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Multimarket contact, differentiation, and prices of chain hotels

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  • Silva, Rosario

Abstract

This study seeks to analyze the joint effect of multimarket contact and product differentiation on the intensity of price competition between chain hotels. The theory predicts that both variables reduce price rivalry, but little is known about their interaction effect. Multimarket literature establishes that when two firms meet one another in more than one market, the mutual recognition of their interdependencies will reduce the intensity of competition, leading to mutual forbearance. This article argues that differentiation moderates negatively the effect of multimarket contact on price because differentiation decreases the recognition of interdependence and thus, it makes difficult mutual forbearance. Using data from 1147 Spanish hotels that belong to a chain, this study shows that chain hotels with higher multimarket contact and higher differentiation (i.e. more stars, the Q certificate, common umbrella brand and a unique combination of services) charge higher prices. The evidence confirms the negative interaction but only for horizontal differentiation (i.e. different services and common brand).

Suggested Citation

  • Silva, Rosario, 2015. "Multimarket contact, differentiation, and prices of chain hotels," Tourism Management, Elsevier, vol. 48(C), pages 305-315.
    • Handle: RePEc:eee:touman:v:48:y:2015:i:c:p:305-315
    DOI: 10.1016/j.tourman.2014.11.006
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    2. Puciato, Daniel, 2016. "Attractiveness of municipalities in South-Western Poland as determinants for hotel chain investments," Tourism Management, Elsevier, vol. 57(C), pages 245-255.
    3. Raffaele Filieri & Elisabetta Raguseo & Claudio Vitari, 2018. "When are extreme ratings more helpful? Empirical evidence on the moderating effects of review characteristics and product type," Grenoble Ecole de Management (Post-Print) halshs-01923243, HAL.
    4. Neirotti, Paolo & Raguseo, Elisabetta & Paolucci, Emilio, 2016. "Are customers’ reviews creating value in the hospitality industry? Exploring the moderating effects of market positioning," International Journal of Information Management, Elsevier, vol. 36(6), pages 1133-1143.
    5. María D. Illescas-Manzano & Sergio Martínez-Puertas & Gema M. Marín-Carrillo & María B. Marín-Carrillo, 2023. "Dynamics of agglomeration and competition in the hotel industry: A geographically weighted regression analysis based on an analytical hierarchy process and geographic information systems (GIS) data," Oeconomia Copernicana, Institute of Economic Research, vol. 14(1), pages 213-252, March.
    6. Balaguer, Jacint & Ripollés, Jordi, 2021. "Does multimarket contact affect prices in the retail fuel industry? First empirical evidence," Energy Economics, Elsevier, vol. 93(C).
    7. Raffaele Filieri & Elisabetta Raguseo & Claudio Vitari, 2018. "When are extreme ratings more helpful? Empirical evidence on the moderating effects of review characteristics and product type," Post-Print halshs-01923243, HAL.
    8. Elisabetta Raguseo & Claudio Vitari, 2017. "The Effect of Brand on the Impact of e-WOM on Hotels’ Financial Performance," Post-Print halshs-01656399, HAL.
    9. Arbelo-Pérez, Marta & Arbelo, Antonio & Pérez-Gómez, Pilar, 2017. "Impact of quality on estimations of hotel efficiency," Tourism Management, Elsevier, vol. 61(C), pages 200-208.
    10. Cruz-García, Paula & Fernández de Guevara, Juan & Maudos, Joaquín, 2021. "Bank competition and multimarket contact intensity," Journal of International Money and Finance, Elsevier, vol. 113(C).
    11. Aldric Vives & Marta Jacob & Marga Payeras, 2018. "Revenue management and price optimization techniques in the hotel sector," Tourism Economics, , vol. 24(6), pages 720-752, September.

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