Modelling tourist expenditure at origin and destination

Abstract

This article proposes a model of foreign tourist expenditure, based on expenditure in the country of origin (i.e. reservation of accommodation and transport) and on goods and services at the destination. The study focuses on two measures reflecting the two types of expenditure: the tourist budget share and the difference in growth rates between expenditure at origin and at destination. The random nature of each of these variables is taken into account. The tourist budget share is determined using a fractional response model, based on the beta distribution. This approach allows us to accommodate certain aspects of the empirical budget share distribution, such as skewness, and to represent the results as bounded between 0 and 1, but also to include covariates. The empirical analysis was conducted using data obtained by the Canary Islands Tourist Expenditure Survey, focusing on German and British tourists in particular. The results obtained show that the fractional regression model proposed represents the behaviour of the relevant variables reasonably well and surpasses the performance of the linear regression model.