Strategic dynamics in hotel and OTA operations: the influence of booking convenience, privacy concerns, and commission rate

The boom in e-commerce has fueled the rise of online retail platforms, with online travel agent (OTA) platforms gaining prominence in the hotel industry. Compared with official direct sales, hotels sell through OTAs, need to pay commission, but can provide customers with more booking convenience, while inevitably raising privacy concerns. This paper considers a two-tier supply chain consisting of a hotel and a customer travel market, and explores how booking convenience, privacy concerns, and commission rate affect the operational strategies of the hotel and OTA in three sale modes: hotel official direct sale mode (Mode H), OTA sale mode (Mode O), and dual-channel mode of direct sale and OTA (Mode D). The results of this study show that: Firstly, the optimal decisions and the profits of both the hotel and OTA are positively related to booking convenience and negatively related to privacy concerns. Secondly, the hotel’s profits in both Mode O and Mode D are negatively affected by the commission rate, whereas the OTA’s profits in these modes are positively influenced by the commission rate. Additionally, through a series of numerical experiments, we investigated the optimal decisions for the hotel and OTA. For the hotel, when customers are more inclined towards the OTA sale, the retail price under Mode H is always higher than that under Mode D. Conversely, when customers are more inclined towards direct sale, the retail price under Mode H is always higher than that under Mode D if commission rate is high, but the opposite is true if commission rate is low. Moreover, we also find that when the commission rate is low, the optimal operational strategy for the hotel is Mode D. As the commission rate increases, the optimal strategy shifts from Mode D to Mode H. For the OTA, the retail price under Mode D is always higher than under Mode O, and Mode O consistently emerges as the preferred strategy for the OTA across various commission rates. Finally, we extended our elasticity analysis and validated the robustness of our theoretical results.