Blind savings or unforeseen costs? How consumers perceive the benefits and risks of using opaque travel selling Web sites

Abstract

Opaque selling Web sites are considered to provide deep discounted rates compared with a products’ market price. However, consumers have to endure several uncertainties that are associated with purchasing a product with an unknown identity. This article aims to identify how consumers assess the perceived benefits and risks when purchasing opaque travel products online and how they formulate risk reduction strategies in order to acquire desired outcomes. Two focus groups were conducted in April 2013 with a total of 12 participants. The analysis revealed low price, value-added deal, and enjoyment from playing with the bidding system as the main benefits. The main risks included insignificant value margin, uncertainty of product quality or performance, and potential hidden fees. The study defined the ‘intentional buying’ process and provided insight for hospitality and tourism suppliers to cautiously evaluate and target customers.

Keywords

Consumer bargaining behavior opaque travel selling Web sites perceived benefits perceived risks

Introduction

Online travel intermediaries have been changing the merchandise distribution landscape ever since purchasing travel online became a popular trend in the global market. In 2012, the online travel segment represented almost a third of the total global travel market value (yStats, 2012), and the US online travel market is forecasted to reach US$145 billion in 2014 and US$168 billion in 2017 (eMarketer, 2013). Notably, 20–30% of online travelers seek out products from opaque selling Web sites (Hotel Marketing, 2010), where consumers choose a rate without knowing the brand of the supplier until after the product is purchased (Statistic Brain, 2013). Opaque selling Web sites allow service providers, such as hotels or airline companies, to post lower prices without revealing their identity so that they can maintain regular prices on other full-information Web sites (Anderson, 2009). Also, these Web sites provide suppliers with another distribution channel for excess capacity (Wang et al., 2009). This form of sales attracts price-sensitive consumers who have a high degree of flexibility in travel itinerary, brands, and product features (Talluri and Van Ryzin, 2004). As a fast growing business model, opaque selling is drawing an increasing amount of attention from analysts and researchers alike.

The existing literature has focused on formatting optimized pricing models for suppliers or opaque sellers, such as how to set profit-maximizing threshold prices on the Web sites (Anderson, 2009; Granados et al., 2008; Hinz et al., 2011; Terwiesch et al., 2005), and how opaque products affect industry profitability (Fay, 2008; Wang et al., 2009). However, understanding the variability of consumer behavior should be the priority. In the past, consumer bargaining has been studied through the purchasing of automobiles, houses, or financial services (Sharma and Krishnan, 2001). Traditional face-to-face bargaining between sellers and buyers involves a high degree of social interaction. The online environment, on the other hand, consists of less social contact. Rather, it provides consumers an ongoing platform for them to obtain a variety of options and channels in which they attempt to maximize their benefits by manipulating the negotiations in a dynamic manner. As a result, consumer bargaining in an online opaque setting is more sophisticated than a traditional one (Sharma and Krishnan, 2001). Meanwhile, customers may be frustrated when they find the ‘best offer’ only results in negative outcomes, such as price unfairness, poor service/product quality, or discriminatory treatment by the service providers. Feelings of regret or deception may lead to withdrawal from the online activities. Studying consumer psychology in this aspect, therefore, is imperative in order to truly achieve the win-win situation for all stakeholders.

The purpose of this study is to explore consumer bargaining behavior when purchasing online opaque travel products. More specifically, the study investigated the perceived benefits and risks of the purchasing process, and how these factors affect the choices made by the consumers. The findings from this study will not only fill a knowledge gap in the literature of consumer behavior but also provide innovative insight and business intelligence for the stakeholders. Hospitality suppliers can evaluate the buying process to target customers and ultimately alleviate the problems of constant price cutting due to the intense competition. Online opaque sellers may understand what triggers consumers’ spending and why consumers elect to return to their Web sites. By revealing these critical consumer factors, this study provides directions for crucial pricing strategies and distribution optimization in the online travel market.

Literature review

Opaque travel selling Web sites

Opaque travel selling Web sites refer to travel intermediaries who withhold the travel products’ identity until the consumers complete the product transaction (Anderson, 2009). Instead of providing a transparent price, Web sites that feature opaque selling promise that the customers will pay a much lower price for the product under certain conditions. For example, Hotwire.com and Priceline.com are two typical online travel intermediaries who have applied the business model of opaque selling. Hotwire.com reveals the products’ threshold price, which allows customers to choose the anonymous products based upon their inclination to pay. Priceline’s ‘name your own price’, a unique opaque selling tool, allows customers to submit bids to get their travel products. Other online travel agencies also offer opaque purchasing options such as Expedia’s ‘unpublished rate hotel’ and Travelocity’s ‘top secret hotel’ (Consumer Search, 2011; Expedia, 2013; Travelocity, 2013).

Opaque selling Web sites employ a buyer-driven mechanism, in which the price for the product essentially depends on consumers’ willingness to pay. As a fast growing business model, opaque selling Web sites not only attract price-sensitive consumers, they also engage hotels and airline companies to be involved in this type of business. The major advantage of opaque selling is that service providers can maintain price competitiveness (Anderson, 2009). For instance, a hotel may be willing to provide a deep discounted rate through opaque selling sites, but it still lists a rack rate on its own Web site. As such, the hotel can sell a room to a price-sensitive customer who books the room through the opaque selling Web site. At the same time, the hotel doesn’t have to reveal its bottom line to other competitors. In other words, hotels still remain strategic in the competition, and the price battle is kept at the minimum (Kotler et al., 2010). As a major e-commerce model among third-party travel intermediaries, these Web sites could help service providers increase sales opportunities (Anderson, 2009; Stuart-Hill, 2013).

Consumer bargaining behavior with opaque selling Web sites

There are several issues concerning consumers’ decision making when bargaining for opaque products. First, due to the nature of opaque purchasing, consumers have to be highly engaged with price evaluations and carefully evaluate the cost and benefits of the outcome. Research indicates that customers will act strategically when they are sensitive about changing prices and sales promotions provided by hospitality service providers (Chen and Schwartz, 2006). Strategic consumer behavior occurs when consumers utilize reference information and recognize price fluctuations to determine their assessment of product offerings (Chernev, 2003; Shen and Su, 2007). For example, many online user-generated travel forums, such as Biddingfortravel.com and Betterbidding.com, provide massive amounts of information regarding how to make a smart choice when using opaque selling Web sites. These forums promote ‘informed’ purchasing, and users are encouraged to share their experiences and strategies when making purchases on opaque travel products (Biddingfortravel.com).

A second issue regarding opaque selling Web sites is that since a product’s identity is not known until consumers complete the purchase, the propensity of risk and uncertainty of the product quality are prevalent. Travel products, such as hotels or tour packages, are intangible and experience-oriented consumptions. Consumers usually have expectations concerning the price and quality of certain brand-name products (Zeithaml, 1988). For example, consumers may perceive Ritz-Carlton as a hotel of five-star level and expect high-end facilities and service quality. However, due to the fact that opaque selling Web sites offer unknown brand-name products, consumers have a limited amount of information to postulate the product and service quality. In other words, consumers have to place a bet on whether or not the value of the products will meet their expectations. Moreover, consumers have to recognize there are compromises in order to get better deals, for instance, accepting nonrefundable products. Therefore, compared with tangible products sold on ordinary online travel intermediaries, consumers have to tolerate higher risks when they purchase opaque travel products. These perceived risks can be crucial determinants in consumers’ decision-making process.

A final issue to consider is that consumer bargaining may further be intertwined with their emotional experience (Cai and Cude, 2011; Ding et al., 2005). Previous research has stated that emotional components of online shopping activities, for example, enjoyment and entertainment during the shopping process, would determine consumers’ behavioral intentions to purchase online products (Lee et al., 2009). While consumers evaluate different promotional offers, feelings of pleasantness may arise and enhance their motivations to search further for discounted products (Ding et al., 2005; Sigala, 2013). In addition, consumers who engage in continuous price and product comparisons would feel that they are smart and be delighted to get good deals (Laroche et al., 2003). Since opaque selling Web sites feature such deep discounted products, some consumers are willing to take risks. As such, analogous to the risk-taking associated with gambling behavior, consumers will be aroused by amusement and excitement. However, if consumers perceive the high-stake uncertainty, potential losses, conflicts, or complexity during the decision-making process, negative emotions may be triggered and consumers will be hesitant to purchase (Chuang et al., 2008). Therefore, it is assumed that the emotional responses, such as the excitement of winning or the frustration of losing a bid on Priceline.com, may influence consumer behavior.

Motivation to purchase online products

Previous studies indicate that online consumers will have two types of motivation that are an impetus to their shopping intentions: utilitarian and hedonic motives (Beldona et al., 2005; Darley et al., 2010; Forsythe et al., 2006). The utilitarian motives include convenience of purchasing, variety of merchandise, comparison of product quality and prices, amount of time saved, and ease of use. Alternatively, the hedonic motives indicate that social needs, emotional enjoyment, and interesting shopping experiences drive consumers to purchase online products. Lai et al. (2008) conducted in-depth interviews to discourse the motivations and decision-making process of consumers’ online bidding behavior. The researchers categorized consumers’ motivation toward online bidding into two segments: task oriented and hedonic oriented. Task-oriented consumers tend to engage in information seeking among various sources to ensure they bid a ‘right’ price. However, hedonic-oriented consumers tend to set up a threshold price limit to determine whether or not they will place a bid (Lai et al., 2008). Lee et al. (2009) argued that both utilitarian and hedonic motives will influence consumer’s decision to pursue online bidding, which in turn, affects their behavioral intention. In their study, consumers’ tendency toward seeking variety was an important determinant that shaped the aspects of utilitarian (e.g., the product diversity that helps consumers to make a better decision) and hedonic (e.g., enjoyment and excitement of winning bids on auction Web sites) motivations.

According to previous research, another factor into consumers’ online purchasing behavior is how they perceive benefits and risks (Chen and Dubinsky, 2003; Forsythe et al., 2006). Specifically, consumers will constantly evaluate the trade-off associated with the benefits and risks of an online purchasing environment (Punj, 2012). For example, finding a bargain for a certain product is a vital factor that motivates consumers to shop online (Jayawardhena, 2004; Punj, 2012). However, consumers may also be concerned about product performance, the possibility of credit card misuse, or disappointment after receiving the product (Forsythe and Shi, 2003). In their study about the perceived risks of purchasing air tickets online, Kim et al. (2009) indicated that security risk, such as the leak of personal information, was the most important factor to predict consumers’ overall risk perceptions, which determined their purchasing behavior toward booking air tickets online.

Although previous research has investigated the motivations associated with online purchasing and with various travel products, virtually none has explored the reasons that may have propelled consumers to make opaque purchases of online travel products. In addition, the risks that are involved in opaque purchasing need to be investigated because of the nature of such deals. Eventually, a basic understanding of the decision making by users of opaque travel selling Web sites could be developed by integrating the effects of these factors.

Methodology

Two focus group interviews were conducted in April 2013 in a state university in southwestern United States. The participants were recruited through the university’s internal broadcast e-mails. The subjects needed to have booked hotel rooms, flight tickets, or rental cars in the past 12 months by either using the bidding mechanism on Priceline or purchasing an unrevealed brand name on travel Web sites such Hotwire or Expedia. A total of 12 individuals met the criterion. These participants were evenly split into two groups. Each group participated in a single 1-h meeting, and the meetings were on two separate days within the same week. Upon their arrival, the participants were asked to complete a questionnaire, which solicited their demographic information and their experience using online travel Web sites.

An experienced moderator was hired to lead the focus group discussions. The key questions were (1) why did you choose to make a purchase on an opaque selling Web sites? (2) Which features on these Web sites do you like and dislike? (3) What are the major benefits of using opaque travel Web sites? (4) What are the concerns you may have regarding making the purchases? Probing questions were also asked to seek more in-depth feedback. The participants voluntarily shared their personal experience and feelings while being encouraged by the moderator. Both focus groups were videotaped.

The qualitative data from the video clips were transcribed verbatim and entered into MAXQDA 11, a software that is normally used to facilitate the inquiry and analysis of qualitative research. The researchers applied the structural coding technique, which is appropriate with initial data categorization, particularly for analyzing data from multiple participants or exploratory investigations (Saldana, 2009). The coding system was further created based upon the statements from the video transcripts and was used to identify the themes related to this study. These themes included perceived benefits, perceived risks, and risk reduction strategies. Each coded theme has several subcategories, which represented the associated wording. Consequently, a thematic map was built to present and explain the recognized subcategories under perceived benefits and perceived risks (see Figures 1 and 2).

Figure 1.

Subcategories of perceived benefits. Note: The width of the line connecting the outer boxes with the inner box indicates the conceptual significance of the perceived benefit category. This is determined by MAXQDA 11 on the basis of the frequency of the concept mentioned by the focus group participants.

Figure 2.

Subcategories of perceived risks. Note: The width of the line connecting the outer boxes with the inner box indicates the conceptual significance of the perceived risk category. This is determined by MAXQDA 11 on the basis of the frequency of the concept mentioned by the focus group participants.

Focus group is used to promote the participants’ expression of their views through the creation of a supportive environment (Marshall and Rossman, 2011; Morgan, 1997). This environment is created by asking focused questions that encourage discussion and expression of differing opinions and points of view. We rigorously followed the recommended focus group procedure by arranging multiple meetings with an appropriate number of individuals in each group, so that we could identify trends in the perceptions and opinions expressed through systematic analysis (Krueger and Casey, 2008). This serves as a validation; a judgment of the trustworthiness of the study (Angen, 2000).

In qualitative research, reliability often refers to the stability of responses to multiple coders of data sets (Creswell, 2007). The focus is on intercoder agreement when multiple coders are used to analyze transcript data. Flexibility prevails in this process and researchers need to fashion an approach consistent with the resources. Two independent coders analyzed all transcripts in our study. The coders read through and coded the transcripts independently into a codebook and compared the major codes. The same code word should be assigned to the passage by all coders to achieve intercoder agreement. The percentage of agreement was then calculated and an above 80% agreement of coding was established (Miles and Huberman, 1994).

Results and discussions

Profile of the participants

The profile of the 12 participants can be found in Table 1. Each participant was given a pseudonym to conceal their identity, but their gender, five females and seven males, still reflected. Age of the participants ranged from 21 to 35. The majority of the participants either is pursuing a graduate degree or has obtained such a degree. Given that the recruitment of subjects took place in a university community, it is likely that education level would skew on the higher end of the spectrum. The participants’ frequency of travel ranged from occasional (0–3 times during the last 12 months), average (4–6 times during the last 12 months), frequent (7–9 times during the last 12 months), to recurrent (more than 10 times during the last 12 months). All participants have used opaque selling Web sites to some extent, ranging from sporadic (1 out of 10 online bookings) to incessant (10 out of 10 online bookings).

Table 1.

Profile of the focus group participants.

Pseudonym	Age	Education	Frequency of travel during last 12 months	Purchase on opaque Web sites/total online booking
Becky	21	High school	4–6 times	10/10
Seth	26	College degree	4–6 times	10/10
Rick	30	High school	7–9 times	9/10
Keith	29	Graduate school	7–9 times	9/10
Alex	30	Graduate school	4–6 times	8/10
Nancy	32	Graduate school	7–9 times	7/10
Sandi	22	College degree	0–3 times	5/10
Sandra	30	Graduate degree	4–6 times	5/10
Brandon	28	Graduate school	≥10 times	3/10
Mason	25	Graduate school	≥10 times	3/10
Yolanda	31	Graduate school	7–9 times	3/10
Dillon	35	High school	0–3 times	1/10

Note: The participants are listed in descending order according to the number of purchase on opaque Web sites.

Perceived benefits of purchasing on opaque selling Web sites

The participants expressed several benefits they perceive regarding their purchasing experiences on opaque selling Web sites (see Figure 1). These benefits can be categorized as (1) low price (i.e., saving money for price-sensitive customers), (2) value-added deal (i.e., securing high-end products at an affordable price for value-driven customers), (3) emotional gratification, (4) control over the specifications of travel, (5) convenience of making purchasing decisions, and (6) provision of relevant information. We provided explanations for the categorization and substantiated it with quotes from the participants.

Low price

All participants mentioned ‘low price’ at least one time during the focus group meeting when asked the reasons they make a purchase on an opaque selling Web site. Significant savings on transactions appear to be a quintessential characteristic that has prompted the participants to pursue a travel product (e.g., a hotel room or a flight ticket) on such Web sites.

I got a flight from Priceline because I had to go to Boston. I decided to choose [that flight because] I can save some money. (Yolanda)

I am the epitome of a poor college student. Whenever we travel for [college] football games, we usually have a friend that goes to that college. But if we must get a hotel, it is like even the price we get is split. So [low] price is a [big motivation]. (Becky)

Um, because I like to travel, so I mean if I couldn’t use Priceline and I couldn’t name my own price, I had to pay full price on each hotel, and sometimes I’m getting them for 65% less than the actual cost. So, pretty much I’m getting two nights for the price of one. So, if it wasn’t for the price, I might have to cut my stay down and not travel as much. (Rick)

The pursuit of low prices and monetary savings reveals a goal-driven approach in the decision-making process of the participants. Under such circumstances, participants have financial considerations and do not desire to pay the regular price for a particular product. Using an opaque selling site allows these price-sensitive participants to secure bargains that meet their budget constraints.

Value-added deal

In addition to budget savings, opaque selling Web sites can facilitate the discovery of value-added travel products. In this context, we are alluding to high-end travel products whose normal price range is beyond the participants’ budgeted capacity or threshold to pay. When a value-added deal is secured, the participants are able to purchase a high-end product, such as a five-star hotel room, by paying a substantially reduced price that falls within their normal budgetary territory.

We didn’t have a whole plan until we arrived, so we had to find a hotel for the next night. We wanted to stay in the downtown area, and you know, on the [hotel] website, usually it is so expensive, and I turned to use the Priceline. I bid on a five-star hotel, with such a good price, I think it was 60 dollars in downtown Austin, so I think it was a good deal. (Keith)

I would say I got a really great deal, like a five-star hotel, for maybe 75 dollars in Boston. It was wonderful. (Yolanda)

I can pay something I might get a two- or three-star price, but you can get a four- or five-star hotel. So, I can stay at a nice ritzy fancy hotel, for 100 dollars instead of 200. Sometimes I have gotten some hotels for 40 or 50 bucks, and it’s a five star hotel. (Rick)

Dodging the hotel’s Web site where a room would have a high price tag, these value-driven customers turn to opaque selling Web sites and lock down a deal at a more affordable rate. These customers felt they were financially empowered by the functionality of the Web sites and, as a result, the value of the outcome had increased.

Emotional gratification

Stimulation may occur in two aspects that lead to emotional gratification. First, the participants mentioned that it was fun naming their own prices and bidding for certain travel product on the opaque selling Web sites. If the bidding price was lower than the threshold price established by the system, the consumers could choose to abandon the bid or rebid for the product. This reverse auction gave some participants a feeling of enjoyment and excitement; one participant stated that it was ‘like a game’. Of the 12 participants, 5 mentioned that it was fun placing a bid because it was similar to gambling, and whether or not they won the bid is not that big a deal.

The second aspect of emotional gratification is derived from the feelings of contentment and joy when a good deal has been captured. The participants saw the outcome as either a reward that goes beyond their expectations or a ‘steal’ that grants them considerable financial leverage compared with other customers who paid a much higher price for the same product.

I traveled to D.C. this month. It was a very impromptu trip. Usually when I travel, I always have somebody I know in that place. But this was the first time I went to somewhere that no one I knew live there. So this was the first time I used Hotwire, and I was pretty happy with it. It saved [me] a lot of money. (Seth)

I went to Santa Fe [and stayed at] a fancy hotel. It cost me 85 dollars to stay there. But I asked other customers and they paid almost 150 to stay at the same hotel. So I feel great. (Alex)

Control over the specifications of travel

Though the issue of price seems quite intricate on opaque selling Web sites, other information that might be needed in a trip arrangement is readily available. Options on hotels’ features and amenities are streamlined and displayed in detail. Participants have the liberty to choose from an array of options from various facilities in order to satisfy their needs. They can define their specific travel requirements and have a considerable level of confidence with the outcome.

The first time we used it was pretty sketchy, because we had to pay and we didn’t even know where we were staying. But it was a good deal and it was within walking distance of where we needed to be because we were there for a convention, and the hotel was across the street from the convention center. (Becky)

I would definitely say being able to set the star level is a good feature, and um, I think being able to bid is nice if you are able to wait until closer to your travel time. (Sandra)

I think as a student, your options are [simple] compared to if you have a family or a dog. So basically we need to have free parking, sometimes free breakfast, sometimes nonsmoking room, and I think that is basic option that I can pick from the website. (Keith)

Convenience of making purchase decisions

Opaque selling sites, such as Hotwire.com, withhold the identity of the product and only inform customers the selling price of the anonymous hotel property. A customer may simply select a hotel based upon the preference of a geographic area or a certain price range. From the customer’s viewpoint, the mechanism may provide a benefit of choice simplification. Also, the participants revealed that the limited information actually allows them to make a decision easier because they only have to focus on the price range.

I like on Priceline when you show the area that you want to stay in, it shows a map of exactly where you are staying within these areas, so what I do is I will click and say I’m staying within these areas so then I will go to the other section where it actually tells you the prices up front, and then I look where it tells you what hotels are in that price range. (Rick)

When driving through any city, not knowing where to stay in the city, and [an opaque selling website] makes those choices easier for you. You don’t have to worry about it. (Brandon)

For some price-sensitive customers who had higher flexibility in their travel schedules or hotel brands, the products featuring the convenience of choice were looked for the most. The opaque selling sites offered a list of different airlines or hotel rooms within a certain price range, reflecting the consumer’s preferences. The participants didn’t have to juxtapose an array of product features garnered from different resources.

When I was doing airlines, um, it will line up all the deals, and it is not just based on an airline. If you were to go to Southwest it would just show you Southwest. [The opaque selling website] gives you all the good deals regardless of what the airline is, and going to a specific place. (Sandi)

I would say for me it is … being able to basically search several hotels within an area all at once … like I just want a 3 star hotel in this area, if you couldn’t do that [on the opaque selling website], you would have to go to each one of their different websites, and you research them and see how many stars they have or whatever on a bunch of different sites, so it is kind of like being able to do that all together in one place [on the opaque selling website]. (Sandra)

Provision of relevant information

Even when participants didn’t plan to make purchases on opaque selling Web sites, the price provided by these Web sites could be used as a reference when customers search for relevant information on travel products. In addition, the acquired information can sometimes serve as the baseline in a negotiation with hotels for a possible price match.

I usually use [the opaque website] as kind of gauge, to find out how much a flight is going to be on different airlines. I will go on [the opaque selling website to] take a look and if I can see where the range of the price of flights is where I am going. But I usually don’t go through those [opaque selling websites to purchase], I usually fly Continental [Airlines]. (Dillon)

Perceived risks of purchasing on opaque selling Web sites

While discussing the concerns in terms of blindly purchasing travel products on opaque selling Web sites, the participants revealed that there were some risks: (1) uncertainty of hotel quality and performance, (2) insignificant value margin, (3) potential hidden fees, (4) inability to save much money, (5) feelings of scam or uneasiness, (6) biased treatment by service providers, (7) privacy issues, and (8) problems or failure with the reservations (see Figure 2).

Uncertainty of hotel quality or performance

Due to the nature of blind booking, customers do not have access to the identity of the hotel before completing the purchase transaction. Also, customers cannot cancel their reservations or receive refunds if they dislike the purchase. As a result, the biggest concern was the quality and overall performance of the received products. Although customers could reduce the risk by setting up more specifications on their desired product, the standard of the indicators may vary. For example, some participants mentioned that the definition of ‘within walking distance’ depends on an individual’s perception. Generally, a hotel’s star level could serve as a risk reduction measure, but the system's criteria of assigning star levels were questioned by the participants.

I mean it is nice to be able to choose the star level, but you don’t know how they set that star level every time, unless maybe you go and do more research and go and look around at the reviews for specific hotels at that star level at the specific hotel or something, then you can find that out. But, if you don’t know how they set the star level, you could be getting some privately owned hotel that sets their own star level in some way. (Sandra)

Another concern that I might have, is the star levels. A three star hotel in New York is not the same as a three star hotel in Dallas. Because a lot of times they base the star levels on the services that the hotels provide [such as] if they have room service, valet parking. (Rick)

Insignificant value margin

The participants who had used the bidding function to purchase airline tickets complained about the long layover time between flight connections. Although Priceline advertised that its bidding feature could save up to 40% of the regular airline prices, the long layover time, rendered the value of the savings marginal. According to participant Nancy’s description of one of her recent trips, she departed at 6 am from a town in west Texas and arrived in Boston, the destination, at 11 pm because she had to wait in Dallas for 7 h. She used an opaque selling site to bid and received the air tickets for US$60 less than the lowest available regular price, but claims she would not use this function anymore. Apparently, the value margin has been divulged by the unnecessary travel time. Airliners’ loyalty programs and the opportunity to accumulate mileage may further discourage the participants’ propensity to purchase flight tickets from opaque selling Web sites.

Well, as far as a flight is concerned, the thing about that is I have noticed that usually the cheaper prices are with multiple carriers and I don’t want to deal with that. As far as flying is concerned, I would rather pay the extra money and how we have to deal with the fewer amounts of flights, the less amount of hassle and, you know a good airline, because I have had a really good experience with Continental. (Dillon)

My recent travel was to Los Angeles a few weeks ago, but I booked the ticket directly from the airlines. I don’t usually book [air] tickets from [opaque websites] because of the mileage accumulation programs. (Alex)

Potential hidden fees

Sometimes customers fail to pay attention to extra expenditures (e.g., parking at downtown hotels, charge on stay by pets, or Internet). For less experienced travelers, the inexplicit, sometimes misleading messages on the opaque selling Web sites may allure them into securing an allegedly decent deal. However, it eventually turned out to be an excessive deal when the extra expenditures were added.

I was coming here with my husband. We happened to be booking travel where we had to bring our dog with us. I selected a pet friendly hotel and I got a decent deal. We got here, and it was a pet friendly hotel, but they charged you 75 dollars a night to keep your pet there. (Sandra)

Inability to save much money

Although customers could use opaque selling Web sites to find bargains, sometimes savings are not as abundant as expected. This issue more likely occurs when the customer is relatively inexperienced in making blind online purchases or has not done sufficient research on the price range of the travel product. For example, compared with other participants in our focus groups, Dillon evidently used opaque selling Web sites infrequently. His experience best represents an unexpected outcome.

We named our price at $72 and we sent a location and we got the deal. Then just in case, we checked the hotel website, actually their regular price is one dollar more than the price paid. (Dillon)

Feelings of scam or uneasiness

Being unable to see the identity of the travel product may sound skeptical or even daunting, especially for customers with less experience with this type of purchasing mechanism. Amateur customers may be apprehensive in the initial stage of their encounter with opaque selling Web sites. Lack of exposure to such Web sites may sometimes prevent potential customers from using the resource.

[On our first experience with the opaque website], we thought it was a scam. It was asking for all your credit card information, and you know you have been taught your whole life, don’t give anybody any shady information. (Becky)

The first time I was going to book, I wasn’t sure if it was legitimate. And if it is legitimate I don’t know if they’re screwing me some other way like putting me in some crappy plane that hasn’t been serviced. (Sandi)

I was afraid if I get there and I spend 400 dollars for 4 nights in a hotel, then they would be like I don’t see anything in our system. I have this irrational fear that when I get there, my money will just have evaporated in the air. (Seth)

Biased treatment by service providers

This issue primarily concerns the type of room assigned by hotels to customers who make their reservations through opaque selling Web sites. Four participants stated that they had a negative experience concerning this. This problem occurs when hotels only provide rooms with one king-size bed when the reservation is made through opaque selling channel despite the fact that two or more people may be included in the travel party. Sometimes, hotels even turn down the subsequent requests made by the participants to change the room type.

I don’t like this because they guarantee a room for up to two people, which usually means one bed. So if I am traveling with more than two people, there might be an issue. I have called hotels after I have done a [opaque website] purchase to get two beds. Some of them will, but some of them say you booked with [an opaque selling website], you get what you get. (Rick)

I went to a hotel. I thought I had two twin beds, but I ended up with only one king-size bed. So you would never know what went wrong in the system. And it did not allow me to change the booking. (Alex)

If you talk to someone on the phone to book your hotel, you usually can get a speedy check in. you can get someone to help you once you get there specifically for you. But with [an opaque selling website] there was really no option with that because you really had no idea what you were getting and so I had to wait an hour to check in one night in Las Vegas. (Brandon)

Privacy issue with tracking cookies

‘Tracking cookies’ are launched by certain commercial Web sites that include embedded advertising material from third-party sites. The advertisements could store a ‘cookie’ that captures information such as particular products being viewed or pages visited. Publishers can then serve ads targeted at a user’s interests. However, tracking cookies are seen by many as an invasion of privacy since they allow an advertiser to develop profiles of users without their consent or knowledge (Cybertec Computers, 2012). By enabling the tracking cookies, the opaque selling Web sites may be able to monitor customers’ purchasing habits and even manipulate customers over time.

One thing that I remember is when I was using the sites, [I heard] they put cookies on your computer. I was a little concerned. (Dillon)

Once I go to these sites and put in the dates that I am traveling, all of a sudden these other sites creep up with information. (Ricky)

Problems or failure with the reservations

Arriving at a hotel only to find that no room is available can be embarrassing. Even though this mistake may not occur frequently, the negative effects can stay with the customers for a long time. A malfunction of the system(s) (the opaque selling, the product supplier, or the consumer’s PC/Internet connection) may have largely caused such kind of problems. Sometimes it happens because the service providers don’t acknowledge the price acquired by the participants.

Two of my friends on two separate occasions said that they used [an opaque selling website] and they got the hotel [room]. [When they arrived], the hotel [said] no, we didn’t put any rooms up. You are going to have to pay the full [price]. (Becky)

When I went to Panama, even though I got a cheap hotel, once I got there, they couldn’t find my reservation. But, [the opaque website] didn’t charge my card. I feel like somebody should have warned you about what it was going to be, especially in a different country. (Brandon)

Risk reduction strategies

The participants inadvertently contributed a number of tips, which we call coping strategies, to reduce the risks while maximizing the benefits when purchasing via opaque selling Web sites. A summary of these coping strategies can be found in Table 2. While not all strategies are explicitly stated to oppose a specific category of risk, we attempted to assign each strategy to a risk that has been identified by the participants.

Table 2.

Coping strategies used by the focus group participants to reduce risks.

Risk category	Strategy
Insignificant value margin	Weighing the trade-off between benefits gained and compromises made Coordinating the flight connections
Inability to save much money	Gaining knowledge on the bidding mechanism Establishing a pricing threshold Checking reference prices on certain Web sites (e.g., kayak.com) where people share information Being less specific about the options
Biased treatments by service providers	Signing up for a hotel rewards card Becoming a preferred guest of the hotel Obtaining a membership with the hotel’s loyalty program Checking to make sure the facilities are as desired
Uncertainty of hotel quality or performance	Avoiding hotels that are designated as below three star Reading reviews
Potential hidden fees	Stopping assumptions from being made Checking with the service provider if the offer seems unclear
Tracking cookies on computers	Using private browsing Deleting the cookies
Feelings of scam or uneasiness	N/A
Problems or failure with the reservations	Double-checking with the opaque selling Web sites to ensure the deal is captured

One of the key strategies voiced by a number of participants is doing research. These respondents extensively searched multiple resources for relevant information on a particular travel product. They then constantly made comparisons across the board in order to determine the most reasonable price. They would not keep unrealistic expectations on the magnitude of price discounts, nor would they accept any offer that is not sufficiently low. Usually, when it is time for them to bid or make a blind purchase, their decision is well informed. This process can be termed as ‘intentional buying’. A possible analogy occurs when a veteran gambler essentially relies on his or her knowledge accumulated throughout the experience in order to win the games.

Coping strategies will help reduce the level of risks the participants associate with blind purchases. These strategies should also increase the benefits gained from such deals. Eventually, a choice of either making the purchase or merely browsing will be made by the participants, contingent on the weight of the two factors in the subsequent value assessment. Figure 3 depicts this intentional buying process.

Figure 3.

The intentional buying process of opaque purchases.

Conclusion and implications

The current study utilized a qualitative research method to explore consumers’ perspectives and experience regarding the purchase of online opaque travel products. The decision-making process of purchasing online travel products is usually complex and dynamic due to the nature of the online shopping environment. Based on the findings from this study, we classified the consumer behavior of opaque selling travel Web sites into three primary segments: perceived benefits, perceived risks, and risk reduction strategies. Previous research specifies that consumers who tend to purchase travel products from opaque selling Web sites are mainly price sensitive and have budget constraints. Indeed, the key to the opaque selling method is reaching price-sensitive customers (Anderson and Xie, 2010). Money saving intuitively serves as a driving force when consumers consider purchasing opaque travel products. However, the exploratory evidence from our study showed that seeking value-added deals, which allow the customers to gain favorable financial leverage over high-end travel products, may act as an equally important reason to pursue opaque purchasing.

In addition, the psychological benefits, such as the enjoyment and excitement of getting good deals, also influence the customers’ motivation and intention of buying opaque travel products. The mechanism of the opaque selling system also offers a benefit of choice simplification. Instead of extensively searching information among online travel Web sites, opaque selling sites provide a platform where customers can simply decide their desired features of a hotel and choose the price that best fits their budget. The functionality of opaque selling Web sites is further perceived as a useful tool for searching relevant information that serves as the judgment between the market price and customers’ bottom line to pay. These perceived benefits are the major motives that either push or pull consumers to purchase opaque travel products. Opaque selling Web sites should address both monetary and nonmonetary values of buying opaque selling products, for instance, emphasizing the pleasant feelings of deal hunting (e.g., paying less than other people) or the satisfaction of winning bids. As such, the perceived benefits can be amplified in order to trigger consumers’ intent to purchase.

The findings of this study also indicate that customers who tend to purchase travel products through opaque selling sites are willing to spend time and effort researching the relevant information of travel products. It indicates that these customers tend to be informed and consistently evaluate the equilibrium of costs and values. Instead of solely searching for a low price, the customers take an interest in whether or not the value of the deal may exceed their expectations, demonstrating intentional buying behavior. In other words, they are value-conscious customers rather than just ‘bargain hunters’. Lichtenstein et al. (1990) used acquisition-transaction theory to propose two distinct segments of price-sensitive consumers: coupon prone and value conscious. The findings from our study respond to Lichtenstain et al.’s segmentation. This appears to be good news for service providers who may have concerns about marginal profits resulting from substantial price cutting or suspicions over the feasibility of the Web sites. Providing reasonably reduced prices on opaque selling Web sites to value-conscious customers may ultimately bring a rewarding solution to their excess capacity.

Although there are several risks involved with purchasing online opaque travel products, the participants revealed that they were still willing to bear these risks because of the benefits recognized in our study. Lai et al. (2008) stated that online consumers are inclined to positively deal with the uncertainty and risk associated with online purchasing, instead of simply driving away. Our study moved one step ahead by investigating consumers’ risk-taking behavior on opaque selling Web sites. We found that the participants would apply different risk reduction strategies to confront feelings of uncertainty and to minimize possible loss. Therefore, it is important for opaque selling Web sites to diminish consumers’ concerns and uncertainties. For example, Priceline shows statements such as ‘best price guarantee’, ‘guaranteed amenities’, and a list of possible hotels on its bidding Web page. Hotwire uses ‘trust the thumb’, which displays the recommendations and testimonials by other customers. Expedia also includes a ‘Hotel star rating guide’ with its opaque selling option. This guide attempts to help customers clarify how the Web site defines a hotel’s star level.

In terms of the risk of hidden fees, the service providers should acknowledge that service charges and other possible fees may occur when consumers arrive at the hotels. For example, some hotels may charge parking fees or additional fees for changing bed options and add-ons. Furthermore, since opaque selling Web sites are a unique business model, some customers, especially first-time users, may not be familiar with how purchasing opaque selling products works. It is imperative that opaque selling Web sites provide detailed explanations on how to operate these Web sites and illustrate the purchasing process. Providing personal customer service is another good way to handle customers’ requests and questions, such as offering online chat or 24-h phone lines that allow customers to contact service representatives. Doing this can reduce the ambiguity of the purchasing process and alleviate users’ confusion.

Opaque selling travel Web sites could be a win-win solution for all stakeholders, especially the hospitality service providers. The opaque selling system allows the hospitality service providers another way to adjust price ranges without losing the privilege of price parity on other full-information-revealed channels (Anderson, 2009). In other words, hospitality service providers do not have to reveal their names to compete with other companies on prices. In addition, the bottom line of purchasing opaque travel products is that these products are nonrefundable or transferable, which guarantees hospitality service providers the minimum profitability. The evidence of the value-conscious customers further attests to the sustainability of this business model to hospitality service providers.

Limitations and future research

Findings from this study came from 12 focus group participants selected from a university community. Recruiting a larger sample would provide more compelling evidence to support the conclusions made in our study. Also, embracing a quantitative study can provide a more holistic model of consumer behavior of purchasing opaque selling products. Furthermore, it is possible that customers’ past experience may influence opaque purchasing behavior and decisions. Customers who have more experience may feel more comfortable and perceive fewer risks when buying opaque travel products since they developed more skills with price negotiations and product comparisons. Finally, future research is recommended to include personality as an important factor to investigate customers’ intent to purchasing opaque travel products. The intentional buying model will eventually be tested using quantitative data collected on a nationwide scale.

Footnotes

Funding

The research contained in the paper was sponsored by the Texas Tech University Internal Competitive Funding Opportunity to Advance Scholarship in the Creative Arts, Humanities and Social Sciences (FY2013 CAHSS Award).

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