Abstract
Market “shocks” are especially problematic for demand forecasting. Conventional approaches assume that the future will be like the past and that the market will continue to develop and evolve in a smooth and continuous way. But this approach breaks down if the market is hit by an external “shock”. This paper explores the process of forecasting the short and longer term impact of a negative market shock on demand for travel. The suggested method is a bottom-up approach based on market segmentation and a simple response-recovery model that represents the profile of the response over time using a small number of parameters, each with a clear practical interpretation. The paper uses the Fiji and Tonga air travel markets as case studies, but the approach is transferable and could equally be applied to a range of other markets, transport modes and types of market shocks.
