Forecasting the consequences of negative atypical events: the case of tourism and terrorist attacks

In this chapter, we describe how time series analysis can often provide better insight than prior year data for predicting the total impact of an atypical event – including (1) taking into account other atypical events, (2) determining if the impact lasted greater than one season, and (3) adjusting for any performance/metric “rebounding” in subsequent seasons. We demonstrate using time series analysis to estimate the impact of the 9–11 terror attacks on the Hawaiian tourism industry. Terror attacks, in addition to the potential loss of life and property, can induce a post event fear factor that results in decreased revenue and profitability for businesses and their respective industries, insurers, and tax-receiving governments.