AbstractTourism destinations compete with each other to attract visitors. Although international tourism has received a lot of attention, domestic tourism remains the mainstay for many destinations. To inform the basis on which destinations compete, an understanding of the determinants of destination choices is required. In this paper, the discrete choice modelling method is applied to investigate the determining factors underlying the short‐break holiday destination choices of prospective tourists from Melbourne, Australia. The results from an estimated nested logit model indicate the relative importance of a number of destination and trip attributes and respondent characteristics. The model results are used to simulate the effects on destinations' market shares resulting from various changes in attributes and tourist characteristics. Copyright © 2003 John Wiley & Sons, Ltd.