Zero-Fee Tour

Questions directly stated from the paper:

* What made zero-fee tours so attractive to the mainland tourists?

* What kind of tourists would join these tours?

* How could this business model be sustainable despite low service quality and a high number of conflicts between the tourists and the tour guides?

* Would zero-fee tours threaten the survival of market players that solely handled regular tours?

* Would the growing trend of zero-tours be reversed one day? (With increasing affluence on the mainland, more and more mainlanders could afford high-quality trips)

* How might the travel experience of first-time visitors joining zero-fee tours affect their decisions to take future trips to Hong Kong?

* Would such experiences drive more mainlanders to visit the city through IVS and/or regular tours, or would the repeat visitor simply take more zero-fee tours?

* How should Trendy Travel position its inbound tour business in both the short and long term?

Main Issues as stated on Asia Case Research Centre:

http://www.acrc.org.hk/case/case_showdetails.asp?ct=newly&c=890&cp=1792&pt=1

* Consequences of information asymmetry between sellers and buyers for market transactions.

* Adverse selection resulting in a low-price, low-quality business model.

* Management challenges in a market environment strongly influenced by information asymmetry.

Thoughts on the issues:

Information Asymmetry | Tourists don’t know what they are getting into. Travel agents don’t know if the tourists have the purchasing power or not. |

Adverse selection | The poorest tourist are the most likely to select the zero fee tours.As a result, conflicts are more likely to occur and leading to poorer services.This vicious cycle continues indefinitely. |

Moral Hazardhttp://en.wikipedia.org/wiki/Moral_hazard | DA gets small profit but passes 100% of risk to RARA gets small profit but passes 100% of risk to tour guides.Tour guides bear all the...