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.     

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.     

Market structure and demand-side substitutability of chained urban hotel segments

This study analyzes how the demand in hotel markets is divided amongst chained hotel segments. Hypotheses regarding consumers’ switching behavior due to changes in income levels and relative prices are tested using data from 25 major urban markets in the United States, encompassing segments ranging from luxury to economy over 43 quarters. The effects of differentiation and market concentration are also investigated in this context. The results suggest that leisure and individual consumers of the low-scale segments may be trading “up” to higher scales when their income increase, but that upscale segments’ corporate consumers are not necessarily trading “down” when Corporate Income fall. In addition, only low-scale segments appear to be substitutes to upscale segments, but the inverse seems not to be true. Also, properties in mid-range segments are found to be the only ones benefiting from a high market concentration, while low-scale properties turn out to be the ones gaining from differentiation through price.     

Multi-dimensional price elasticity for leisure and business destinations in the low-cost air transport market: Evidence from easyJet

This study investigates the price elasticity of demand in the European low-cost carrier (LCC) industry by analysing Internet fares for all easyJet flights departing from the Amsterdam Schiphol airport towards 21 European destinations between March and September 2015. Results suggest that the price elasticity of demand greatly varies across different dimensions, ranging from −0.535 for the business-oriented route of Hamburg to −1.915 for the leisure-oriented route of Split. Price elasticity is also found to be higher for reservations made more days in advance, for reservations and departures occurring on weekends, and for flights taking off during lunchtime and in the summer period. All results are consistent with the different behaviours of leisure and business passengers and the ongoing increase in the business component of the LCC passenger mix.     

Off-season tourists and the cultural offer of a mass-tourism destination: The case of Rimini

This paper assesses the potential implications on off-season tourism of enhancing the cultural offer of Rimini, a popular Italian seaside holiday destination hosting about 12 million overnight stays per year. Since more than 9 million of these stays are concentrated in the summer season, in the last 20 years. Rimini has been undergoing a policy of seasonality smoothing, which mainly pivots around business and cultural tourism. This assessment has been carried out through discrete choice experiments submitted to a sample of about 800 tourists who visited Rimini outside the summer months. Since tourism can be viewed as a composite good, which overall utility depends on how the component characteristics are arranged, the choice experiments allow to disentangle the importance and the willingness to pay of tourists for different attributes of the holiday. The choice model incorporates a number of possible changes to actual tourism features (which are also the subject of public debate), including them in hypothetical alternative “holiday packages”. The conditional logit analysis of the choice experiments can highlight any synergy or trade-off between cultural and business tourism. Results suggest that business and leisure tourists share many features related to the use of the territory, while there are important trade-offs between these two groups and cultural tourists. Since business tourists have a higher willingness to extend their stay, a softer budget, and their demand is also complementary to the demand of summer tourists (Brau, Scorcu, & Vici, 2009), from the destination point of view investing in this market segment would be the best option. Although a “second best”, however, cultural tourists share with the local population of Rimini many aspects of the demand of territory (Figini, Castellani, & Vici, 2009). Hence, cultural tourism can play a fundamental role in the intermediate season as a tool for smoothing seasonality, to diversify investments and to give value to the city’s cultural heritage.     

Key drivers of airline loyalty

This study investigates drivers of airline loyalty. It contributes to the body of knowledge in the area by investigating loyalty for a number of a priori market segments identified by airline management and by using a method which accounts for the multi-step nature of the airline choice process. The study is based on responses from 687 passengers. Results indicate that, at aggregate level, frequent flyer membership, price, the status of being a national carrier and the reputation of the airline as perceived by friends are the variables which best discriminate between travellers loyal to the airline and those who are not. Differences in drivers of airline loyalty for a number of segments were identified. For example, loyalty programs play a key role for business travellers whereas airline loyalty of leisure travellers is difficult to trace back to single factors. For none of the calculated models satisfaction emerged as a key driver of airline loyalty.     

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.     

Does market exit of a network airline affect airline prices and frequencies on tourist routes?

This paper examines the influence of network airline bankruptcy (and consequently its market exit) on prices and route frequencies. Specifically, the 2011 case of Spanair is analyzed, using Spanish route data for the period 2006–2013. The study finds that the Spanair bankruptcy led to a reduction in prices on those routes where its services were replaced by low-cost airlines. On the other hand, there was no evidence of any clear reduction in flight frequencies. Given that tourist passengers are particularly sensitive to prices, this paper provide evidence about the positive impact of low-cost airlines on tourism.     

Tourism theory and the earth

Given that tourism is an “earthly business”, why is it that the Earth rarely explicitly appears in tourism studies and tourism theory? In an attempt to grapple with this paradox, this paper seeks to contribute to a conceptual re-cognition of the Earth in tourism theory by probing some theoretical obstacles and possibilities. The paper demonstrates how the Earth has been conceptually erased in tourism theory by a privileging of the mapping of tourism and tourists onto the reference plane of the social. As an alternative the paper seeks to provide a geo-philosophically informed conceptualisation of the Earth as a primary plane of reference of which tourism is a particular form of de/re-territorialisation.     

Pricing determinants in the hotel industry: Quantile regression analysis

Due to the skewed distribution of hotel prices, quantile regression provides a more flexible and complete characterization of the determinants of the hotel prices at the higher and lower tail of the distribution. This study applies quantile regression approach to investigate the major determinants of hotel room pricing strategies. The ordinary least square regression is also used for comparative purposes. The data are drawn from 58 international tourist hotels in Taiwan and average room rate (ARR) is used as the proxy of hotel room price. The results of OLS and quantile regression share common characteristics but also have differences in some aspects. The OLS results reveal that number of rooms, hotel age, market conditions and number of housekeeping staff per room are the main attributes of hotel room rate. The quantile regression results further demonstrate that room number and the number of housekeeping staff per guest room do not significantly influence hotel price at the low price quantile. Hotel age and market conditions are only significant determinants in high-price category. Additionally, for the high-priced quantile hotels, the proportion of foreign individual travellers positively and significantly influences room price. The empirical results can help hoteliers in shaping investment and pricing strategies.     

Estimating willingness to pay air passenger duty

Carbon taxation on air travellers is widely considered an effective way of offsetting environmental externalities and adjusting tourist flows. Despite the popularity of carbon taxation, research investigating travellers’ willingness to pay (WTP) such taxes remains scant. Using the air passenger duty (APD) levied by the UK government, this study estimates UK outbound travellers’ WTP and further derives the demand curves under six trip scenarios. The contingent valuation method is used to elicit the travellers’ WTP based on an online questionnaire survey. Comparative analysis and hierarchical linear modelling reveal that first, travellers are willing to pay more APD for business class and long-haul trips, and second, all of the demand curves are downward sloping with increasing elasticities.     

Meeting the needs of disabled air passengers: Factors that facilitate help from airlines and airports

With the number of impaired air passengers having increased globally, air service providers may have the potential to create a lucrative niche market. However, it is less clear what the service needs of these passengers are as well as providing facilities and services. This paper aims to explore the service needs of impaired air passengers and to identify factors affecting the facilities and services. The results of data from a sample of 180 respondents from among airline, airport and government staff are presented in this research. These results show that the top three items which travellers complained about in relation to airlines are the lack of provision of a user-friendly on-board restroom, wheelchair services and the distance between cabin seats and restroom on board. The results also show that female staff are more likely to be willing to help impaired passengers than male staff. In considering the factors comprising perceived needs, two factors, i.e. “Compensation and improvement schemes” and “Not suitable for taking a flight” appear to have significant effects. The managerial implications are also discussed.     

Hotel roomrates under the influence of a large event: The Oktoberfest in Munich 2012

Surprisingly few studies deal with the implications of large events for hotel prices. We address this issue by modeling hotel prices in Munich under the influence of the Oktoberfest. By utilizing internet data from a metasearch provider for check-in dates prior to and during the Oktoberfest 2012, it is analyzed how the event affected the daily price level as well as price differentials between hotels. In general, average hotel prices are very volatile over time. Apparently, Munich hotels tend to set prices according to expected demand and vary those depending on the day of the week during the event. Ceteris paribus, roomrates are highest on Oktoberfest Friday and Saturday nights, followed by Oktoberfest weekdays and Oktoberfest Sunday nights, but there is a general and strong price-raising impact. Prices differ across hotels mainly due to the star category attributed to a hotel and the proximity to the event. Both price premia are time-dependent.     

Present whilst absent: Home and the business tourist gaze

This paper reflects on business travel as a contemporary form of mobility and how it relates to family life. Through qualitative research with business travellers, insights are gained into the role digital technology plays in enabling connections to home and family. The paper argues that technology affords a ‘business tourist gaze’, characterised by a focus on ‘home’ rather than ‘away’ as might be the case for leisure tourists. The paper discusses how, through the business tourist gaze, the boundaries between the everyday and the exotic are dissolved and the business traveller is disconnected from the destination, simultaneously absent whilst present both at the destination and at home. Theoretical understandings of the business tourist experience are offered.     

The moderating role of context in the effects of choice attributes on hotel choice: A discrete choice experiment

This study used discrete choice modeling to identify the moderating role of context in the effects of cognitive, affective, and sensory attributes on hotel choice. To evaluate a hotel consumer's choice for attributes in a different choice context (leisure vs. business), a stated preference experiment based on D-optimal design was conducted using both a multinomial logit (MNL) model and a random parameter logit (RPL) model. The results show that while leisure travelers' choices for family vacation trips were more influenced by price and overall atmosphere than were business travelers', business travelers put an emphasis on room quality and comfort when on a business trip alone. The study demonstrates the trade-offs made by leisure and business travelers when choosing a hotel through discrete choice modeling. The findings provide hotel managers with important insights and implications in terms of target segmentation, product development, and marketing communication strategy.     

The impact of gasoline price fluctuations on lodging demand for US brand hotels

Analyzing US brand hotels, over a 13-year period, this study provides empirical evidence of a significant negative relationship between gasoline prices and demand for certain lodging products, controlling for economic factors (i.e. gross domestic product and population density). Applying principles from microeconomic demand theory to the literatures on gasoline price elasticities, consumer demographics and lodging demand, a set of hypotheses were devised to test the relationship between gasoline prices and lodging demand for specific hotel locations and price segments. Using fixed effects models, the results reveal that lodging demand decreases as gasoline prices rise in all segments except upper-upscale and all locations except urban areas. Hotels in midscale without food and beverage and economy market segments, in resort, suburban and highway locations, exhibit the greatest association between gasoline price shifts and demand. Implications of these findings are discussed for both hospitality research and practice.     

From economic theory to leisure practice via empirics: the case of demand and price

Despite the relationship of price and demand being central to economic analysis, doubts have been expressed in leisure studies about the ability of economists to contribute meaningfully to price decisions in leisure, or even to an understanding of price-demand relationships in leisure. This article uses a review of relevant theoretical and empirical considerations and a recent empirical investigation to refute such assertions. It demonstrates how leisure managers might utilize appropriate management information and market research data to improve both their understanding of the price-demand relationship and consequent pricing decisions, with the help of economic analysis.     

Determinants of demand for international tourist flows to Turkey

This article describes the development and findings of a set of models used to identify the most important of the following selected variables influencing international tourist flows to Turkey: per capita income; relative prices; relative exchange rate; promotional expenditure (the Turkish Government has invested a substantial amount in promoting foreign tourism) and ‘special events’, eg political unrest. The demand for travel was measured both by the number of tourists, and by the total tourist expenditure. Data were obtained from secondary sources, and analysis was by least squares multiple regression. Income, price and exchange rate were found to be important factors but the impact of promotional expenditure was minimal     

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.