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How to Improve Customer Loyalty to Online Travel Agencies - A research on Expedia, an online travel booking platform
Master’s Thesis 15 credits Department of Business Studies Uppsala University Spring Semester of 2018 Date of Submission: 2018-06-01
Author: Yirui Shen Supervisor: Jason Crawford
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Abstract
Nowadays with the development of Internet, there is a shift from offline to online travel agencies.
Challenges like customer loyalty go hand in hand with advantages such as fast speed and convenience.
This paper aims to identify what are the determining factors that have an impact on customer loyalty to
online travel agencies through an empirical study of Expedia, an online travel booking platform.
According to the research of previous literature, this paper proposes seven factors that have an
influence on customer loyalty in the environment of online travel agencies. Then a new framework is
outlined and seven hypotheses are generated to address the research questions that are put forward.
This study adopts an online questionnaire, a quantitative strategy, as the method to collect data. After
analysis, the results support five outlined hypotheses and two are not supported. Finally, the findings
will provide some managerial implications to improve the customer loyalty to Expedia and also be
helpful for the whole online travel agency market.
Key words:
Customer loyalty, perceived customer value, trust, perceived customer risks, online travel agency
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Table of Contents
1. Introduction ......................................................................................................................................5
1.1 Research Background .................................................................................................................. 5
1.2 Research Problem ........................................................................................................................ 6
1.2.1 Company Overview.............................................................................................................7
1.2.2 Competitor Analysis in the Online Market ........................................................................8
1.3 Research Purpose .........................................................................................................................8
1.4 Research Question........................................................................................................................ 8
1.5 Research Outline ......................................................................................................................... 8
1.6 Research Contribution ..................................................................................................................9
2. Theoretical Foundation...................................................................................................................10
2.1 Loyalty........................................................................................................................................10
2.2 Traditional Customer Loyalty.....................................................................................................10
2.3 Online Customer Loyalty............................................................................................................11
2.4 Previous Theoretical Literature on Factors in Relation to Online Customer Loyalty................12
2.4.1 E-service Quality...............................................................................................................13
2.4.2 Customer Trust..................................................................................................................13
2.4.3 Perceived Customer Value................................................................................................14
2.4.4 Switching Costs.................................................................................................................14
2.4.5 Brand.................................................................................................................................15
2.4.6 Customer Perceived Risks.................................................................................................16
2.4.7 Customer Experience.........................................................................................................16
2.5 Research Model.......................................................................................................................... 17
2.6 Hypotheses Summary..................................................................................................................18
3. Methodology................................................................................................................................... 19
3.1 Research Design..........................................................................................................................19
3.2 Data Collection ...........................................................................................................................19
3.2.1 Quantitative Research .......................................................................................................19
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3.2.2 Sampling .......................................................................................................................... 20
3.2.3 Measurements ...................................................................................................................21
3.2.4 Pilot Test.......................................................................................................................... 23
3.2.5 Choice of Data Analysis....................................................................................................23
4. Results and Analysis....................................................................................................................... 24
4.1 Respondents’ Characteristics......................................................................................................24
4.1.1 Demographic Information.................................................................................................24
4.1.2 Travel Options...................................................................................................................25
4.2 Factor Analysis........................................................................................................................... 26
4.3 Reliability Analysis.....................................................................................................................27
4.4 Regression Analysis....................................................................................................................27
4.4.1 Multiple Linear Regression...............................................................................................28
4.4.2 Hypotheses Testing...........................................................................................................30
4.4.3 Summary of the Results of the Hypotheses.......................................................................31
5. Discussion........................................................................................................................................ 32
6.1 E-service Quality........................................................................................................................ 32
6.2 Customer Trust........................................................................................................................... 32
6.3 Perceived Customer Value..........................................................................................................32
6.4 Switching Costs.......................................................................................................................... 33
6.5 Brand.......................................................................................................................................... 33
6.6 Perceived Customer Risks.......................................................................................................... 34
6.7 Customer Experience..................................................................................................................34
7. Conclusion........................................................................................................................................ 35
7.1 Summary......................................................................................................................................35
7.2 Managerial Implications.............................................................................................................. 35
7.3 Limitation and Suggestions for Future Research ........................................................................36
References............................................................................................................................................. 37
Appendix............................................................................................................................................... 45
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1. Introduction
This section begins with a brief introduction of the research background, including an overview of
current trend of travel agencies and the market environment. Based on this, the research problem is
put forward, then the company overview and its competitor analysis are presented, then followed by
the research purpose and research question. After that, a brief outline of the paper is presented.
Finally, it ends up with the contribution of this article.
1.1Research Background
As is known to all that travel agencies are a great helper for tourists in providing varieties of services,
such as travel packages, accommodation, airlines and also cruises (Bitner & Booms, 1981), which can
be regarded as significant intermediaries in the industry of tourism(LeBlanc, 1992). Among them,
travel packages are the most profitable products(McKercher, Packer, Yau, & Lam, 2003). Through
getting cheaper fares and accommodation prices and selling at higher prices, travel agencies can make
great profits.
Nowadays there is a shift from offline to online travel agencies. As the Internet has grown rapidly in
the last decade, it has become the favorable platform for many travel agencies companies. There is a
tendency that more and more agents long for using Internet as an essential channel to advertise their
products. They provide attractive travel products and services online to bring together buyers and
suppliers together in such a virtual transaction platform.
As to the role that online travel agency plays in Europe’s online travel distribution landscape, it can be
seen from the Figure 1 below, from 2014 to 2020, European online travel agency gross bookings are
gradually increasing year after year. Through calculation, following a 26% increase from 2014 to 2015,
OTA transactions climbed a much more modest 9% in 2016. But in 2016 they accounted for almost
half of the total online travel bookings. It is estimated that European online travel agency gross
bookings will reach the peak in 2020. Thus, it is undeniable that OTAs will continue to benefit from
this offline-to-online shift among European travelers.
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Figure 1 European online travel agency gross bookings from 2014 to 2010
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Source: European Online Travel Overview Twelfth Edition
1.2 Research Problem
With the accelerated growth of the Internet, the online platform can help travel agencies conduct
transactions with fast speed and low cost even in a long distance. Furthermore, the new information
technologies have completely transformed the structure of tourism industry and customer’s purchasing
behavior. There are multi-channels including both offline and online for tourism industry. And vast
young generation prefer to use online booking engines to research options and make reservations when
planning their domestic or overseas travel.
However, it has also raised new challenges for not only customers but also online travel agencies.
Through the online channel, customers are now faced with more technologically complicated
purchasing processes and it always takes a long time for them to compare prices in different websites
because of the lack of human interaction. What’s more, faced with homogenous travel packages by
different online travel agencies, customers’ preferences change easily. There is less possibility for
them to keep loyal to a certain tourism company. On the other hand, travel agencies have to ensure
their intermediary role and enhance the interaction between customers and providers (Kracht & Wang,
2010). Both of these challenges can be gathered below the issue of customer loyalty. Indeed, retaining
customers is considered to be far more profitable than consistently chasing new ones (Peter & Olson,
2010). However, building up and maintaining customer loyalty is more difficult (Blazquez-Resino et al,
2015; Grissemann & Stokburger-Sauer, 2012). Thus, this paper aims to identify the factors that
contribute to customer loyalty in online travel agencies based on an empirical study on Expedia, an
online travel platform.
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1.2.1 Company Overview
Expedia.com is a popular booking website for tourists to book flight tickets, accommodation
reservations, cruise tickets and also excursions, owned by Expedia Group. Expedia Group is a
worldwide travel platform, headquartered in Bellevue, Washington with a broad brand portfolio that
involves varieties of world’s most trusted and reputable travel brands.
Figure 2 Global Presence, supply and business results of Expedia
Source: Expediagroup Website (https://www.expediagroup.com/about/)
As is shown in Figure 2, being a company with over 22,000 employees in more than 30 countries, it
generates 46% of the international revenue until Mar. 31, 2018. It covers more than 200 travel booking
websites and over 150 mobile websites in 75 countries with 35 languages. Collaborated with numerous
and various suppliers such as 665,000 properties, over 550 airlines, dozens of rental car companies and
cruise lines and over 1.6 million vacation rentals, it has made a revenue of 10.4 billion dollars till 2018
and the gross bookings reached 92.0 billion dollars.
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1.2.2 Competitor Analysis in the Online Market
Except Expedia, Priceline, eDreams, Bravofly, Unister Travel, HRS Holidays, Travel Public, Holiday
Check, ETI, On the Beach and Promovacances are some of the other online agencies that deal with the
global online travel sector. Priceline’s Booking.com leads a dominant position in European OTA
market owing to their strong marketing reach and favorable terms they have negotiated with hotel
suppliers. Bravofly provides last minute cruise bookings for festivals like Christmas and New Year in
a cheaper price to attract more customers, which taking up a market share of 12%. Most of these
companies also facilitate their consumers with ‘no cancellation fee’ policy where the consumers can
change or cancel almost any reserved hotel. Members of these companies can get extra 10% discount
on hotel stays at select hotels across the world. In addition, the advancing supplier-direct channels are
also strong competitors against OTAs. Such supplier websites as airlines, hotels and transportation
companies sell their products directly to customers through their websites in order to prevent OTAs
from having shares on profits. They offer such advantages as long standing loyalty programs, and
better pricing to travelers. Having recognized such strong competition from other companies, it is of
vital importance for Expedia to find out ways to improve its customer loyalty.
1.3 Research Purpose
The main purpose of this paper is to identify the determining factors that lead to customer loyalty to
online travel agencies according to the theoretical foundation of previous theories and literature. After
identifying these factors through the quantitative study, then put forward some managerial implications
to Expedia to better improve its customer loyalty. Areas for future research are also suggested.
1.4 Research Question
The research question of this study is: What are the factors that contribute to customer loyalty in online
travel agencies?
1.5 Research Outline
This paper proceeds as follows. It begins with a brief introduction of background information,
including an overview of current trend of travel agencies and the market environment. Based on this,
the research problem is raised, followed by the research purpose and research question. Then
according to the study of previous literature, a research model and seven hypotheses are proposed.
After that, the research method of this paper is presented, followed by the findings and discussion.
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Finally, it ends with the conclusion part, including a brief summary, the managerial implications,
limitations and suggestions for future research.
1.6 Contribution
Previous research has yielded mixed findings about the factors that influence customer loyalty in
general. But what are the actual factors and how will they have an influence on online travel agency
industry are not clear enough. This article presents a conceptual framework and identifies the main
factors that contribute to customer loyalty to online travel agencies through questionnaire method.
Furthermore, different influences of these factors on customer loyalty to online travel agencies are also
identified in this article.
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2. Theoretical Foundation
Firstly, this section begins with a literature review of the general concept of loyalty. Then to be more
specifically, the concept of traditional customer loyalty is explained. After that, the new idea of online
customer loyalty is presented. Secondly, previous theoretical literature on factors in relation to online
customer loyalty is discussed and seven main factors are identified. Thirdly, according to the study of
previous literature, a research model and seven hypotheses are proposed.
2.1 Loyalty
The idea of loyalty has evolved from a behavioral perspective, which defines loyalty as repeat
purchasing behaviors (McConnell, 1968; Frank, 1967; Ehrenberg & Goodhart, 2000), to a cognitive
perspective, which paying much attention on the attitudinal aspect of loyalty (Day, 1969; Lalaberba &
Marzusky, 1973; Yang & Peterson, 2004), then finally to a composite perspective, which combines
attitudinal attitude and repeat purchasing behavior together, referring them as two significant elements
to the definition of loyalty (Jacoby & Kyner, 1973; Dick & Basu, 1994; Kumar & Shah, 2004; Han &
Back, 2008). Based on the evolution, investigators then developed a new process approach (Oliver,
1997; El-Manstrly & Harrison, 2013; McMullan & Gilmore, 2003) to define loyalty, pointing out that
loyalty develops in a process including four phases, which are cognition, affection, conation, and
action. While this dynamic view of loyalty is widely accepted by recent academic research (Han,
Kwortnick, & Wang, 2008), its empirical validation is only limited to the offline context
(Evanschitzky & Wunderlich, 2006; El-Manstrly & Harrison, 2013; Han et al., 2008).
2.2 Traditional Customer Loyalty
After reviewing the definition of loyalty, it is also necessary to know the actual meaning of customer
loyalty. Traditionally, customer loyalty is often treated as repeat purchases or retaining existing
customers (Gefen, 2002). Actually, there are many different definitions of customer loyalty. At first, it
was defined as repeat purchase behaviors of customers (McConnel, 1968). As time passed by,
researchers recognized the emotional attachment of customers to a certain brand and defined customer
loyalty as the measurement of customer attachment towards a brand (Aaker, 1991). Jacoby and
Chestnut (1978) defined customer loyalty as a psychological decision-making process. Then Dick and
Basu (1994) referred customer loyalty as the possibility of a consumer switching to other brands when
that brand made some changes either in travel information or prices. In a modification of Oliver’s
(1997) article, he conceptualized customer loyalty as the customer’s deeply held commitment to
repurchase a favorable product or service continually. He called “ultimate loyalty” as being driven by
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behavioral intentions based on extremely strong attitudinal preference. (Oliver, 1997) In contrast,
Keller (1998) argued that customer loyalty was related to brand commitment but they were more
distinctive. He measured customer loyalty in a more behavioral perspective instead of the economic
sense. When brand loyalty increases, customers tend to pay higher prices for their favored brand and
being less sensitive to market moves.
2.3 Online Customer Loyalty
As e-commerce develops rapidly, it is also important to have a clear idea of how online loyalty is
different from the traditional customer loyalty. Grondin (2002) conceptualized it as “the degree to
which a consumer is willing to purchase again from a favored online supplier”. In the same year, based
on the theory of Zeithaml et al. (1996), Gefen (2002) referred online customer loyalty to the
customer’s willingness to maintain connections with the existing online service provider and have the
intention to recommend it to other customers. Different from previous research, Liang, Chen and
Wang (2008) pointed out the psychological dimension of online customer loyalty. It was defined as the
psychological and attitudinal attachment to the online supplier, accompanied by an intention to make
efforts in the purpose of maintaining the original customer–supplier business relationship (Liang, Chen,
and Wang, 2008). Cyr et al. (2009) made a precise definition: the willingness to revisit a website, or to
rebuy products from this website again. A study by Aberdeen Group defined online customer loyalty
as the process of attracting new customers and maintaining existing customers in an e-commerce
environment (Aberdeen Group, 2009). Hsu, Wang and Chih (2013) developed the research by
recognizing the switching behavior of consumers. They classified it as a customer’s willingness to
purchase from a website and the customer have little possibility to switched websites for the same
product. But there is a widely accepted definition made by many scholars. It was demonstrated as
‘customer’s preferrable attitude toward the website supplier that leads to the repeat purchasing
behavior’ (Rafiq, Fulford & Lu, 2013; Huang, 2008; Sultani & Gharbi, 2008; Anderson & Srinivasan,
2003). It was noted that some scholars regarded it as the willingness to continue the purchasing
behavior through the Internet or the intention to revisit (Wang & Lin, 2008; Cyr, Kindra, & Dash,
2008; Luarn & Lin, 2003; Gefen, 2002). Still others define it as an attitudinal attitude or the
psychological attachment to a certain product (Rafiq, et.al., 2013; Chen &Wang, 2008; Anderson &
Srinivasan, 2003). Despite the fact that there are different voices about how to define online customer
loyalty, it is not hard to find that the ideas of repeated behavior, preferences, purchase and intentions
appear frequently in the context. Based on these above related literature, we attempt to measure
customer loyalty in three dimensions: (1) repeated behavior (Wang & Lin, 2008; Cyr, Kindra & Dash,
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2008; Luarn & Lin, 2003; Gefen, 2002) (2) psychological attachment (Liang, Chen & Wang, 2008) (3)
willingness to maintain the long-term relationship (Liang, Chen & Wang, 2008)
2.4 Previous Theoretical Literature on Factors in Relation to Online Customer Loyalty
Research into the factors determining online loyalty has undergone significant growth in recent years.
Reichheld and Schefter (2000) stated that to get customer loyalty, one must first receive their trust or
create a trusting environment that could improve loyalty (Kim, Xu & Koh, 2004). Website trust has a
high degree of connection with online customer loyalty. Kim, Jin, and Swinney (2009) demonstrated
that trust and customer loyalty were positively connected with each other in an online environment.
Sigala and Sakellaridis (2004) pointed out that E-service quality was a necessary factor of online
purchases and loyalty that couldn’t be ignored. Madu and Madu (2002) demonstrated totally 15
dimensions of E-service quality for measurement. Doolin, Dillon, Thompson and Corner (2005) found
that perceived risk was relative to customers’ shopping experience, indicating that negative customer
experience increased the perceived risk, which had an influence on customer loyalty. Consumers were
always looking for ways to avoid mistakes, so perceived risk could to some extent help explain
consumer behaviour in the online context (Chang & Chen, 2008). In addition to that, Ling et al.
(2010); Ward and Lee (2000) found that in an Internet-marketplace, when customers were determined
to purchase, trusted and branded companies could also be seen as a determining factor of their choices.
A branded name could help attract new customers to make them feel more relaxing and comfortable
during the process (Ling, Chai & Piew, 2010). Shim, Eastlick, Lotz and Warrington (2001) noticed
that owning a successful previous purchasing experience could greatly influence customers’ future
purchasing behavior in the online atmosphere. Chang and Chen (2008) agreed that customer
experience had an influence on future purchasing intentions because customers who had positive prior
experiences are eager to repeat purchase. Based on the literature above, there were seven main factors
that were identified to explain the factors that affected online customer loyalty. They were E-service
quality, customer trust, perceived customer value, switching costs, brand, customer perceived risks and
customer experience.
2.4.1 E-service Quality
As is known, online customer loyalty is difficult to obtain (Van, Liljander & Jurrie, 2001), so a high-
qualitied service is required to satisfy the customers. Numerous studies have shown that higher
perceived e-service quality results in higher profitability degrees (Hoffman, Novak & Chatterjee, 1995;
Tilson, 1998; Lohse & Spiller, 1999; Vanitha, Lepkowska & Rao, 1999). E-service quality is used as a
strategic element by travel agencies to increase the competitiveness (Monzó, 2015). Thus, e-service
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quality is an important factor of online customer loyalty (Sigala & Sakellaridis, 2004). It involves such
elements as Internet technologies, website design and website content. They can all have a positive
impact on customer loyalty (Gregory & Kingshuk, 2001). It was demonstrated that the website’s
commission to a travel agency is also important to improve the e-service quality, which includes
overall information, package features, marketing and promotion strategies and tangibility of products
or intangibility of services. (Lee et al. 2004). According to the above related literature about e-quality,
this study aims to discuss it in three dimensions: (1) useful information (Jeong & Lambert, 2001), (2)
customization (Madu & Madu, 2002; Wong & Sohal, 2003), (3) responsiveness (Madu & Madu, 2002;
Kim & Lee, 2007). And the following hypothesis is proposed:
H1: E-service quality has a positive influence on customer loyalty to online travel agencies.
2.4.2 Customer Trust
Due to lack of touch of online travel agencies, customers feel more hesitated and riskier when making
a decision (Gefen & Straub, 2003). Trust, thus, acts as a foundation for the customer-supplier
relationship (Chen & Barnes, 2007). Morgan and Hunt (1994) stated that the tourist’s trust was one of
the elements to keep long-term relationship for the travel agency. In their study, customer loyalty was
demonstrated as affective trust (Morgan and Hunt, 1994). In other words, the customer is confident
that the travel package offered by the travel agency will meet his initial expectations. Delgado and
Munuer (2001) agreed with his study, claiming the sense of security held by the tourists that the travel
agency would meet his consumption expectations could be called customer trust. Undoubtedly, trust
can be regarded as the essential factor that exists before any intention or behavior of buying, no matter
online or offline travel agencies. It was also defined by Moorman, Deshpande, and Zaltman (1993) that
depending on an exchange partner was called customer trust. Kim, Ferrin, and Rao (2008)
conceptualized trust as the belief that the supplier in an online context would fulfil its obligations. It
was found by Alsajjan and Dennis (2010) that trust had a connection with the attitude, the intention
and the behavior of customers. Customers who has the confidence in online travel agency websites
have a positive attitude toward the agency and are more likely to repurchase. Yoon and Kim (2000)
stressed the importance of company reputation as a variable that couldn’t be ignored. In reality, any
service provider in an online context who is unable to establish a trust relationship with his customers
is destined to fail (Beatty, Dick, Reatty & Miller, 2011). Therefore, this study aims to identify trust in
three dimensions: (1) obligation fulfilment (McKnight & Chervany, 2002; Kim, Ferrin & Rao, 2008),
(2) company reputation (Yoon & Kim, 2000), (3) company integrity (Corbitt, Thanasankit & Yi, 2003)
And it is proposed that:
H2: Customer trust has a positive influence on customer loyalty to online travel agencies.
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2.4.3 Perceived Customer Value
After evaluating the E-service quality and developing the trust to the website, a customer will form his
own perceived value of the product that he is provided. Perceived customer value is seen as one of the
most important factors that influence online customer loyalty (Katro, 2011). It is rooted in equity
theory, which takes both the ratio of the customers’ input or output and the service suppliers’ input or
output into account (Oliver & DeSarbo, 1988). It was defined by Zeithaml (1988) as “the customer’s
general assessment of the utility of a product or service according to his own perceptions”. Taking a
step further, Bolton and Lemon (1999) recognized the concept of perceived cost, including monetary
and non-monetary payments such as money consumption and time consumption. He argued that it can
be defined as “customers’ evaluation of the perceived cost of the product (Bolton & Lemon, 1999)”.
Sirdeshmukh, Sabol and Singh (2002) classified perceived customer value as a superior goal. Katro
(2011) did research on factors affecting customer value and found out such factors as pricing and
personalization possibilities can be the determinants (Katro, 2011). It was also stated that customer
judgments, the environment in which customers make these judgments and the time at which
customers buy products also have an impact on perceived value (Monzó, 2015). Thus, this study aims
to discuss perceived customer value in two dimensions: (1) reasonable price (Katro, 2011) (2)
personalization possibilities (Katro, 2011) And it is proposed that:
H3: Perceived customer value has a positive influence on customer loyalty to online travel agencies.
2.4.4 Switching Costs
Switching cost was defined as “the perception of the scale of the additional costs required to end the
current relationship and find a new alternative” (Porter, 1980). It was demonstrated by Morgan and
Hunt (1994) that switching cost had a nature of only economics. Nowadays with the help of the
Internet, searching costs for price, travel information, physical travel (Nielsen & Norman, 2000) and
also comparisons among different stores can be reduced (Bakos, 1997; Lynch & Ariely, 2000). As
time passed by, Sharma and Patterson (2000) realized that switching cost, however, might also consists
of psychological and emotional costs (Sharma and Patterson, 2000). Gobé (2001) also believed that the
emotional aspect of switching costs was what made a key difference for consumers. When customers
attach it to a specific functional or emotional value experienced earlier, then he is more likely to keep
loyal to a certain online travel agency. It was revealed later that switching costs play a significant role
in affecting customer loyalty through the sense of satisfaction. Hauser, Simester and Wernerfelt (1994)
them indicated that switching costs in essence may reduce customers’ sensitivity to their satisfaction
levels. On the occasion that switching costs were high or the switching processes were especially
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painful, there were more chances that dissatisfied customers maintain their initial relationships with
current travel agencies and reluctant to dissolve the relationship (Porter, 1980; Jackson, 1985). In this
way, fake loyal customers rather than committed loyal ones may exist. This study attempts to measure
switching costs using two dimensions: (1) economical costs (Morgan & Hunt, 1994) (2) emotional
costs (Sharma & Patterson, 2000) And it is proposed that
H4: Switching costs have a negative influence on customer loyalty to online travel agencies.
2.4.5 Brand
Brand was defined as “the company’s name, sign, logo or any other visual or invisible associations that
represent the whole company so as to differentiate its products from other counterparts” (Holland &
Baker (2001). Ling et al. (2010) agreed that a well-known brand name would affect the perceptions of
customers and might evoke the comfortable and relaxing feeling during their purchasing process.
Mohammed, Nima and Mahboubeh (2015) added that the company logo also had an impact on
customer loyalty to the brand. Ling, Chai and Piew (2010) measured brand in the dimensions of
familiarity, user friendliness and the recognition, claiming that a recognizable and user-friendly brand
help attract more customers. Undoubtedly, the importance of a brand has increased rapidly in the e-
loyalty area. There has been study on investigating the relationship between brand and online loyalty,
which agrees with the previous argument about the importance of brand in regards with loyalty
(Holland & Baker, 2001). All above literature shows that brand plays an important role in creating
customer loyalty. This study attempts to measure brand in four dimensions according to Holland &
Baker (2001): (1) company name (Holland & Baker, 2001) (2) company logo (Holland and Baker,
2001) (3) company sign (Holland & Baker, 2001) (4) company’s other visual or invisible associations
(Holland & Baker, 2001). And it is proposed that:
H5: Brand has a positive influence on customer loyalty to online travel agencies.
2.4.6 Customer Perceived Risks
However, there are also some potential negative outcome that can be regarded as risks identified so far.
Firstly, the Internet fraud problems increase every year. Secondly, the problems related with spyware
and other vulnerable secure systems are likely to lead to the feeling of worried and insecure by
customers about their information provided for the website (Wang & Ling, 2008). It was found out that
confidentiality and security problems are the major concerns to the Internet channel. The potential
losses perceived by customers in making the purchase of products or services are referred to customer
perceived risks. Compared to other factors discussed above, consumers’ perceived risks in the context
of online travel agency have received little attention. Perceived risks were classified by Jacoby and
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Kaplan (1972) into four dimensions, which are financial, psychological, social and physical risks.
Based on this, Roselius (1971) added one more risk, that was time risk. Jarvenpaa and Todd (1997)
confirmed the previous scholars’ research, stating that such perceived risks as economic, social,
performance, security risks are specifically associated with online context. From another perspective,
Lin et al., (2009) adopted a tri-dimensional view which classifies perceived risk into risks connected
with the product itself, risks connected with the Internet as the purchase platform, and risks connected
with the website on which the transaction is conducted. Recognizing these problems, McKnight,
Choudhury and Kacmar (2002) pointed out that customer trust plays a significant role in helping
customers reduce perceptions of risk and insecurity in online travel agency context. It’s impossible for
customers to give service suppliers such personal information as credit card information, living address
or personal identification number without trust (Hoffman, Novak and Peralta, 1999). This study
attempts to measure customer perceived risks in three dimensions: (1) transaction confidentiality
(Jacoby & Kaplan, 1972; Sigala & Sakellaridis, 2004) (2) Property loss (Jarvenpaa & Todd, 1997) (3)
security risks (Jarvenpaa & Todd, 1997) And it is proposed that:
H6: Customer perceived risks have a negative influence on customer loyalty to online travel agencies.
2.4.7 Customer Experience
Customer Experience was defined by Meyer and Schwager (2007) referred as the responses by
customers with any contact, no matter direct or indirect. Direct contact occurs in surfing process,
which can be mastered by customers. Indirect contact happens sometimes privately such as word of
mouth, review, and media advertising. Great experiences are truly valuable and memorable for
customers. Researchers found out that customers who have high degree of preference to online travel
agencies are people who had previous experience in online purchases due to their less tendency of fear
of uncertainties. Consumers can utilize their prior experiences to evaluate the product information,
service quality, risks and warranty information (Mathwick, Malhotra & Rigdom, 2001; Parasuraman &
Zinkhan, 2002). It was also confirmed by Chi and Qu (2008). Vargo and Lusch (2008) proved that
customer experience was related with the service-dominant logic, where the value was co-created by a
combination between the customer's goals and a travel agency's offered products (Lemke et al., 2011).
Based on what Vargo and Lusch (2004) argued for, by using the product or service, value-in-use was
created (Grönroos, 2008). For a customer, value-in-use is the experiences they live in a travel, and
therefore, customers should have memorable experiences in their travels (Shaw, Bailey & Williams,
2011). In reality, current hotel guests tend to have an assessment of the accommodation according to
their perceived quality of previous experiences. Thus, experience is now central to the travel product
offerings. This study attempts to adopt two dimensions: (1) prior experience of customers themselves
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(Shaw et al, 2011) (2) hearsay of experience of other customers (Shaw et al, 2011) And it is proposed
that:
H7: Customer experience has a positive influence on customer loyalty to online travel agencies.
2.5 Research Model
Based on the above discussion, this study has proposed a research model, aiming to explore the factors
that contribute to customer loyalty in online travel agencies. The research model is summarized in
Figure 5 below.
Figure 5 The Research Model
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2.6 Hypotheses Summary
Table 1: Hypotheses Summary
H1: E-service quality has a positive influence on customer loyalty to online travel agencies.
H2: Customer trust has a positive influence on customer loyalty to online travel agencies.
H3: Perceived customer value has a positive influence on customer loyalty to online travel
agencies.
H4: Switching costs have a negative influence on customer loyalty to online travel agencies.
H5: Brand has a positive influence on customer loyalty to online travel agencies.
H6: Customer perceived risks have a negative influence on customer loyalty to online travel
agencies.
H7: Customer experience has a positive influence on customer loyalty to online travel
agencies.
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3. Methodology
This chapter began with introducing research design, and then followed by the process of data
collection. For the data collection section, firstly the quantitative research and sampling method were
introduced. Afterwards, the questionnaire was outlined, and the measurements of all the factors were
clarified. Then a pilot test was conducted before sending out the questionnaire. In the end, the
statistical tests conducted were talked about in this research.
3.1 Research Design
Though there are many research strategies that can be used when doing a study, it is important to
choose the most suitable research strategy for answering the outlined research questions. On a general
term, research design can be classified into quantitative research design and qualitative research design
(Bryman & Bell, 2011). Since our research purpose is to explore the factors that contribute to customer
loyalty to online travel agencies, that means the data in need for this study are perceptual. In other
words, it is about consumers’ perceptions of their beliefs towards the online travel product
consumption experience. Therefore, the quantitative method was chosen to conduct this study. The
research strategy of this study is the questionnaire strategy, which is the most widely-used way among
all quantitative studies (Hair, Black, Babin & Anderson, 2013). A questionnaire gives every person the
same opportunity to answer the same questions. In this study, the online questionnaire was distributed
through social media to gather data. Before that, a pilot test was utilized to assure the validity and
reliability of the questionnaire.
3.2 Data Collection
3.2.1 Quantitative Research
Quantitative research is a strategy that focuses on quantification in the data collection process, and
emphasizes on testing of theories in the data analysis process (Bryman & Bell, 2011). Numerical data
are gathered and generalized across groups of people. According to Saunders, Lewis and Thornhill
(2007), the primary quantitative methods are experiments and questionnaires. Data in this study was
collected through a questionnaire, which can be available through email or in the Internet. There are
several reasons why questionnaire is chosen as the method. Firstly, questionnaires are often cost-
efficient because there is no need to print out copies or hire surveyors. Secondly, it is always quick
and easy to get results through the Internet by using electronic devices. This method can help us to
organize the collected information and gain an overview of the context. Thirdly, from the respondents’
perspective, they are faced with less pressure compared with other face-to-face methods and they can
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take their time to finish the questions. And it is more likely for them to answer the questions truthfully.
Therefore, questionnaire was used in our study to collect data.
3.2.2 Sampling
Snowball sampling was used in this study for the purpose of enlarging the sample. During the data
collection process, I sent the questionnaire online hyperlink to my friends and classmates through the
Internet and also post it on the social media. Then those who have finished the questionnaire passed it
to their friends and families. In this way, more people are invited to fill in this questionnaire and the
whole sample size is getting increasingly larger, just like trundling a ball (Denscombe, 2007).
However, there are some limitations of snowball sampling that should be noticed. People always want
to make friends with like-minded persons, so these respondents are very likely to send the
questionnaire to people who share the similar interests and opinions with them. Oversampling such a
particular network of peers can lead to bias. To avoid this bias, they are also asked to send the
questionnaires to those who don’t have close relationships with them in addition to friends and
families. Many researchers hold different views and attitudes towards the sample size and the way it
should be calculated (Bartlett, Kortlik & Higgins, 2001). The goal of this study was to collect at least
50 respondents considering the limited time.
3.2.3 Measurements
The structure of the questionnaire for the study was categorized into three primary sections. The first
section of this questionnaire compromised questions in relation with respondents’ demographic
characteristics, including age, gender and monthly income. Age was categorized into six groups: below
18, 18-25, 26-35, 36-45, 46-55 and over 55. Gender was classified into female and male. Monthly
income was classified into five groups ($ per month): below 500, 500-1000,1000-2000, 2000-3000 and
over 3000. The second section contained questions regarding respondents’ traveling options,
frequencies and knowledge about online travel agencies. Frequencies were classified into four groups:
once a month, once half a year, once a year and once over a year. Usage of online travel agency was
classified into yes/no. The usage and knowledge of Expedia were also classified into yes/no. The third
section contained items adapted from literature to measure each construct. There were 8 constructs,
each owning items that were measured by a Likert-type scale from number 1 to 5. (1 means strongly
disagree and 5 means strongly agree). The items were 22 in total. All the measurement items of each
construct and its references were summarized in Table 2 below.
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Table 2: Constructs with Items and References
Construct
Items References
E-service quality QUA1: Expedia website provides useful
information.
Jeong and Lambert, (2001)
QUA2: Expedia website provides good
customization services.
Madu and Madu, (2002); Wong
and Sohal, (2003)
QUA3: Expedia website provides quick
responses to customers.
Madu and Madu, (2002); Kim
and Lee, (2007)
Customer trust TRU1: I believe Expedia will fulfill its
obligations.
McKnight and Chervany,
(2002); Kim, Ferrin, and Rao,
(2008)
TRU2: I believe Expedia has good
reputation. Yoon and Kim, (2000)
TRU3: I believe Expedia website has
integrity.
Corbitt, Thanasankit and Yi
(2003)
Perceived customer
value
VAL1: The products/services of Expedia
are reasonably priced given their quality.
Katro (2011)
VAL2: The products/services of Expedia
meet my needs.
Katro (2011)
Perceived risks RIS1: I fear that Expedia will reveal my
personal privacy information.
Jacoby and Kaplan (1972);
Sigala and Sakellaridis (2004)
RIS2: I fear that Expedia will result in
property loss.
Jarvenpaa and Todd (1997)
RIS3: I fear that there are some security
risks when the transaction information is
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transmitted through the internet.
Customer
experience
EXP1: I have used Expedia before and
the service of Expedia gives me great
travel experience.
Shaw, Bailey and Williams,
(2011)
EXP2: I have not used Expedia before but
I heard that it can provide customers with
good travel experience.
Switching costs COS1: I would not like to switch to other
websites as the economic costs are high.
Morgan and Hunt (1994)
COS2: I would not like to switch to other
websites as the emotional costs are high.
Sharma and Patterson (2000)
Brand BRA1: Expedia ‘s name attracts me. Holland and Baker (2001)
BRA2: Expedia’s logo attracts me.
BRA3: Expedia’s sign attracts me.
BRA4: Expedia’s other visual or invisible
associations attract me.
Customer loyalty LOY1: I will revisit Expedia website next
time when I need to make a travel
reservation.
Wang and Shih (2008); Cyr,
Kindra and Dash, (2008); Luarn
and Lin, (2003); Gefen (2002)
LOY2: I have psychological attachment
to Expedia website.
Liang, Chen and Wang (2008)
LOY3: I would like to maintain long-term
customer-business relationship with
Expedia.
Liang, Chen and Wang (2008)
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Based on the measurements, a questionnaire in English was designed. You can find it in Appendix 1.
The English version of the questionnaire was made on a survey software, Google Form, which can be
accessed by all the Internet users in Europe.
3.2.4 Pilot Test
Before delivering the questionnaires, a pilot test was made to have an evaluation of the reliability and
validity of these constructs in regard with each different dimension. The questionnaires were delivered
first to 10 people that were part of targeted group of the questionnaire but were not participants of the
actual investigated group. The respondents were asked to finish the questionnaire in 30 minutes and
then share their comments and suggestions on any unclear or obscure questions. The pilot study
resulted in a few changes of obscure words but not big changes. The sequence of some questions was
adjusted after the pilot test was conducted in order to make the questionnaire more logical and to
ensure that those dimensions are understandable. After the pilot test, the questionnaires were sent out.
The online survey started from May. 7th and ended on May.12th.
3.2.5 Choice of Data Analysis
IBM SPSS was used in this study to analyze the data collected by questionnaires.
1. Factor analysis was applied in this study to test the validity of the constructs. Mean, standard
deviation, and factor loading of each variable were presented in Table 5.
2. Reliability analysis was applied in the study to examine the efficient level of internal
consistency of all the factors. Corrected item total correlation, Cronbach' alpha if item deleted
and Cronbach' alpha were presented in Table 6.
3. Regression analysis was applied to test the seven hypotheses proposed in the theoretical part.
Multicollinearity was tested before running the multiple linear regression. Then t-tests with
standardized and unstandardized coefficients were presented in Table 7.
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4. Results and Analysis
Firstly, in this section I begin with results of the respondents’ characteristics, followed by the factor
analysis results for the purpose of examining the validity of these measures. Afterwards, the results of
reliability analysis tests are also demonstrated. Finally, the regression analysis results are outlined to
test the seven hypotheses which were proposed in the previous theoretical part.
4.1 Respondents’ Characteristics
4.1.1 Demographic Information
The demographic information of respondents regarding age, gender and monthly income are shown in
the Table 3 below.
Table 3 Demographic Information of Respondents
Measure Items Frequency Percentage (%)
Age Below 18 1 2 18-25 33 66 26-35 13 21 36-45 2 4 46-55 0 0 Over 55 1 2
Gender Female 34 68 Male 16 32
Monthly Income Below 500 22 44 ($/ month) 500-1000 7 14 1000-2000 14 28 2000-3000 1 2 Over 3000 6 12
As is shown from the Table 3 above, most of the respondents are aged 18-25, which accounts for 66%,
two-thirds of the total data. People who are 26-35 years old are the second largest group of this survey,
which takes up 21% of the total data. Apart from that, 2% of people below 18, 4% of people from 36-
45,1% of people who are over 55 are also included in this survey. Additionally, 68% of the
respondents are female and 32% of them are male. With respect to monthly income, 44% of them
have an income of below $500 per month, 14% have $500-$1000 per month and 28% of them have an
income of $1000-2000 per month. As most of the respondents are 18-25 years old, it can be inferred
that most of them are still in school but they have already had a steady income although their income is
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considered as a low-level income. In addition, there are also small groups of people who have a
monthly income of $2000-$3000 with the percentage of 2% and who get monthly income of more than
$3000 with the percentage of 12%. Thus, the characteristics of these respondents can be concluded as
mostly young generation with a middle level income.
4.1.2 Travel Options
The travel options of respondents regarding frequency of traveling, prior experience of online travel
agency and prior experience or hearsay of Expedia were shown in the Table 4 below.
Table 4: Travel Options of Respondents
Measure Items Frequency Percentage (%)
Frequency of Travelling Once a month 10 20 Once half a year 27 54 Once a year 12 24 Once over a year 1 2
Prior Experience of Yes 38 76 Online Travel Agency No 12 24
Prior Experience of Yes 11 22 Expedia No 39 78
Hearsay of Expedia Yes 26 52 No 24 48
As is shown from the Table 4 above, 20% of the respondents travel once a month, 54% of them travel
once half a year and 24% of them travel once a year. Only 2% of them travel once more than a year.
Additionally, 76% of them have prior experience of online travel agency before while the rest 24%
haven’t. With regard to Expedia, 78% of them haven’t used this platform before and people who have
used it account for only 22%. However, 52% of them have heard of this platform and 48% of them
haven’t. The data shows that traveling is very popular now among young generation. Most of them
travel at least once within a year. And online travel agencies are one of their favorable choices, but not
Expedia. With few people having prior experience in Expedia, it highlights the importance for Expedia
managers to put more effort into advertising, branding and improving customer loyalty to this platform.
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4.2 Factor Analysis
Factor analysis is a useful way to examine the validity of the constructs, which allows users to simplify
the analysis process by reducing lots of variable to just a few important and interpretable factors. It can
examine the inter-relationship between variables. Thus, I ran the factor analysis for each item of each
factor. The detailed results can be found in Table 5 below.
Table 5 Results of Factor Analysis
Constructs Items Mean Std. Deviation Factor loading
E-service Quality QUA1 3.240 0.7709 0.398 QUA2 3.040 0.6376 0.403 QUA3 3.040 0.7273 0.553
Customer Trust TRU1 3.240 0.6869 0.858 TRU2 3.320 0.9134 0.682 TRU3 3.260 0.7231 0.761
Perceived Customer VAL1 3.260 0.6943 0.760 Value VAL2 3.180 0.8254 0.512
Perceived Risks RIS1 2.740 1.0264 0.622 RIS2 2.440 0.9723 0.552 RIS3 2.780 0.9322 0.658
Customer EXP1 2.480 1.0544 0.199 Experience EXP2 3.380 0.9875 0.547
Switching COS1 2.800 1.0102 0.537 Costs COS2 2.700 1.1650 0.516
Brand BRA1 2.940 1.2191 0. 474 BRA2 2.740 0.9649 0. 631 BRA3 2.780 1.0359 0. 415 BRA4 2.780 0.9100 0. 245
Customer Loyalty LOY1 3.120 1.0029 0.646 LOY2 2.200 1.0498 0.541 LOY3 2.500 1.0738 0.593
From the results, it can be seen that most of the values of Factor Loading are more than 0.3 except two
items with extremely low factor loadings: EXP1 has a factor loading of 0.199 and BRA4 has a factor
loading of 0.245. It implies that EXP1 and BRA4 are not sufficient enough to represent their respective
factors. Thus, I get rid of these two items.
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For the purpose of examining the validity of these constructs, I conducted both principal component
analysis with varimax and maximum likelihood analysis with varimax. It produces the same result: the
Kaiser-Meyer-Olkin (KMO) test of sampling adequacy is always 0.694. This shows that this is an
acceptable but mediocre sample. And the significance of Bartlett’s test of sphericity is 0.000, which is
below 0.005. It shows that these are valid constructs.
4.3 Reliability Analysis
If the measurements are repeated a few times, then reliability shows the degree to which consistent
results are produced. A measure is said to have a high reliability if similar or same results are produced
in the same conditions. Cronbach's alpha is the most widely used measurement of reliability (Pallant,
2010), which is commonly used if there are a number of Likert questions in a questionnaire that
establishes a scale and the researcher wishes to examine whether the scale is reliable or not. Through
the analysis of Cronbach's alpha, the extent to which the items in the questionnaire are correlated with
each other can be shown. Results can be found in the Table 6 below.
Table 6 Results of Reliability Analysis
Constructs Items Corrected Item Cronbach' alpha -Total Correlation if item deleted Cronbach' alpha
E-service Quality QUA1 0.722 0.645 0.801 (QUA) QUA2 0.695 0.691 QUA3 0.545 0.833
Customer Trust TRU1 0.694 0.793 0.839 (TRU) TRU2 0.715 0.789 TRU3 0.737 0.749
Perceived Customer VAL1 0.593 0 0.738 Value (VAL) VAL2 0.593 0
Perceived Risks RIS1 0.629 0.695 0.747 (RIS) RIS2 0.529 0.714 RIS3 0.568 0.671
Customer EXP1 0.683 0 0.756 Experience (EXP) EXP2 0.734 0
Switching COS1 0.572 0 0.723 Costs (COS) COS2 0.572 0
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Brand BRA1 0.711 0.899 (BRA) BRA2 0.773 0.866 0.896 BRA3 0.853 0.834 BRA4 0.781 0.866
Customer Loyalty LOY1 0.570 0.852 0.781 (LOY) LOY2 0.659 0.659 LOY3 0.746 0.554
As is shown from the Table 6 above, all results of corrected item-total correlation are positive and
higher than 0.5. And it can be found that three constructs: E-service quality, customer trust and brand
have a Cronbach' alpha of more than 0.8, which is good. It shows that the internal consistency of these
three items in the scale are greater than other constructs. In other words, the items of E-service quality,
customer trust and brand share more covariance than others. But the Cronbach' alpha of other five
constructs are all over 0.7, which is acceptable. Regarding the Cronbach' alpha if item deleted, the
results of three constructs with only two items are zero. These three constructs are perceived customer
value, customer experience and switching costs. Pallant (2010) stated that it is normal to get low
Cronbach’s Alpha when there are small numbers of items, because Cronbach’s Alpha is sensitive to
the short scales. It implies that the number of items has an impact on the result and it’s better to have
more than two items when designing measurements.
4.4 Regression Analysis
4.4.1 Multiple Linear Regression
Multiple linear regression is the most widely applied tool to explain the relationship between one
continuous dependent variable and not less than two independent variables. In my study, I have
outlined one dependent variable that is customer loyalty and seven independent variables that are E-
service quality, customer trust, perceived customer value, perceived risks, customer experience, switching costs and brands. Therefore, the multiple linear regression is applied in this study to test the
seven hypotheses. The results will provide unstandardized and standardized coefficients, t-value and
significance of each hypothesis.
Before I begin running the regression, a test for multicollinearity is made to prevent the possibility of
high inter-correlations among these independent variables. Multicollinearity can be tested with the
help of tolerance and variance inflation factor (VIF). The principle is when the value of tolerance is
less than 0.2 or 0.1 or the value of VIF is not less than 10, then the possibility of multicollinearity is
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problematic (Cortina, 1993). The result shows that the value of tolerance is less than 0.2 and VIF of
each variable is below 5. It indicates that there is little possibility of multicollinearity in this study.
Then I can continue with multiple regression.
Since the hypotheses in this study are one-sided., the t-value for the t-test at a 5% level of significance
is 1.645. Therefore, t-value which is higher than 1.645 shows that the result is good. In addition,
regarding the significance of the research model, if the statistic is lower than 0.05, then it is significant.
Otherwise it is insignificant. The results can be found in Table 7 Below.
Table 7 Results of Multiple Regression
Unstandardized Coefficients
Standardized Coefficients
t
Sig.
B Std. Error Beta
Constant 0.536 0.710 2.755 0.045
QUA 0.056 0.081 0.101 2.689 0.295
TRU 0.046 0.079 0.094 3.584 0.010
VAL 0.128 0.122 0.174 2.057 0.021
RIS -0.167 0.051 0.398 3.275 0.025
EXP -0.219 0.108 -0.299 2.017 0.204
COS -0.366 0.093 0.737 3.955 0.000
BRA 0.249 0.055 0.901 4.565 0.000
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4.4.2 Hypotheses Testing
H1: E-service quality has a positive influence on customer loyalty to online travel agencies
The result shows that QUA’s beta=0.056 >0, meaning E-service quality has a positive influence on
customer loyalty to online travel agencies. The t-value is 2.68, which is higher than 1.645. But the
significance of QUA is 0.295, which is higher than 0.05. It implies that E-service quality (QUA)
doesn’t have a significant influence on online customer loyalty (LOY). So H1 is not supported.
H2: Customer trust has a positive influence on customer loyalty to online travel agencies.
The result shows that TRU’s beta=0.046>0, meaning customer trust has a positive influence on
customer loyalty to online travel agencies. The t-value is 3.584, which is higher than 1.645. And the
significance of TRU is 0.010, which is lower than 0.05. It implies that customer trust (TRU) has a
significant influence on online customer loyalty (LOY). So H2 is supported.
H3: Perceived customer value has a positive influence on customer loyalty to online travel
agencies.
The result shows that VAL’s beta=0.128>0, meaning customer perceived value has a positive
influence on customer loyalty to online travel agencies. The t-value is 2.057, which is higher than
1.645. And the significance of VAL is 0.021, which is lower than 0.05. It implies that customer
perceived value (VAL) has a significant influence on online customer loyalty (LOY). So H3 is
supported.
H4: Switching costs have a negative influence on customer loyalty to online travel agencies.
The result shows that COS’s beta=-0.366<0, meaning switching cost has a negative influence on
customer loyalty to online travel agencies. The t-value is 3.955, which is higher than 1.645. And the
significance of COS is 0.000, which is lower than 0.05. It implies that switching costs(COS) have a
significant influence on online customer loyalty (LOY). So H4 is supported.
H5: Brand has a positive influence on customer loyalty to online travel agencies.
The result shows that BRA’s beta=0.249>0, meaning brand has a positive impact on customer loyalty
to online travel agencies. The t-value is 4.565, which is higher than 1.645. And the significance of
BRA is 0.000, which is lower than 0.05. It implies that brand (BRA) has a significant influence on
online customer loyalty (LOY). So H5 is supported.
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H6: Customer perceived risks have a negative influence on customer loyalty to online travel
agencies.
The result shows that RIS’s beta=-0.167 <0, meaning customer perceived risk has a negative influence
on customer loyalty to online travel agencies. The t-value is 3.275, which is higher than 1.645. And the
significance of RIS is 0.025, which is lower than 0.05. It implies that customer perceived risks (RIS)
has a significant influence on online customer loyalty (LOY). So H6 is supported.
H7: Customer experience has a positive influence on customer loyalty to online travel agencies.
The result shows that EXP’s beta= -0.219 <0, meaning customer experience has a negative impact on
customer loyalty to online travel agencies. The t-value is 2.017, which is higher than 1.645. but the
significance of BRA is 0.204, which is higher than 0.05. It implies that customer experience doesn’t
have a significant influence on online customer loyalty (LOY). So H7 is not supported.
4.4.3 Summary of the Results of the Hypotheses Hypotheses Results
H1: E-service quality has a positive influence on customer loyalty to online
travel agencies.
Not Supported
H2: Customer trust has a positive influence on customer loyalty to online travel
agencies.
Supported
H3: Perceived customer value has a positive influence on customer loyalty to
online travel agencies.
Supported
H4: Switching costs have a negative influence on customer loyalty to online
travel agencies.
Supported
H5: Brand has a positive influence on customer loyalty to online travel
agencies.
Supported
H6: Customer perceived risks have a negative influence on customer loyalty to
online travel agencies.
Supported
H7: Customer experience has a positive influence on customer loyalty to online
travel agencies.
Not Supported
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5. Discussion
This section focuses on discussing the findings from the analysis, together with the literature
framework to answer the outlined research question.
This paper aims to explore the factors that contribute to customer loyalty to online travel agencies. In
general, the results provide support for five outlined hypotheses of factors in relation with online
customer loyalty. Consistent with the proposed hypotheses, customer trust, perceived customer value
and brand are found to produce a positive influence on online customer loyalty while switching costs
and customer perceived risks have a negative influence on online customer loyalty. However, the
findings don’t support H1 and H7 that e-service quality and customer experience have a positive
influence on customer loyalty to online travel agencies.
5.1 E-service Quality
It was found that E-service quality doesn’t have a significant influence on customer loyalty to online
travel agencies, which was quite contrary to previous literature. It was stated that E-service quality is
an essential dimension of the website quality and imposes a great impact on customer loyalty (Yi and
Gong, 2008). But in reality, if an online travel website provides useful information, customization
possibilities and quick responses, the customer will develop a positive impression of the website but
might not directly lead to customer loyalty. A distinguished website presence with a high price or high
perceived risks will also result in customers’ hesitation. Therefore, the importance of E-service quality
can’t be denied, but a travel agency with only high e-service quality is not sufficient to win customer
loyalty.
5.2 Customer Trust
The finding supports the conclusions from several previous studies (Tepeci,1999; Corbitt et al, 2003)
on the positive relationship between customer trust and online customer loyalty. It is also found that
TRU1 (the dimension of obligation fulfillment) has a highest correlation of 0.858 with customer trust,
followed by TRU3 (company integrity) and TRU2 (company reputation). It shows that obligation
fulfillment has a strong association with customer trust. This finding greatly supports previous studies
claiming that trust is the belief that the online supplier will fulfill its obligations (Kim et al, 2008). In
addition, company integrity and customer loyalty are also inextricably connected. When the online
travel agency acts with integrity, it builds trusting relationships with customers. At the same time, its
reputation rises. This will undoubtedly bring more loyal customers and positively affect productivity
and sales as well. When customers feel confident in travel agencies’ ability to do what was promised
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and act responsibly, they will become more loyal to this agency. Overall, a trusting atmosphere is of
urgent need to be created in order to positively increase loyalty.
5.3 Perceived Customer Value
The finding of this study supports the strong positive relationship between perceived customer value
and loyalty that Kim, Xu and Koh (2011) discovered in an online context. It was also found that
VAL1(reasonable price) has a higher correlation with perceived customer value than VAL2
(personalization possibilities) through the factor analysis result. Customers tend to be more loyal to
online travel agencies that match their price expectations. They prefer to evaluate whether it deserves
for the monetary payments of the offering product (Bolton & Lemon, 1999) because many of them are
concerned about spending too much money on a tour that is not worth the money they have paid. It is
consistent with prior research claiming that perceived price produces a significant impact on customer
loyalty (Katro, 2010).
5.4 Switching Costs
This finding supports the ideas explained by Jackson (1985) and Porter (1980) that the switching costs
lead to relationship maintenance and place a positive impact on customer loyalty to online travel
agencies. Despite dissatisfied experience, a customer is likely to maintain present relationship when
the perceived economic and psychological costs of switching to a new travel website are too high. It
agrees with the discovery of Hauser, et.al. (1994), claiming that the huge switching costs can to some
extent reduce customer’s level of sensitivity to perceived satisfaction feelings. On the other hand,
when customers are satisfied with the present service, then they will not come up the idea of switching,
in that case they will face varieties of risk and uncertainty in choosing an alternative. Furthermore, this
satisfaction may lead to an emotional attachment (Gobé, 2001) to this certain travel agency. They
would like to maintain long-term relationships with it.
5.5 Brand
Test for H5 agrees with the conclusions from previous studies (Ling et al. 2010; Holland & Baker,
2001) on the positive relationship between brand and online customer loyalty. Brands function through
helping to express the identity of the customer and enabling them to facilitate effective control to
achieve desired results. So the brand can be a great way to help people better perform their activities
towards online travel agencies. It is also found that BRA2 (company logo) has a high correlation with
brand. Logo is a visual representation of a brand that can remind the customers of its functional
benefits. It serves as a powerful and effective tool for customer relationship management. In particular,
the recognition of the brand from the logo can make the customer feel that they benefit the brand and
34
help attract new customers (Mohammad et al. 2015). As a result, the brand logo helps to create
customer loyalty.
5.6 Customer Perceived Risks
Test for H6 supports the negative relationship between customer perceived risks and online customer
loyalty that Wang and Lin (2008); Jacoby and Kaplan (1972); Sigala and Sakellaridis (2004) have
found. Such perceived risks as security risks and financial risks are strongly associated with the online
context (Jarvenpaa & Todd, 1997). It is also found that RIS3(security risks) and RIS1(transaction
confidentiality) have a higher correlation with customer perceived risks than RIS2 (property loss)
through the factor analysis result. The higher the security risks and the extent of publication of private
personal information are, the less loyal customers tend to be. This highlights the importance of not
only preventing customers’ money loss but also protecting their privacy information. It was because of
their trust on this website that they are willing to give out their information. Thus, it is necessary to
prevent the illegal use of their information, otherwise their trust will also be ruined (Jarvenpaa & Todd,
1997). In general, to increase consumers’ loyalty, marketing managers should keep in mind the
thought of decreasing the customer perceived risks in customers’ decision-making process.
5.7 Customer Experience
The findings show that the level of customer experience is not a significant factor of customer loyalty
to online travel agencies. It implies that whether they are experienced or inexperienced customers,
their loyalty to online travel agencies will not have any big difference. One possible reason for this
lack of support may be because tourism purchases are always unique and special products. Some
customers are novelty seekers, even if they are satisfied with the product or service, they might not
come back (Woodside & MacDonald, 1994). Instead, the alternative one can bring them a feeling of
freshness. The other possible explanation may be the small sample size. The sample size of 50 is really
small, it may affect how well experience influences customer loyalty. The third possible reason is that
a half of our respondents are from China and most of them have no prior experience with this
American company -Expedia. This may also lead to a biased result. Therefore, the result may probably
be better if more data from respondents of different countries can be collected.
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6. Conclusion
This part begins with the summary of this study based on the combination of theoretical framework
and the results of quantitative research. Then the managerial implications are presented. Finally, the
limitations and suggestions for future studies are given.
6.1 Summary
In this study, a conceptual framework and seven hypotheses building on the previous theories and
related literature review are outlined. Through a quantitative questionnaire research method, it is found
that customer trust, perceived customer value, brand have a positive impact on customer loyalty to
online travel agencies while switching costs and perceived customer risks have a negative impact on
online customer loyalty. These results can be seen as helpful indicators for travel agencies to better
design an attractive online transaction platform and high-efficient marketing strategies to improve
customer loyalty.
6.2 Managerial Implications
The findings of this study might not enough for the travel agency industry to establish powerful
relationship with customers but they can to some extent act as significant foundations for agency
managers to develop and implement commercial strategies to improve customer loyalty. Several useful
implications for marketing operators who take the responsibility of designing strategic plans and
implementing tools to improve the customer loyalty to online travel agencies such as Expedia are
outlined below.
Firstly, although the results indicate that E-service quality and customer experience don’t have a
significance on customer loyalty to online travel agencies, this does not demonstrate that tourism
marketers can take neglecting these two variables for granted. After all, online website with a bad
service quality won’t attract potential customers. And customers who own a negative experience of the
service may not expect to risk repeating that negative experience again. One basic principle for
Expedia is to ensure that the information is the latest, accurate and complete. Based on this, good
designs and attractive navigation menus that connect all of the relevant pages are an add to beautify the
web pages. What’s more, they can also inspire consumers to advantage of customized and personalized
services through their personal account. Quick responses are also necessary when customers have any
questions regarding travel packages, accommodation reservation and associated services.
36
Secondly, managers of Expedia can develop strategies and take actions for the sake of increasing the
customer trust. The most important thing is to fulfill its obligations. One obligation Expedia must meet
is to keep detailed records of all transactions. These records should be kept in the travel agency.
Another important obligation Expedia must fulfil is to notify tourists when travel activities are
cancelled and explain the causes and return the expenses that the tourists have already paid. The third
obligation for Expedia is to appoint licensed tour guides to lead tour groups. The responsibilities of a
tour guide include processing departure and arrival procedures, making transportation, accommodation,
dining and sightseeing arrangements as well as other services needed for the tourists to complete the
journey.
Thirdly, since perceived risks such as transaction confidentiality and security risks are a big concern
for customers, managers of Expedia can offer customers an information transaction systems in a secure
paying environment, along with privacy protection rules and high-speed transmission. Additionally,
getting customers informed of their rights, company warranty, money-back guarantees, and how to
properly use security approval symbols are also of vital importance to them. In this way, customers’
feeling of uncertainty and insecurity can be relieved to some extent.
Finally, managers of Expedia can also make full use of price promotions to win customer loyalty. They
can take such pricing strategies as rewarding customers who have purchased from their website a
specific number of times, offering discounts for customers who reorder the same product or service
from their website many times or directly lowering their prices for special groups of customers.
6.3 Limitation and Suggestions for Future Research
Firstly, the respondents of this study are mainly from China and Sweden. Most of the Chinese
respondents haven’t heard of Expedia before, which may lead to a biased result. Future research
should target more international respondents who have different country of residence to make the
result more persuasive. Secondly, since the sample size in this study is really small, leading to some
unexpected results. Future research should increase the sample size to make the result more exact and
persuasive. Finally, there are a few other variables that have not been involved in the research model
of this study, such as customer perceived ease of use, perceived behavioral control, or compatibility,
representing opportunities for further research.
37
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45
Appendix 1 Questionnaire
This questionnaire is designed to explore the factors that contribute to customer loyalty to online
travel agencies represented by Expedia. It is divided into three sections. First is about your
demographic information, second is about your traveling options, and the last part is questions using a
Likert-type scale from 1 to 5. Please be assured that this is anonymous. In completing this
questionnaire, you need to respond to every section completely and accurately. Your responses are
very helpful to our research. Now let's start.
Section 1 Demographic Information
What is your age?
o below 18 o18-25 o 26-35 o 36-45 o 46-55 o over 56
What is your gender?
o male o female
What is your monthly income? ($/month)
o below 500 o500-1000 o1000-2000 o2000-3000 oover 3000
Section 2 Travel Options
How often do you travel? o Once a month o Once half a year
o Once a year o Once over a year
Have your used online travel agency before? o Yes o No
Have you used Expedia before? o Yes o No
Have you heard of Expedia? o Yes o No
46
Section 3 Questions
In this part, we would like to know how much you agree or disagree with the following statements. For
each question, there are five options from 1 to 5. Please choose one option when you answer these
questions.
Questions Strongly Disagree → Strongly Agree
Expedia website provides useful information. o 1 o 2 o 3 o 4 o 5
Expedia website provides good customization services. o 1 o 2 o 3 o 4 o 5
Expedia website provides quick responses to
customers.
o 1 o 2 o 3 o 4 o 5
I believe Expedia will fulfill its obligations. o 1 o 2 o 3 o 4 o 5
I believe Expedia has good reputation. o 1 o 2 o 3 o 4 o 5
I believe Expedia website has integrity. o 1 o 2 o 3 o 4 o 5
The products/services of Expedia are reasonably priced
given their quality.
o 1 o 2 o 3 o 4 o 5
The products/services of Expedia meet my needs. o 1 o 2 o 3 o 4 o 5
I fear that Expedia will reveal my personal privacy
information.
o 1 o 2 o 3 o 4 o 5
I fear that Expedia will result in property loss. o 1 o 2 o 3 o 4 o 5
I fear that there are some security risks when the
transaction information is transmitted through the
internet.
o 1 o 2 o 3 o 4 o 5
I have used Expedia before and the service of Expedia
gives me great travel experience.
o 1 o 2 o 3 o 4 o 5
I have not used Expedia before but I heard that it can
provide customers with good travel experience.
o 1 o 2 o 3 o 4 o 5
47
I would not like to switch to other websites as the
economic costs are high.
o 1 o 2 o 3 o 4 o 5
I would not like to switch to other websites as the
emotional costs are high.
o 1 o 2 o 3 o 4 o 5
Expedia ‘s name attracts me. o 1 o 2 o 3 o 4 o 5
Expedia’s logo attracts me. o 1 o 2 o 3 o 4 o 5
Expedia’s sign attracts me. o 1 o 2 o 3 o 4 o 5
Expedia’s other visual or invisible associations attract
me.
o 1 o 2 o 3 o 4 o 5
I will revisit Expedia website next time when I need to
make a travel reservation.
o 1 o 2 o 3 o 4 o 5
I have psychological attachment to Expedia website. o 1 o 2 o 3 o 4 o 5
I would like to maintain long-term customer-business
relationship with Expedia.
o 1 o 2 o 3 o 4 o 5