Advertising and word of mouth in tourism, a simulation study

This paper seeks to model the effect of word of mouth (WOM) on travel behavior. In particular it seeks to examine the effect of social networks on WOM amongst a population in the origin prior to travel. In this paper the effect of WOM is compared to that of paid advertising (ADV). In other words we simulate a situation in which a tourism operator (a hotel manager for example) wishes to understand the possible effectiveness of traditional advertising as compared to word-of-mouth for promoting the services offered to a particular target market. By comparing the two situations (ADV and WOM) we can better understand the relative effect of these two methods and the higher effectiveness, at least in the short term, of WOM. For ADV, a more intense advertising effort is needed to reach the same level of informed people than for WOM. The findings show that for WOM, this level of effort is dependent on a moderate cohesion of the group. However, if the cohesion is either very low or very high, this proportion is attained only with a much higher expenditure of resources.