Market Segmentation in the Tourism Industry and Consumers' Spending

Abstract Despite the unabated pace of globalisation and the incessant flow of tourists to multiple tourist destinations, there is little attention paid by tourist operators and hospitality managers to the segmentation of holiday makers based on their distinctive spending habits for revenue maximization. Segmenting holiday makers according to their levels of expenditure is an important factor in developing comprehensive marketing strategies since travellers who decide to spend a vacation in the same area and in the same period might spend their money in very different ways. This paper uses the CHAID technique to examine direct as well as daily tourist expenditures of holiday makers in Hong Kong to define market segments (particularly, the big spenders). The results obtained confirm that CHAID is a relatively flexible technique to use and can be employed as a precursor to a more parametric approach.