How market structure and market power shape hotel price discrimination – Evidence from big data

Abstract

Limited research has addressed market structure and market power in the hospitality context. This study builds on the market structure literature by examining how market structure and power relate to and affect hotel properties’ price discrimination. We collected the published room rates of 583 hotels in Houston, Texas, in 2016 hotels.com . These dyadic price data captured booking windows with varied booking and check-in dates. Estimation results revealed two types of price discrimination, intertemporal and restriction-based, in the hotel industry. We confirmed that market structure and market power each played a role in such discrimination, with price discrimination being more intense in a more competitive market and among hotels with less market power. A sub-group analysis of hotels across different classes indicated heterogeneity in our results. Implications are provided for revenue managers and hotel investors to monitor market structure and power to design and manage proper pricing strategies.