Academic journal article Journal of Electronic Commerce Research

Online Engagement Investments of Online Travel Agencies: A Game-Theoretic Approach

Academic journal article Journal of Electronic Commerce Research

Online Engagement Investments of Online Travel Agencies: A Game-Theoretic Approach

Article excerpt

(ProQuest: ... denotes formulae omitted.)

1.Introduction

In view of the rising prevalence of the Internet, online travel agencies (OTAs) have emerged as a key modality for managing the increasing tourism demand of customers. The rapid growth of the tourism industry coupled with the perceived advantages of information technology, such as its sophisticated and multifunctional nature, has driven OTAs as new communication and distribution channels for customers and travel products/services. In other words, OTAs provide customers with electronic platforms for purchasing travel products/services, particularly customized ones, without any limitations of time and place [Anderson 2011; Clemons et al. 2002; Guo & He 2012; Ling et al. 2011].

To encourage competition in the market, OTAs devise ways to improve their performance, such as providing customized service. In recent years, an increasing number of customers are utilizing OTAs in designing their travel itineraries [Guo et al. 2013]. The bookings made in the OTA market in the United States exceeded $150 billion in 2013 [Trefis 2015]. In China, travel products purchased from OTAs reached 56.42 billion in the first quarter of 2014 [iResearch 2014]. These statistics show that the online travel market offers profitable business opportunities for online travel companies. Numerous OTAs, such as Priceline, Expedia, Orbitz, and Ctrip, have flourished on the Internet around the world. As leading OTAs, Expedia and Priceline are forming an alliance in the global OTA market. OTAs that wish to obtain a high revenue and maintain a large market share need to make more investments to attract new customers and maintain loyal ones.

In marketing research, engagement has been receiving increasing attention in recent years [Bowden 2009; Brodie et al. 2011b; Stibe et al. 2013]. With the growing prevalence of the Internet, researchers have begun analyzing the role of engagement in enhancing customer loyalty in the online environment. For instance, Cheung et al. [2012] demonstrated that customer engagement behavior influences loyalty intentions (repurchase intention and intention to recommend). The current study conceptualizes engagement as the manifestation of user experience on online platforms [Brodie et al. 2011a]. In other words, engagement refers to the psychological state that represents the extent of pleasure and involvement in an activity or interaction within OTAs. Highly engaged customers tend to exhibit enjoyable and pleasant preference for user experience with OTAs, which ultimately translates to customer loyalty [Cha 2011; Shim et al. 2015]. Therefore, OTAs need to increase their investments for online engagement to maintain a consistent stream of online reservations. In this study, online engagement investment refers to the investments that encourage the pleasant/enjoyable preference for user experience with OTAs. Examples of such investments include providing various tools that support interactions and effective communications (e.g. rating buttons, online reviews, and pictures sharing), offering customized service to loyal users (e.g. tour route design), allowing customers to express their opinions and share their experiences (e.g. feedback ratings). Furthermore, OTAs could perhaps recognize the contribution of customers and reward engaging ones with coupons and vacation packages.

Although researchers have highlighted the need to explore the concept of engagement in the context of an online environment [Nambisan & Baron 2007; Zheng et al. 2015], limited studies have focused on the investment decision-making progress of OTAs for enhancing customer engagement in online platforms, particularly, the optimal decision of engagement investment.

The current study attempts to analyze how OTAs make investment decisions as regards encouraging the online engagement of customers in online travel platforms. By analyzing a two-OTA online travel market, we first emphasize the important role of online engagement in retaining loyal customers and preventing switching ones, and then provide the optimal decisions of online engagement investment for each OTA. …

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