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Reading tea leaves in the tourism industry: A Case Study in the Gulf Oil Spill

March 24, 2011

Posted by Hyunyoung Choi and Paul Liu, Senior Economists

A few years ago, our in-house economists, Hal Varian and Hyunyoung Choi, demonstrated how to “predict the present” with monthly visitor arrivals to Hong Kong. We took this idea further to see if search queries could predict the future. If users start to research their travel plans some weeks or months in advance, then intuitively shouldn’t we be able to extend "predicting the present" into "predicting the future?" We decided to test it out by focusing on a region whose tourism was recently severely impacted: Florida’s gulf coast.

With the travel industry still in the midst of recovering from a deep recession, the Gulf Oil spill had the potential to do significant economic damage. Our case study on the Gulf Oil spill helped find useful insight into people’s future travel plans to Florida; in fact, we found that travel search queries actually were good predictors for trips to Florida, and destinations within Florida, about 4 weeks later.

The results we saw surprised us. Google Insights for Search suggested that at least with respect to hotel bookings (using data from Smith Travel Research, Inc.), the aggregate effect of the oil spill was modest on Florida travel, since travelers tended to shift their destinations from the affected regions on the west coast to the east coast or central regions of Florida. In particular, hotel bookings for affected areas along the Gulf coast were 4.25% less than predicted, and unaffected areas along the Atlantic coast were 4.89% greater than predicted.

You can read the full case study here or try your own hand at predicting the future!