Segmenting Markets by Travel Expenditure Patterns: The Case of International Visitors to Australia

Abstract

This article addresses the issue of segmenting markets according to drivers of travel expenses, exemplified by the case of international visitors to Australia and modeled by means of hedonic (log-linear) regression. Based on characteristics of a trip (number of travel companions from the same household, duration of trip, and choice of type of accommodation) as well as the reason for travel and influences to come to Australia, the overall expenditure for a trip is estimated by log-linear regression. The results (all ceteris paribus) reveal that visitors from mature markets, most of them in Europe, tend to spend approximately 20% to 30% less on a trip to Australia than those from less mature markets, most of them in Asia. Attending conferences as a delegate, visitation to rural areas such as the outback, and travel aimed at enjoying local food and beverages are associated with higher spending compared to other reasons for visiting Australia. In contrast, (commoditized) beach holidays and visitation to events lead to comparably less spending. With regard to accommodation, the use of hotels results in expenditure of 20% higher than average for other forms of accommodation, whereas staying with friends and relatives leads to expenditures of 8% to 14% less than average. Finally, travelers on group tours spend up to 10% less than average.

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