Modelling the heterogeneity of tourist spending in a mature destination: An approach through infinite mixture

Abstract

Identifying tourists' preferences is essential for stakeholders to provide better products and services. Among the tools to classify such choices, expenditure segmentation is valuable for separating tourist groups with shared interests. The underlying idea of the (infinite) mixture model is that tourists spend on a specific activity depending on their preferences. However, the propensity to consume may be based on or influenced by the group to which the tourist belongs. Thus, such a tendency could increase depending on homogeneity or heterogeneity. This paper uses a compound distribution mixture to model the expenditure heterogeneity. The resulting mixture model derives from a multivariate Pareto (Lomax) distribution that is easy to implement and includes zero value in its support since it is empirically proven that a tourist's expenditure on some activity can be zero. Results show that once the spending on transport has been carried out, tourists prefer to spend more on food than other activities. Conditioned to the expense carried out on food, the mean expenditure on leisure activities is more significant than on transport. Finally, tourists would prefer to spend more on food than on transportation once they decide to spend on other activities.

Keywords

• Empirical and non empirical Bayes
• Heterogeneous expenditure
• Multivariate Pareto distribution
• Tourism