Examining the Market Structure of the German and UK Tour Operating Industries through an Analysis of Package Holiday Prices

Abstract

This paper offers new empirical evidence that can be used to analyse the structure of the market in which tour operators compete. The authors examine the prices of package holidays to the Balearic Islands, one of the Mediterranean's leading tourist destinations, offered by a sample of German and UK tour operators. The hedonic price method is used, expressing package holiday prices in terms of the characteristics of the packages. The model also incorporates information that facilitates assessment of certain aspects of the market: in particular, the market power of various tour operators and the influence of agreements with hotel chains. The paper concludes that tour operators' strategies and price structures are characteristic of an oligopolistic market.