Artificial neural networks in modelling seasonal tourism demand - case study of Croatia

The purpose of this paper is to design an artificial neural network in the attempt to define the data generating process of the number of German tourist arrivals in Croatia considering the strong seasonal character of empirical data. The presence of seasonal unit roots in tourism demand determinants is analysed using the approach developed by Hylleberg, Engle, Granger and Yoo – Hegy test. The study is based on seasonality analysis and Artificial Neural Networks approach in buildinga model which intend to describe the behaviour of the German tourist flows to Croatia. Different neural network architectures were trained and tested, and after the modelling phase, the forecasting accuracy and model performances were analysed. Model performance and forecasting accuracy evaluation was tested using the mean absolute percentage error.Based on the augmented HEGY test procedure it can be concluded the German tourist arrivals to the Republic of Croatia have nonstationary behaviour associated with the zero frequency and seasonal frequency. Taking this into consideration, in theanalysis of the phenomenon it is necessary to consider its seasonal character. Given the importance of the tourism for Croatian economic development, the research results could be useful, for both, researchersand practitioners, in the process of planning and routing the future Croatian hotel industry development and improvement of business performances.