Coping With Digital Market Re-Organization: How the Hotel Industry Strategically Responds to Digital Platform Power

Abstract

How do organizations in a sector where powerful platforms have emerged cope with the new constraints and opportunities that platforms induce? A growing number of studies highlights the power of digital platforms to re-organize markets and thereby create new forms of dependence. But there are also indications that organizations are capable of countering platform power especially by demanding their regulation. This paper expands this view to investigate also strategies at the organizational level. It draws on resource dependence theory and studies of strategic responses to environmental changes to study how organizations strategically respond to the rise of digital platforms. To show organizations’ capacities to cope with the new digital market organization, we use a qualitative case study of the Swiss hotel sector and its reactions to so-called online travel agencies, based on interviews with hotel managers and professional representatives. We distinguish between three types of hotels – small family-run, luxury, and chain hotels, and identify three types of strategic responses: bypassing, optimizing, and mitigating. Contrary to a platform power perspective, we find some evidence for organizations’ capacity to keep platforms at bay, by limiting dependence through mitigation, and platforms’ reach through bypassing. Hotels also learn to “play that algorithmic game” and take advantage of platforms’ technological affordances, but such strategies seem to accommodate platform power rather than countering it. Finally, we find that hotels with fewer resources (small family-run hotels) are less equipped to counter platform power, suggesting that platforms risk fostering existing hierarchies and segmentation in markets.

Digital distribution of hospitality services in the context of the COVID-19 pandemic

“…The topic of digital distribution of hotel and restaurant business services covers research of digital markets, digital technologies, and distribution of services. "A growing number of studies highlights the power of digital platforms to re-organize markets and thereby create new forms of dependence" (Balsiger et al, 2021). Digital markets have their own characteristics and "include all kinds of trading using the Internet for product search, purchasing, and payment" (Overby & Audestad, 2021b) and have long been a zone of "blue ocean" strategies (Carton, 2017; Mesut, 2021).…”

“…It is indicated that "the prospects for Internet use and consumption associated with the hotel sector will increase even more in the coming years" (Cruz, 2003, p. 105). Currently, "digitalization brings the challenge to hotels' work process" (Buer, 2019, p. 6), and "the hotel industry strategically responds to digital platform power" (Balsiger et al, 2021). In the post-pandemic period, digitalization will become one of the main strategic concepts in the tourism and hotel business (Melnychenko et al, 2020;Mazaraki et al, 2019).…”