Title: Third party distributor in the hotel industry: an analytical study of their contract design

Authors: Jun Yang

Addresses: Department of Management and Marketing, School of Business Administration, University of Houston – Victoria, 3007 N. Ben Wilson, Victoria, TX 77901 USA

Abstract: Many hotels are using third party discount websites, such as expedia.com. The hotels benefit from an enlarged potential market by reaching price sensitive consumers, but also face fierce competition from those third party vendors. Meanwhile, many hotels start to use |best rate guarantee| on their own websites to attract customers. The author discusses the characteristics of hotel industry and uses a game theoretical approach to study the contract design between hotel chains and third party vendors. The results confirm |best rate guarantee| is the best strategy for hotel chains. Analytical results and managerial implications are presented.

Keywords: hospitality industry; internet search engines; differential pricing; third party distributors; multi-channel structure; intercultural information management; hotels; contract design; third party websites; discount websites; game theory; best rate guarantee; hotel chains.

DOI: 10.1504/IJIIM.2010.037864

International Journal of Intercultural Information Management, 2010 Vol.2 No.3, pp.263 - 273

Published online: 31 Dec 2010 *

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