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Pricing on the European Mass Tourism Market: Tour Operators, Low Cost Carriers and Internet

Author

Listed:
  • Jaume Rosselló Nadal

    () (Centre de Recerca Econòmica (UIB · Sa Nostra))

  • Antoni Riera Font

    () (Centre de Recerca Econòmica (UIB · Sa Nostra))

Abstract

The recent expansion of Low Cost Carriers (LCCs) and the increasing use of Internet are provoking a deep transformation in the marketing of the typical Mediterranean summer tourism product in Europe. Internet may significantly reduce intermediary costs by enabling the connection between accommodation and transport business and consumers. At the same time, a more flexible product can be created in contrast to the conventional rigid tourist package offered by traditional tour operators. This paper investigates differences in price level and price dispersion across off-line and on-line markets and across tour operators and new emerging Internet retailers -including LCCs- using microdata on travel & accommodation individual expenses of tourists in the Balearic Islands, one of the most representative mature Mediterranean resorts. On the basis of the hedonic regression model, results suggest that price of transport; accommodation and board offered on Internet are lower than those offered by others channels, whatever the quality and quantity. Additionally, results reveal how on-line and off-line markets differ in the indirect value attributed to different characteristics of the product showing market segmentation.

Suggested Citation

  • Jaume Rosselló Nadal & Antoni Riera Font, 2008. "Pricing on the European Mass Tourism Market: Tour Operators, Low Cost Carriers and Internet," CRE Working Papers (Documents de treball del CRE) 2008/4, Centre de Recerca Econòmica (UIB ·"Sa Nostra").
  • Handle: RePEc:pdm:wpaper:2008/4
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    References listed on IDEAS

    as
    1. Clay, Karen & Krishnan, Ramayya & Wolff, Eric, 2001. "Prices and Price Dispersion on the Web: Evidence from the Online Book Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 49(4), pages 521-539, December.
    2. Kathy Baylis & Jeffrey Perloff, 2002. "Price Dispersion on the Internet: Good Firms and Bad Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 21(3), pages 305-324, November.
    3. Erik Brynjolfsson & Michael D. Smith, 2000. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers," Management Science, INFORMS, vol. 46(4), pages 563-585, April.
    4. Jeffrey R. Brown & Austan Goolsbee, 2002. "Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 481-507, June.
    5. Eric K. Clemons & Il-Horn Hann & Lorin M. Hitt, 2002. "Price Dispersion and Differentiation in Online Travel: An Empirical Investigation," Management Science, INFORMS, vol. 48(4), pages 534-549, April.
    6. Morton, Fiona Scott & Zettelmeyer, Florian & Silva-Risso, Jorge, 2001. "Internet Car Retailing," Journal of Industrial Economics, Wiley Blackwell, vol. 49(4), pages 501-519, December.
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    Keywords

    Internet pricing; e-tail; hybrid retailers; intermediaries; tourist products; Mediterranean Sea.;

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