Cornell Hospitality Quarterly

http://cqx.sagepub.com/ Travel Planning : Searching for and Booking Hotels on the Internet
Rex S. Toh, Charles F. DeKay and Peter Raven Cornell Hospitality Quarterly 2011 52: 388 originally published online 1 September 2011 DOI: 10.1177/1938965511418779 The online version of this article can be found at: http://cqx.sagepub.com/content/52/4/388

Published by:
http://www.sagepublications.com

On behalf of:

The Center for Hospitality Research of Cornell University

Additional services and information for Cornell Hospitality Quarterly can be found at: Email Alerts: http://cqx.sagepub.com/cgi/alerts Subscriptions: http://cqx.sagepub.com/subscriptions Reprints: http://www.sagepub.com/journalsReprints.nav Permissions: http://www.sagepub.com/journalsPermissions.nav Citations: http://cqx.sagepub.com/content/52/4/388.refs.html

>> Version of Record - Oct 14, 2011 OnlineFirst Version of Record - Sep 1, 2011 What is This?

Downloaded from cqx.sagepub.com at UNIV OF CHICAGO LIBRARY on April 9, 2013

418779
8779Toh et al.Cornell Hospitality Quarterly

CQXXXX10.1177/193896551141

Sales and Marketing Focus: Hotels

Travel Planning: Searching for and Booking Hotels on the Internet

By Rex. S. Toh1, Charles F. DeKay1, and Peter Raven1

Cornell Hospitality Quarterly 52(4) 388398 The Author(s) 2011 Reprints and permission: sagepub.com/journalsPermissions.nav DOI: 10.1177/1938965511418779 http://cqx.sagepub.com

Abstract A survey of 249 leisure travelers at four hotels in Seattle, Washington, finds overwhelming use of the internet for searching and booking hotel rooms, although a noticeable percentage still make telephone calls to book rooms. Eight of ten respondents used the web for a hotel room search. Of this group, 67 percent continued online to make their booking (on either the hotels page or a third-party site), 26 percent made telephone calls, and the remainder used travel agents or walked in to book rooms. Earlier research indicates that the personal contacts (notably by phone) are aimed at negotiating a price lower than that found online. For those booking electronically, hotel websites were used most commonly by this group of respondents (37 percent), following by third-party sites (30 percent) and opaque auction sites (25 percent). In contrast to studies from the early 1990s, this study found that women have surpassed men in information search activities. Also, those who purchased hotel rooms online trended toward being younger, having higher incomes, and purchasing more room-nights than those who used traditional distribution channels. Although the study findings cannot be generalized because of the sampling procedure, it is clear that a substantial number of travelers use the internet for search only, and then book another way (usually by phone). Women conduct much more research regarding potential hotels and rates than do men. Hotels own websites remain the first choice for booking rooms, but opaque auction sites are almost as popular as regular third-party sites. For this sample, Priceline and other similar sites accounted for 25 percent of all bookings. Finally, even those travelers who did not use the internet for any purpose in connection with their hotel stay still had a relatively favorable opinion of the concept of online booking. Keywords consumer behavior, hotel management, tourism

Travelers have embraced the internet as their chief mechanism for locating and booking hotel rooms and other travel arrangements. Because of this popularity, Werthner and Ricci (2005) reported a few years ago that tourism was the number one industry in terms of online transaction volume, and the Economist (2004) predicted that travel could be the first big industry with the majority of its sales online. That magazine anticipated that the proportion of electronic travel distribution would reach 50 to 70 percent within 10 years of that prediction. At the time Europe was about three years behind the United States in adopting internet distribution, and Asia was even farther behind. As early as a decade ago, travel services were among the top three categories of goods or services purchased on the internet (Sweney 1997) and that remains so at this writing. By 2008, statistics reported by TravelClick (2009) showed that 48 percent of room sales for transient nongroup reservations were made on the internet, either directly on the hotels own websites or through nonopaque third-party websites, such as Expedia, Orbitz, and Travelocity.

Much of the growth in internet travel bookings can be attributed to price transparency and the perception of lower prices (OConnor 2003; Sahay 2007) as well as the economies of bundling, where airline seats, hotels rooms, and car rentals are purchased as a package at a discount. One outcome of the ease of search is that some online travel buyers shop multiple websites for hotel rooms before buying, and then search again later for lower rates (Carroll 2004). Jansen, Ciamacca, and Spink (2009) estimated that approximately 6.5 percent of web inquiries are travel related. This article deals with individual transients in the United States (not groups) seeking, choosing, and booking hotel
1

Seattle University, Seattle, WA, USA

Corresponding Author: Rex S. Toh, Seattle University, 901 12th Avenue, P.O. Box 222000, Seattle, WA 98122-1090 Email: rextoh@seattleu.edu

Downloaded from cqx.sagepub.com at UNIV OF CHICAGO LIBRARY on April 9, 2013

Toh et al. rooms on the internet and examines their demographic, behavioral, and attitudinal characteristics. After stating the study objectives, we will state our research hypotheses, outline our survey protocol, and follow with a description of the results. We then offer operational implications of our findings, and outline the limitations of our study. We conclude by reporting some results that we consider to be surprising and interesting, and make recommendations for further research.

389 contributing to the growth was Orbitzs decision at the end of 2009 to drop the $25 change and cancellation fees for the majority of hotel bookings in the United States, quickly followed by the other third-party websites (Nassauer 2009). It is to be noted that the TravelClick data are taken from a survey of the top 30 international hotel chains and are weighted toward European hotels. Thus, our second objective is to know which distribution channels dominate for all sizes of hotels in the United States. Note that in this paper and purely for purposes of convenient nomenclature, third-party websites, such as Expedia, are distinguished from auction websites, such as Priceline. Also, because the United States leads Europe and Asia in adoption of the internet and auctions for hotel sales, seeing where the United States is today provides insight into where Europe and Asia may be going, because travelers in both of those areas are rapidly adopting internet-based search. As a corollary, we would also like to know how much the internet has replaced direct voice reservations made through hotels toll-free telephone numbers, and through travel agents, as well as walk-ins. Third, we would like to know the most important factors travelers consider in choosing a hotel, and also whether the presence of the internet has changed behavior and attitude (compared, e.g., to Rivers, Toh, and Alaoui 1991). Finally, we would like to measure differences in attitudes toward several internet and website issues, between internet users and nonusers, between business and pleasure travelers, and between men and women. We want to replicate and compare our findings with another gender-based study that offered unexpected results by showing that women have surpassed men in using the internet for travel research (Kim, Lehto, and Morrison 2007).

Study Objectives and Research Questions

For a previous companion study (Toh, DeKay, and Raven 2011), we interviewed representatives of nine hotels, one airline, and one third-party website. In that study, we outlined how hotels can steer customers to their own websites and call centers to avoid paying high commissions to thirdparty websites (TPWs, also known as online travel agents, or OTAs). We also tracked the room rates of thirteen hotels over a seventeen-week period and showed that room rate parity seldom exists and that rates fall over time as the arrival date approaches. For this study, we have several study objectives and research questions. First, we would like to know travelers preferred methods in searching for and booking their hotel stays (i.e., internet, telephone, travel agents, or walk-ins). Garrow et al. (2006) reported that several studies show that consumers shop online but go back to the hotels own websites to book the reservations. However, the percentage of travelers who switch from one booking method to another was not reported. Thus, we would specifically like to know what percentages of searches on the internet convert to online bookings and where searchers go to book if they switch to another method. Also, in the companion piece in the May 2011 CQ (Toh, DeKay, and Raven 2011), we reported that hotels will discount their rack rates to avoid paying high commissions (15 to 30 percent to the TPWs, and 10 percent to traditional travel agents). Thus, the issue here is to explore and report on specific search then book strategies. We measure not only the leakage but also the channels used by those who switch. We also want to examine what kind of traveler books a room and then rebooks for a lower rate. To our knowledge, none of these issues has been directly examined. The change from telephone reservations to online reservations has been dramatic. According to TravelClick (2009), reservation sources for 30 major hotel chains are now as follows: internet (45 percent), travel agents (32 percent), and phone (22 percent). The phenomenal growth in direct online reservations has been enhanced by Travelocitys expanded best-rate guarantee, where a customer who books a hotel room and finds a lower price online will get a refund of the difference (subsequently emulated by the other TPWs). Also

Research Hypotheses
Based on our study objectives and research questions outlined above, and augmented by research findings as noted, we advance the following research hypotheses. Mindful of the advantages of the internet that we have outlined and the results of our literature search documenting the explosive growth of the internet, especially in the area of travel-related activities, we postulate: Hypothesis 1: Most travelers will search and book for rooms on the internet, as opposed to telephones, travel agents, and walk in. Based on interviews with the nine hotel executives, we discovered that hotels will discount their rack rates to avoid paying high commissions (15 to 30 percent) to TPWs and 10-percent commissions to travel agents (Toh, DeKay, and Raven 2011). In fact, Garrow et al. (2006) reported that there are studies which show that consumers shop online,

Downloaded from cqx.sagepub.com at UNIV OF CHICAGO LIBRARY on April 9, 2013

390 but go back to hotels own websites to book their rooms. Thus we postulate: Hypothesis 2: Some of those who search for hotels on the internet will then call the hotel directly to book their rooms. Given the fast-growing popularity of the internet and the decision of Delta Airlines to do away with 5-percent travel agent commissions after the September 11, 2001, attacks (soon followed by the other airlines), travel agents are shrinking, except for international air travel and the cruise industry (Toh, Rivers, and Ling 2005). We also believe that in the era of hand-held smart phones that can be used to make last-minute inquiries about room availability, walk-ins are rare. We saw this in Toh and DeKay (2002), especially in the case of downtown hotels, and our interviews with the hotel executives confirm it. Thus, we postulate: Hypothesis 3: In the hospitality industry, travel agents are greatly diminished as a channel of distribution, and walk-ins are today very rare. We believe that those who use the internet for travelrelated purposes are similar to those who use it for other general purposes. It is also reasonable to conjecture that those who stay more nights in hotels and belong to more hotel frequent-guest programs are more likely to book on the internet. Some are road warriors, and the internet provides them more accommodation choices. A larger group is pleasure travelers trying to save money by getting the lowest room rates by searching more efficiently on the internet. Thus we postulate: Hypothesis 4: Those who use the internet to search for or book rooms are younger, richer, spend more nights in hotels, and belong to more hotel loyalty programs. They also tend to be pleasure travelers. It is a reasonable conjecture that compared with nonusers, users of the internet for travel planning believe more strongly that the internet is great for making hotel and price comparisons quickly, and offers the lowest room rates, and that they also place more importance on the quality of the hotel website. Thus we postulate: Hypothesis 5: Compared to nonusers, internet users believe more strongly that the internet is great for making hotel amenity and price comparisons quickly, and the internet channel offers the lowest room rates. Internet users also place more importance on the quality of the hotel website and getting free internet access. Also, compared to

Cornell Hospitality Quarterly 52(4) nonusers, internet users more strongly believe in booking early to get a room, or to get the lowest room rate. Because of customers desires to get the lowest rates within their desired market segments and because we were told by hotel revenue directors that online customers are price conscious, we expect that compared to business travelers, pleasure travelers (who pay for their own rooms) are more price sensitive. Therefore, we expect that they are more inclined to believe that the internet is the most convenient vehicle for comparing hotels and rates. Also, because they have more control over where they stay, and want better information to make their choices, they place more importance on the quality of hotel websites. We also expect that the price-sensitive pleasure travelers are more likely to return to the websites to see if they can find lower rates and change their reservations to save on room costs. Thus we postulate: Hypothesis 6: Compared to business travelers, pleasure travelers will assign higher importance scores to the notion that the internet is the most convenient vehicle for comparing hotels and rates, and will also assign greater importance to the quality of hotel websites. They are also more likely to return to the websites to see if they can find lower rates. It is widely known that men were the first to use computers, and tend to be more fascinated by electronic devices than women. Pew Internet and American Life Project (2004) reported that 78 percent of men like to do online transactions, compared to 71 percent for women, a moderate difference that may not be of much practical significance. But there is a preponderance of past studies (too many to report) which show that men are more computer savvy than women. Thus we postulate: Hypothesis 7: In comparison to women, men are more likely to use the internet, and to agree that the internet is the most convenient place for comparing hotels and rates, that it offers the best room rates, and that the quality of the hotels website is important. Men are also more likely to check more than one internet site to get lower rates, and then to recheck for lower rates and rebook, if necessary. Morosan and Jeong (2008) showed that people have a more favorable attitude toward TPWs than hotel websites. Furthermore, websites such as Expedia provide price as well as package bundling, and make it convenient to quickly compare hotels and room rates. It is reasonable to conjecture that convenience and the desire to minimize

Downloaded from cqx.sagepub.com at UNIV OF CHICAGO LIBRARY on April 9, 2013

Toh et al. search time would compel people to search and book on third-party websites. Also, we were told by many of the hotel revenue directors we interviewed that we put distressed room inventory on auction sites only when the arrival date approaches, and only our worst rooms. Note that hotel auction sites are opaque (unlike eBay), and one does not know what hotel or location one would end up with. Thus we postulate: Hypothesis 8: On the internet, most travelers will book on third-party websites, followed by hotel websites; auction sites will be unimportant for bookings. From the results of our literature search and the results of previous studies (Toh and Hu 1988; Rivers, Toh, and Alaoui 1991; Browne, Toh, and Hu 1995; Toh, DeKay, and Raven 2008, 2011), plus our interviews with the hotel executives, we postulate: Hypothesis 9: The internet will dominate searchand-book strategies, with travelers relying on it to quickly compare hotels and room rates, checking multiple websites. Travelers will also consider booking early to get a room or the best rate, but will seldom recheck for lower rates once they have booked. Hypotheses 10: Location, service, room readiness, and room rates will be considered the most important by travelers, followed by internet access and quality of the hotel website, with hotel loyalty programs and the recommendation of the much diminished travel agent and corporate travel planner as the least important.

391 questionnaires distributed, 249 were returned, representing a respectable 25-percent response rate from a target population of individual (nongroup) travelers. To encourage and reward participation and get hotel cooperation, we offered participants a drawing for a $100 gift certificate. Because of the token amount involved, we do not believe that the incentive made a significant difference in the type of hotel guests who were willing to participate. Our previous survey (Toh, DeKay, and Raven 2008) showed that a lottery encourages survey participation, and also allows hotels to justify distributing the questionnaires to incoming guests. The time or order of returned questionnaires could not be determined because of the survey protocol, and thus we could not do a check for differences between early and late returns to assess nonresponse bias. Thus, ours was necessarily a convenience sample, because the overriding imperative was to avoid collecting data in any way that could be construed as intrusive to the guests or interfere with the hotels operations. Given the response rate and the absence of significant aberrations in the respondents demographics compared to previous studies, we believe that our sample, while not probabilistic, is representative. Questions asked included whether one was a business or pleasure traveler or belonged to hotel loyalty programs, the number of nights stayed in hotels in a year, internet habits and search-then-book activities, and demographic profiles. Using a 5-point Likert-type scale, we also collected data on travelers behavioral and attitudinal characteristics, using items developed from our earlier expert interviews. The questions were also an extension of four previous surveys conducted in the United States and Australia (Browne, Toh, and Hu 1995; Rivers, Toh, and Alaoui 1991; Toh, DeKay, and Raven 2008; Toh and Hu 1988).

Survey Results Survey Protocol

On the basis of the interviews we conducted with the eleven industry executives, plus experience conducting similar published surveys on hotel guests (Rivers, Toh, and Alaoui 1991; Toh, DeKay, and Raven 2008), we developed and distributed a pilot survey to 142 graduate students, which allowed us to revise and construct an eighteen-item survey questionnaire. We distributed the survey from August through October 2009 through four chain hotels of various sizes and types in the Seattle metropolitan area. The hotel sizes ranged from 179 to 415 rooms, with an average of 271, and catered to both business and pleasure travelers of moderate to high income. Two of them had convention facilities. Two were affiliated with international chains, and two were operated by regional chains. Hotel general managers agreed to distribute the surveys at the hotel reception desk as guests checked in. Of the 981 The demographic profile of the 249 survey participants was as follows. There were 117 men (47 percent) and 132 women, with an average age of 47 years, and an average household annual income of $119,000. Among the 239 who answered the question, 71 (30 percent) identified themselves as business travelers, while the other 168 identified themselves as pleasure travelers. They stayed an average of sixteen nights per year in a hotel. Thus, our convenience sample appears to be representative of the general population of travelers and is not dominated by road warriors. The demographic profile of our survey respondents also appears to be similar to the four previous surveys alluded to, except that women are featured more prominently, reflecting the increasing participation of women in business travel (Brownell 2011). Regarding internet use, out of 246 responses to the question, 191 or 78 percent said that they typically used the internet to search for hotels. But among those who used the

Downloaded from cqx.sagepub.com at UNIV OF CHICAGO LIBRARY on April 9, 2013

392 internet to search, only 67 percent followed up by actually booking on the internet, while 26 percent switched to telephones when booking. Thus, it appears that a substantial minority of those who searched on the internet ended up telephoning hotels to book. Although the respondents did not say this, our earlier interviews with revenue managers indicated that these guests called the hotels to negotiate for lower rates. Only twelve respondents said they typically used travel agents to search for hotels, and just nineteen typically used travel agents to book their hotels, confirming the decline of travel agents for hotel bookings in the United States (a contrast with Europe, based on other studies). Interestingly, among those who searched on the internet, 4 percent switched to travel agents for a booking. Finally, only thirteen people reported that they walked into hotels with no advance reservations to ask for rates and pay for their rooms, confirming the rarity of walk-ins. Almost certainly, this is because travelers can book hotels any time, even at the last minute, on their smart phones. Indeed, eight of the thirteen walk-ins had previously searched on the internet. Moreover, 3 percent of those who had searched on the internet ended up walking into hotels to purchase their rooms, perhaps hoping for last-minute discounts on distressed rooms. To summarize, of the 78 percent who said they searched on the internet, 67 percent actually booked on the internet, 26 percent switched to telephone reservations, 4 percent contacted their travel agents to book, and 3 percent walked into hotels. Thus, Hypotheses 1, 2, and 3 are all supported. Among the 249 respondents, 80 percent reported that they either searched or booked on the internet and the other 20 percent did not. Looking at the demographic differences between these two groups, our results show that those who use the internet are on average forty-six years old, while those who do not are on average fifty years old, with a significant directional difference (p = .05). In addition, those who use the internet have an average household annual income of $122,000, while those who do not report an average $108,000, with a nonsignificant directional difference (p = .14). Those who use the internet spend an average of seventeen nights in a hotel in a year, while nonusers spent an average of thirteen, a significant directional difference (p = .02). Those who use the internet belong to an average of 1.67 hotel loyalty programs, while those who do not averaged 1.29, but the directional difference was not significant (p = .09). Thus, compared to people who shun the internet, we have strong evidence that people who use the internet for travel planning are, as we hypothesized, typically younger people who stay more often in hotels. We also have inconclusive evidence that they may have higher incomes and belong to more hotel loyalty programs. The results reported above are summarized in Exhibit 1, and support Hypothesis 4. Next, let us examine the attitudinal differences between those who use the internet for travel planning and those who Exhibit 1:

Cornell Hospitality Quarterly 52(4)

Differences between Internet Users and Non Internet Users Used the Internet Average age Average income Average nights spent in hotels in a year Average membership in hotel loyalty programs 46 $122,000 17 1.67 Did Not Use the Internet 50 $108,000 13 1.29 p .05 .14 .02 .09

do not, between respondents who considered themselves business and pleasure travelers, and between males and females. We report the results in Exhibit 2. Note that all average scores subsequently reported are within an increasing range from 1 to 5, in a Likert-type scale. In Exhibit 2 section A, among those who use the internet to search for hotels, the average score measuring the degree of agreement with the statement that the internet is convenient for making hotel and price comparisons quickly is 4.67 versus 4.21 for those who did not use the internet, indicating a significant directional difference (p = .002). The corresponding comparative scores for agreement that the internet offers the best room rates are 3.90 versus 3.56, a directionally significant difference (p = .050). Among those who use the internet, the average score measuring the degree of importance of the quality of the hotel website is 3.83 versus 3.37 for those who do not use the internet, again a significant difference (p = .015). None of this should be surprising, but what is interesting is that even those who did not use the internet to search for hotels had high scores for the various types of internet use. We think this bodes well for the increased use of the internet in future travel planning. Also interesting (although not reported in Exhibit 2 section A) is that there appears to be no significant differences between users and nonusers of the internet in the belief of booking early to get a room, or the lowest room rates. Surprisingly, there also appears to be no significant differences in the importance of getting free internet access in the hotel. Thus, Hypothesis 5 is only partially supported. In Exhibit 2 section B, surprisingly, results show that those who considered themselves as price-sensitive pleasure travelers were no more inclined than those who identified themselves as business travelers to believe that the internet is the most convenient for comparing hotels and rates. But as intuition would have suggested, pleasure travelers placed more importance on the quality of the hotel website, because they have more control over where they stay. It is to be

Downloaded from cqx.sagepub.com at UNIV OF CHICAGO LIBRARY on April 9, 2013

Toh et al. Exhibit 2:

Factor A.  Between respondents who were users and nonusers of the internet The internet is the most convenient for comparing hotels and rates The internet offers the best room rates The quality of the hotel website is important B.  Between respondents who considered themselves business and pleasure travelers The internet is the most convenient for comparing hotels and rates The internet offers the best room rates The quality of the hotel website is important C. Between respondents who were males and females Checked more than one internet site for the lowest room rate The internet is the most convenient for comparing hotels and rates The internet offers the best room rates The quality of the hotel website is important Internet Users (mean) 4.67 3.90 3.83 Business (mean) 4.39 3.82 3.63 Men (mean) 4.30 4.58 3.90 3.58 Non-internet Users (mean) 4.21 3.56 3.37 Pleasure (mean) 4.63 3.89 3.81 Women (mean) 4.14 4.64 3.82 3.88

393

Directional Differences in Attitudes toward Internet Usage in Travel Planning p .002 .050 .015 .358 .036 .085 .081 .217 .262 .012

noted, however, that the difference is not significant (p = .085) and is slight (an importance score of 3.81 vs. 3.63), and may be of little practical significance (Schwab 1980). Furthermore, among pleasure travelers, 28 percent said that they return to websites to see whether they can find lower room rates, and then if they do, they change their reservations. This is more (one and a half times) than the corresponding figure of 18 percent for business travelers. Thus, Hypothesis 6 is only partially supported. In Exhibit 2 section C, females were more inclined than males to believe that the internet is the most convenient for comparing hotels and rates, and that the quality of the hotel website is important. The proportion of women in our sample who used the internet to search or book their hotel rooms was not significantly different from the number of men (82 percent vs. 79 percent, p = .64). But when asked whether they returned to any website to see if they could find lower rates, 28 percent of women said yes, versus only 18 percent for men, representing a significant directional difference (p = .04). Furthermore, when asked to rate their agreement with the statement that they checked more than one internet site for the lowest room rate, women had a higher average score of 4.30, versus 4.14 for men, a nonsignificant directional difference (p = .08). Thus, Hypothesis 7 is not supported. This finding is consistent with the results of a recent study by Kim, Lehto, and Morrison (2007), who found that in the case of travel planning, women ascribed higher perceived importance to travel websites (than men did). They also found that women not only search more travel websites but they do so more frequently, a result that is inconsistent with the Pew Internet and American Life Project conducted just a few years earlier (2004), which found that 78 percent of men like to do shopping online, compared to only 71 percent for women. Overall, our results confirm the findings of

Kim, Lehto, and Morrison (2007) with more recent data. Furthermore, we made an interesting finding that among men, 74 percent of those who searched on the internet ended up booking online. The corresponding figure for women was only 61 percent. It also appears that nearly one-third of women who searched on the internet ended up booking by telephone, compared to only 19 percent for men. When asked to rate their degree of agreement with the statement that after they checked on the internet they called the hotel directly to see if they can get a lower rate, women scored higher with an average of 2.69 versus 2.61 for men, although the directional difference was not significant (p = .14). But this is consistent with the Kim, Lehto, and Morrison (2007) finding that women, compared to men, tend to have more positive attitudes toward off-line information sources. Thus interestingly, women are, by historical standards, more intensive users of the internet than men when doing travel planning, and women tend to be less loyal to websites, since they are more prone to search then switch. Coupling our findings with those of Kim, Lehto, and Morrison (2007), we are led to the conclusion that over time, not only have women become more intensive users of the internet compared to men in travel research, they are in general more intensive seekers of information from various types of sources. This further confirms that there is no support for Hypothesis 7. When people booked their hotel reservations online, the channel of distribution was as follows: hotel websites = 37 percent, third party websites = 30 percent, opaque auction sites = 24 percent, and others (such as airline websites) = 9 percent. This finding shows that most people still prefer hotel websites for booking online. We see two potential reasons why our respondents indicated a preference for hotel websites: they want to avoid third-party booking fees, and

Downloaded from cqx.sagepub.com at UNIV OF CHICAGO LIBRARY on April 9, 2013

394 they want to collect hotel loyalty points, which are unavailable through third-party websites. We were surprised to find that nearly one-quarter of the online reservations were made on auction sites. This could be a result of recession, but there is evidence that travelers are becoming more sophisticated and resorting to this means of getting cheap accommodation. Also, a few hotels admitted that in these difficult recessionary times, rooms are put out on auction as far as six months out to ensure decent capacity during low periods. This parallels the airline practice of selling block seats at heavily discounted but nonrefundable fares to travel consolidators to ensure a nearly full flight. Similarly, faced with excess capacity of perishable inventory and low cost per occupied room of $25 to $38 according to the hotel managers we interviewed, hotels use auction sites to lock in low but guaranteed revenue by selling nonrefundable rooms. We next wanted to know which type of travelers favored hotel websites over other websites. Suspecting that members of frequent guest programs behave differently from nonmembers, we conducted a chi-square test with membership status cross tabulated against types of websites used to book (i.e., hotel, third party, auction, others). The notion of equal proportions can be rejected at the 2-percent level of significance. When we concentrated on hotel websites alone, we found that 65 percent of members booked there versus 35 percent for nonmembers, with a significant directional difference (p = .005). Thus, we may conclude that the overall popularity of hotel websites can be attributed largely to frequent guest program members who want to collect loyalty points, available only if one booked directly with the hotels. Thus, Hypothesis 8 is not supported. We now present the results of our investigation into the behaviors of travelers (in Exhibit 3) and their attitudes (in Exhibit 4). It appears from Exhibit 3 (which shows statements measuring behavior in descending order of agreement) that the internet dominates search and booking behaviors. Travelers rely on the internet to quickly compare hotels and their room rates, they check several websites for the lowest rates, and they consider the internet to be the best source for the lowest rates. They moderately agreed with the strategy of booking early to get a room or the best rate, or to check for discounts. Sometimes they search on the internet and then call the hotel to get a lower rate. They seldom recheck for lower rates or book late for lower rates. Consistent with our results, overall only 23 percent of the respondents return to any website to see whether they could find a lower rate. Thus, it appears that prices tend to be sticky, once a purchase has been made. From an examination of Exhibit 4 measuring attitudes toward factors affecting hotel selection, it appears that convenience of location, service quality, room readiness, and Exhibit 3:

Cornell Hospitality Quarterly 52(4)

Measuring Behaviors: Degree of Agreement (Increasing Scale from 1 to 5) Statement Internet is the most convenient means to quickly compare hotels and rates I often check several websites for lowest rates The internet offers me the best rates I book early to get a room I always check for discounts such as AAA I book early to get lower rates After searching on the internet, I call the hotel to try to get a lower rate I often recheck for lower rates and rebook if necessary I book late to get lower rates Means 4.61 4.22 3.86 3.43 3.42 3.27 3.00 2.66 2.63

Exhibit 4:

Measuring Attitudes: Degree of Importance (Increasing Scale from 1 to 5) Factor Convenience of location Service quality Low room rate Room readiness Past experiences with the hotel Free access to internet Hotel has a good website Food and beverage quality Belong to the hotels loyalty program Recommendation of a travel agent or corporate travel planner Means 4.71 4.27 4.25 4.21 4.18 3.93 3.74 3.41 2.72 2.44

past experience with the hotel are very important, together with low room rate. Internet-related factors such as free access to the internet and a good website are considered moderately important. Recommendations of the travel agent or corporate travel planner are perceived to be the least important. Loyalty programs are also not perceived to be important. We note the work of McCall and Voorhees (2010), who wonder whether these programs actually work in their present form, but Keh and Lee (2006) assert that loyalty programs can induce willingness to pay price premiums and encourage repeat purchase. Moreover, other studies (Toh, Fleenor, and Arnesen 1993; Arnesen, Fleenor, and Toh 1997) show that business travelers often go out of their way to secure loyalty points at company expense. Overall, there is complete support for Hypothesis 10. A summary of all 10 hypotheses and our findings are shown in Exhibit 5.

Downloaded from cqx.sagepub.com at UNIV OF CHICAGO LIBRARY on April 9, 2013

Toh et al. Exhibit 5:

Hypothesis 1 2 3 4 5 6 7 8 9 10

395

Brief Summary of Hypotheses and Results Summary Most travelers will search and book for rooms on the internet Some internet searchers will then call the hotel directly Travel agents are becoming less important, and walk-ins are very rare Internet users are younger and richer, and tend to be pleasure travelers Internet users believe the internet is great for comparing offerings Pleasure travelers believe the internet is convenient for comparisons Men travelers are more likely than women travelers to favor the internet Most travelers will book on third-party websites, rather than hotel websites The internet will dominate search and book strategies Location, service, and rates will be considered most important by travelers Results Supported Supported Supported Partially supported Partially supported Partially supported Not supported Not supported Supported Supported

Implications for the Hospitality Industry

We have shown that among those who searched on the internet, 67 percent booked on the internet, 26 percent switched to telephones, 4 percent switched to travel agents, and 3 percent walked into hotels when they were booking. With that as background, let us examine how hotel websites can improve their stickiness. Despite the perception of lower prices available online, one of the authors anecdotal experience shows why travelers have been trained to search electronically but to book on the telephone. The author searched on a TPW for a hotel near JFK airport in New York. Having located the desired hotel, he telephoned the hotel directly to ask for an AAA rate, which yielded a $20 discount per night. Just as he was about to hang up, he asked if there was an even lower rate. The hotel asked if he was at least 62 years old to qualify for a senior rate, which resulted in yet another $10 discount. The hoteliers we interviewed in the companion study admitted that basically, switchboard operators are trained to secure the reservations directly, and will find a way to discount the rack rate to secure the booking. One hotelier admitted that the rack rate is for people who do not ask for a discount. To get direct bookings, hotel websites must be rich in content with colorful visual aids and maps aimed especially at women who have a higher tendency to extend their search, should provide best-rate guarantees, and offer bonus hotel loyalty points (also see: Wong and Law 2005; Morosan and Jeong 2008). Rong, Li, and Law (2009) reported that reservation information, facilities information, and contact information are crucial to a successful hotel website, with surrounding information of lesser importance. Schmidt, Cantallops, and Santos (2008) called for more photographs. To prevent confusion and dissonance among travelers searching for room rates and to enhance price integrity,

hotels should also try to maintain room rate parity, still a problem within the United States (Brewer, Feinstein, and Bai 2006), and especially acute among the larger and higher ranked hotels (Toh, DeKay, and Raven, 2011; Zong et al. 2008). According to the results of our interviews with the nine hotel executives and one TPW executive, the large third-party websites such as Expedia, Orbitz, and Travelocity appear to be the captains in the channel of distribution when dealing with the smaller hotel chains and independents, where they have managed to maintain a certain degree of rate parity among the participating channels. Our survey sheds no direct light on the reasons for the continued prominence of hotel websites in searching and booking, but we predict that the elimination of booking fees, the advantages of quick hotel and price comparisons offered by third-party websites, and the cost economies associated with package bundling will allow the TPWs to continue to be an important channel of distribution. Further more, as more people become comfortable with the auction process, auction sites will grow in popularity, especially during periods of low occupancy. In regard to the demographic, behavioral, and attitudinal characteristics of users and nonusers of the internet, hotel websites should be designed to be more attractive to younger and richer people who travel often and belong to more frequent-guest programs. Hotel websites should in particular stress that they can offer loyalty points whereas third-party websites cannot. We have shown that frequentguest program members tend to gravitate to hotel websites, probably for this reason. To get people to book on their websites instead of on third-party websites, hotels should consider offering bonus loyalty points for travelers returning from their last stay to their websites to book another trip. Most of the hotels we interviewed admitted that once guests check in via bookings through TPWs, the hotel will get their email addresses and send them literature soliciting direct reservations through their own websites in the future.

Downloaded from cqx.sagepub.com at UNIV OF CHICAGO LIBRARY on April 9, 2013

396 Besides offering bonus loyalty points, hotels can offer further inducements such as free parking and telephone privileges, and can throw in a free breakfast for direct reservations. Also, one hotelier told us, I always try to reward my most loyal guests who book directly with us with the best rooms and the best views. We were able to confirm Kim, Lehto, and Morrisons (2007) findings that women tend to use the internet more than men for travel research and are more likely than men to search for lower rates. Likewise, their report that women have more positive attitudes toward website functionalities, content, and affective themes also compels hotels to pay greater attention to women in travel website design. We suggest that beside just functional information regarding the hotel location and rate, hotel websites should provide more visual aids in full color to highlight hotel architectural structures, amenities, safety measures such as floors dedicated exclusively to women, and maps of surrounding attractions (see Brownell 2011). We even suggest that hotel websites should be designed by women for women. A recent study by Zhang et al. (2009) suggests that people are relying heavily on online recommendations for trip planning, so perhaps hotels should sponsor links to online hotel reviews by women for women. Finally, we also saw that the quality of the hotel website is relatively more important to pleasure travelers, who are more price sensitive. The internet appears to be of utmost importance in searching for hotels and comparing room rates. But once the decision is made, most travelers tend to be content with their choice and stop their search. This allows hotels to lower rates to clear distressed inventory as the day of arrival approaches, and this survey indicates that only a small percentage of travelers will take advantage of these late reduced rates. This is reinforced by the observation that travelers attached the least degree of agreement to the strategy of booking late to get the lowest rates. Our finding that members of frequent guest programs are more likely to use the hotels own website to book (saving the hotels the cost of commissions) suggests that loyalty programs, although expensive to maintain (Matilla 2006) and of dubious value (Skogland and Siguaw 2004), provide indirect cost savings and should not go away. The lowest importance in choosing a hotel is attached to the recommendations of the travel agent or corporate travel planner. This suggests that most promotions should be targeted directly at the final consumer.

Cornell Hospitality Quarterly 52(4) are discussed in Toh 2008.) Second, we used a convenience sample, an inevitable result of the constraints placed by hotel management on questionnaire distribution and collection. We know of no other published studies of this nature that were able to use probabilistic methods of sampling. Fortunately, the sample collected reflects known characteristics of the population. Third, the entire sample was collected in Seattle because of budgetary restrictions. Nevertheless, Seattle is a typical medium-size cosmopolitan city with convention facilities, a cruise center, and tourist attractions. The Seattle area is also the location of many corporate headquarters, notably, Nordstrom and Microsoft. Fourth, the sample was collected over only a three-month shoulder period (August, September, and October). Ideally, the survey should have been spread out over a year. But we believe that whereas the frequency of travel is affected by the season, room booking behavior is largely invariant to it. Fifth, we acknowledge that survey results are generically idiosyncratic to the sample collected, and can be distorted (Lee, Hu, and Toh 2000). It is to be noted that we took great precautions to secure a reasonably large survey sample from four different hotels using an extensively pretested questionnaire. Also, no study can be expected to be completely comprehensive or exhaustive. For those who want to examine online bookings in greater detail or pursue special topics, we refer them to two recent biographical studies (Law, Leung, and Buhalis 2009; Buhalis and Law 2008). Indeed, the literature on online hotel bookings is growing rapidly. Note that in our study, we measured behaviors and attitudes but we did not investigate underlying reasons. For example, we could measure the percentage of travelers who used the different channels to search or book rooms, and we could show the percentage of those who searched online and then switched to off-line channels. But we never asked why, partly because the hoteliers we interviewed already told us that travelers are looking for lower rates. Future research could investigate why people prefer certain channels, and look into the reasons as to why they searched on one source and then switched to another, say from online search and to telephone, instead of switching to travel agents or simply walking in. One final caution about the inferences we made on the differences between various respondent subsets (shown in Exhibit 2). Although we may have noted statistically significant differences, the differences may be so small that they might not be of practical significance (Cohen 1969), so individual hoteliers should consider whether these findings justify making the suggested changes.

Limitations of the Study

There are five notable limitations to our study. First, in our study, room booking behavior pertains only to transients or individuals, and not groups. (Group reservations

Conclusion
Five of our results are surprising and interesting. First, onethird of those who searched online did not end up booking

Downloaded from cqx.sagepub.com at UNIV OF CHICAGO LIBRARY on April 9, 2013

Toh et al. on the internet. Women particularly went off-line, and according to the hotel revenue directors we interviewed they did this to call the hotels directly to negotiate for lower rates. Second, although we know that women are becoming an increasingly important segment of the travel market (Toh, DeKay, and Raven 2008; Brownell 2011), we are mildly surprised to discover that women are prodigious and intensive users of the internet for travel research, given the preponderance of past findings to the contrary. In this regard, we are able to confirm the findings of Kim, Lehto, and Morrison (2007). Third, we are surprised that hotel websites are still more popular than nonauction third-party websites, in spite of the fact that the TPWs present the most convenient way to quickly compare hotels and rates. Fourth, we are also surprised that opaque auction sites such as Priceline accounted for almost one-quarter of all hotel online bookings. We believe that the growing sophistication in internet usage and growing familiarity with various nonopaque auction sites such as eBay will propel this upward trend. Finally, even those who did not use the internet to search for or book hotel rooms gave high scores to the various types of internet use. This bodes well for the increased use of the internet in future travel planning. To conclude, we offer a sobering observation regarding the costs of internet distribution. The system of searching for and booking hotel rooms is now quicker and provides more choices for the traveler and is therefore more efficient for the buyer. However, the hotels, although relieved of much of the administrative costs of selling, are unhappy that they have to pay 15- to 30-percent commissions to third-party websites, versus only 10 percent to traditional travel agents. Many hoteliers, particularly the smaller ones who pay the highest commissions, tell us that they regard third-party websites as a necessary evil: We dislike them, but we cannot do without them. Our survey results indicate that hotel websites still dominate online booking, and that some people do search on third-party websites and then call the hotels directly. Without doubt, however, travelers search and purchase practices will continue to evolve. Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

397
Brewer, P., A. H. Feinstein, and B. Bai. 2006. Electronic channels of distribution: Challenges and solutions for hotel operators. FIU Hospitality Review 24 (2): 68-77. Browne, W. G., R. S. Toh, and M. Y. Hu. 1995. Frequent-flier programs: The Australian experience. Transportation Journal 35 (2): 35-44. Brownell, J. 2011. Creating value for women business travelers: Focusing on emotional outcomes. Cornell Hospitality Reports 11 (12). Buhalis, D., and R. Law. 2008. Twenty years on and 10 years after the internet: The state of etourism research. Tourism Management 29 (4): 609-23. Carroll, W. J. 2004. From property to screen: Managing online hotel and lodging distribution. New York: PhoCusWright Inc. Cohen, J. 1969. Statistical power analysis for the behavioral sciences. New York: Academic Press. Economist. 2004. Click to fly. (May 13, 2004): 1-3. Garrow, L., M. Ferguson, P. Keskinocak, and J. Swan. 2006. Expert opinions: Current pricing and revenue management practices across U.S. industries. Journal of Revenue and Pricing Management 5 (3): 237-47. Jansen, B., C. Ciamacca, and A. Spink. 2009. An analysis of travel information searching on the web. Journal of Information Technology and Tourism 10 (2): 101-18. Keh, H. T., and Y. H. Lee. 2006. Do reward programs build loyalty for services? The moderating effects of satisfaction on type and timing of rewards. Journal of Retailing 82: 127-36. Kim, D., Y. Lehto, and A. M. Morrison. 2007. Gender differences in online travel information search: Implications for marketing communications on the internet. Tourism Management 28: 423-33. Law, R., R. Leung, and D. Buhalis. 2009. Information technology applications in hospitality and tourism: A review of publications from 2005-2007. Journal of Travel and Tourism Marketing 26 (5/6): 599-623. Lee, E., M. Y. Hu, and R. S. Toh. 2000. Are consumer survey results distorted? Systematic impact of behavioral frequency and duration of survey response errors. Journal of Marketing Research 37 (February): 125-33. Matilla, A. S. 2006. How affective commitment boots guest loyalty (and promotes frequent guest programs). Cornell Hotel and Restaurant Administration Quarterly 47 (2): 147-81. McCall, M., and C. Voorhees. 2010. The drivers of loyalty program success. Cornell Hospitality Quarterly 51 (1): 35-52. Morosan, C., and M. Jeong. 2008. Users perceptions of two types of hotel reservations web sites. International Journal of Hospitality Management 27: 284-92. Nassauer, S. 2009. Orbitz cuts some fees. Wall Street Journal, 254 (76): D4. OConnor, P. 2003. On-line pricing: An analysis of hotel-company practices. Cornell Hotel and Restaurant Administration Quarterly 44: 88-96. Pew Internet and American Life Project. 2004. The internet and daily life. http://www.pewinternet.org.

Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.

References
Arnesen, W. A., C. P. Fleenor, and R. S. Toh. 1997. The ethical dimensions of airline frequent-flier programs. Business Horizons (January-February): 47-56.

Downloaded from cqx.sagepub.com at UNIV OF CHICAGO LIBRARY on April 9, 2013

398
Rivers, M. J., R. S. Toh, and M. Alaoui. 1991. Frequent-stayer programs: The demographic, behavioral, and attitudinal characteristics of hotel steady sleepers. Journal of Travel Research 30 (2): 41-45. Rong, J., G. Li, and R. Law. 2009. A contrast analysis of online hotel web service purchasers and browsers. International Journal of Hospitality Management 28 (3): 466-78. Sahay, A. 2007. How to reap higher profits with dynamic pricing. Sloan Management Review 48: 53-60. Schmidt, S., A. S. Cantallops, and C. P. D. Santos. 2008. The characteristics of hotel websites and their implications for website effectiveness. International Journal of Hospitality Management 27: 504-16. Schwab, D. P. 1980. Construct validity in organizational behavior. Research in organizational behavior, edited by B. M. Staw and L. L. Cummings, Vol. 2: 3-43. Greenwich, CT: JAI. Skogland, I., and J. A. Siguaw. 2004. Are your satisfied customers loyal? Cornell Hotel and Restaurant Administration Quarterly 45 (3): 221-34. Sweney, D. 1997. Making money on the web: What is really working? InfoWorld 19 (36): 63-64. Toh, R. S. 2008. Guests meetings and hotel group room reservations. Tourism management: Analysis, behavior, and strategy, edited by A.G. Woodside and D. Martin, 302-17. Cambridge, MA: CAB International. Toh, R. S. and F. DeKay. 2002. Hotel Room Inventory Management: An Overbooking Model. Cornell H.R.A. Quarterly 43 (2): 79-90. Toh, R. S., F. DeKay, and P. Raven. 2008. Characteristics of members of hotel frequent-guest programs: Implications for the hospitality industry. Tourism Analysis 13: 271-80. Toh, R. S., F. DeKay, and P. Raven. 2011. Selling rooms: Hotels vs. third party websites. Cornell Hospitality Quarterly 52 (2): 181-89.

Cornell Hospitality Quarterly 52(4)

Toh, R. S., C. P. Fleenor, and D. W. Arnesen. 1993. Frequent-flier games: The problem of employee abuse. Academy of Management Executive 7 (1): 60-72. Toh, R. S., M. J. Rivers and T. Ling. 2005. Room occupancies in the cruise industry: Cruise lines out-do the hotels. International Journal of Hospitality Management 24: 121-35. Toh, R. S., and M. Y. Hu. 1988. Frequent-flier programs: Passenger attributes and attitudes. Transportation Journal 28 (2): 11-22. TravelClick. 2009. http://www.travelclick.net/information-center/ booking-by-channel.cfm. Werthner, H., and F. Ricci. 2005. E-commerce and tourism. Communications of the ACM 17 (12): 101-9. Wong, J., and R. Law. 2005. Analysing the intention to purchase on hotel websites: A study of travelers to Hong Kong. International Journal of Hospitality Management 24 (2): 311-29. Zhang, L., B. Pan, W. Smith, and X. R. Li. 2009. Travelers use of online reviews and recommendations: A qualitative study. Journal of Information Technology and Tourism 11 (2): 157-67. Zong, J., F. Tang, W. Huang, and Jun Ma. 2008. Online pricing dispersion of Chinese hotels. Journal of China Tourism Research 4 (3/4): 248-60.

Bios
Rex S. Toh has written nearly ninety journal articles in the areas of tourism/hospitality, research methodology, and transportation/ logistics. He has served on the editorial boards of the Cornell Hospitality Quarterly, Journal of Travel Research, Tourism Analysis, and the Annals of Tourism Research. Charles F. DeKay has published in the areas of tourism/hospitality and economics. Peter Raven has published in the areas of tourism/hospitality and international marketing.

Downloaded from cqx.sagepub.com at UNIV OF CHICAGO LIBRARY on April 9, 2013