An application of Multinomial Logit Model (MNL) on tourist destination choices

Abstract

This paper provides an analysis of multinomial logit model (MNL) on tourist destination choice. The choice set consisted of the Tropical North Queensland (TNQ), competed with the California Beach, the Cornwall Beach, and “No Travel” choice. The MNL model was used to identify the best scenario that gave the TNQ a market leadership in accordance with good budget performances. A scenario was developed by testing variable price combined with dummy variable of increasing family facilities; then testing the scenario based on the combination of willingness to pay (WTP) and elasticity analysis. Findings reported the best scenario was a combination of policy on the price and family facilities which made TNQ lead the markets and gave the highest revenues. Furthermore, the elasticity analysis was conducted to understand the impact of policy changes on the model outputs. The result showed that the market share and revenue of TNQ under the chosen scenario still exceed the performances of other scenarios. It was worth noting that these additional revenues raised from the chosen scenario ($71.662) cannot exceed the cost for family facility improvements; otherwise there was no policy visible than “do nothing” scenario.