UNDERSTANDING CONSUMER BEHAVIOUR IN

CONTEXT OF TOURISM INDUSTRY

Submitted by:
Nidhi Rana - 13
Prachi -
Ritika Kohli 68
Lokesh Rajput -
Flow of presentation
Project Outline
Introduction
Global tourism industry
Indian tourism industry
Growth in number of tourists
Impact of tourism sector on GDP
Secondary Research
SWOT Analysis
Porter 5 forces Model
Environmental Analysis
Primary Research
Chronbach alpha
Factor analysis
Conclusions
Recommendations
Project Outline

PROBLEM
To facilitate decision making of a multinational Tour and Travel Company
starting operations in India.

PRIMARY OBJECTIVE
To identify factors affecting consumer buying behaviour in Tourism
sector.

PROCESS
Secondary research through reports and past papers
Primary research through Questionnaire
Developing SWOT and Porters 5 forces for the sector
Evaluating factors via factor analysis
 Overview of Tourism Industry
Global tourism industry

The travel and tourism industry has emerged as one of the largest and
fastest growing economic sectors globally.
Asia Pacific recorded the highest growth in the number of international tourist
arrivals in 2012 at 7 per cent followed by Africa at 6 per cent.
Indian tourism industry

The travel and tourism sector holds strategic importance in the Indian economy .

Some of the important economic benefits provided by the tourism sector are provision of employment,
income and foreign exchange, development of other industries such as handicrafts etc.

According to the World Economic Forums Travel and Tourism Competitiveness Report 2013, India
ranks 11th in the Asia pacific region and 65th globally out of 140 economies ranked on travel and
tourism Competitiveness Index.

Total tourist visits have increased at a rate of 16.3 per cent per annum from 577 million tourists in 2008
to 1057 million tourists in 2012.
Growth in number of tourists

This growth can mainly be attributed to the rising income levels and
changing lifestyles etc.
The international tourist arrivals in India (7.5 million in 2013) is expected
to witness an annual growth rate of 6.2 per cent over the next decade.
Expenditure generated by foreign tourists are expected to amount to INR
2958 billion by 2023 growing at 9.6 per cent per annum

Source: India Tourism Statistics 2008, 2009, 2010, 2011, Ministry of Tourism
http://tourism.gov.in/writereaddata/CMSPagePicture/file/marketresearch/New/2012%20Data.pdf
Impact of tourism sector on GDP

The travel and tourism sector directly contributed INR 1920 billion to
Indias GDP in 2012 reflecting a growth CAGR of 14 per cent since 2007

This is forecasted to grow at a CAGR of 12 per cent from the estimated

INR 2222 billion in the year 2013 to INR 6818 billion by 2023.
Growth of tourism in India Key drivers

Domesti
rising income levels
Changing consumer lifestyles
c
Availability of low cost airlines Tourism
Diverse product offerings New product offerings
Easy finance availability Rich natural/cultural resources
Government initiatives and policy
support
Multiple marketing and promotion
Key activities
Drive Healthy economic growth levels

Attractive tour packages

rs
Increased business travel Outbou
Healthy economic growth Inbound
nd
Easy finance availability Tourism
Tourism
Rising disposable income
 SECONDARY RESEARCH
Environmental Analysis
Political
Hefty Taxation
Diktat of local or state government
Political Stability
Govt. spending on tourism & travel

Economical
4th largest economy in the world; 2nd largest among emerging
nations
Foreign Exchange Rate
Elasticity of Demand
Social
Different languages, cultures, traditions, cuisines
Respect & entertainment of guests Embedded in culture itself.
Increasing young population coupled with rising income levels

Technological
Increasing role of web & internet
Facilitates Online Booking
Providing customers with easy payment facility via online and use of
credit cards
SWOT Analysis

1. Vast 1. Infrastructure
geography 2. Safety
2. Varied culture 3. Specific
3. Knowledge of tourist locations
English by the 4. Medical
local people facilities

1. Increased
privatisation
1. Terrorism
2. Go green
2. Economic initiative
slowdown
3. Increased
3. Better hotel facility
facilities and
prices by other 4. International
countries student
exchange
program
Porters Five Forces: Tourism Industry

Industry Rivalry :

Highly Fragmented Industry with Intense Rivalry

Highly Fragmented Industry.
Organized players would barely have 15-20% of the marketplace
Most of organized players are present in metros & mini-metros
Large disposable incomes in towns like Lucknow, Jaipur, Coimbatore etc. serviced by family run unorganized
players

Industry rivalry is intense but not cut throat

Rivalry Intense because of low switching costs, low levels of product differentiation
Rivalry is not cut throat since exit barriers are not high, fixed costs are not high, market growth is good

Source : http://articles.economictimes.indiatimes.com
Threat of Substitutes:

Low Threat of Substitutes, as travel moves up the list of household priorities

India is witnessing a growth of discretionary spend as % of income

from 30% in 2005 to around 70% by 2025. Travel , being a discretionary spend poised to gain.

Travel has moved up the list of household spending priorities

Unlikely to be substituted by a durable purchase or investments
Education & Recreation will occupy 9% share of wallet in 2025 as compared to 5% now.

Source : http://articles.economictimes.indiatimes.com/
Buyer Power:

While buyers are fragmented, their diminishing brand loyalty and ability to switch (for most
products) gives them reasonable buying power

Buyers are fragmented

Diverse retail buyer and corporate buyer profiles
Switching costs for buyers is not high as brand loyalty is low/diminishing
Credible threat of backward integration
Buyers can directly buy from suppliers (hotels, airlines etc)
Luxury segment is brand conscious to and willing to pay a premium for great experience and service
quality
Supplier Power:

Supplier usually sell commodity products . Concentration & ability to

sell direct gives power to suppliers like airlines. Other suppliers are
fragmented

Forward integration by suppliers like airlines selling direct

Attempts by suppliers to sell packages and complex itineraries not very successful
While suppliers concentrated in some areas like domestic airlines, there is widespread
fragmentation in hotels, tour operators, car rentals etc.
There is no significant cost to switch suppliers
Travel agency cannot typically buyout suppliers like airlines
Barriers to Entry & Exit :

While entry and exit barriers are low, difficult to build scale because of lack of ready
distribution channels

Easy entry of small startups, however significant scale is necessary to negotiate profitable deals
Due to a fragmented market , travel agencies do not have access to ready distribution channels
Online channel is growing at a rapid rate but is primarily selling air and rail
Identifying the Competitors

Brand market exactly similar products,

at similar price, and also to the
Competit same customers.
ors Fight for similar sales volume.

market similar products, but

Product with differentfeaturesand
Competit benefits, and at different prices.
Dont fight for similar sales
ors volume.

market different products, but

Generic provide the same utility or
Competit benefit.
Large no. of small scale
ors companies

Total market different products, but

Budget competing for the same
financial resources of the
Competit customers. 19
ors
 primary RESEARCH
 Research Design &
Methodology

RESEARC COMPETITO
RESEARCH SAMPLING MEASUREM R ANALYSIS
H INSTRUMEN ENT
METHOD T METHOD
Population Universe - All Indians
interested in travelling Thomas cook
Sample Size - 150 Cox and
Descriptive Kings
Questionnaires Sampling Area : Delhi Factor Analysis
Research MakeMyTrip
Reliability Test Cronbach's
Alpha
Cronbach's alpha Internal consistency
Excellent (High-Stakes
0.9
testing)
0.7 < 0.9 Good (Low-Stakes testing)
0.6 < 0.7 Acceptable
0.5 < 0.6 Poor
< 0.5 Unacceptable

Cronbachs Alpha .746 > .70,

acceptable
Reliability Statistics
Cronbach's
Alpha Based
on
Cronbach's Standardized
Alpha Items N of Items
.747 .746 3
 Factor Analysis -
Output
HYPOTHESIS : KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .886
Null hypothesis (H0): All variables are uncorrelated.
Bartlett's Test of Sphericity Approx. 843.
Alternate hypothesis (Ha): All the variables are correlated. Chi-Square 811
df 36
Sig. .
000
THE FACTORS ARE : 1

Reasonable Pricing Total Variance Explained

Extraction Sums of Rotation Sums of Squared
Different Modes of Payment Initial Eigenvalues Squared Loadings Loadings
Special Promotional offers Compon % of Cumulat % of Cumulat % of Cumulati
ent Total Variance ive % Total Variance ive % Total Variance ve %
Ancillary Services 1 5.174 57.489 57.489 5.174 57.489 57.489 4.155 46.171 46.171
Staff assessment 2 1.110 12.339 69.828 1.110 12.339 69.828 2.129 23.657 69.828
Recommendations 3 .816 9.061 78.889
4 .480 5.333 84.222
Attending to customers details 5 .385 4.273 88.496
Suggestions by friends 6 .365 4.053 92.548
Diversity of packages available 7 .275 3.057 95.605
8 .266 2.957 98.562
9 .129 1.438 100.000

OUTPUT :

KMO Test - .886 > .5, therefore factor analysis is apt.

Bartletts Test - .0001 < .005, therefore rejecting null hypothesis
Factor Analysis -
Factors
Extracted Factors Rotated Component Matrixa
Component
Factor 1 : Value for money of tour packages 1 2
Reasonable Pricing .835 .144
Reasonable Pricing Different Modes of .920 .097
Different Modes of Payment Payment
Special Promotional offers Special Promotional .870 .162
Recommendations offers
Staff assessment .367 .657
Attending to customers details
Ancillary Services .522 .607
Recommendations .777 .324
Factor 2 : Customization available Attending to .692 .437
and reputation of the agency customers details
Suggestions by .600 .597
Ancillary Services friends
Staff assessment Diversity of packages -.076 .787
Suggestions by friends available
Diversity of packages available

Using factor analysis we have removed some of the variables and we have reduced 9 variables
into 2 factors for minimizing data complexity.

Therefore, Value for money of tour packages & Customization available and
reputation of the agency
 Multi Dimensional
Scaling
Multi Dimensional Scaling was used to understand the positioning of the top players in
Tourism.

Results :
MakeMyTrip : Ancillary Services
Thomas Cook : Pricing and Customization Options
Cox & Kings : not in any of the factors considered
Function
1 2 Functions at Group Centroids
Pricing .974 -.166
Customization .169 -.585 Function
Promotional .088 .686 Brands 1 2
offers 1 -.105 .467
Ancillary -.577 .544
2 .904 -.255
services
Post travel .031 .332 3 -.783 -.391
communication

Promotional Offers and Post Travel Communications are domains that still need to be explored
by the Travel Agencies.

Function 1 Promotional Offers and Post Travel Communications

Perception Map

Positioning of new travel

agencies into any of the other
quadrants is managements
decision.
Conclusions
Travel and tourism sector depends highly on the use of word of mouth to spread
opinions and recommendations

It has plenty of room for growth due to various factors like heritage , climatic
conditions etc.

Online travel agencies can utilise these social media platforms to promote their tour
packages and also positive reviews from customers.

Online booking have helped the tourism industry to expand their customer base.

Growth of discretionary spend as percentage of income Increase from 30% in

2005 to around 70% by 2025

Distribution channels due to fragmented market travel agencies do not have

access to ready distribution channels .

Value for money of tour packages and Customization available and

reputation of the agency are two major factors.
 Recommendations

Special sensitisation Subliminal

campaigns Advertisement
s
Contd..

Flagship projects
Focused branding and promotional
campaigns
Direct and intensive reach marketing
programs
Customised tour packages
Differentiated tourism offerings for repeat
travellers
Contd

For online travel and tourism websites these tips should be

kept in mind:

Modern Looking
Website with High quality Organic search
Online Booking commercial engine strategy
capability and a photography or SEO strategy
CMS

A paid search
Email Marketing
engine strategy:
& Social Media
Google Adwords
Strategy
for Search
References

http://
www.kpmg.com/IN/en/IssuesAndInsights/ArticlesPublications/Documents/KPMG-CII-Travel-Tourism-s
ector-Report.pdf
http://www.tandfonline.com/doi/abs/10.1300/J073v19n04_01#
http://msed.vse.cz/files/2012/Sanittham_2012.pdf
http://ijbssnet.com/journals/Vol_3_No_19_October_2012/35.pdf
http://www.innovateus.net/travel/what-consider-while-choosing-travel-agency
http://
www.academia.edu/4440070/Consumer_behaviour_in_tourism_Concepts_influences_and_opportuni
ties
Thank
You!