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doi:10.1016/j.annals.2011.09.006

Annals of Tourism Research, Vol. 39, No. 1, pp. 495–498, 2012

0160-7383/$ - see front matter Ó 2011 Elsevier Ltd. All rights reserved.
Printed in Great Britain

ANOTHER LOOK AT THE DETERMINANTS

OF TOURISM EXPENDITURE

Wei-Ting Hung
Vanung University, Taiwan
Jui-Kou Shang, Fei-Ching Wang
Jinwen University of Science and Technology, Taiwan

It is essential to understand the determinants of tourism expenditure since the

revenue has become a major source of income in many countries. Mok and Iverson
(2000) suggested that segmenting tourists based on tourism expenditures might be
a useful alternative to the conventional approach of segmenting visitors according
to travel activities. Recent studies applied tourism expenditure as a segmentation
variable to distinguish between heavy spenders and light spenders in terms of
demographic and socioeconomic factors has provided fruitful results (Aguilo &
Juaneda, 2000; Craggs & Schofield, 2009; Dolnicar et al., 2008; Legoherel, 1998;
Mok & Iverson, 2000; Pizam & Reichel, 1979; Spotts & Mahoney, 1991).
496 Research notes and reports / Annals of Tourism Research 39 (2012) 480–502

However, the above studies have applied the OLS method, cluster and factor
analysis and revealed mixed results. The limitation of the traditional regression
model is that it only considers the average relationship between household tourism
expenditures and other explanatory variables. Additionally, dividing the sample
into different categories and using separate equations to distinguish the different
spending behavior of heterogeneous households may lead to misleading results
(Koenker & Hallock, 2001). Quantile regression provides a flexible and complete
characterization of the determinants of household spending patterns. Moreover,
total amount of expenditure was often used as dependent variable in previous stud-
ies (Mok & Iverson, 2000; Spotts & Mahoney, 1991). As in Koenker and Hallock
(2001) and Ronning and Schulze (2004), we used the percentage of household
income spent on tourism (PTE) to account for the interaction between tourism
expenditure and other consumptions. Thus, the major distinctions between previ-
ous related studies and this study are the application of quantile regression ap-
proach and the use of PTE as dependent variable. Therefore, the objective of
this study is to use a novel approach to distinguish the determinants of household
with different tourism expenditure so as to fully understand tourist consumption
behavior and provide information for tourism marketing.
Data used in this study were drawn from the 2006 Survey of Family Income and
Expenditure (SFIE) in Taiwan. After discarding incomplete data, data for 11,213
households were used in the study. Household income (INCOME), and age
(AGE) and education (EDUCATION) of the household head were used as vari-
ables for representing family characteristics. Educational level of the household
heads was divided into ten categories, from 1 to 10 in SFIE, where a larger number
represents a higher educational level. Additionally, household income and the
amount spent on other goods and services may affect tourism expenditure (Dolni-
car et al., 2008). The model also included variables of home loan expenses
(LOAN) (yes = 1, no = 0) and medical and health care expenses (HEALTH).
Household Internet access (INTERNET) (yes = 1, no = 0) and car ownership
(CAR) (yes = 1, no = 0) were also used as indicators of information and transporta-
tion accessibility, respectively. These variables indicate the financial and social sta-
tus of a household, possibly affecting tourism expenditures. Similar to Lee, Var,
and Blaine (1996), all numerical variables except for PTE were natural log-trans-
formed. Statistical analyses were conducted using STATA 11.0 statistical software.
For more detailed information on methodology of quantile regression analysis,
please refer to Koenker (2005). Table 1 lists the estimated coefficients for the inde-
pendent variables at the 10th, 25th, 50th, 75th and 90th quantiles. The PTE below
50th quantile (e.g. 10th and 25th quantiles) are defined as light spenders, the
PTE at 50th quantile is regarded as medium spenders, and the PTE greater than
50th quantile (e.g. 75th and 90th quantiles) are represented as heavy spenders in
this study. The OLS results are also listed for comparison purposes.
The OLS regression results reveal that age and education of the household head
correlated significantly and positively with PTE. The quantile regression results fur-
ther showed that the marginal effect on PTE increased with an increasing age and
educational level of the household head. The positive influence of AGE on PTE
may have resulted from older household heads whom can afford extra time and
money for family travel. Additionally, the age of household head has a large posi-
tive effect in households with a large PTE. For light spenders, age effects are rela-
tively small. Moreover, the relationship between educational level and PTE is
significantly positive. In addition, educational level affects PTE the most among
heavy spenders. This effect may be owing to that well educated people have rela-
tively fewer tourism information-related search costs than less educated people
do and, thus, have more travel opportunities. Another possibility is that well edu-
cated people have better communicative competence and knowledge than less
educated ones and, thus, willing to spend more on travel.
 Research notes and reports / Annals of Tourism Research 39 (2012) 480–502 497

Table 1. Empirical Results for Tourism Expenditure

OLS 10th quantile 25th quantile 50th quantile 75th quantile 90th quantile

Constant 4.779874*** 0.8756146*** 0.233 2.020026*** 7.834294*** 14.49498***

(0.000) (0.000) (0.231) (0.000) (0.000) (0.000)
AGE 2.328015*** 0.0909791*** 0.2656902*** 0.6998093*** 1.849434*** 4.247944***
(0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
EDUCATION 0.4443085*** 0.0248234*** 0.0581055*** 0.1478484*** 0.4178101*** 0.9944473***
(0.000) (0.000) (0.000) (0.000) (0.000) (0.000)
INCOME 0.279793*** 0.0857311*** 0.0747333*** 0.0331 0.322866*** 0.0627
(0.000) (0.000) (0.000) (0.283) (0.000) (0.761)
LOAN 0.1389733* 0.0332013*** 0.0327646** 0.035 0.111 0.3887618**
(0.068) (0.001) (0.032) (0.243) (0.149) (0.033)
HEALTH 0.214688*** 0.0219428*** 0.0335201*** 0.0956972*** 0.3115674*** 0.3598603***
(0.000) (0.001) (0.000) (0.000) (0.000) (0.004)
INTERNET 0.0754 0.0544392*** 0.0645905*** 0.059511** 0.0218 0.0502
(0.341) (0.000) (0.000) (0.037) (0.752) (0.810)
CAR 0.2574323*** 0.0499264*** 0.0752892*** 0.1066447*** 0.0732 0.2507
(0.001) (0.000) (0.000) (0.001) (0.293) (0.246)

*Significant at 10%-level; **significant at 5%-level; ***significant at 1%-level.

The OLS regression estimates indicate that household income level negatively
and significantly correlates with PTE. However, quantile regression results indicate
that the estimated coefficients are negative in lower quantiles and positive in high-
er ones. This implies that household income has negative effects on PTE for light
spenders and positive effects on heavy tourism spenders. We can infer that tourism
product is considered an inferior good by light spenders and is considered a nor-
mal good by heavy spenders. These results are in line with Sinclair and Stabler
(1997), who suggested that tourism can be either a normal good or an inferior
good. The results are also consistent with Koenker and Hallock (2001), which dem-
onstrated that different Engel curves for heavy and light spenders reflect different
income elasticities for consumers.
According to the OLS results, home loans are negatively related to PTE. The
quantile regression results reveals that the negative relationships home loans
and PTE are significant for light spenders. This phenomenon may be partially ow-
ing to the crowding out effect of home loans. Both OLS regression and quantile
regression results demonstrate a significant negative relationship between medical
and health care expenses and PTE. That is, medical and health care expenses are
the key determinants of household tourism expenditures in Taiwan. The relation-
ship is negative since health status is the main constraint on travel for senior trav-
elers.
Most studies recognize the Internet as the major information source for travel
decisions and planning (Pan & Fesenmaier, 2006). The quantile regression results
reveal that Internet access has a positive influence on expenditure for light and
medium spenders. However, Internet access is not a main information source
for heavy spenders. Finally, the OLS regression results show that car ownership
is positively associated with PTE. Additionally, the quantile regression results indi-
cate that car ownership is less important to heavy spenders than it is to light spend-
ers.
This study sheds light on household tourism spending behavior by applying the
quantile regression approach and using PTE as a dependent variable. In addition
to confirming the results of related studies, this study provides further insight into
498 Research notes and reports / Annals of Tourism Research 39 (2012) 480–502

the determinants of tourism expenditure. Based on our empirical evidence, tour-

ism product is considered an inferior good by light spenders and is considered a
normal good by heavy spenders. Home loans are one of the major constraints of
tourism spending for light spenders. Internet access and car ownership play major
facilitating roles in tourism spending of light and medium spenders. Due to the
limited available data, the findings of this study should not be over-generalized.
Further detailed investigation and a comparison of tourism expenditure determi-
nants among different countries are still needed. Nevertheless, the results of this
study on tourist spending behavior are expected to provide a valuable reference
for market segmentation based on household tourism expenditure.

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Received 14 April 2011; revised 1 August 2011; accepted for publication 8 September 2011

doi:10.1016/j.annals.2011.09.006