Analysis on Product Differentiation Strategy and Product Innovation of Travel Agency in China

In the light of the situation of low-price competition in travel agency industry, this paper analyses the intrinsic mechanism of differentiation competition of travel agency with Hotelling model from the perspective of game theory. The paper indicates that with homogenization of travel agency products, price would be the key element to affect purchase decision of the customers, and only differentiation competition strategy can avoid low-price competition effectively. On the basic of this analysis, the paper puts forward products innovation strategy of travel agency as differentiation competition approaches, and gives suggestions that only after travel agencies has known the market in full detail and grasped the market effectively, can travel agencies strengthen their products' differentiation and exclusiveness and enhance their core competitiveness, including adding innovation elements into products, creating and guiding consumption, cementing differentiation with brand recognition, and constructing refined product.