Dangerous Models: Three Rival Models for Determining the Optimal Mix of Tourists, with an Application to Greece

Abstract

Tourism has a considerable economic effect on the host country; and setting the proportions of different types of tourist is an important dimension of host country tourism policy. We investigate three rival portfolio models that have been used to set policy targets for the proportions of different types of tourist - two versions of a levels model and a growth rates (or Markowitz) model. Using a case study of Greece, we show that by altering its tourist mix, Greece could reduce risk by 26%, with unchanged income. It also shows that the first levels model is superior, and policy makers should not use the other two models as their recommendations are potentially misleading, unclear, self-contradictory and impossible to implement.

Keywords: Tourism, portfolio models, diversification, nationalities, Greece

JEL Classification: G11, Z3