Tourist Expenditure and Quality: Why Repeat Tourists Can Spend Less than First-Timers

Abstract

In the tourism and marketing literature, repeat visitation/repeat purchasing is assumed to be desirable behaviour. However, consumer expenditure might decrease with purchase repetition. Thus, expenditure by repeat visitors could actually be lower than that of first-timers. This result can be explained using limited information models and consumers' perceptions of prices as a signal of product/service quality. This paper estimates the effect that quality as a motivation may have on tourist expenditure, distinguishing between first-time and repeat visitors. The hypothesis is that quality as a motivation has a higher positive effect on tourist expenditure for first-timers than it does for repeat visitors. It is more likely for new visitors to regard higher prices as a signal of higher quality than repeat visitors, given their greater uncertainty about the characteristics of the destination.