Online Travel Agencies and Their Role in the Tourism Industry

Garcia, Gisele Magrini; Anjos, Sara Joana Gadotti dos; Doğan, Seden

doi:10.30519/ahtr.865546

Cited by 4 publications

(2 citation statements)

References 76 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The booming OTA online booking platform has brought about hugely significant changes and impact on the hotel industry today (Chang et al, 2019;Lv et al, 2020). In hotel distribution systems, the overwhelming popularity of OTAs has meant their increasingly important role in serving the hotel and travel industry (Garcia et al, 2022;Mellinas, 2019). Therefore, interaction between the hotel industry and OTAs has become a hot topic in researching hotel supply chain management practices today.…”

Section: Introductionmentioning

confidence: 99%

“…For the hotels, OTAs can attract a larger number of travelers that will improve overall hotel occupancy rates (Kracht and Wang, 2010). It is notable that some small hotels are more reliant on OTAs because of their smaller market scale and lower popularity ratings (Chen, 2022a;Garcia et al, 2022;Ling et al, 2011). In reality, however, mutual cooperation between hotels and OTAs has been anything but smooth, and it often results in conflict due to the reasonable or unreasonable distribution of benefits derived (Guillet and Law, 2013).…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Advertising fee as a new supply chain coordination approach between hotels and online travel agencies

Chen

2023

JHTI

View full text Add to dashboard Cite

PurposeChannel coordination has become an essential part of researching hotel supply chain management practices. This paper develops an improved channel coordination approach to coordinate the profit distribution between hotels and online travel agencies (OTAs) achieved through an introduction of advertising fees. This direction further improves the decentralization of cooperation and achieves Pareto improvement to achieve mutual profitability.Design/methodology/approachThe methodology used in this study involves Stackelberg game theory employed for the decision-making and analysis of both the hotel and OTA. The OTA, acting as the leader, offers a hotel a contract specifying the commission rate that the hotel will pay to the respective OTA. The hotel, acting as a follower, sets a self-interested room rate as a given response. A deterministic, price-sensitive linear demand function is utilized to derive possible analytical solutions once centralized, noncooperative decentralization and cooperative decentralized channel occurs.FindingsResults show that a new channel coordination approach is possible, namely via advertising fees. Prior to channel coordination, the OTA tends to set a higher commission rate, and the hotel sets a higher room rate in response under noncooperative decentralization. As such, this results in a lower channel-wide profit for all. One way to reduce channel-wide profit loss is to use a method of cooperative decentralization, which can, and will result in optimal profit as centralization takes place. However, the lack of incentives makes cooperative decentralization unfeasible. Further improvement is possible by using advertising fees based on a cooperative decentralization agreement, which can reach Pareto improvement.Practical implicationsThis paper helps the OTA industry and hotel owners cooperate by way of smoother coordination. This study provides practitioners with two important practical implications. The first one is that the coordination between the hotel industry and OTA through cooperative decentralization allows for the achievement of higher profitability than that of noncooperative decentralization. The second one is that this paper solves the outstanding problem of insufficient incentives characteristic of cooperative decentralization by means of an advertising fee as a new supply chain coordination approach.Originality/valueThis paper offers both the problem and solution regarding the lack of incentives that hamper cooperative decentralization without the use of advertising fees. This paper is unique in that it derives analytical solutions regarding commissions levied in a typical hotel supply chain under noncooperative decentralization.

show abstract