Annual Traveller Demand from Advertising and Word of Mouth

Abstract

To acquire an information regarding the best travel destination, there are two main sources which can be used: advertising (books and magazines, TV, radio, and travel agencies) and word-of-mouth recommendations (WOM) via the Internet and friends. This study employed two research questions. First, how does advertising influence WOM, and vice versa. Second, to tackle the unsolved problem regarding how to predict traveler demand using WOM that can help improving tourism competitiveness. By using static demand and quadratic cost function, the authors found that advertising generates optimal outcome in tourism industry rather than WOM. Although the player's (the tourism industry in a country) net profit tends to have a positive effect on optimal advertising investment, it is the opposite case if WOM is used. WOM can be detrimental to an agent's advertising campaigns, and may create disadvantage on tourism competition.