Insights from analysing tourist expenditure using quantile regression

Abstract

Mature tourism destinations are increasingly needing to diversify their products and markets. To be successful, such strategies require a very detailed understanding of potential tourists’ levels and patterns of spending. Empirical studies of tourist expenditure have tended to employ ordinary least squares regression for this purpose. There are, however, a number of important limitations to this technique, chief among which is its inability to distinguish between tourists who have higher- and lower-than-average levels of spending. As such, some researchers recommend the use of an alternative estimation technique, known as quantile regression, which does allow such distinctions to be made. This study uses a single data set, collected among rural tourists in Madeira, to analyse the determinants of tourist expenditure using both techniques. This enables direct comparison to be made and illustrates the additional insights to be gained using quantile regression.