Risk management in the Irish tourism industry: the contribution of a portfolio investment approach

Abstract Economies that have become dependent on the tourism industry for job creation, income generation and foreign exchange revenues should encourage diversification within their tourism markets in order to limit the adverse effects of a downturn in tourist demand. Policy makers and strategists with responsibility for the long term development of the industry should seek to attract a range of nationalities which will minimize the volatility of demand. The problem facing the policy maker is analogous to that of the investor confronted with a range of securities which exhibit different levels of risk and return. A portfolio selection methodology utilized by investors in the securities markets is applied to Irish tourism markets, and a range of market mixes which minimize risk and maximize revenue growth are estimated.