Relationship between price sensitivity and expenditures in the choice of tourism activities at the destination

Abstract

The analysis of the drivers of expenditures is an important topic that has been studied in the literature; however, the effect of individual price sensitivities to tourism activities on on-site expenditures has received no attention. Price sensitivity is an internal characteristic of the individual related to an external, very influential variable (price), and expenditures on tourism activities represent direct income for the destination. On this account, the objective of this study is to analyse the effect of individual price sensitivity on tourists' expenditures tourists on vacation activities. The operative formalization follows a mixed logit model to estimate individual sensitivities to price, and then a regression analysis to detect their effect on expenditures. The empirical application finds that price sensitivity has a non-linear quadratic influence on holiday expenditures. The managerial implications are also outlined.