“Determinants of Tourism Expenditure in Ticino”
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University of Lugano Faculty of Economics and Communication Sciences Master in International Tourism “Determinants of tourism expenditure in Ticino” Master’s thesis Author: Maria Novella Baronio Supervisor: Prof. Massimo Filippini Second Reader: Prof. Rico Maggi Academic year: 2016/2017 Submission date: 22/09/2017 To my present and future family ii Table of Content List of Acronyms ........................................................................................ iv List of Figures .............................................................................................. v List of Tables .............................................................................................. vi Abstract ...................................................................................................... vii 1 Introduction ............................................................................................ 1 2 Literature Review ................................................................................... 5 3 Data Analysis ......................................................................................... 9 3.1 Data source ........................................................................................................... 9 3.2 Sample ................................................................................................................ 10 3.3 Sample analysis .................................................................................................. 12 3.4 Tourism expenditure ............................................................................................ 23 3.5 Expenditure analysis ........................................................................................... 26 4 Regression Analysis ........................................................................... 29 4.1 Hypotheses.......................................................................................................... 29 4.2 Definition of the model ......................................................................................... 31 4.3 Result of the regressions analysis ....................................................................... 32 4.4 Discussion ........................................................................................................... 36 5 Conclusion and Findings .................................................................... 42 5.1 Personal assessment .......................................................................................... 43 5.2 Limitation and future research ............................................................................. 44 Bibliography ............................................................................................... 46 Appendix .................................................................................................... 49 iii List of Acronyms EUROSTAT Statistical Office of the European Communities FSO Federal Statistical Office OLS Ordinary Least Squares UNWTO United Nation World Tourism Organization VFR Visiting Friends and Relative iv List of Figures Figure 1: Total number of people in the travel party .......................................................... 13 Figure 2: Age of the tourists ............................................................................................... 13 Figure 3: Definition of tourists’ type .................................................................................... 14 Figure 4: Country of residence of the tourists .................................................................... 15 Figure 5: Number of attraction visited at the destination .................................................... 16 Figure 6: Type of accommodation used ............................................................................. 17 Figure 7: Total daily expenditure ........................................................................................ 26 Figure 8: Means of transport used to arrive at the destination ........................................... 49 Figure 9: Means of transport used to move around the destination ................................... 49 Figure 10: Events participation .......................................................................................... 50 Figure 11: Expenditure allocation (overnight tourists) ........................................................ 50 Figure 12: Expenditure allocation (daily tourists) ............................................................... 51 Figure 13: Correlation matrix relative to overnight tourist................................................... 52 Figure 14: Correlation matrix relative to daily tourist .......................................................... 53 Figure 15: Residuals vs fitted value in the case of overnight tourists ................................. 54 Figure 16: Residuals vs fitted value in the case of daily tourists ........................................ 55 Figure 17: Spearman and Pearson coefficient for overnight tourists ................................. 56 Figure 18: Spearman and Pearson coefficient for daily tourists ......................................... 59 v List of Tables Table 1: Size of the final sample ........................................................................................ 11 Table 2: Summary statistics for the variables considered .................................................. 18 Table 3: Regression analysis ............................................................................................. 33 vi Abstract Understanding the drivers of tourist expenditure—and the impact that each characteristic has—is fundamental to managing and influencing the economic impact of tourism at any destination. In particular, it is crucial to understand how tourism expenditure is allocated and what its determinants are. The aim of this study is to understand more deeply how tourists distribute their travel budget in accordance with their characteristics and, hence, identify the more important features that define a high level of expenditure. In particular, the determinants of expenditure are estimated for overnight tourists and for daily tourists visiting Ticino. The method used to find out the most important characteristics is the linear regression analysis: this method allows us to compute the impact, positive or negative, of each variable, and to understand whether or not it is an important element in determining the final expenditure level. The results will reveal that some variables—such as the type of companion, the age, the education, the ways to move around at the destination, or the activities performed at the destination—are important variables in both cases, while other characteristics are significant for only a single category. Namely, the number of adults in the household, the type of accommodation used, the size of the party, the place of residence, the purpose of the trip, and the importance of the event in the choice of Ticino as a destination are significant in the case of overnight tourists. Again, the means of transportation used to reach the destination and the gender of the tourists are significant factors in the case of daily tourists. Key words: tourism expenditure, behaviour, linear regression vii 1 Introduction Tourism is becoming increasingly more valuable over time. The economic impact provided, both in terms of expenditure and work places created, is central and a crucial aspect to consider: increasing the tourism expenditure creates more opportunities and more richness for the state or region. Nevertheless, to have more opportunity for increasing tourism expenditure, it is crucial to know which elements create and determine the tourism demand in a specific area. As Lee et al. explained: “Tourism today carries not only sociocultural and political significance but also provides considerable economic benefits. For many countries, tourism expenditure has become an important source of business activity, income, employment and foreign exchange. Realizing the growing significance of tourism, governments, local authorities and private sectors in many countries, regions and communities have begun to funnel their resources into tourism development” (Lee et al., 1996, p. 527). In Switzerland, tourism is a source of employment and an important business activity. However, as the Federal Statistical Office underlined, a total number of 37.7 million overnight stays were registered in Switzerland in 2015 representing a decline of more than 3% from 2008. In particular, Swiss tourists moving inside their country represented 16.1 million overnight stays with a slight increase, of 0.2%, from 2014, whilst foreign tourists were 19.6 million, 1.7% less compared to 2014 (FSO, 2016, pagg. 12/13). This means that even if Switzerland is a popular tourism destination (based on the information that can be obtained from examining the data related to international tourists’ arrival), the overall number of tourists is decreasing. In other words, it is no longer possible to focus only on strategy to increase the total number of tourists coming to the destination but it is central to focus on the demand of the actual tourists and understand how it is possible to increase their expenditure. Svensson et al. (2011, p. 1683) state that “in the current environment of growing competitiveness, destination planners must take into consideration how to expand their market share more in terms of spending than the number of travellers, particularly in consolidated