Modelling dependence between daily tourist expenditure and length of stay

Abstract

In this article, tourists’ choice of the number of stays (length of stay, a discrete variable) and daily expenditure (a continuous variable) is modelled relaxing the linearity assumption and employing a structural form. A bivariate copula distribution, specified in terms of the marginal distributions of daily tourist expenditure and length of stay, is used to model and test dependence. We propose the Farlie–Gumbel–Morgenstern family of distributions, which provides a powerful tool to build a bivariate distribution with a flexible covariance structure and weak dependence. In addition, covariates can be introduced to study the factors that affect both variables simultaneously. Using Canary Islands Tourist Expenditure Survey data, the estimation results obtained indicate a negative correlation and weak dependence structure between the number of nights’ stay and the daily expenditure. The signs of the coefficients of the socio-economic variables and of the vacation characteristics are generally in line with the findings of empirical literature.