Tourism expenditures have been much researched in the past: at the aggregate level to evaluate national benefit of the tourism industry and at the disaggregate level to evaluate the attractiveness of tourist market segments. Past studies, however, fail to take into account that tourism expenditures are affected by the plethora of other expenditures households make and that households are heterogeneous in allocating discretionary funds to alternative spending options. The present study fills this gap by investigating heterogeneity in household discretionary expenditures derived from a realistic choice task. In doing so, it challenges the implicit paradigm of prior research into tourism expenditures in which the context of the household tradeoff in allocating income is ignored. The results, highlight the importance of studying tourism expenditure in the context of other household expenditure decisions; demonstrate the high level of heterogeneity between individuals with respect to their spending preferences; and illustrate the value of this knowledge for tourism destination management as well as government policy in being able to assess the competition between expenditure categories and identify market segments most suitable for the product category offered.