. Since the data for tourist receipts obtained
from Department of Statistics Malaysia is only available in yearly, hence the model estimated
using this method comprises of yearly time series data from 2000 to 2018. The fittings were
performed using SPSS software.

Initially, 𝑥1𝑡 is used as the independent variable to fit the model representing the tourist
arrivals in Million. 𝑦𝑡 is used as the dependent variable which is the tourist receipts in Billion
RM. Tables below represent the output of the SPSS for this initial regression model. The result
in table 6.6a shows that 𝐹 − 𝑠𝑡𝑎𝑡𝑖𝑠𝑡𝑖𝑐 and 𝑥1𝑡 are significant and the adjusted 𝑅2 is fairly high
at 89.3 percent. The model fits fairly well to the data set. However, the value of Durbin-Watson
given in Table 6.6a is very poor at 0.293 signifying the presence of positive serial correlation.
Thus, an improvement will be made to this model by introducing a lag variable.

15 | F o r e c a s t i n g o f T o u r i s t A r r i v a l s a n d T o u r i s t R e c e i p t s i n M a l a y s i a
 Table 6.6a: Summary Statistics

Adjusted R Std. Error of the

Model R R Square Square Estimate Durbin-Watson
a
1 .948 .899 .893 7.1526805 .293
a. Predictors: (Constant), Arrivals
b. Dependent Variable: Receipts

Table 6.6b: The F-statistic

Model Sum of Squares df Mean Square F Sig.

1 Regression 7755.351 1 7755.351 151.588 .000b
Residual 869.734 17 51.161
Total 8625.085 18
a. Dependent Variable: Receipts
b. Predictors: (Constant), Arrivals

Table 6.6c: The estimated values of the 𝛽’s

Standardized
Unstandardized Coefficients Coefficients Collinearity Statistics
Model B Std. Error Beta t Sig. Tolerance VIF
1 (Constant) -22.238 6.158 -3.611 .002
Arrivals 3.514 .285 .948 12.312 .000 1.000 1.000

a. Dependent Variable: Receipts

At the second stage, lag 1 of the dependent variable, 𝑦𝑡−1 was introduced into the
model with the hope that it will reduce the serial correlation problem. The model of the form
𝑦𝑡 = 𝛽0 + 𝛽1 𝑥1𝑡 + 𝛽2 𝑦𝑡−1 + 𝜀𝑡 was then fitted. The result shows significant improvement in
the estimated model where the value of the DW statistic increased from 0.293 in the first model
to 2.168 in the second model. Therefore, Model 2 is the best to forecast the tourist receipts
with the estimated model of 𝑦𝑡 = −6.049 + 1.11𝑥1𝑡 + 0.715𝑦𝑡−1.

This final model was fitted using the general-to-specific strategy where all two
independent variables were entered as indicated in Table 6.7a. Table 6.7b shows that all the
independent variables fit the model very well as indicated by the values of R 2 at 98.7%. There

16 | F o r e c a s t i n g o f T o u r i s t A r r i v a l s a n d T o u r i s t R e c e i p t s i n M a l a y s i a
is no First Order serial correlation problem. The general fitness of the model is given in Table
6.7c. When tested at 5% level of significance, the Sig. F change value of 0.000 is less than
0.05 results in the rejection of the null hypothesis.

All the two independent variables are significant and included in the model based on
Table 6.7d. There is no multicollinearity problem in this model since the largest VIF value is
5.763 which is less than 10. The assumptions on normality and independence of error terms
are also satisfied based on Figure 6.2 and Figure 6.3 since the plots are close to the regression
line on the normal P-P plot and the plots are randomly scattered on the plot of residuals against
predicted values.

Table 6.7a: Entering Variables

Variables Entered/Removeda
Variables Variables
Model Entered Removed Method
1 Lag1Receipts,
. Enter
Arrivalsb
a. Dependent Variable: Receipts
b. All requested variables entered.

Table 6.7b: Summary Statistics

Model Summaryb
Adjusted R Std. Error of the
Model R R Square Square Estimate Durbin-Watson
1 .987a .974 .971 3.5753818 2.168
a. Predictors: (Constant), Lag1Receipts, Arrivals
b. Dependent Variable: Receipts

Table 6.7c: The F-statistic

ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression 7248.894 2 3624.447 283.529 .000b
Residual 191.750 15 12.783
Total 7440.645 17
a. Dependent Variable: Receipts
b. Predictors: (Constant), Lag1Receipts, Arrivals

17 | F o r e c a s t i n g o f T o u r i s t A r r i v a l s a n d T o u r i s t R e c e i p t s i n M a l a y s i a
 Table 6.7d: The estimated values of the 𝛽’s
Standardized
Unstandardized Coefficients Coefficients Collinearity Statistics
Model B Std. Error Beta t Sig. Tolerance VIF
1 (Constant) -6.049 4.302 -1.406 .180
Arrivals 1.110 .380 .291 2.921 .011 .174 5.763
Lag1Receipts .715 .099 .715 7.189 .000 .174 5.763

Figure 6.2: The Normal P-P Plot

18 | F o r e c a s t i n g o f T o u r i s t A r r i v a l s a n d T o u r i s t R e c e i p t s i n M a l a y s i a
 Figure 6.3: The Plots of Residuals Against Predicted Values

Time, t Year Receipts, y(t) Arrivals, x1(t) Lag1 Receipts, y(t-1)

1 2000 17.3354 10.2216 -
2 2001 24.2215 12.8751 17.3354
3 2002 25.7811 13.31 24.2215
4 2003 21.2911 10.5739 25.7811
5 2004 29.6514 15.7034 21.2911
6 2005 31.9541 16.4311 29.6514
7 2006 36.2717 17.5469 31.9541
8 2007 46.07 20.9728 36.2717
9 2008 49.5612 22.0525 46.07
10 2009 53.3677 23.6462 49.5612
11 2010 56.4925 24.5772 53.3677
12 2011 58.3159 24.7143 56.4925
13 2012 60.5567 25.0327 58.3159
14 2013 65.4433 25.7155 60.5567
15 2014 71.9988 27.4373 65.4433
16 2015 69.1196 25.7213 71.9988
17 2016 82.0982 26.7574 69.1196
18 2017 82.165 25.9485 82.0982
19 2018 84.1352 25.8324 82.165

19 | F o r e c a s t i n g o f T o u r i s t A r r i v a l s a n d T o u r i s t R e c e i p t s i n M a l a y s i a
 Table 6.8: The Lag 1 of Y
The independent variables 𝑥1𝑡 and 𝑦𝑡−1 in period 𝑇 + 1 where 𝑇 = 19 are firstly
forecasted to forecast for the same period using the best regression model earlier. The Holt’s
method is applied using the independent variables and the forecast value generated can be
used as input in the regression model to forecast the dependent variable 𝑦𝑇+1 , where 𝑦𝑇+1 =
𝛽0 + 𝛽1 𝑥1(𝑇+1) + 𝛽2 𝑦𝑇 + 𝜀𝑡 . The parameter values are obtained using solver to get the best
fitted model for the data. Based on the following tables, the values for 𝑥1(𝑇+1) and 𝑦𝑇 are
25.9466 and 85.138 respectively.

Time (t ) Year Arrivals (x1) S T Holt's Error, e Error Sq ABS((e/x1)*100)

1 2000 10.2216 10.2216 0.0000 10.2216 0.0000 0.0000 0.0000

Estimation Part
2 2001 12.8751 12.2344 0.5460 10.2216 2.6535 7.0411 20.6095
3 2002 13.31 12.9185 0.5834 12.7804 0.5296 0.2805 3.9792
4 2003 10.5739 10.9991 -0.0954 13.5019 -2.9280 8.5732 27.6908
5 2004 15.7034 14.5906 0.9046 10.9037 4.7997 23.0372 30.5647
6 2005 16.4311 15.7683 0.9787 15.4952 0.9359 0.8759 5.6959
7 2006 17.5469 16.8811 1.0151 16.7470 0.7999 0.6399 4.5588
8 2007 20.9728 19.7398 1.5151 17.8962 3.0766 9.4653 14.6694
9 2008 22.0525 21.1283 1.4808 21.2549 0.7976 0.6362 3.6168
10 2009 23.6462 22.6807 1.5002 22.6090 1.0372 1.0757 4.3862
11 2010 24.5772 23.7571 1.3852 24.1809 0.3963 0.1570 1.6124

Evaluation Part
12 2011 24.7143 24.1487 1.1157 25.1423 -0.4280 0.1832 1.7318
13 2012 25.0327 24.5499 0.9219 25.2644 -0.2317 0.0537 0.9258
14 2013 25.7155 25.2115 0.8513 25.4718 0.2437 0.0594 0.9478
15 2014 27.4373 26.6943 1.0226 26.0628 1.3745 1.8894 5.0097
16 2015 25.7213 25.7093 0.4781 27.7169 -1.9956 3.9825 7.7587
17 2016 26.7574 26.3889 0.5327 26.1874 0.5700 0.3249 2.1303
18 2017 25.9485 25.9262 0.2627 26.9216 -0.9731 0.9470 3.7503
19 2018 25.8324 25.7916 0.1550 26.1889 -0.3565 0.1271 1.3802
F (t+1) 25.9466 MSE 0.8800
MAPE 2.9633
Alpha 0.7585
Beta 0.2712

Table 6.9: The Initial Value of X1

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Time (t ) Year Lag1 Receipts, y(t-1) S T Holt's Error, e Error Sq ABS((e/y(t-1))*100)
1 2001 17.3354 17.3354 0 17.3354 0.0000 0.0000 0.0000
2 2002 24.2215 23.4211 0.9157 17.3354 6.8861 47.4184 28.4297
3 2003 25.7811 25.4004 1.0757 24.3368 1.4443 2.0859 5.6020
4 2004 21.2911 21.6437 0.3486 26.4761 -5.1850 26.8843 24.3529
5 2005 29.6514 28.6802 1.3549 21.9923 7.6591 58.6619 25.8305
6 2006 31.9541 31.4161 1.5627 30.0351 1.9190 3.6827 6.0056
7 2007 36.2717 35.5257 1.9459 32.9788 3.2929 10.8431 9.0784
8 2008 46.07 44.6183 3.0213 37.4717 8.5983 73.9316 18.6637
9 2009 49.5612 48.6355 3.1711 47.6396 1.9216 3.6927 3.8773
10 2010 53.3677 52.4491 3.2678 51.8067 1.5610 2.4368 2.9250
11 2011 56.4925 55.6427 3.2566 55.7169 0.7756 0.6015 1.3729
12 2012 58.3159 57.6267 3.0651 58.8994 -0.5835 0.3404 1.0005
13 2013 60.5567 59.8599 2.9400 60.6918 -0.1351 0.0183 0.2232
14 2014 65.4433 64.4526 3.1887 62.7999 2.6434 6.9878 4.0393
15 2015 71.9988 70.7511 3.6566 67.6413 4.3575 18.9878 6.0522
16 2016 69.1196 68.8842 2.8255 74.4077 -5.2881 27.9639 7.6506
17 2017 82.0982 80.2340 4.1081 71.7097 10.3885 107.9207 12.6537
18 2018 82.165 81.4631 3.6749 84.3421 -2.1771 4.7396 2.6496
F (t+1) 85.1380 MSE 18.8885
MAPE 4.2852
Alpha 0.8838
Beta 0.1505

Table 6.10: The Initial Value of Lag 1 of Y

Having obtained the estimated values for the independent variables, the tourist
receipts for the year 2019 at time t = 20 can now be estimated as follows:

𝑦̂𝑇+1 = −6.049 + 1.11(25.9466) + 0.715(85.138)

𝑦̂𝑇+1 = 83.6254

Thus, the estimated tourist receipts for the year of 2019 is RM83.6254 Billion.

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7.0 CONCLUSION

The decision on the superiority of a particular model is decided based on the values of
the error measures of the benchmark and competing models. Based on the three models used
under univariate modelling, their values of MSE and MAPE are compared. The best model
that fit the data is the Holt’s Method given the lowest values of error measures. The best values
of forecasts for quarter 1, 2, 3 and 4 of 2019 are 6.3556 Million, 6.2626 Million, 6.1695 Million
and 6.0764 Million respectively.

As for the forecasting of tourist receipts, the initial values have been estimated and the
best fitted regression model has been found. Therefore, the estimated tourist receipts for the
year of 2019 is RM83.6254 Billion.

These estimated values can be useful to further plan the proper promotional
campaigns and economic boosting activities that allow the government to achieve their
respective targets, especially in the tourism industry.

There were a few limitations encountered during this project such as limited knowledge
on other models and other software that can be used to develop the best models. However,
for the syllabus that has been covered for this subject, the best effort have been put to provide
the best models and estimation values within the time frame of several weeks.

22 | F o r e c a s t i n g o f T o u r i s t A r r i v a l s a n d T o u r i s t R e c e i p t s i n M a l a y s i a
8.0 APPENDICES
Time (t ) Year Quarter Tourist Arrivals (y ) Trend (T)
1 2004 1 3.9785 3.5623
2 2 3.9109 3.6941
3 3 3.8218 3.8231
4 4 3.9922 3.9493
5 2005 1 4.1599 4.0727
6 2 4.0079 4.1933
7 3 4.046 4.3111
8 4 4.2173 4.4261
9 2006 1 4.3793 4.5383
10 2 4.1849 4.6477
11 3 4.339 4.7543
12 4 4.6437 4.8581
13 2007 1 5.2801 4.9591
14 2 5.4103 5.0573
15 3 4.9579 5.1527
16 4 5.3245 5.2453
17 2008 1 5.3423 5.3351
18 2 5.6208 5.4221
19 3 5.3667 5.5063
20 4 5.7226 5.5877
21 2009 1 5.4602 5.6663
22 2 5.8863 5.7421
23 3 6.0316 5.8151
24 4 6.2682 5.8853
25 2010 1 5.7518 5.9527
26 2 6.1163 6.0173
27 3 6.367 6.0791
28 4 6.3421 6.1381
29 2011 1 5.5404 6.1943
30 2 5.8225 6.2477
31 3 6.6671 6.2983
32 4 6.6843 6.3461
33 2012 1 5.5625 6.3911
34 2 6.0699 6.4333
35 3 6.5212 6.4727
36 4 6.8791 6.5093
37 2013 1 6.4494 6.5431
38 2 6.1033 6.5741
39 3 6.2037 6.6023
40 4 6.959 6.6277
41 2014 1 7.0914 6.6503
42 2 6.7836 6.6701
43 3 6.7367 6.6871
44 4 6.8255 6.7013
45 2015 1 6.4827 6.7127
46 2 6.0846 6.7213
47 3 6.4829 6.7271
48 4 6.671 6.7301
49 2016 1 6.666 6.7303
50 2 6.3668 6.7277
51 3 6.6972 6.7223
52 4 7.0275 6.7141
53 2017 1 6.6317 6.7031
54 2 6.3194 6.6893
55 3 6.4849 6.6727
56 4 6.5125 6.6533
57 2018 1 6.5202 6.6311
58 2 6.2102 6.6061
59 3 6.6557 6.5783
60 4 6.4462 6.5477
61 2019 1 6.5143
62 2 6.4781
63 3 6.4391
64 4 6.3973

Table 8.1: The Trend Values of Tourist Arrivals

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Time (t ) Year Quarter Tourist Arrivals (y ) Moving Total Centered Moving Total Centered Moving Average Unadjusted Seasonal Indices
1 2004 1 3.9785 - - - -
2 2 3.9109 - - - -
3 3 3.8218 15.7034 31.5882 3.9485 96.7906
4 4 3.9922 15.8848 31.8666 3.9833 100.2228
5 2005 1 4.1599 15.9818 32.1878 4.0235 103.3907
6 2 4.0079 16.2060 32.6371 4.0796 98.2416
7 3 4.046 16.4311 33.0816 4.1352 97.8429
8 4 4.2173 16.6505 33.4780 4.1848 100.7778
9 2006 1 4.3793 16.8275 33.9480 4.2435 103.2002
10 2 4.1849 17.1205 34.6674 4.3334 96.5726
11 3 4.339 17.5469 35.9946 4.4993 96.4367
12 4 4.6437 18.4477 38.1208 4.7651 97.4523
13 2007 1 5.2801 19.6731 39.9651 4.9956 105.6942
14 2 5.4103 20.2920 41.2648 5.1581 104.8894
15 3 4.9579 20.9728 42.0078 5.2510 94.4187
16 4 5.3245 21.0350 42.2805 5.2851 100.7462
17 2008 1 5.3423 21.2455 42.8998 5.3625 99.6238
18 2 5.6208 21.6543 43.7067 5.4633 102.8822
19 3 5.3667 22.0524 44.2227 5.5278 97.0850
20 4 5.7226 22.1703 44.6061 5.5758 102.6335
21 2009 1 5.4602 22.4358 45.5365 5.6921 95.9266
22 2 5.8863 23.1007 46.7470 5.8434 100.7346
23 3 6.0316 23.6463 47.5842 5.9480 101.4051
24 4 6.2682 23.9379 48.1058 6.0132 104.2402
25 2010 1 5.7518 24.1679 48.6712 6.0839 94.5413
26 2 6.1163 24.5033 49.0805 6.1351 99.6942
27 3 6.367 24.5772 48.9430 6.1179 104.0721
28 4 6.3421 24.3658 48.4378 6.0547 104.7463
29 2011 1 5.5404 24.0720 48.4441 6.0555 91.4935
30 2 5.8225 24.3721 49.0864 6.1358 94.8939
31 3 6.6671 24.7143 49.4507 6.1813 107.8585
32 4 6.6843 24.7364 49.7202 6.2150 107.5507
33 2012 1 5.5625 24.9838 49.8217 6.2277 89.3185
34 2 6.0699 24.8379 49.8706 6.2338 97.3704
35 3 6.5212 25.0327 50.9523 6.3690 102.3891
36 4 6.8791 25.9196 51.8726 6.4841 106.0922
37 2013 1 6.4494 25.9530 51.5885 6.4486 100.0130
38 2 6.1033 25.6355 51.3509 6.4189 95.0838
39 3 6.2037 25.7154 52.0728 6.5091 95.3081
40 4 6.959 26.3574 53.3951 6.6744 104.2642
41 2014 1 7.0914 27.0377 54.6084 6.8261 103.8873
42 2 6.7836 27.5707 55.0079 6.8760 98.6564
43 3 6.7367 27.4372 54.2657 6.7832 99.3143
44 4 6.8255 26.8285 52.9580 6.6198 103.1081
45 2015 1 6.4827 26.1295 52.0052 6.5007 99.7239
46 2 6.0846 25.8757 51.5969 6.4496 94.3406
47 3 6.4829 25.7212 51.6257 6.4532 100.4600
48 4 6.671 25.9045 52.0912 6.5114 102.4511
49 2016 1 6.666 26.1867 52.5877 6.5735 101.4077
50 2 6.3668 26.4010 53.1585 6.6448 95.8161
51 3 6.6972 26.7575 53.4807 6.6851 100.1812
52 4 7.0275 26.7232 53.3990 6.6749 105.2829
53 2017 1 6.6317 26.6758 53.1393 6.6424 99.8387
54 2 6.3194 26.4635 52.4120 6.5515 96.4573
55 3 6.4849 25.9485 51.7855 6.4732 100.1809
56 4 6.5125 25.8370 51.5648 6.4456 101.0379
57 2018 1 6.5202 25.7278 51.6264 6.4533 101.0367
58 2 6.2102 25.8986 51.7309 6.4664 96.0385
59 3 6.6557 25.8323 - - -
60 4 6.4462 - - - -

Table 8.2: The Moving Averages and Unadjusted Seasonal Indices

24 | F o r e c a s t i n g o f T o u r i s t A r r i v a l s a n d T o u r i s t R e c e i p t s i n M a l a y s i a
 Quarters
Year 1st 2nd 3rd 4th Total
2004 - - 96.7906 100.2228
2005 103.3907 98.2416 97.8429 100.7778
2006 103.2002 96.5726 96.4367 97.4523
2007 105.6942 104.8894 94.4187 100.7462
2008 99.6238 102.8822 97.0850 102.6335
2009 95.9266 100.7346 101.4051 104.2402
2010 94.5413 99.6942 104.0721 104.7463
2011 91.4935 94.8939 107.8585 107.5507
2012 89.3185 97.3704 102.3891 106.0922
2013 100.0130 95.0838 95.3081 104.2642
2014 103.8873 98.6564 99.3143 103.1081
2015 99.7239 94.3406 100.4600 102.4511
2016 101.4077 95.8161 100.1812 105.2829
2017 99.8387 96.4573 100.1809 101.0379
2018 101.0367 96.0385 - -

Total 1389.0961 1371.6715 1393.7432 1440.6063

Mean 99.2212 97.9765 99.5531 102.9005 399.6512
Adjusted Mean (Indices) 99.3077 98.062 99.64 102.9903 400

Table 8.3: The Adjusted Quarterly Seasonal Indices

25 | F o r e c a s t i n g o f T o u r i s t A r r i v a l s a n d T o u r i s t R e c e i p t s i n M a l a y s i a
 Time (t ) Year Quarter Arrivals (y ) Naive with Trend Error, e Error Sq ABS((e/y)*100)
1 2004 1 3.9785
2 2 3.9109
3 3 3.8218 3.8444 -0.0226 0.0005 0.5926
4 4 3.9922 3.7347 0.2575 0.0663 6.4493
5 2005 1 4.1599 4.1702 -0.0103 0.0001 0.2475
6 2 4.0079 4.3346 -0.3267 0.1068 8.1525
7 3 4.0460 3.8615 0.1845 0.0341 4.5612
8 4 4.2173 4.0845 0.1328 0.0176 3.1498
9 2006 1 4.3793 4.3959 -0.0166 0.0003 0.3780
10 2 4.1849 4.5475 -0.3626 0.1315 8.6650
11 3 4.3390 3.9991 0.3399 0.1155 7.8329
12 4 4.6437 4.4988 0.1449 0.0210 3.1209

Estimation part
13 2007 1 5.2801 4.9698 0.3103 0.0963 5.8768
14 2 5.4103 6.0037 -0.5934 0.3521 10.9683
15 3 4.9579 5.5437 -0.5858 0.3432 11.8157
16 4 5.3245 4.5433 0.7812 0.6102 14.6713
17 2008 1 5.3423 5.7182 -0.3759 0.1413 7.0364
18 2 5.6208 5.3602 0.2606 0.0679 4.6371
19 3 5.3667 5.9138 -0.5471 0.2993 10.1947
20 4 5.7226 5.1241 0.5985 0.3582 10.4588
21 2009 1 5.4602 6.1021 -0.6419 0.4120 11.7560
22 2 5.8863 5.2098 0.6765 0.4576 11.4922
23 3 6.0316 6.3457 -0.3141 0.0986 5.2068
24 4 6.2682 6.1805 0.0877 0.0077 1.3993
25 2010 1 5.7518 6.5141 -0.7623 0.5811 13.2529
26 2 6.1163 5.2779 0.8384 0.7028 13.7069
27 3 6.3670 6.5039 -0.1369 0.0187 2.1501
28 4 6.3421 6.6280 -0.2859 0.0817 4.5076
29 2011 1 5.5404 6.3173 -0.7769 0.6036 14.0224
30 2 5.8225 4.8400 0.9825 0.9652 16.8735
31 3 6.6671 6.1190 0.5481 0.3005 8.2215
32 4 6.6843 7.6342 -0.9499 0.9023 14.2112
33 2012 1 5.5625 6.7015 -1.1390 1.2974 20.4772
34 2 6.0699 4.6290 1.4409 2.0763 23.7390
35 3 6.5212 6.6236 -0.1024 0.0105 1.5700
36 4 6.8791 7.0061 -0.1270 0.0161 1.8455
37 2013 1 6.4494 7.2566 -0.8072 0.6516 12.5166
38 2 6.1033 6.0465 0.0568 0.0032 0.9300
39 3 6.2037 5.7758 0.4279 0.1831 6.8979
40 4 6.9590 6.3058 0.6532 0.4267 9.3871
41 2014 1 7.0914 7.8063 -0.7149 0.5110 10.0806
42 2 6.7836 7.2263 -0.4427 0.1960 6.5263
Evaluation part

43 3 6.7367 6.4892 0.2475 0.0613 3.6745

44 4 6.8255 6.6901 0.1354 0.0183 1.9834
45 2015 1 6.4827 6.9155 -0.4328 0.1873 6.6758
46 2 6.0846 6.1571 -0.0725 0.0053 1.1918
47 3 6.4829 5.7109 0.7720 0.5959 11.9075
48 4 6.6710 6.9073 -0.2363 0.0558 3.5418
49 2016 1 6.6660 6.8646 -0.1986 0.0394 2.9787
50 2 6.3668 6.6610 -0.2942 0.0866 4.6209
51 3 6.6972 6.0810 0.6162 0.3797 9.2004
52 4 7.0275 7.0447 -0.0172 0.0003 0.2454
53 2017 1 6.6317 7.3741 -0.7424 0.5511 11.1946
54 2 6.3194 6.2582 0.0612 0.0037 0.9686
55 3 6.4849 6.0218 0.4631 0.2145 7.1411
56 4 6.5125 6.6547 -0.1422 0.0202 2.1840
57 2018 1 6.5202 6.5402 -0.0200 0.0004 0.3070
58 2 6.2102 6.5279 -0.3177 0.1009 5.1159
59 3 6.6557 5.9149 0.7408 0.5487 11.1297
60 4 6.4462 7.1332 -0.6870 0.4719 10.6568
F(t+1) 6.2433 MSE 0.3305
MAPE 7.0374

Table 8.4: Fitted Values using Naïve with Trend Model

26 | F o r e c a s t i n g o f T o u r i s t A r r i v a l s a n d T o u r i s t R e c e i p t s i n M a l a y s i a
 Time (t ) Year Quarter Arrivals (y ) Average Error, e Error Sq ABS((e/y)*100)
1 2004 1 3.9785 5.8015 -1.8230 3.3233 45.8210
2 2 3.9109 5.8015 -1.8906 3.5743 48.3415
3 3 3.8218 5.8015 -1.9797 3.9192 51.7998
4 4 3.9922 5.8015 -1.8093 3.2735 45.3205
5 2005 1 4.1599 5.8015 -1.6416 2.6948 39.4622
6 2 4.0079 5.8015 -1.7936 3.2170 44.7513
7 3 4.0460 5.8015 -1.7555 3.0817 43.3882
8 4 4.2173 5.8015 -1.5842 2.5096 37.5640
9 2006 1 4.3793 5.8015 -1.4222 2.0226 32.4752
10 2 4.1849 5.8015 -1.6166 2.6134 38.6290
11 3 4.3390 5.8015 -1.4625 2.1389 33.7056
12 4 4.6437 5.8015 -1.1578 1.3405 24.9324

Estimation part
13 2007 1 5.2801 5.8015 -0.5214 0.2718 9.8746
14 2 5.4103 5.8015 -0.3912 0.1530 7.2304
15 3 4.9579 5.8015 -0.8436 0.7116 17.0150
16 4 5.3245 5.8015 -0.4770 0.2275 8.9583
17 2008 1 5.3423 5.8015 -0.4592 0.2109 8.5953
18 2 5.6208 5.8015 -0.1807 0.0326 3.2146
19 3 5.3667 5.8015 -0.4348 0.1890 8.1016
20 4 5.7226 5.8015 -0.0789 0.0062 1.3785
21 2009 1 5.4602 5.8015 -0.3413 0.1165 6.2504
22 2 5.8863 5.8015 0.0848 0.0072 1.4409
23 3 6.0316 5.8015 0.2301 0.0530 3.8151
24 4 6.2682 5.8015 0.4667 0.2178 7.4457
25 2010 1 5.7518 5.8015 -0.0497 0.0025 0.8638
26 2 6.1163 5.8015 0.3148 0.0991 5.1471
27 3 6.3670 5.8015 0.5655 0.3198 8.8819
28 4 6.3421 5.8015 0.5406 0.2923 8.5242
29 2011 1 5.5404 5.8015 -0.2611 0.0682 4.7124
30 2 5.8225 5.8015 0.0210 0.0004 0.3609
31 3 6.6671 5.8015 0.8656 0.7493 12.9834
32 4 6.6843 5.8015 0.8828 0.7794 13.2073
33 2012 1 5.5625 5.8015 -0.2390 0.0571 4.2964
34 2 6.0699 5.8015 0.2684 0.0720 4.4220
35 3 6.5212 5.8015 0.7197 0.5180 11.0365
36 4 6.8791 5.8015 1.0776 1.1613 15.6650
37 2013 1 6.4494 5.8015 0.6479 0.4198 10.0461
38 2 6.1033 5.8015 0.3018 0.0911 4.9451
39 3 6.2037 5.8015 0.4022 0.1618 6.4834
40 4 6.9590 5.8015 1.1575 1.3398 16.6333
41 2014 1 7.0914 5.8015 1.2899 1.6639 18.1898
42 2 6.7836 5.8015 0.9821 0.9645 14.4778
Evaluation part

43 3 6.7367 5.8015 0.9352 0.8746 13.8824

44 4 6.8255 5.8015 1.0240 1.0486 15.0028
45 2015 1 6.4827 5.8015 0.6812 0.4641 10.5082
46 2 6.0846 5.8015 0.2831 0.0802 4.6529
47 3 6.4829 5.8015 0.6814 0.4643 10.5109
48 4 6.6710 5.8015 0.8695 0.7561 13.0342
49 2016 1 6.6660 5.8015 0.8645 0.7474 12.9690
50 2 6.3668 5.8015 0.5653 0.3196 8.8791
51 3 6.6972 5.8015 0.8957 0.8023 13.3744
52 4 7.0275 5.8015 1.2260 1.5031 17.4459
53 2017 1 6.6317 5.8015 0.8302 0.6893 12.5189
54 2 6.3194 5.8015 0.5179 0.2682 8.1956
55 3 6.4849 5.8015 0.6834 0.4671 10.5385
56 4 6.5125 5.8015 0.7110 0.5055 10.9177
57 2018 1 6.5202 5.8015 0.7187 0.5165 11.0229
58 2 6.2102 5.8015 0.4087 0.1670 6.5813
59 3 6.6557 5.8015 0.8542 0.7297 12.8343
60 4 6.4462 5.8015 0.6447 0.4157 10.0014
F(t+1) 5.8015 MSE 0.6266
MAPE 11.1752

Table 8.5: Fitted Values using Average Forecast

27 | F o r e c a s t i n g o f T o u r i s t A r r i v a l s a n d T o u r i s t R e c e i p t s i n M a l a y s i a
 Time (t ) Year Quarter Arrivals (y ) Average Change Error, e Error Sq ABS((e/y)*100)
1 2004 1 3.9785
2 2 3.9109
3 3 3.8218
4 4 3.9922 3.7435 0.2488 0.0619 6.2309
5 2005 1 4.1599 4.0329 0.1271 0.0161 3.0542
6 2 4.0079 4.3290 -0.3211 0.1031 8.0104
7 3 4.0460 4.0158 0.0302 0.0009 0.7477
8 4 4.2173 3.9891 0.2283 0.0521 5.4122
9 2006 1 4.3793 4.3220 0.0573 0.0033 1.3084
10 2 4.1849 4.5460 -0.3611 0.1304 8.6274
11 3 4.3390 4.1687 0.1703 0.0290 3.9249
12 4 4.6437 4.3189 0.3248 0.1055 6.9955

Estimation part
13 2007 1 5.2801 4.8731 0.4070 0.1656 7.7082
14 2 5.4103 5.7507 -0.3404 0.1158 6.2908
15 3 4.9579 5.7936 -0.8357 0.6984 16.8559
16 4 5.3245 4.7968 0.5277 0.2785 9.9108
17 2008 1 5.3423 5.2816 0.0607 0.0037 1.1362
18 2 5.6208 5.5345 0.0863 0.0074 1.5354
19 3 5.3667 5.7690 -0.4023 0.1618 7.4953
20 4 5.7226 5.3789 0.3437 0.1181 6.0060
21 2009 1 5.4602 5.7735 -0.3133 0.0982 5.7379
22 2 5.8863 5.5070 0.3794 0.1439 6.4446
23 3 6.0316 5.9682 0.0634 0.0040 1.0520
24 4 6.2682 6.3173 -0.0491 0.0024 0.7833
25 2010 1 5.7518 6.4592 -0.7074 0.5003 12.2979
26 2 6.1163 5.6119 0.5044 0.2544 8.2468
27 3 6.3670 6.0404 0.3267 0.1067 5.1304
28 4 6.3421 6.6746 -0.3325 0.1106 5.2427
29 2011 1 5.5404 6.4550 -0.9146 0.8365 16.5078
30 2 5.8225 5.1271 0.6954 0.4836 11.9433
31 3 6.6671 5.5627 1.1044 1.2197 16.5649
32 4 6.6843 7.2305 -0.5461 0.2983 8.1706
33 2012 1 5.5625 7.1152 -1.5527 2.4109 27.9137
34 2 6.0699 5.0102 1.0597 1.1230 17.4583
35 3 6.5212 5.7627 0.7585 0.5753 11.6313
36 4 6.8791 7.0006 -0.1215 0.0148 1.7655
37 2013 1 6.4494 7.2837 -0.8343 0.6961 12.9361
38 2 6.1033 6.4135 -0.3102 0.0962 5.0825
39 3 6.2037 5.7154 0.4883 0.2384 7.8711
40 4 6.9590 6.0809 0.8781 0.7711 12.6189
41 2014 1 7.0914 7.3869 -0.2954 0.0873 4.1663
42 2 6.7836 7.5353 -0.7517 0.5650 11.0804
Evaluation part

43 3 6.7367 6.6959 0.0408 0.0017 0.6056

44 4 6.8255 6.5594 0.2662 0.0708 3.8993
45 2015 1 6.4827 6.8465 -0.3638 0.1323 5.6111
46 2 6.0846 6.3557 -0.2711 0.0735 4.4555
47 3 6.4829 5.7142 0.7688 0.5910 11.8581
48 4 6.6710 6.4830 0.1880 0.0353 2.8182
49 2016 1 6.6660 6.9642 -0.2982 0.0889 4.4734
50 2 6.3668 6.7576 -0.3908 0.1527 6.1373
51 3 6.6972 6.2147 0.4825 0.2328 7.2045
52 4 7.0275 6.7128 0.3147 0.0990 4.4781
53 2017 1 6.6317 7.3579 -0.7262 0.5273 10.9497
54 2 6.3194 6.5990 -0.2796 0.0781 4.4237
55 3 6.4849 5.9654 0.5196 0.2699 8.0117
56 4 6.5125 6.4115 0.1010 0.0102 1.5509
57 2018 1 6.5202 6.6091 -0.0888 0.0079 1.3627
58 2 6.2102 6.5379 -0.3277 0.1074 5.2760
59 3 6.6557 6.0591 0.5966 0.3560 8.9645
60 4 6.4462 6.7235 -0.2773 0.0769 4.3010
F(t+1) 6.5642 MSE 0.3669
MAPE 7.7880

Table 8.6: Fitted Values using Average Change Model

28 | F o r e c a s t i n g o f T o u r i s t A r r i v a l s a n d T o u r i s t R e c e i p t s i n M a l a y s i a
Time (t ) Year Quarter Arrivals (y ) Average Percent Change Error, e Error Sq ABS((e/y)*100)
1 2004 1 3.9785
2 2 3.9109
3 3 3.8218
4 4 3.9922 3.7458 0.2464 0.0607 6.1721
5 2005 1 4.1599 4.0357 0.1242 0.0154 2.9851
6 2 4.0079 4.3400 -0.3321 0.1103 8.2864
7 3 4.0460 4.0189 0.0271 0.0007 0.6709
8 4 4.2173 3.9913 0.2260 0.0511 5.3586
9 2006 1 4.3793 4.3266 0.0527 0.0028 1.2029
10 2 4.1849 4.5561 -0.3712 0.1378 8.8704
11 3 4.3390 4.1724 0.1666 0.0278 3.8398
12 4 4.6437 4.3226 0.3211 0.1031 6.9151

Estimation part
13 2007 1 5.2801 4.8922 0.3879 0.1504 7.3456
14 2 5.4103 5.8273 -0.4170 0.1739 7.7076
15 3 4.9579 5.8477 -0.8898 0.7918 17.9478
16 4 5.3245 4.8117 0.5128 0.2629 9.6302
17 2008 1 5.3423 5.2987 0.0436 0.0019 0.8154
18 2 5.6208 5.5487 0.0721 0.0052 1.2820
19 3 5.3667 5.7767 -0.4100 0.1681 7.6398
20 4 5.7226 5.3853 0.3373 0.1138 5.8945
21 2009 1 5.4602 5.7830 -0.3228 0.1042 5.9119
22 2 5.8863 5.5161 0.3702 0.1371 6.2898
23 3 6.0316 5.9810 0.0506 0.0026 0.8385
24 4 6.2682 6.3414 -0.0732 0.0054 1.1676
25 2010 1 5.7518 6.4685 -0.7167 0.5137 12.4605
26 2 6.1163 5.6277 0.4886 0.2387 7.9888
27 3 6.3670 6.0582 0.3088 0.0954 4.8507
28 4 6.3421 6.6992 -0.3571 0.1275 5.6311
29 2011 1 5.5404 6.4597 -0.9193 0.8451 16.5922
30 2 5.8225 5.1794 0.6431 0.4136 11.0453
31 3 6.6671 5.6027 1.0644 1.1329 15.9646
32 4 6.6843 7.3204 -0.6361 0.4046 9.5162
33 2012 1 5.5625 7.1777 -1.6152 2.6090 29.0378
34 2 6.0699 5.1029 0.9670 0.9351 15.9309
35 3 6.5212 5.8374 0.6838 0.4676 10.4858
36 4 6.8791 7.0611 -0.1820 0.0331 2.6450
37 2013 1 6.4494 7.3236 -0.8742 0.7642 13.5548
38 2 6.1033 6.4250 -0.3217 0.1035 5.2701
39 3 6.2037 5.7489 0.4548 0.2068 7.3308
40 4 6.9590 6.0883 0.8707 0.7582 12.5123
41 2014 1 7.0914 7.4399 -0.3485 0.1214 4.9139
42 2 6.7836 7.5905 -0.8069 0.6512 11.8956
Evaluation part

43 3 6.7367 6.7009 0.0358 0.0013 0.5312

44 4 6.8255 6.5672 0.2583 0.0667 3.7842
45 2015 1 6.4827 6.8469 -0.3642 0.1326 5.6179
46 2 6.0846 6.3626 -0.2780 0.0773 4.5695
47 3 6.4829 5.7450 0.7379 0.5445 11.3826
48 4 6.6710 6.4960 0.1750 0.0306 2.6228
49 2016 1 6.6660 6.9861 -0.3201 0.1025 4.8023
50 2 6.3668 6.7602 -0.3934 0.1548 6.1791
51 3 6.6972 6.2215 0.4757 0.2263 7.1025
52 4 7.0275 6.7207 0.3068 0.0941 4.3661
53 2017 1 6.6317 7.3831 -0.7514 0.5647 11.3310
54 2 6.3194 6.6085 -0.2891 0.0836 4.5745
55 3 6.4849 5.9926 0.4923 0.2423 7.5908
56 4 6.5125 6.4171 0.0954 0.0091 1.4645
57 2018 1 6.5202 6.6116 -0.0914 0.0084 1.4024
58 2 6.2102 6.5379 -0.3277 0.1074 5.2773
59 3 6.6557 6.0662 0.5895 0.3475 8.8565
60 4 6.4462 6.7362 -0.2900 0.0841 4.4989
F(t+1) 6.5760 MSE 0.3688
MAPE 7.8337

Table 8.7: Fitted Values using Average Percent Change Model

29 | F o r e c a s t i n g o f T o u r i s t A r r i v a l s a n d T o u r i s t R e c e i p t s i n M a l a y s i a
 Time (t ) Year Quarter Arrivals (y ) SES Error, e Error Sq ABS((e/y)*100)
1 2004 1 3.9785 3.9785 0.0000 0.0000 0.0000
2 2 3.9109 3.9785 -0.0676 0.0046 1.7285
3 3 3.8218 3.9593 -0.1375 0.0189 3.5968
4 4 3.9922 3.9201 0.0721 0.0052 1.8050
5 2005 1 4.1599 3.9406 0.2193 0.0481 5.2706
6 2 4.0079 4.0030 0.0049 0.0000 0.1211
7 3 4.0460 4.0044 0.0416 0.0017 1.0275
8 4 4.2173 4.0163 0.2010 0.0404 4.7671
9 2006 1 4.3793 4.0735 0.3058 0.0935 6.9834
10 2 4.1849 4.1605 0.0244 0.0006 0.5828
11 3 4.3390 4.1675 0.1715 0.0294 3.9536
12 4 4.6437 4.2163 0.4274 0.1827 9.2044

Estimation part
13 2007 1 5.2801 4.3379 0.9422 0.8877 17.8440
14 2 5.4103 4.6061 0.8042 0.6468 14.8650
15 3 4.9579 4.8349 0.1230 0.0151 2.4800
16 4 5.3245 4.8699 0.4546 0.2066 8.5372
17 2008 1 5.3423 4.9993 0.3430 0.1176 6.4204
18 2 5.6208 5.0969 0.5239 0.2745 9.3204
19 3 5.3667 5.2460 0.1207 0.0146 2.2488
20 4 5.7226 5.2804 0.4422 0.1956 7.7279
21 2009 1 5.4602 5.4062 0.0540 0.0029 0.9886
22 2 5.8863 5.4216 0.4647 0.2160 7.8949
23 3 6.0316 5.5538 0.4778 0.2283 7.9209
24 4 6.2682 5.6898 0.5784 0.3345 9.2274
25 2010 1 5.7518 5.8544 -0.1026 0.0105 1.7841
26 2 6.1163 5.8252 0.2911 0.0847 4.7592
27 3 6.3670 5.9081 0.4589 0.2106 7.2082
28 4 6.3421 6.0387 0.3034 0.0921 4.7844
29 2011 1 5.5404 6.1250 -0.5846 0.3418 10.5520
30 2 5.8225 5.9586 -0.1361 0.0185 2.3382
31 3 6.6671 5.9199 0.7472 0.5583 11.2073
32 4 6.6843 6.1325 0.5518 0.3044 8.2544
33 2012 1 5.5625 6.2896 -0.7271 0.5286 13.0710
34 2 6.0699 6.0827 -0.0128 0.0002 0.2101
35 3 6.5212 6.0790 0.4422 0.1955 6.7806
36 4 6.8791 6.2049 0.6742 0.4546 9.8012
37 2013 1 6.4494 6.3968 0.0526 0.0028 0.8164
38 2 6.1033 6.4117 -0.3084 0.0951 5.0536
39 3 6.2037 6.3240 -0.1203 0.0145 1.9384
40 4 6.9590 6.2897 0.6693 0.4479 9.6173
41 2014 1 7.0914 6.4802 0.6112 0.3736 8.6189
42 2 6.7836 6.6541 0.1295 0.0168 1.9083
Evaluation part

43 3 6.7367 6.6910 0.0457 0.0021 0.6785

44 4 6.8255 6.7040 0.1215 0.0148 1.7801
45 2015 1 6.4827 6.7386 -0.2559 0.0655 3.9471
46 2 6.0846 6.6658 -0.5812 0.3377 9.5513
47 3 6.4829 6.5004 -0.0175 0.0003 0.2693
48 4 6.6710 6.4954 0.1756 0.0308 2.6324
49 2016 1 6.6660 6.5454 0.1206 0.0146 1.8096
50 2 6.3668 6.5797 -0.2129 0.0453 3.3439
51 3 6.6972 6.5191 0.1781 0.0317 2.6592
52 4 7.0275 6.5698 0.4577 0.2095 6.5131
53 2017 1 6.6317 6.7001 -0.0684 0.0047 1.0307
54 2 6.3194 6.6806 -0.3612 0.1305 5.7158
55 3 6.4849 6.5778 -0.0929 0.0086 1.4326
56 4 6.5125 6.5514 -0.0389 0.0015 0.5968
57 2018 1 6.5202 6.5403 -0.0201 0.0004 0.3083
58 2 6.2102 6.5346 -0.3244 0.1052 5.2234
59 3 6.6557 6.4423 0.2134 0.0456 3.2068
60 4 6.4462 6.5030 -0.0568 0.0032 0.8813
F(t+1) 6.4868 MSE 0.1348
MAPE 4.2953
Alpha 0.2846

Table 8.8: Fitted Values using Single Exponential Smoothing Technique

30 | F o r e c a s t i n g o f T o u r i s t A r r i v a l s a n d T o u r i s t R e c e i p t s i n M a l a y s i a