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

26 Pages Posted: 6 Feb 2004  

Pongsak Hoontrakul

Sasin of Chulalongkorn University

Peter Ryan

University of Ottawa - Faculty of Administration

Abstract

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.

Keywords: Tourism Industry, Online Travel Intermediary

Suggested Citation

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

Pongsak Hoontrakul (Contact Author)

Sasin of Chulalongkorn University ( email )

Sasa Patasala Building, Soi Chulalongkorn 12 (2)
Phyathai Road
Bangkok 10330
Thailand
+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
Canada
613-562-5800 Ext. 4733 (Phone)

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