Analysis of Online Travel/Tourism Market and Purchase Behavior

Lauren OriansMarketing Departmental Honors Project

Wright State University5/3/2012

 

Overview1. Introduction2. Literature Review

Background of Travel/Tourism Industry and Evolution into Online Methods Online Marketing Practices of Travel/Tourism Industry Case Studies of Online Travel Companies Current Consumer Purchase Behavior in Online Travel/Tourism Products and

Services

3. Hypotheses4. Methodology5. Analysis and Results6. Managerial Implications7. Q & A

IntroductionPrior research in online travel purchasing

Research gap due to change in: Internet environment Purchasing influences Declining consumer loyalty Marketing methods

Analysis meets this research gap!This research concludes:

Consumers value PRICE of a travel product/service and the TRUST of an online company above all other influences

Traditional media is the most substantial marketing method

Background of Travel/Tourism Industry and Evolution into Online Methods

People =Desire to see new places and experience new culturesOne of the fastest growing sectors in global economyTravel/Tourism in almost every region of the world Large amount of the global workforceGlobal tourism was estimated to grow by $4.41 trillion from

2004 through 2014 Air travel is the biggest component of the travel industry This year in 2012, United States online travel bookings are

projected to have double digit growth

Tradition: travel agencies/brick-and-mortar travel service firms was way to purchase travel products and services.

Internet=BIG INNOVATION!50% reduction in the number of travel agents in the past decade

Today : 14,000, 10 years ago: 29,500Very successful form of e-commerce

Began with computer booking systems by travel agenciesnatural fitUnited States Travel Association in 2009:

96.8% of US travelers used online methods to plan their travel

80.3% of these US travelers purchasing travel products online

Rapid Growth=Positive Internet CharacteristicsReach new marketsMillions of consumersImprove efficiencyShowcase information AccessibilityResearch/Price CheckConsumer Reviews & Photos

Growth of Travel and Tourism Market In 2005, 1/3rd travel booked online250% increase in US adult travel purchase from 2000 to 2009 In 2011, 50% air travel and 54% rail booked onlineExpansion opportunities

Corporate Business Market & International Bookings

Online Marketing Practices of Travel/Tourism Industry

Digital “touch points” to reach customers onlineMost effective online is company web site

Communicate brand message & relevant information Kept up-to-date to be effective Low-price guarantees

Email Holiday seasons Not always receptive

Display ads Product information delivery

Virtual Online ToursFeedback from travel suppliers to online travel agents Social MediaBlogging

Large online travel agenciesAdvantage: offers products through many suppliers=economies of scale 54% of US Travelers start with an online travel agent

Specialized Rewards specialty of individual travel sites (Delta)

Mobile Phone and AppsWord of Mouth—four times more effective than promotionsA Consumer Online Community (3rd Party Perspective)

Makes use of customer reviews, comments, and ratings (TripAdvisor)

Establishing Consumer Trust“The willingness of consumers to rely on an exchange

partner for the delivery of certain desired benefits”Four Types (Koehn)

Goal-based, Calculative, Knowledge-based, and Respect-based trust.

Trust Concern: Privacy and Security Secure SitesSensitive information protection=encryptionDocumented privacy/security policiesVerification by sites like TrustE and Verisign

Marketing Communication MisleadingStock photos, special lens photos and photo

embellishments Sometimes bend the truth about a travel location

Case Studies of Online Travel Companies

Kayak utilized T.V advertising 13 animated humorous T.V spots Repeat clip viewings encouraged through Kayak.com and

TiVo Dean Harris, CMO of Kayak, “we needed to do something

powerfully creative." Consumer-created T.V advertisement contest: Prize=free

trip to New York

Offers customized trip packages—customization key Customers can add more than just hotel and flight 2002: spent twice on advertising than competitors Sport sponsorships VP of Marketing states “travel is an emotional and

experiential product” Forbes “Best of the Web Pick” and is the highest-

ranked travel site in 2011

Park, Wang and Fesenmaier Study in 2011 Identified purchasing influences of travelers

Personal factors (internet skills and experience) Technology design factors Context factors (travel purpose)

Number of Travel Products Purchased (US Travelers) In 2009, majority purchase 1+ travel

product/service per transaction Two thirds purchase 2+ travel products onlineThird only purchase 1 travel product online

Current Consumer Purchase Behavior in Online Travel/Tourism Products and Services

Low-Risk Commodities FlightsLodgingRental cars

High-Risk, Information Search Intensive!Travel packagesCruisesRV rentals

Popularity for Online Purchase1. Airline Tickets2. Accommodations3. Travel Packages

Purchase FactorsQualitySimplicity Easy NavigationLow PricesSpecial OffersPositive Reviews

Consumer Loyalty 42% Loyal to at least one

company in 2003> 28% in 2010!

Search three websites before making decision in 2005<21 in 2010!

HypothesesFurther research is appropriate Price-sensitivity, Customer Loyalty decreasing, Consolidation

This research seeks to find any changes in consumer purchasing influences due to this declining consumer loyalty.

FIRST HYPOTHESIS: “Price of a Travel Product/Service by on online travel firm is the greatest influence in online travel purchase.” Growing trend for Consumer Reviews (Trip Advisor, Google Reviews) Customer loyalty declining, quick to establish trust

SECOND HYPOTHESIS:“Trust/Reputation of a Company is the second greatest influence in online travel purchase.”

MethodologyPrimary Data10-item

questionnaire paper survey

Administered to a sample of 50 consumers In vicinities of

Dayton and Findlay, Ohio

Questions Regarding:DemographicsOnline travel

consumer behaviorPurchasing

patterns Online travel

market opinions

Analysis and ResultsThe results were obtained in March 2012 Each survey was given an identification

number for participant anonymity 50 survey participantsUtilizing SPSS, 50 entries were input and

analyzed using descriptive statistics as well as frequencies.

41

9

Item One: “Have you ever purchased a travel product/service from an online travel company, with an online travel company being either a di-rect site (example Delta.com) or an online travel

agency (example Travelocity.com)”

Yes No

32

23

6

23

1 8

Item Two: “What type(s) of travel products/services have you purchased from an online

travel company in the past? (choose all that ap-ply)”

Transportation

Lodging

Travel Packages

Event Tickets

Other Travel Products/Services

I have not purchased travel products/services online

Trust/Reputation of Company

Price of Product/Service

Ability to Customize Product/Service

Special Company Deals/Offerings

Ease of Transaction/Usability of Website

I do not purchase online travel products/services

0 5 10 15 20 25 30 35 40 45 50

7

30

0

1

5

7

Item Three: "What is the greatest influence on your choice of an online travel company for purchase of a

travel product/service? (only choose one)"

Trust/Reputation of Company

Price of Product/Service

Ability to Customize Product/Service

Special Company Deals/Offerings

Ease of Transaction/Usability of Website

I do not purchase online travel products/services

0 5 10 15 20 25 30 35 40 45 50

17

11

1

5

10

6

Item Four: "What is your second greatest influence for purchase of a travel product/service from an on-

line travel company? (only choose one)"

Travelocity.com

Kayak.com

Expedia.com

Bing Travel

Orbitz.com

Priceline.com

Yahoo! Travel

Hotels.com

CheapFlights.com

I do not purchase online travel products/services

I have purchased from other online travel

0 5 10 15 20 25 30 35 40 45 50

16

6

12

1

11

5

0

10

9

7

15

Item Five: "What online travel companies have you purchased from in the past? (Circle all that apply)"

38

12

Item Six: "Do you ever view travel customer re-views, comments or feedback on a hotel, desti-

nation, etc before making a purchasing decision (such as TripAdvisor.com, Google Reviews, etc)?"

Yes No

7

1720

6

Item Seven: "Statement: Online travel and tourism have driven out brick and mortar (physical) travel agencies and services completely from use in the

United States"

Strongly Disagree Disagree

Neutral Agree

Strongly Agree

Item Eight: “What is your age? (in years)”

Mean Age 26

Max Age 73

Min Age 19

Mode Age (15 Respondents) 21

17

33

Item Nine: "What is your gender?"

Male Female

T.V, Commercial/AdsOnline Internet Ads (Ads, Pop Ups and Banners)

Commercials (No specification Online or T.V)Online Ads and Email

Online PostsT.V and Email

T.V and OnlineSocial Media

T.V and MagazineCommercial and Facebook Advertising

T.V, Internet and EmailFood

Ads on Websites and FacebookSpecials and Low Prices

Commercials and Online adsOnline Ads, Word of Mouth, Email

N/A

0 2 4 6 8 10 12 14 16 18 20

167

4111

41

21111

24

12

Item Ten: "What is the most frequent type of advertising you notice utilized by online travel companies to reach consumers like your-

self? (Do not mention specific companies)"

Managerial Implications Support and Validate First Hypothesis—Price Greatest Influence Support an Validate Second Hypothesis—Trust/Reputation 2nd Greatest Influence

Companies CANNOT just focus on Price though! Gain Consumer Trust (non-biased reviews, secure transactions, customer service)

Online travel agents have dominant market share Travelocity, Expedia and Orbitz

Complex packages and high priced items are often not purchased online—trust and personal service needed

Utilize Traditional Media

Trends Smartphone mobile devices Online improvements over brick and mortar Ease of site navigation

Q & A