Using Discrete Hidden Markov Model for Modelling and Forecasting the Tourism Demand in Isfahan

Tourism has been increasingly gaining acceptance as a driving force to enhance the economic growth because it brings the per capita income, employment and foreign currency earnings. Since tourism affects other industries, in many countries, tourism is considered in the economic outlook. The perishable nature of most sections dependent on the tourism has turned the prediction of tourism demand an important issue for future success. The present study, for the first time, uses the Discrete Hidden Markov Model (DHMM) to predict the tourism demand. DHMM is the discrete form of the well-known HMM approach with the capability of parametric modeling the random processes. MATLAB Software is applied to simulate and implement the proposed method. The statistic reports of Iranian and foreign tourists visiting Isfahan gained by Iran Cultural Heritage, Handicrafts, and Tourism Organization (ICHHTO)-Isfahan Tourism used for simulation of the model. To evaluate the proposed method, the prediction results are compared to the results from the Grey model and Persistence method on the same data. Three errors indexes, MAPE (%), RMSE, and MAE, are also applied to have a better comparison between them. The results reveal that compared to two other methods, DHMM performs better in predicting tourism demand for the next year, both for Iranian and foreign tourists.