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Document Type

Open Access

Degree Program

Hotel & Tourism Management

Degree Type

Master of Science (M.S.)

Year Degree Awarded

2007

Month Degree Awarded

September

Keywords

price bundling, online travel agents

Abstract

Price bundling, offering two or more separate products/services together in a single package at a different price from the sum of the components’ prices, is one of the most prevalent marketing practices in many industries, including hospitality and travel. Virtually all types of firms in the hospitality and travel industry, from suppliers such as hotels and airlines to intermediaries such as travel agents, are encouraging customers to purchase travel “packages” rather than a single component of travel. The purpose of this study is to determine whether the practice of price bundling by online travel agents is associated with actual monetary savings to consumers. Conventional economics theories generally assume that price bundling results in consumer savings in comparison with purchasing the same component products separately, and this is what travel agents are highlighting in their advertisements for selling travel packages. This study also investigated whether the magnitude of bundle discounts vary by four relevant variables such as travel agent, destination city, hotel class, and the timing of purchase. The results show that purchasing a travel bundle results in significantly lower consumer prices than purchasing the component products separately. However, the magnitude of the bundle savings is inconsistent across the relevant variables. In particular, Travelocity tends to offer significantly greater bundle savings than Expedia; bundles including upper-class hotels appear to provide greater absolute discounts than lower-class-hotel bundles, but those two are not significantly different in terms of percentage discounts. Some important implications of the results are discussed, along with the limitations of the study and suggestions for future research.

First Advisor

David C Bojanic

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