Behavioural economics highlights that human decision-making is often influenced by emotions, cognitive limitations, and psychological biases rather than pure rational analysis. Choosing a holiday can be surprisingly stressful because customers are frequently presented with overwhelming amounts of information and choice. The article explains that decision paralysis occurs when people face too many options, making it difficult to compare alternatives and make confident decisions. Travel providers can improve customer experiences by simplifying choices and presenting information in ways that align with how people naturally think and decide.
Behavioural economics and the perfect holiday
We’ve been doing a lot of thinking about travel recently. Not surprisingly the question came up: what makes the perfect holiday? Well the answer, it seems, is not necessarily what you might think.
The science of what makes the perfect holiday is getting smarter - and it's not exactly what you might expect.
Behavioural science – becoming more widely known nowadays as behavioural economics - has a lot of new and interesting ideas on the subject of leisure, travel and holidays to complement what it is discovering about how humans make choices and the irrationality of some of our behaviours. In fact it’s probably fair to say that our psychological understanding of pleasure (hedonic psychology) is growing faster now that it has for a long time.
Choosing a holiday
Almost anyone who has ever done user research in travel knows that finding and buying a holiday online is a stressful and confusing experience for most people. From a behavioural economics point of view this is because the way holidays are sold is a throwback to rational economic thinking: where an abundance of choice and information is useful and where people will make a rational decision which maximises their utility from the holiday they buy.
In reality shopping for travel creates a number of conditions which make it hard for people to arrive at a choice they are happy with. First and most obvious is decision paralysis. Humans have an inability to process too much information. Once we are offered more choices than we have the cognitive bandwidth to cope with (normally 7 choices, plus or minus 2) the human brain struggles to maintain the self-control to process a decision. The hand-maiden of decision paralysis is procrastination, a quite healthy reaction to difficult decisions but one which can decrease the quality of our life over time.
How many choices we have is important, but so too is how those choices are presented to us. The idea of choice architecture was proposed in Thaler and Sunstein’s ‘Nudge’ in 2008. It’s very clear that the travel industry has difficulty in presenting choice in a way that matches our preference for relativity in decision making. Options we don’t want are really useful in guiding us into decisions. How many holiday websites and brochures confront us with too much choice and make it hard to meaningfully differentiate between the choices on offer? In fact, if the holiday brochure did not exist it would now seem like madness to invent it. And the idea that a travel website should echo the characteristics of paper brochures is a time-expired idea to say the very least.
It won’t be long before the travel industry adopts these new ideas and uses them to help customers make choices. But there’s another dimension to all of this which the industry seems a long way from addressing.
Taking a holiday
Daniel Kahneman’s idea about the Experiencing Self and the Remembering Self is extremely relevant when thinking about holidays – and may be one of the most useful ideas for the field of experience design that’s arrived in recent years. His excellent TED talk on the subject has a lot to say about holidays.
In summary, we are two selves: the Experiencing Self is the one which lives our life, which sees, hears, does; the Remembering Self is the one which occasionally takes stock of our experiences and draws conclusions. Kahneman describes this as the difference between ‘being happy in your life, and being happy with your life’.
The most important point is that it’s the Remembering Self which makes decisions.
This is worth reflecting on. Most people who take holidays and most companies who sell holidays tend to think that the experience of the holiday is what they are buying and the benefit they will derive from it. But in fact the outcome of the holiday is the memories it creates. These will help us decide about the happiness and well-being we derived from our holiday and govern future actions and decisions relating to travel.
So how do we help to create good memories? Kahneman also presents us with the Peak End rule. This suggests that the average quality of an experience is less important than peaks in sensation. It’s the peaks (positive or negative) which are most active in the formation of memory, reflections and opinions about an experience. And how an experience ends is particularly influential over this process. Which begs the question: how did your last holiday end? And did you see any evidence of your holiday company trying to positively manage that ending?
Add to all of this a study published by Springer Netherlands which suggests that the more reliable uplift in happiness associated with holidays comes in the period of anticipation between booking and travelling and you get a rather different view of how holidays work and what holiday companies should be doing for their customers.
Manage the before, the during and the after
It might be easier to think about holidays not as one or two weeks in August, but 6-9 month experiences with a before, a during and an after.
Clearly holiday companies need to be better at framing travel choices so that choosing a holiday becomes less stressful. But beyond that, there appears to be a really important time between booking and travelling where companies can maximise the pleasure derived from anticipating your holiday, and creating strong peaks in this phase which will translate into good memories for the traveller.
Of course the holiday itself remains important, but we can start to look at this as a period when we want to avoid peak negatives (delays, bad service episodes) and engineer peak positives (an unexpected extra, service that went the extra mile). These peaks could be especially powerful if they take place towards the end of the holiday, driving both memories of the holiday as a whole and future behaviour.
Finally we could also start to think about how we help travellers in the formation of their memories after the trip. How can we help them focus on the positive peaks which will inform their long-term perceptions of the trip – and the company which took them there?
Using these new insights into the way human beings think, feel and act, we are in a better position than ever before to challenge the status quo and design a user experience which get us closer to the ideal: making ‘good’ decisions easy for consumers and, by helping to create positive memories, maximising the potential for brand loyalty and repeat purchase.
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Behavioural Economics - FAQs
Although consumers often claim to want more options, excessive choice can make decision-making harder. When faced with too many destinations, packages, prices, and features, customers may struggle to evaluate alternatives effectively and postpone decisions altogether. This phenomenon, known as decision paralysis, can reduce customer satisfaction and increase frustration. Travel companies that organize information clearly and guide customers through decisions can create more enjoyable planning experiences while helping users make confident choices.
The article references Daniel Kahneman's distinction between the experiencing self and the remembering self. The experiencing self lives through events in real time, while the remembering self reflects on experiences afterward and forms lasting impressions. This distinction is important because future decisions are often influenced by memories rather than the moment-to-moment reality of experiences. Holiday companies therefore need to think about how memorable experiences are created and remembered rather than focusing exclusively on operational delivery.
The Peak-End Rule suggests that people judge experiences largely based on their most emotionally intense moments and how the experience ends rather than on every moment equally. Positive peaks and strong endings often have a disproportionate influence on memory formation. For travel brands, this means that creating memorable highlights and ensuring trips conclude positively can significantly impact customer satisfaction. Great final impressions can strengthen positive memories and increase the likelihood of repeat bookings and recommendations.
Research discussed in the article suggests that a significant portion of the happiness associated with holidays occurs before travel begins. Anticipation, planning, and excitement contribute substantially to customer enjoyment and overall satisfaction. Travel companies can enhance this period by providing engaging content, countdowns, destination information, and personalized communications. These interactions help build excitement and create positive emotional experiences before customers even depart.
The article argues that organizations should view holidays as long-term experiences consisting of three phases: before, during, and after travel. Each stage provides opportunities to support customers and create positive memories. By reducing stress during planning, delivering memorable moments during travel, and helping customers relive positive memories afterward, travel brands can build stronger customer relationships and encourage repeat business. Understanding human psychology provides powerful insights into designing more meaningful travel experiences.