Analysis of Online Travel/Tourism Market and Purchase Behavior

Analysis of Online Travel/Tourism Market and Purchase BehaviorLauren OriansMarketing Departmental Honors ProjectWright State University5/3/2012

OverviewIntroductionLiterature ReviewBackground of Travel/Tourism Industry and Evolution into Online MethodsOnline Marketing Practices of Travel/Tourism IndustryCase Studies of Online Travel CompaniesCurrent Consumer Purchase Behavior in Online Travel/Tourism Products and ServicesHypothesesMethodologyAnalysis and ResultsManagerial ImplicationsQ & A

IntroductionPrior research in online travel purchasingResearch gap due to change in:Internet environmentPurchasing influences Declining consumer loyaltyMarketing methodsAnalysis 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 influencesTraditional 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

5. according to yStats.com-double digit growth4. Global Tourism Grow to 8.61 Trillion through 2014 by World Travel and Tourism Council3. Over 231 million jobs and 10% of the GDP amount of the workforce2. Estimations are that in 2015, the number of people flying =one billion 1. due to changes in:Environment, Economics, Technology, Consumer Behavior, Lifestyles

4Tradition: 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-commerceBegan with computer booking systems by travel agenciesnatural fitUnited States Travel Association in 2009: 96.8% of US travelers used online methods to plan their travel80.3% of these US travelers purchasing travel products online

Consumers can see availability, pricing and custom deals online!No standing in line or calling=empowerment!More choices to consumers from suppliers!

-Dara Khosrowshahi, chief executive of the worlds largest online travel agency, describes the jump to utilizing the internet for tourism and travel as a real revolution (The Economist, 2005). -Trustworthy online travel agency companies today include Expedia.com, Orbitz.com and Travelocity.com (Park, Wang, & Fesenmaier, 2011). -Online travel e-commerce is also great for suppliers of travel products and services because they can utilize online methods and broaden the range of services that online agents can offer (The Economist, 2005). **certified by the Airlines Reporting Corporation (travel agency location numbers

5Rapid Growth=Positive Internet CharacteristicsReach new marketsMillions of consumersImprove efficiencyShowcase information AccessibilityResearch/Price CheckConsumer Reviews & PhotosGrowth of Travel and Tourism Market In 2005, 1/3rd travel booked online250% increase in US adult travel purchase from 2000 to 2009In 2011, 50% air travel and 54% rail booked onlineExpansion opportunitiesCorporate Business Market & International Bookings

Ease of Usee ticketing11% cruises and 5% traditional vacationInternational bookings--Worldwide online travel bookings growth 10% from 2010 to 2011

6Online Marketing Practices of Travel/Tourism IndustryDigital touch points to reach customers onlineMost effective online is company web siteCommunicate brand message & relevant informationKept up-to-date to be effectiveLow-price guaranteesEmailHoliday seasonsNot always receptiveDisplay ads Product information deliveryVirtual Online ToursFeedback from travel suppliers to online travel agents Social MediaBlogging

Low-price guarantees make sure customers do not look at other competitor online travel websiteslow-price guarantees honor the lower rates customers find through other travel sites.7Large online travel agenciesAdvantage: offers products through many suppliers=economies of scale 54% of US Travelers start with an online travel agentSpecialized Rewards specialty of individual travel sites (Delta)Mobile Phone and AppsWord of Mouthfour times more effective than promotionsA Consumer Online Community (3rd Party Perspective)Makes use of customer reviews, comments, and ratings (TripAdvisor)Establishing Consumer TrustThe willingness of consumers to rely on an exchange partner for the delivery of certain desired benefitsFour Types (Koehn)Goal-based, Calculative, Knowledge-based, and Respect-based trust.

Consolidation is trendprice standardization

For example, Expedia, Inc owns Hotels.com, Hotwire.com and TripAdvisor.com (Creager, 2012). Sabre owns Travelocity.com, IGoUGo.com, and Lastminute.com (Britains best travel website)Sabre also helps run portions of Yahoo! Travel (Creager, 2012). Orbitz Worldwide owns CheapTickets.com and RatesToGo.com (Creager, 2012). The consolidation of companies demonstrates how the internet travel market is now controlled by the key players in the market. Mobile phone and apps provide a huge area of opportunity for travel companies as they give consumers the convenience of purchasing travel products and services when not at home. Goal-based trust where both parties believe they share a common goal, calculative trust where each party predicts the behavior of the other party based on evidence, knowledge-based trust where both parties are familiar with each other bordering on friendship, and respect-based trust where there is a personal friendship and parties share similar values (Austin, Ibeh & Chow Choy Yee, 2006). Ribbinks study in 2004, featured in the article The Impact of Online Negative Word-of-Mouth on Customer Purchase Decision for the Travel Websites, confirms that consumer trust will create positive attitudes toward online sites, reduce cognitive risk, and promote intention to purchase.

8Trust Concern: Privacy and Security Secure SitesSensitive information protection=encryptionDocumented privacy/security policiesVerification by sites like TrustE and VerisignMarketing Communication MisleadingStock photos, special lens photos and photo embellishments Sometimes bend the truth about a travel location

Case Studies of Online Travel CompaniesKayak 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 packagescustomization 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 travelersPersonal 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 ServicesShown if consumer does purchase more than 1 product will only add either a lodging reservation or airline ticket at most

12Low-Risk Commodities FlightsLodgingRental cars High-Risk, Information Search Intensive!Travel packagesCruisesRV rentals

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