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An Economic Analysis of the Tourism Industry - Implications of the Online Travel Intermediary

Pongsak Hoontrakul

Sasin of Chulalongkorn University

Peter Ryan

University of Ottawa - Faculty of Administration

Informational asymmetry and fragmentation of capacity suppliers in the tourist industry provide travel intermediaries with market power. Market structure is characterized by over-capacity in off-peak seasons, high fixed costs and low variable costs, leading to product under-pricing. Forward sales of capacity at low contract prices surrender profits from consumer surplus to intermediaries enjoying oligopsony benefits. The creation of formal futures contracts in rooms and seats would permit operators to hedge demand uncertainty and retain more of the profits. Online intermediaries can serve the interests of domestic hotel operators through exploitation of databases to provide analytical solutions to capacity utilization and to develop demand balancing.

Number of Pages in PDF File: 26

Keywords: Tourism Industry, Online Travel Intermediary

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Date posted: February 6, 2004  

Suggested Citation

Hoontrakul, Pongsak and Ryan, Peter, An Economic Analysis of the Tourism Industry - Implications of the Online Travel Intermediary. Available at SSRN: http://ssrn.com/abstract=494622 or http://dx.doi.org/10.2139/ssrn.494622

Contact Information

Pongsak Hoontrakul (Contact Author)
Sasin of Chulalongkorn University ( email )
Sasa Patasala Building, Soi Chulalongkorn 12 (2)
Phyathai Road
Bangkok 10330
+662 954 1689 (Phone)
+662 954 1690 (Fax)
HOME PAGE: http://www.pongsak.hoontrakul.com
Peter Ryan
University of Ottawa - Faculty of Administration ( email )
136 Jean-Jacques Lussier
Room 257A
Ottawa, Ontario K1N 6N5
613-562-5800 Ext. 4733 (Phone)
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