Forecasting tourism demand in a transit economy

China's domestic tourism market makes up more than 90 percent of the country's tourist traffic, and contributes more than 70 percent of total tourism receipts. This study proposed a demand model that examined the relationship between the annual expenditure of urban domestic travelers and per capita GDP. It was found that the demand theory developed in market economies was applicable in a Income elasticity of domestic travel in China's urban areas was determined to be 0.30. The model also recognized the positive effect of the country's Special Economic Zones on the domestic demand. Underlying reasons of the study's findings were discussed. The model can be used to forecast domestic demand from China urban centers. Implications of the study include the suggestion that the demand measurement of expenditure is more appropriate than person trips in the Chinese context and from the perspective of destination marketing.