The influence of travel agents on travel expenditures

Abstract

Travel agents work as intermediaries who stand between visitors and travel service providers, bringing travel related products and services to customers on behalf of the hospitality industry. Reece (2008) suggests that travel agencies can reduce consumers’ monetary and opportunity costs when searching for the best deals (i.e., lowest prices, highest quality travel packages). Because travel agents receive commissions for their services, either from the producers or from the consumers, economic theory suggests that rational consumers will only purchase travel agents’ services if the marginal revenue from the purchase is larger than the additional costs of the commission. However, little is known about how consumers define the marginal revenue of hiring travel agents. While some consumers measure marginal revenue by the sum of cost reduction in travel-related expenses, others may care more about the overall travel experience than the cost. Therefore, this study aims to examine the relationship between travel agents and visitors’ travel expenditures in order to understand consumers’ decision-making process when purchasing travel agents’ service. Previous research has discussed topics regarding the selection criteria of agents (Meidan, 1979), the effects of travel agents on visitors’ behaviors (Baloglu & Mangaloglu, 2001), and the characteristics of people who purchase travel agents’ services (Dolnicar & Laesser, 2007). This study analyzed Taiwan’s tourism data and concluded that travel agents’ services contribute to consumers’ marginal revenue differently, depending on the amount of total travel expenditures. While the ordinary least squares (OLS) estimation provides the mean marginal effects of travel agents’ services on visitors’ travel expenditures, this paper contributes to the literature by adding the quantile regression analysis to highlight the heterogeneity in travel agents’ effects on travel expenditures across consumers with different levels of travel expenditures.