Competition And Coordination Between Hotels And Travel Agencies

With the rapid development of economy in China and the globalization of trade and business, the incomes of residents increase, and then the tourism industry has a great development chance. In China, the domestic tourist arrivals in2013was3.262billion, which is twice than the1.61billion in2007, and the total tourism revenue in2013is2.95trillion RMB, which is almost three times than the1.1trillion in2007.The rapid development of tourism industry depends on the services provided by two important parts, i.e. hotels and travel agencies, including traditional travel agencies and online travel agencies (OTA). Hotels provide rooms to satisfy the demand from tourists. In order to improve the occupancy rates, hotels cooperate with travel agencies to guarantee a certain amount of rooms sold. Traditional travel agencies provide travel packages to tourists by offline. Specifically, hotels reserve a certain amount of rooms for travel agencies with a relatively low wholesale price. Then travel agencies bundle these rooms with other services as travel packages, such as air tickets and car rents. In addition, OTAs provide many kinds of tourism services by online, such as hotel rooms, air tickets, and so on. Specifically, hotels put the room information on the websites of OTAs. OTAs help hotels to sell rooms and obtain some commissions.With the advent of e-commerce era, the consumer behavior has been changed, mainly reflecting in the popularity of online shopping, including reservation of hotel rooms. First, tourists prefer to reserve hotel rooms through travel agencies, especially through OTAs, which makes the guest flow of hotel’s official website decreased. Second, cooperation with OTAs, hotels need pay commissions to OTAs, which makes hotels’profits and the loyalty of customers decreased. Third, through cooperation with traditional travel agencies, hotels need charge a relatively low wholesale price, which may incur opportunity loss. Then, hotels have to adopt various marketing strategies to improve profits and make customers stay, including optimal pricing strategy and optimal cooperation strategy with travel agencies.Under the business environment described above, this thesis studies the competition and cooperation between hotels and travel agencies from the theoretical perspective, in order to provide suggestions for hotel managers and travel agencies operators. The research topics are as follows.I. The effect of seasonality on cooperation strategySeasonal fluctuation of the tourism demand is a quite common phenomenon, which influences the cooperation strategies. In different areas, hotels face diverse seasonal fluctuations of tourism demand, for almost all the spots have an obvious seasonality, i.e. differing from the durations of tourism peak season, off season and shoulder season. The seasonality influences the hotels of different types. In order to earn more profits, hotels will make various room rate strategies to announce the wholesale price of rooms reserved for the travel agency. In other words, hotels located different areas will have different cooperation strategies with travel agencies. In chapter3, the impacts of seasonal demand variation on the optimal cooperation strategies for hotels and travel agencies are explored, and the optimal cooperation strategy, including the optimal room rate to individual customers, the wholesale price and the number of rooms reserved for travel packages, are given.II. Tradeoff between market segmentation and cooperation with travel agenciesOwing to the rapid development of business-to-customer (B2C) e-commerce, an increasing number of consumers are willing to reserve hotel rooms online, since they can make reservations in advance according to their travel or business plans. Particularly, numerous hotels with online reservation systems have adopted the strategy of market segmentation based on reservation lead time, i.e. using price and reservation lead time as determinant attributes to segment markets, such as advance-purchase discounts. Specifically, hotels segment the rooms into several parts using a pricing strategy with respect to the reservations lead time, and accordingly charge different sale prices. Furthermore, cooperating with travel agencies to guarantee a specific amount of demand is an appropriate strategy for hotels to achieve improvement in occupancy rate and profit. However, cooperation will incur opportunity loss for hotels with finite capacities through lower wholesale rates, and hotels may lose these individual customers. Consequently, with the opportunity loss, do hotels using market segmentation based on reservation lead time need cooperation with travel agencies? In chapter4, the trade-off between two potential marketing strategies for hotels is analyzed, namely market segmentation based on reservation lead time and cooperation with travel agencies.III. Tradeoff between two online distribution channels Along with the growth of e-and m-commerce, more and more consumers are willing to reserve hotel rooms online or through mobile handsets. For reducing marketing cost and improving revenue, hotels begin to sell rooms to customers by using two online channels, i.e. their own official website and online travel agency (OTA). Therefore, hotels need to make tradeoff between these two online distribution channels. Chapter5studies the cooperation contract between tourism hotels and OTAs from the perspective of partner selection using the agent model. The decentralized decisions of hotel and OTA are analyzed, and the effects of OTA’s market share and market impact on the cooperative relationship between them also explored.IV. Selection of travel agenciesCooperation with travel agencies is an important strategy for hotel. Then the selection of partners are also important. This thesis discuss this issue from two aspects. First, in chapter4, the influences of the attributes of travel agencies on hotel profits are explored, i.e., switch rate and market size. Second, in chapter5, the selection of OTA from the perspective of hotels is studied, and the effects of OTA’s market share and market impact on the cooperative relationship between them are mainly discussed. In practice, hotel should select appropriate travel agencies to cooperation according to the attributes of travel agencies and hotels.