Price Bundling and Travel Product Pricing Practices Used by Online Channels of Distribution

Abstract

Price bundling 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 to save money and streamline the purchasing process. The purpose of this research is to determine whether the practice of price bundling by online travel agents results in actual monetary savings for consumers (i.e., lower prices) relative to the prices charged by individual service providers (i.e., hotels and airlines) through their own online Web sites. The results indicate that there are monetary savings in the form of lower prices realized by consumers who purchase bundled offerings from online travel agents, and there is an interaction effect between channel and hotel class.

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