טכניון מכון טכנולוגי לישראל
הטכניון מכון טכנולוגי לישראל - בית הספר ללימודי מוסמכים  
M.Sc Thesis
M.Sc StudentMax Fransez
SubjectTravel and Tourism Industry in Israel: Rank-Size Rule,
Switching Costs and Consumers' Loyalty
DepartmentDepartment of Industrial Engineering and Management
Supervisor Dr. Baron Mira


Abstract

This paper investigates whether service branches in the tourism and travel industry tend to concentrate in certain cities or geographic regions or whether they are dispersed uniformly throughout the country. In addition, we examine the relationship between the number of tourism and travel agencies per locality and the socio-economic characteristics of its residents. We try to find the factors that influence consumers' choice of tourism and travel agents, and examine whether loyalty to agents is an important factor.

My hypothesis was that the distribution of service branches in the Israeli tourism and travel industry is not concentrated in clusters, but is uniformly distributed throughout the country. By using the "Rank-Size Rule", we found that service branches in the Israeli tourism and travel industry tend towards geographical concentration.

We investigated whether the number of agencies in cities (per capita) depends on the socio-economic characteristics of their residents. It was found, surprisingly, that the variable is hardly affected by population median age (expected to influence positively), but depends on student percentage in the city among other characteristics.

Consumers’ choice of travel agents was examined using data from the period 2000-2003. During this period the importance of low price, as the most important factor in choosing agents, was decreasing. Consumers look for reliability, decent service and professionalism, and therefore are willing to concede low price.

We conducted our own survey among people who traveled abroad in the last three years. The results show that switching costs plays an important role regarding consumers’ choice of travel agents; about two-thirds of those interviewed attribute some importance to this factor. Accordingly, evidence of loyalty was found; consumers regularly use the same travel agents, expressed less willing to switch agencies.

This paper has three main conclusions. First, the convenience and simplicity of using the rank-size rule as a concentration index, makes it a valuable research tool in spatial competition theory. Second, switching costs influence consumers’ choice of service branches, and therefore affect the market size and share of branches and firms. Third, loyalty to travel agents exists and should be retained and enhanced by improving agent reliability, professionalism and service standards.