Modeling expenditure differentials of international tourists by targeted utility: A synthesized theoretical and quantile decomposition approach

Abstract

This paper introduces conditional counterfactual quantile decomposition methods to the literature on tourism consumption, where observed expenditure differentials are directly referred to differences in tourists’ targeted utility. Decomposition terms are synthesized with the neoclassical framework of utility‐constrained expenditure minimization, such that their interpretations do not rely on the approximation of tourists’ preferences by typical socioeconomic expenditure determinants. Using survey data from an underrepresented sun, sea, and sand destination, we show that differences in tourists’ targeted utility prior to the trip translate exclusively into higher quantities demanded of consumption‐related antecedents, as opposed to higher prices paid by high utility‐targeting tourists. The paper suggests that decomposition analysis may guide profit maximization in the tourism industry.

Psychological Factors of Tourist Expenditure: Neglected or Negligible?

“…Indeed, there were only nine cases which had a negative and statistically significant relationship. The income variable has been found to be significant in most recent research as well (e.g., Correia et al, 2018;Almeida and Garrod, 2021;Alfarhan et al, 2022a).…”

“…The age of respondents is one of the factors most frequently mentioned when trying to explain tourist expenditure albeit without any general agreement among researchers regarding its possible impact. It has had a positive effect on expenditure in a number of studies with older participants being more inclined to spend than younger ones ( Brida and Scuderi, 2013 ; Pellegrini et al, 2021 ; Alfarhan et al, 2022a ). In contrast, however, some other studies have demonstrated the opposite effect ( Bernini and Cracolici, 2015 ; Yang et al, 2021 ).…”

“… Alfarhan et al (2022a) have noted that purchasing a tourism package increases the expenditure of high utility-targeting tourists and does not affect the expenditure of low utility-targeting tourists. Travelers who organize their entire trip with tour operators tend to spend more than those who do not make any reservations in advance and only reserve partial elements of the trip ( Park et al, 2020 ).…”

“…The other four factors usually examined are related to the nature of the destination, the number and type of activities, the mode of transport and purpose of the journey. These have not been included in the current model due to their specific nature (for an overview, see e.g., David-Negre et al, 2018 ; Park et al, 2020 ; Alfarhan et al, 2022a ). Moreover, Alfarhan et al (2022b) in their recent approach argue that expenditure and expenditure differentials are, in fact, driven by cognitive differences (namely as regards prosperity at the country of residence and individual travel aspiration), however, in a more aggregated sense.…”

How do prosperity and aspiration underlie leisure tourism expenditure patterns?

“…Detailed information on the quantile regression outputs using this data set are presented inAlfarhan et al (2021aAlfarhan et al ( , 2021b.…”