The effects of energy consumption and economic growth on tourism: A path to economic diversification in GCC economies

Abstract

This research examines the effects of energy consumption and economic growth on tourism in GCC economies. Gulf Corporation Council (GCC) countries have encountered economic growth uncertainties owing to the fluctuations in oil prices and are working to diversify their economies. Reducing reliance on oil and promoting non-hydrocarbon sectors like tourism can achieve economic diversification. The tourism industry requires energy to match the demands of luxury-driven hospitality, and tourism growth contributes to GDP. Using panel data from the GCC countries, we investigate the impact of energy consumption and economic growth on tourism. We employed feasible generalized Least Squares (FGLS) for empirical analysis. We also used panel corrected standard errors (PCSEs) and Driscoll-Kraay standard errors (DKSEs) methods for further robustness checks. Tourism is linked to increased energy consumption and economic growth. Our empirical results revealed that the tourism industry is growing as energy consumption and economic growth rise. Our results hold true even when different tourism proxies and econometric techniques are used. The policy implication is that the governments of the GCC countries should develop appropriate energy policies to boost tourism that help these economies in economic diversification efforts.