Low cost carriers’ destination selection using a Delphi method

Over the past two decades, demand for air transport between Taiwan and China has grown rapidly, partly in response to the economic development of the two countries, but also as a result of political factors. Low cost carriers (LCC) that have operated for several decades in the United States and Europe will provide a good operational benchmark for direct cross-strait flights once these services become possible. This research involves the construction of a sequential destination selection model for direct cross-strait flights by LCC based on a multi-attribute value function. The selection framework comprises three elements: destination competitiveness, airport infrastructure and potential demand. Previous research focused only on a few alternative airports, but the 41 airports available for foreign flights in Mainland China have all been included in the empirical analysis undertaken in this paper. The results therefore fit better with the operational features of LCC who are normally seeking suitable secondary airports rather than traffic hubs. The analysis reveals that six airports would be suitable for LCC, namely, Shanghai Pudong, Shenzhen, Xiamen, Hangzhou, Wuhan and Nanjing.     

Low-cost pricing strategies in leisure markets

The practice of dynamic pricing typical of low-cost carriers is generally regarded as a form of price discrimination between “leisure” and “business” travellers on a single flight or route. The same may not be true across different routes because of the different incidence of business travellers. If price increases in the 15 days prior to departure are meant to discriminate business demand, leisure demand should account for earlier price variations. In the present study, we used a database containing the daily fare over the 3 months prior to each flight operated by easyJet during 2009. For each route, we defined the “leisure index” as the difference between the price rates of change during the 90 days and 15 days prior to departure. Overall, “business” routes had lower average prices per km, while “leisure” routes showed less dynamic price behaviour, with higher minimum and lower maximum prices per km.     

Has Ryanair's pricing strategy changed over time? An empirical analysis of its 2006–2007 flights

This paper analyzes the question of whether Ryanair's pricing strategies have changed over time. We create a panel dataset of fares for all of Ryanair's European flights over a two-year period, from 1 January 2006 to 31 December 2007. We calculate the average fare over a 90-day period prior to departure and the intensity of dynamic pricing for each flight in the panel, in particular analysing the changes in these variables observed between pairs of “equivalent” flights. Our results show that overall, both average fares and the intensity of dynamic pricing decreased in 2007. More than one-third of flights saw a price reduction of more than 10%. Now that it has become the dominant low-cost carrier in Europe, Ryanair appears to be softening its dynamic pricing activities on existing routes, typically employed to stimulate additional touristic demand. Thus, booking in advance becomes relatively more expensive.     

International tourism demand and the business cycle

The focus of this study is on presenting causes and hypotheses for the existence of asymmetric income and price effects on tourism demand across business cycles. The theoretical assumptions were tested by analyzing tourism import demand in different source markets, drawing on econometric models that provide for the magnitudes of price and income effects either to vary depending on the phase of the business cycle or to remain stable across the business cycles. The major outcome of this study is that the general assumption in most of the tourism demand studies—i.e. that the income effects are symmetric—should not be expected to be automatically true for every source market.     

Optimal imperfect pricing decision-making: Modifying and applying Nash's rule in a service sector context

This paper aims to demonstrate how a simple rule of thumb can form a basis to offer a rational and consistent approach to pricing decision-making when faced with (partially) unknown demand and cost functions. To this purpose Nash's decision rule (1975) is re-evaluated, modified, and applied in a service product context. The decision rule can provide management with a powerful indicator of the direction in which profit will change as the result of a change in price. It specifies the conditions under which differential pricing or discounting may be (more) profitable. In this way, the rule provides a basis for a more competitive business pricing policy. The modification to Nash's rule demonstrates that pricing can benefit from quantitative techniques which are comparatively straightforward to understand and apply. It reduces uncertainty by specifying the required elasticity of demand necessary to make change in price worthwhile. With this rule, managers have an additional tool to evaluate potential price changes in the context of particular market circumstances. The paper concludes by explaining how Nash's applied and modified rule provides an original and rational methodology for exploring whether discounting is a suitable pricing strategy for service businesses with high variable costs and inelastic demand patterns.     

Online purchasing tickets for low cost carriers: An application of the unified theory of acceptance and use of technology (UTAUT) model

This paper examines determinants of purchasing flights from low-cost carrier (LCC) websites. In doing so an extended unified theory of acceptance and use of technology (UTAUT) model is proposed building on earlier work by Venkatesh, Thong, and Xu (2012). The results, derived from a sample of 1096 Spanish consumers of LCC flights, indicate that key determinants of purchasing are trust, habit, cost saving, ease of use, performance and expended effort, hedonic motivation and social factors. Of these variables, online purchase intentions, habit and ease of use are the most important.     

Measuring price elasticities of demand for outbound tourism using competitiveness indices

The real exchange rate (REX) has long been used as the proxy for prices in tourism demand models. However it has limitations, particularly when it comes to models of outbound tourism. As an alternative, a price competitiveness index (PCI) is developed and used as a proxy for prices in a model of outbound tourism from Australia. Results obtained show that while REX is statistically insignificant and yields a price elasticity of −0.002, PCI is significant and generates a price elasticity of −1.07. The results obtained show that PCI outperforms REX as the preferred price variable in modelling outbound demand on both theoretic and empirical grounds. Furthermore, this index can be used to monitor the inter-temporal competitiveness of a destination.     

Spatial patterns of package tourism in Europe

Package tours by air have been a significant factor in the expansion of international tourism in Europe since the 1960s. This paper examines the geographical dimensions of charter flights in Europe through an analysis of civil aviation data at different scales. A review of the development and organization of package tours precedes an examination of country-to-country flows within Europe. With the dominant patterns and major changes in the general structure of the European charter traffic over the period 1970–1980 identified, attention is focused on subnational patterns. Particular attention is paid to regional variations in nonscheduled flights to Spain. Aspects of spatial variations in the demand for package tours within generating countries are also explored. Explanation of the spatial patterns identified is largely to be found in the way in which this sector of the tourist industry is organized and has developed.     

Tourism demand for Italy and the business cycle

This study provides a strategy for modelling the effect of the business cycle on tourism demand under the rationale that tourism cycles are heavily influenced by lagged effects of the overall business cycle. Using quarterly data on overnight stays in Italian hotels, both domestic and inbound between 1985 and 2004, we adopt a structural time series approach to evaluate two alternative models, the first with a latent cycle component (LCC) and the second based on specific economic explanatory variables (XCV). The two models are compared in terms of explanatory power, best-fit, residual diagnostics and forecasting ability. The results show similar performances. The policy implication is that the XCV model can be used for calibrating countercyclical interventions in tourism policy.     

Advance booking and hotel price variability online: Any opportunity for business customers?

Is it possible for business customers to effectively adjust their purchasing strategies, as a response to revenue management? We consider daily online best available rates for a panel of 357 hotels in Milan and Rome, up to an advance booking of 29 days.We analyse price trajectories, finding that dynamic pricing strategies with no established trend towards the arrival date are prevalent, with a predominance of decreasing trajectories for lower-scale hotels in Milan during fairs. We show that price levels are explained by a variety of structural determinants. We quantify the effects of advance booking, room quality, services, competition, seasonality and fairs, underlining their different importance on leisure and business destinations. Other features, such as breakfast and refunding options, appear to be used as marketing tools to differentiate rooms, keeping a low pace in price adjustment. Managerial implications are discussed, with reference to both corporate travel departments and hôteliers.     

Immigration and international inbound tourism: Empirical evidence from Australia

Immigration can potentially influence tourism flows. However, in spite of the vast number of studies on tourism demand modelling, the immigration-tourism linkage has not received much attention in the empirical literature. This paper seeks to address this gap. A dynamic demand model is developed and estimated using data from 1980 to 2008 for the 15 main markets of Australia. The explanatory variables included are income, own price, price of a substitute destination, airfare and immigration. The estimation results empirically establish the connection between immigration and inbound tourism. The short run and long-run immigration elasticities generated are 0.028 and 0.09 respectively. Additionally this paper demonstrates that omission of prices of substitutes affects the value of the own price elasticity of demand. The results have implications for future research and for stakeholders who can improve the efficiency of their planning exercises by taking into account additional information on immigration trends.     

A dynamic panel data analysis of snow depth and winter tourism

This paper analyses the relationship between the number of overnight stays and different measures of snow depth based on panel data covering 28 Austrian ski resorts for the period 1986/87–2005/06. Using the dynamic heterogeneous panel data technique of Pesaran, Shin, and Smith (1999), we found a long-run relationship between the number of overnight stays, amount of snow depth, weighted real GDP per capita of the major countries of visitor origin, and price index of accommodation services. The long-run elasticity of overnight stays with respect to snow depth was 0.10. However, for high-elevation resorts the evolution of the number of overnight stays was independent of variations in snow depth. Furthermore, the long-run elasticity of the number of overnight stays with respect to weighted real GDP per capita of the country's visitors was much greater for high-elevation resorts than for low-elevation resorts. Finally, early Easter holidays were significantly and positively related to winter tourism demand.     

Modeling domestic holiday tourism demand in Australia: Problems and solutions

An econometric model is very useful for understanding the underlying relationship between tourism demand and economic variables such as income and travel prices. However, a long time series horizon of data is essential to run an econometric model that is consistent with economic theory. Although time series data on the number of domestic trips and visitor nights in Australia are available since 1978–79, breaks in the time series in different years have made it difficult to estimate a domestic holiday demand model. It is because the data series in different periods are not directly comparable. In this study, a simple data adjustment technique has been used to obtain comparable data series. Among several econometric demand models, a single equation multivariate time series demand model in a double log linear functional form was found to be the most appropriate and practical model to estimate and analyze the demand parameters of domestic holiday travel in Australia. However, the model with variables in level terms was observed having the “spurious regression problem” which has been corrected using the cointegration and error correction mechanisms. The estimated income and price elasticity of domestic holiday travel demand are consistent with economic theory and therefore can be used for forecasting and other purposes.     

Targeting leisure and business passengers with unsegmented pricing

We analyse the fare setting strategy of a leading European low-cost carrier, Ryanair, which, until recently, adopted an unsegmented pricing policy (all tickets belong to a single fare class). We show that, to account for different demand characteristics, the company adjusts the two main components governing the dynamics of posted fares, namely time (the number of days before departure) and capacity (the current number of available seats). We find that: 1) in routes with a strong presence of leisure (business) traffic, fares are set to be less (more) responsive to the time component; 2) in schedules more suitable for leisure (business) travellers, fares are set to be less (more) responsive to the capacity component.     

Nonlinear ARDL estimation of tourism demand for Puerto Rico from the USA

This study estimates the long-run demand for tourism for Puerto Rico (1970–2016) from the USA. Since income elasticity may not be symmetric through business cycles, it becomes necessary to account for the asymmetric impact of changes in income on tourism demand. To this end, the study utilizes the nonlinear ARDL framework of Shin et al. (2014) to investigate the asymmetric cointegration. The results indicate the existence of an asymmetric or nonlinear cointegration relationship between Puerto Rico's tourism demand and its determinants. The long-run asymmetric income elasticities suggest that a 1% increase in US's real per capita GDP leads to a 1.9% increase in Puerto Rico's tourism earnings, while a 1% decrease in US's real per capita GDP produces a 4.8% reduction in tourism receipts.     

Analysis of Japanese Tourist Demand to Guam

The economy of Guam is highly dependent on tourism. Japanese tourists are especially important as they represent on average 85% of all visitors. While frequent surveys document the preferences, demographics and satisfaction levels of the Japanese, no attempt has been made to determine how the traditional economic demand variables affect arrivals. This study attempted to determine the role of consumer income and prices in creating arrival demand. A single equation, error correction model was used to measure the short- and long-term elasticities of price and income. It was found that income elasticity was very high, while price was not especially significant. In addition, the repeat factor and several catastrophic events were found to be important in determining demand. These results led to a discussion of the theoretical implications regarding the economic and cultural underpinnings of Japanese tourism demand.     

Important attributes of lodgings to gain repeat business: A comparison between individual travels and group travels

The purpose of this study is to investigate the attributes of the satisfaction that are related to the lodging-guests’ tendency to revisit the lodgings and to compare these attributes among the different travel styles, such as individual travel, travel with friends or as a couple, and travel with family. We examine 6351 guest evaluations from a highly popular travel reservations website. Multinomial logistic regression analyses are performed and they show that the important attributes for lodgings to gain repeat business vary among their guest's travel styles.     

Economics of tourism & growth for small island countries

We theoretically analyze the impact of changes in foreign income from tourism source countries on the growth of tourism dependent small island economies. Using a general theoretical construct, we attempt to answer the question of how price elasticity of demand, income elasticity of tourist and the degree of competition in the service sector influence the economic development of small economies. One of the main results is that politicians may consider applying policies which lead to a competitive environment in the service sector to maximize growth and the consequent labor income share.     

How demand uncertainty and market concentration affect long-term price instability

The object of this paper was to investigate the long-term influences of demand uncertainty and market concentration on price instability in the hotel industry. We applied 1996–2008 price and room revenue data collected by Taiwan's Tourism Bureau to test the following two hypotheses: (1) demand uncertainty is negatively associated with price instability in the hotel industry; (2) the market concentration is negatively associated with hotel price instability. We constructed a two-stage price instability model and the estimate results produced the following two findings: First, the uncertainty in room demand significantly contributed to the price instability. Second, the effects of market structure on price instability were heterogeneous across different levels of price instability distribution. Notably, when the distribution of price instability moved from lower to higher quantiles, the relationship between market concentration and price instability altered from positive to negative.     

Evaluating Service Marketing in Airline Industry and Its Influence on Student Passengers' Purchasing Behavior Using Taipei–London Route as an Example

This article reports an empirical study into airline consumer purchase behavior on a major global route between the United Kingdom (UK) and Taipei. It focuses on the factors influencing airline choice for a sample of 60 Taiwanese students based at UK Universities and traveling on five airlines: British Airways, Cathay Pacific Airways, China Airlines, EVA Airways, and Royal Dutch Airways. Several stages of data gathering were undertaken and a well‐established analytical framework for services marketing was used to identify gaps between the desired and received service. The main findings suggest that service quality, including in‐flight entertainment, cabin crew attitude, and seating comfort, can be as important as, or more important than, price in student purchase decisions for long‐haul flights. Other important factors in carrier choice included student discounts, baggage allowances, and airline safety record.