Understanding Repurchase Intention of Airbnb Consumers: Perceived Authenticity, EWoM and Price Sensitivity by Lena Jingen Liang A Thesis presented to The University of Guelph In partial fulfilment of requirements for the degree of Master of Science in Tourism and Hospitality Guelph, Ontario, Canada © Lena Jingen Liang, May, 2015 ABSTRACT UNDERSTANDING REPURCHASE INTENTION OF AIRBNB CONSUMERS: PERCEIVED AUTHENTICITY, EWOM AND PRICE SENSITIVITY Lena Jingen Liang Advisors: University of Guelph, 2015 Professor HS Chris Choi Professor Marion Joppe The main purpose of this paper is to extend the research on consumer repurchase intention (RI), perceived value (PV) and perceived risk (PR) into the realm of the peer-to-peer economy, specifically in the context of Airbnb. A series of research propositions were proposed built on the prospect theory and means-end chain theory. Three antecedents: perceived authenticity (PA), electronic word-of-mouth (eWoM) and price sensitivity (PS) were identified through a content analysis, producing an extended model. 395 surveys were collected via a panel based in North America. The results showed that PR negatively impacts Airbnb consumers’ PV and RI while PV positively enhances their RI. Interestingly, PS was found not to reduce customers’ PR but improve their PV and promote the intention to repurchase. PA was found to have significant effects in reducing Airbnb consumers’ PR and positively influences PV. Theoretical and managerial implications are discussed and future study direction was offered. Acknowledgements To the University of Guelph, the College of Business and Economics, and the School of Hospitality, Food and Tourism Management: without your provision of space, funding, resources and help from all of you, my completion of this degree is impossible. I have all of you to thank. To my two advisors, Dr Chris Choi and Dr Marion Joppe: we would argue about a research question, we would argue about a research method, but I know deep in my heart, it is unarguable that you are my family, and will be so for all my life. To my committee Dr Stephen Smith: thank you for always asking me numerous questions. All those questions had made me see more about my research and always give a second thought of every word I used. To all my friends, Shuyue, Joe, Lenka, Jay, Bixian, Brittany, Chanel, Chi-wei, Warren, Derek, Drew, Tammy and everyone in MINS 210: your supportiveness and listening really help me survive. I will always remember the days we talked, we hugged, we worked, we travelled, we played, we ate, we laughed and cried. To my dearest families, dad Zhikun and brother Haixing, I always love you even though you are thousand miles away; mum Lijuan in heaven, thank you for making me strong and I will not forget all the things you taught me. And I wish all the best for everyone in my family, especially my grandpa and grandma. iii Table of Contents Abstract .................................................................................................................................... ii Acknowledgements ................................................................................................................ iii Table of Contents .................................................................................................................... iv List of Tables, Figures and Appendices ................................................................................... v CHAPTER 1: INTRODUCTION...................................................................................................... 1 CHAPTER 2: LITERATURE REVIEW.............................................................................................. 4 2.1 Online Repurchase Studies ............................................................................................... 4 2.2 Peer-to-Peer Economy ................................................................................................................ 9 2.3 Studies on Airbnb ................................................................................................................. 10 CHAPTER 3: THEORETICAL FRAMEWORK & MODEL DEVELOPMENT .................................... 12 3.1 Theoretical Background ....................................................................................................... 12 3.2 Proposed Model ................................................................................................................... 15 3.3 Hypotheses Development .................................................................................................... 16 3.3.1 Perceived Value (PV) & Perceived Risk (PR) ................................................................. 16 3.3.2 Perceived Authenticity (PA) .......................................................................................... 19 3.3.3 Electronic Word of Mouth (eWoM) .............................................................................. 21 3.3.4 Price Sensitivity (PS) ...................................................................................................... 23 CHAPTER 4: METHODOLOGY ................................................................................................... 26 4.1 Research Design & Sampling .................................................................................................... 26 4.2 Measurement of the Constructs .......................................................................................... 27 4.3 Data Analysis & Findings ...................................................................................................... 28 4.3.1 Demographics of the Respondents ............................................................................... 29 4.3.2 Scale Validity & Reliability ............................................................................................. 29 4.3.3 Structural Model Analysis ............................................................................................. 34 CHAPTER 5: CONCLUSION ...................................................................................................... 37 5.1 Implications .......................................................................................................................... 38 5.2 Limitations & Future Study Direction .................................................................................. 40 CHAPTER 6: BIBLIOGRAPHY ........................................................................................................... 42 iv List of Tables, Figures and Appendices Table 1: Overview of reviewed online repurchase studies………………………..6 Table 2: Validity test………………………………………………………………30 Table 3: Confirmatory factor analysis for measurement model…………………..32 Table 4: Results of hypothesis tests…………………………………………….…36 Figure 1: Model of repurchase intention for Airbnb………..………………….…16 Figure 2: Structural path coefficients……………………………………………...35 Appendix: All items used in survey………………………………………………52 v CHAPTER 1: INTRODUCTION Web 2.0 has reshaped the way consumers buy products and services (Cheung, Chan,& Limayem, 2005), not only in terms of how transactions are conducted, but also the nature of the buyers and sellers. On the supply side, individuals can rent out whatever they have, whether a tangible or intangible good or service, to someone they might never have met before via various web 2.0 sites. On the demand side, buyers can obtain what they need, whether a service or product, at a lower price. These ways of doing business have attracted increasing attention around the world since 2010, and are labeled as the ‗sharing economy‘, ‗collaborative consumption‘, or ‗peer-to-peer consumption‘. The platforms that offer the matching services for these buyers and sellers, have quickly strengthened their positions in different markets, including the hospitality industry. One of the most representative platforms occupying the hospitality market is Airbnb,a peer-to-peer transaction-based online marketplace that matches hosts who wish to share their spare space with travelers who are looking for accommodations (The Economist, 2013). Millions of individuals participate in sharing their unused places and roomsthrough fee-based transactions where travelers can rent private rooms or entire places at lower rates for a short-term period, increasing the opportunity for travelers to mingle with local people and experience locals‘ lives (Sacks, 2011). However, to date, little research has been conducted on these fee-based online communities in the hospitality context. Ferocious debates have occurred as a result of the growing popularity of Airbnb (e.g.Dickerson, 2015; Folger, 2014). Extreme opinions, either strongly supportive or strongly opposed, were found in various media reports (e.g. New York Times; The Economist), economists‘ blogs (e.g. Tom Slee), etc. Nevertheless, Airbnb continues to 1 gain popularity at an astonishing rate at the global level, with the total nights booked increasing from 180 in 2008 to 10 million in 2012 (Airbnb, 2014). Unlike Bookswap1 or Lending Club2, Airbnb does not involve the ownershipexchange of a product. Unlike Zipcar3 and Uber4, the transaction in Airbnb involves human gathering and the sharing of the private sphere. Unlike Couchsurfing5 and HomeExchange6, it involves a direct money transaction. Unlike hostels, hotels or bed and breakfast, the trading in Airbnb involves more potential risks becauselisting a property on Airbnb does not require government approval or inspections (Airbnb, 2014). Thus, Airbnbshows a unique characteristic as it offers a transaction that contains human-to-human gathering and the sharing of the private sphere, making this study of the repurchase intention in the Airbnb context complicated but unique and important. Furthermore, from a marketing perspective, understanding why tourists would choose Airbnb again provides valuable information for the traditional hospitality industry managers. Hotel managers can learn about the changes in tourists‘ demand with respect to accommodation. For Airbnb and other similar network hospitality exchange platforms, understanding what the consumers care about when using those platforms is important for their marketing strategy as the cost of retaining a customer is much less compared to the cost of obtaining a new one. In addition, little attention has been paid to date to the tourism related factors associated with online repurchasing behaviors such as perceived authenticity. Therefore, this study proposes a research framework based on prospect theory and means-end chain (MEC) theory on consumer repurchase intention (RI), perceived 1 Buys and sells books, www.bookswap.ca 2 Peer-to-peer lending platform, www.lendingclub.com 3 An alternative to car rental, www.zipcar.com 4A mobile app that allows consumers to submit a trip request, which is routed to crowd-sourced taxi drivers 5 A hospitality exchange website, www.couchsurfing.com 6 A home exchange website, www.homeexchange.com 2 value (PV) and perceived risk (PR) in the realm of the peer-to-peer economy, specifically in the context of Airbnb. Three antecedents —perceived authenticity (PA); electronic word-of-mouth (eWoM) and price sensitivity (PS) — were identified based on a content analysis (see Proposed Model page 14 for full details). Three main objectives of the study are to 1) explore the effects of the three antecedents on PV, PR and on consumers‘ RI; 2) examine the mediating roles of PV and PR on the relationships between the extrinsic product cues and RI; and 3) investigate the relationships between PV, PR and RI. 3 CHAPTER 2: LITERATURE REVIEW 2.1 Online Repurchase Studies Wu, Chen, Chen and Cheng (2014) argue that empirical studies on examining the value-RI or risk-RI linkage in the online context are scarce. Therefore, this study explores online RI and defines it as Airbnb consumers‘ self-reported likelihood of repeat purchasing accommodations on www.Airbnb.com. Several prior studies have exploredRI in the online context, while various antecedents as well as research models were examined (See Table 1 for a brief summary of theliterature). Among the reviewed articles, satisfaction seems to dominate the online RI studies. However, in the realm of the peer-to-peer economy, satisfaction alone may not necessarily predict RI because there may be a need to differentiate between the satisfaction with the website/platform and the satisfaction with the peer seller. Moreover, satisfaction may be reflected by consumers in different forms. For example, Chiu, Wang, Fang and Huang (2014) explored the relationships between utilitarian value, hedonic value, PR and RI, finding that there are significant influences of utilitarian value, hedonic value and PR on RI as well as powerful effects from PR on those two values. This shows that value and risk may be effective in predicting RI. Wu et al. (2014) also showed that satisfaction is not the only way to predict RI. They examined the interactions between PV, transaction costs and RI. Positive influences of PV on RI as well as the relative importance of the three types of costs on PV and RI were found. Nevertheless, they designed the model only with customers buying tangible products online in mind, whereas Airbnb products are intangible; therefore their model is not suitable to be adopted for this study. In other words, evidence from the literature suggests that satisfaction is not the only way to predict intentions to repurchase in the online context. To better 4 understand the RI of Airbnb consumers, a model with PV, PR and RI can be built. Moreover, researchers have to look at tourism related constructs when exploring this model because Airbnb is a platform that offers accommodation searching services for tourists. As shown in Table 1, no known tourism related constructs have been investigated in the context of online RI. In an effort to enrich the extant literature, this study incorporates effective antecedents in the field of tourism and consumer behavior, to build a theoretical framework based on the initial model of the relationship between PV, PR and RI. 5