Optimizing tourist demands with utility efficient frontier

Abstract

Mean-variance portfolio analysis leads to determine tourist demands mix but it does not provide any information regarding the risk attitude of the decision maker. In this article, we propose to fill this research gap by proposing a methodological approach which combines the portfolio theory with the utility function technique. By doing so, our approach incorporates the risk attitude of the decision maker through different values of risk tolerance. We apply this methodology on destination management framework. An illustration of its strengths is suggested by using the case study of European tourists visiting France between 2008 and 2013. Our article shows that the optimal origins mix depends on the level of risk aversion of the destination manager. Accordingly, the implications of our methodological approach are highlighted.