Article

Journal of Vacation Marketing

2016, Vol. 22(2) 167–178
Exploring price fluctuations ª The Author(s) 2015
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DOI: 10.1177/1356766715592663
jvm.sagepub.com
agencies: A case study of
room reservations in an
upscale hotel in Hong Kong

Sunny Sun, Rob Law and Tony Tse

The Hong Kong Polytechnic University, Kowloon, Hong Kong

Abstract
The Internet has changed the traditional behavior of customers when purchasing tourism-related
products, especially when reserving hotel rooms online. Online travel agencies (OTAs) that offer
Web-based hotel room reservation services have proliferated in recent years. This study explores fluc-
tuations in hotel room rates offered by OTAs, a topic that has yet to be fully explored. The results
show that ‘last-minute sales mode’ is less frequently adopted among different OTAs at present. More-
over, these agencies even charge the same room rate regardless of the hotel rating (e.g. 5-star, 4.5-star,
or 4-star). Furthermore, bundle pricing is more cost-effective than purchasing separate items. Finally,
most OTAs have failed to keep their promise of a ‘best rate guarantee’. These findings can help hotel
managers improve their strategic management, ensure rate parity among various OTAs, and assist cus-
tomers in reserving hotel rooms online.

Keywords
Hong Kong, online travel agencies, price fluctuation, room reservation, upscale hotel

Introduction decreased by 3.5% through direct transactions

with hotels (direct calls and walk-in customers).
Compared with the figure in the year 2000,
The market share of online hotel room reserva-
the number of Internet users worldwide has
tions has reached more than 75% across different
increased sixfold to 2.9 billion in 2014 (Internet
OTAs (TravelClick, 2014).
Live Stats, 2014). The widespread adoption of
Aside from selling hotel rooms through their
the Internet has altered traditional communica-
official Web sites, hotels also employ various
tion and transaction methods in several business
travel agencies, such as Priceline.com, Agoda.com,
sectors, particularly in tourism-related busi-
and Booking.com, to reach their customers,
nesses (Akehurst, 2009). The Internet has also achieve optimal prices, and maximize their reve-
revolutionized the purchasing behaviors of con-
nue (Law and Wong, 2010; Tso and Law, 2005).
sumers because travelers typically plan a trip
This observation was highlighted in the 2012
using online platforms. Customers can obtain
year-end report of the InterContinental Hotels
information through search engines and compare
Group, which suggested that the increasing
the room rates offered by different online travel
agencies (OTAs) when booking hotel rooms
(Freed, 2013; Kim et al., 2007). In the last quar-
Corresponding author:
ter of 2013, the number of room reservations in Sunny Sun, The Hong Kong Polytechnic University, 17
New York increased by 18% and 9.1% through Science Museum Road, TST East, Kowloon, Hong Kong.
OTAs and hotel Web sites, respectively, and Email: 11545750g@connect.polyu.hk
168
dependence of customers on OTAs had a poten-
tial effect on the brand and profitability of a
company (Freed, 2013). OTAs, such as Expedia,
often attract customers because of the prices they
offer (RevMax, 2013). Given that monitoring
data has become more inexpensive, hotels and
OTAs are beginning to gather information, con-
struct customer-specific packages, and charge
different rates for their services. Therefore, price
dispersion becomes more obvious across OTAs
than across traditional channels, such as over-
the-phone booking (e.g. Choi and Kimes, 2002;
Koch and Cebula, 2002). For example, according
to Kennedy (2015), a diversity of room rates
exists for the same room category and the same
check-in date. ‘One room, three rates!’ is still a
commonplace among various OTAs in Asia,
although the case in the United States has been
different for years.
Previous studies have investigated various
OTAs and found that price dispersion across
these OTAs significantly affects the brand and
profitability of hotels. However, how hotel room
rates fluctuate across different OTAs is largely
overlooked in the existing literature. Thus, this
study examines the number of OTAs a certain
hotel has employed for distributing rooms and
investigates how hotel room prices fluctuate
across different OTAs.
This study primarily tries to answer the ques-
tion of ‘how do hotel room rates fluctuate across
different OTAs?’ Based on this research ques-
tion, this study aims to achieve the following
objectives: (1) to explore whether the room rates
of a certain hotel depend on the star ratings given
by different OTAs, (2) to evaluate whether bun-
dle pricing (with or without breakfast) provides
lower room rates for customers, and (3) to exam-
ine whether the best price guarantee that is pro-
vided by different OTAs is indeed the lowest
available hotel room rate.
Literature review
Online hotel room travel agencies
Hotels traditionally target their customers through
direct and indirect channels, such as reservation
departments or travel agencies (Law and Wong,
2010). The rapid development of the Internet has
led to the emergence of OTAs that offer online
hotel room reservation services. The rapid prolif-
eration of these agencies has brought dramatic
changes to most companies in the industry. OTAs
have also gained widespread acceptance in the
Journal of Vacation Marketing 22(2)
hospitality industry because they help hotels reach
their customers effectively (e.g. Hui et al., 2009;
O’Connor and Frew, 2004). Nearly all hotels have
set up their own Web sites as a direct channel for
selling their rooms. Nevertheless, many hotels
also collaborate with OTAs to distribute their
products, to reach a wider range of customers, and
to maximize their revenues (e.g. Hui et al., 2009;
Qi et al., 2013). Hotelclub.com, lastminute.com,
and elong.com are among the most famous OTAs.
Room rates vary depending on the type of
OTA as well as the reservation method and
period. Murphy et al. (2005) conducted a two-
part survey of 100 Swiss hotels and found that
half of them offer different rates to their custom-
ers through telephone, online reservation request
forms, and e-mail. Tso and Law (2005) found
that local travel agencies offer the lowest rates
for all types of hotels. Hui et al. (2009) found that
local OTAs generally offer the lowest rates for
upscale and luxury hotels, whereas national
OTAs provide the best rates for middle-priced
hotels. By contrast, the Web sites of hotels are
among the channels that offer the most expensive
prices. Customers expect that the prices on hotel
Web sites are lower than those offered by offline
agencies (Joint Hospitality Industry Congress,
2000). Customers often search and compare
prices from different OTAs to determine the low-
est rate before making a final decision (Chiang
and Jang, 2007; Kim et al., 2006). However, they
may encounter several difficulties in comparing
the rates of many OTAs because the abundant
supply of information can be overwhelming and
may even lead to frustration. Rheem (2010)
observed that 43% of customers would leave an
online travel product booking Web site if the
total price is higher than their expected price,
although in essence, rate parity for hotel rooms
should be ensured among all the distribution
channels (Varini and Murphy, 2006). Addition-
ally, with the rapid development of the Internet,
customers can evaluate the room rates across
various channels, thereby making the rate parity
a critical issue (Choi and Mattila, 2006). For
example, Demirciftci et al. (2010) investigated
the rate parity of hotels across direct and indirect
distribution channels in the United States, and
the results showed no significant differences,
although significant differences were found
among individual channels. However, Toh et al.
(2011) indicated that room rate parity is rare by
tracking the room rates of 13 hotels and those
posted by third-party Web sites over a 17-week
period demonstrated in Los Angeles, California.
Sun et al.
Previous studies have investigated the fluc-
tuations of hotel room rates across different
OTAs and illustrated the price dispersion across
these OTAs. Although a number of studies indi-
cated that rate parity exists in the United States,
the issue in Hong Kong or East Asia is unknown.
Previous studies have neither counted the num-
ber of OTAs employed by a certain hotel nor
determined how room rates fluctuate across dif-
ferent hotel room distribution channels since a
better understanding of the number of OTAs and
the price fluctuations can help hotels to improve
revenue management in terms of rate parity and
reputation management based on the perfor-
mance of various OTAs.
Hotel room pricing strategy
As the fluctuations in hotel room rates signifi-
cantly affect the purchasing decisions of custom-
ers, the total revenue, pricing patterns, and online
strategies of hotels have attracted the attention of
scholars and practitioners (e.g. O’Connor and
Frew, 2004; Toms and Taves, 2004). Hotels
often adopt different pricing strategies to maxi-
mize their revenue and predict the general
demand for their rooms because of the perishable
nature of their products. For example, time is an
important factor that contributes to the frequency
of price fluctuations (Badinelli, 2000; Lai and
Ng, 2005). Zhou et al. (2005) reported that the
room rates offered online are typically subject
to many changes. Such fluctuation usually
depends on the time, demand, and perception
of customers toward the fairness of a deal. Dif-
ferent reservation time (e.g. days before arrival)
is regarded as a rate fence for time-based pricing.
To implement different room rates, the planning
horizon is set between the reservation date and
the actual check-in date. Meanwhile, hotels offer
discounted room rates for leisure travelers who
reserve rooms in advance (Badinelli, 2000; Choi
and Mattila, 2003). Under a demand-based price-
setting model, hotels only sell their rooms to the
most profitable customers when the demand for
their rooms exceeds their capacity. In most cases,
as the guest arrival date approaches, hotels tend
to sell their rooms for a lower price to compen-
sate for the perishable nature of their rooms
(Choi and Mattila, 2003). Choi and Mattila
(2005) and Mauri (2013) found that customers
would perceive a deal as fair when they are
aware that the room rates vary according to their
reservation dates and length of stay. Bundle pric-
ing is another strategy that is widely adopted in
169
the hotel industry. Myung et al. (2008) illustrated
the process of evaluating a bundle. According to
their study, customers compare the bundle price
with the total regular price of separate items to
determine whether they would benefit from the
bundle. Findings indicate that value for price is
regarded as the most important consideration of
customers. Kim et al. (2009) pointed out that
savings are the most significant benefits that
consumers can gain from package bundles
(e.g. for air tickets, hotels, and activities) com-
pared with separate purchase. Meanwhile, using
a restaurant operation as an example, Kwon and
Jang (2011) found that consumers with lower
confidence in the quality of bundled food prod-
ucts have a higher tendency to order a bundle
menu. Pricing strategy is also associated with
other factors, such as hotel star rating. For
instance, Zong et al. (2008) examined the online
hotel room booking market in China and found
a significant relationship between price disper-
sion and room attributes (e.g. room type, loca-
tion, and star rating). Given that customers
prefer to book hotel rooms with the lowest rates,
some OTAs promise that they can deliver the
best hotel room rates to attract customers.
Hotels also guarantee their customers with the
best rates to gain competitive advantage over
third-party Web sites such as Expedia and Pri-
celine (KPMG, 2004; Rohlfs and Kimes,
2007). However, the consumers may become
confused as to which of these online distribution
channels actually offer the best rate (Enz, 2003).
Guillet and Law (2010) investigated the consis-
tency of 11 Hong Kong OTAs in terms of price,
star rating, and best rate guarantee and found
that only one-fifth of the hotels in Hong Kong
consistently received a favorable star rating.
Similarly, KPMG (2005) found that 73% of sur-
veyed hotels failed to deliver their best price
guarantee. In general, two models, merchant
and agency, are used to determine the hotel
room rate. In the merchant model, the OTAs
determine the price, and in the agency model,
the hotel manager determines the price (Ivanov,
2014). Gazzoli et al. (2008) compared the room
rates of global hotel distribution chains with
those offered on their respective Web sites and
found that US-owned OTAs outperformed their
international partners in room availability, best
rate guarantee, and rate parity. Unlike previous
studies that merely investigated the pricing stra-
tegies of different OTAs (e.g. bundle pricing
and best rate guarantee), the current study
examines fluctuations in room rates offered by
170
OTAs by considering the star ratings, best rate
guarantees, and bundle pricing strategies (with
or without breakfast) of different distribution
channels.
Methodology
Previous research has used case studies and inter-
views to investigate hotel room prices and pric-
ing strategies (e.g. O’Connor and Frew, 2004;
Rohlfs and Kimes, 2007; Zong et al., 2008). In
contrast, the present study employed a quantita-
tive approach to examine the fluctuation of hotel
room rates across different OTAs. Three search
engines (i.e. Google, Yahoo, and Baidu) were
used to identify OTAs and illustrate the fluctua-
tions in the hotel room rates offered by these
agencies. These search engines were selected
because they accounted for nearly 95% of the
market share of search engines and were widely
used by customers. Figure 1 presents the net mar-
ket share of search engines in the fourth quarter
of 2013. As the figure shows, Google accounted
for nearly 70% of the net market share, while
Baidu and Yahoo accounted for 17.33% and
6.09%, respectively (NetMarketShare, 2013).
In the present study, an upscale hotel in Hong
Kong was selected as an example. According to
InterContinental Hotels Group (2015), the defi-
nition of an upscale hotel is ‘a [four- or five-star]
full-service hotel characterized by superior ser-
vice’. In this study, the target hotel is a 4-star
hotel with superb craftsmanship in architecture,
landscaping, and interior design in each facet
of the hotel as well as provides gourmet dining,
24-h room service, Internet access, and other ser-
vices. Thus, the target hotel selected in this study
is defined as an upscale hotel. It not only operates
its own easy to use, functional, and informative
Web site but also collaborates with OTAs such
as Agoda.com and Booking.com (Tse, 2013).
In total, it has five types of rooms; only the room
type with the lowest room rate was investigated
in the present study.
The data were collected between November
11, 2013 and January 14, 2014. The assumed
check-in date was January 16, 2014. The
researchers searched for information on each of
the three search engines using the keywords
‘Hotel X’, ‘Hotel X reservations’, and ‘book
Hotel X’. A total of 106 Web sites that provided
online hotel room booking services were identi-
fied. Among these Web sites, 14 were partner-
ship Web sites, 7 were room rate comparison
Web sites, 5 were phone reservation Web sites,
Journal of Vacation Marketing 22(2)
4 were nonfunctional Web sites, and 4 were una-
vailable. In other words, a total of 34 Web sites
were not available and were eventually excluded
from the analysis. Thus, the final data set was
restricted to 72 hotel room booking Web sites,
of which 49 were international, 17 were regional,
and 6 were Chinese. Thereafter, the researchers
reported the lowest room rate offered on these
Web sites. To ensure the reliability and validity
of these 72 Web sites, the researchers simulated
the actual Hotel X room booking process up to
the payment stage. The hotel room rates of dif-
ferent OTAs were checked once every 2 days
during this investigation period. The maximum,
minimum, and average hotel room rates set by
these OTAs were then compared.
Results and discussions
Table 1 provides the general information on all
available OTAs. A total of 72 hotel room travel
agencies were identified, of which 66 were Eng-
lish and 6 were Chinese. Among the English
Web sites, 49 were international and 17 were
regional. In terms of star rating, 44 Web sites
rated Hotel X a 5-star hotel, 13 Web sites rated
it a 4.5-star hotel, 8 Web sites rated it a 4-star
hotel, and the remaining 7 Web sites did not pro-
vide any star rating. In terms of breakfast avail-
ability, the room rates of 43 OTAs included
breakfast, those of 25 OTAs excluded breakfast,
and the remaining 4 OTAs did not mention
whether breakfast was included in their rates.
Figure 2 shows the fluctuations in the room
rates of Hotel X between November 15, 2013 and
January 14, 2014 as published in the hotel’s offi-
cial Web site. Two months before the assumed
check-in date, the room rate was Hong Kong dol-
lar (HKD) 2288 (HKD 7.8 ¼ US$1), which was
stable for more than half a month. This rate
dropped to HKD 2145 and remained stable for
more than 1 month. The rate began to increase
sharply 4 days before the assumed check-in date.
The highest room rate charged by Hotel X was
HKD 2392.
Fluctuations in the room rates of different
OTAs
Room rates of all OTAs began to increase 1 week
before the assumed check-in date. The room
rates ranged from HKD 1373 to HKD 4350
(Figure 3). The international OTAs offered nightly
maximum and minimum room rates of HKD
4350 and HKD 2131. By contrast, the regional
Sun et al. 171

Figure 1. Market share of search engines. Source: Adapted from NetMarketShare (2013).

Table 1. General information on different OTAs.

English Web sites Chinese Web sites Star ratinga Breakfastb

International Regional Chinese

Web sites Web sites Web sites 5-Star 4.5-Star 4-Star With Without

Number 49 17 6 44 13 8 43 25
Total 72
OTAs: online travel agencies.
a
Seven Web sites were unclassified based on star rating.
b
Four OTAs did not mention whether breakfast was included in their room rates.

Figure 2. Room rates of an upscale hotel investigated.

OTAs offered nightly maximum and minimum
room rates of HKD 3373 and HKD 2131. The
OTAs, meanwhile, offered nightly maximum
and minimum room rates of HKD 2440 and HKD
1373. In sum, the international Web sites offered
the highest room rates, whereas the Chinese
Web sites offered the lowest rates. Given the
perishable nature of hotel rooms, hotels adopt a
‘last-minute sales mode’ for providing the most
updated information to dispose unsold products
(Lai and Ng, 2005). However, this practice may
not be applicable to this upscale hotel in Hong
Kong because of the increasing demand for hotel
rooms and the preference of hotels to sell their
172
Figure 3. Room rates offered by all available OTAs. OTAs: online travel agencies.
rooms to their most profitable customers. The
room rates of all OTAs began to rise after
January 7, 2014, which was 1 week before the
assumed check-in date. In particular, the Chinese
OTAs offered the lowest room rate for Hotel X
(HKD 1373). This rate remained steady for
almost 3 weeks, yet slightly increased 1 week
before the assumed check-in date.
The room rates of all OTAs were similar from
2 months to 2 weeks before the assumed check-in
date (Figure 4). Both international and regional
OTAs also demonstrated similar patterns in their
published rates. The room rates began to increase
2 weeks before the assumed check-in date. The
rates of both international and regional OTAs
increased slightly, whereas those of Chinese
OTAs increased remarkably and reached the
maximum 1 week before the assumed check-in
date. Therefore, rather than adopt the traditional
last-minute sales mode, these channels increased
their room rates 2 weeks before the assumed
check-in date.
Fluctuations in the room rates of OTAs for
hotels with different star ratings
OTAs often base their room rates on the star rat-
ing assigned to a particular hotel (Zong et al.,
2008). The OTAs that rated Hotel X a 5-star
hotel offered higher rates than those that rated
Hotel X a 4.5- or 4-star hotel (Figure 5). The
OTAs that rated Hotel X a 4-star hotel suddenly
increased their room rates 3 weeks before the
assumed check-in date, and this same rate
Journal of Vacation Marketing 22(2)
reached the maximum 2 days before the assumed
check-in date.
The OTAs that rated Hotel X a 5-star hotel
offered both the highest (HKD 4350) and lowest
(HKD 1373) hotel room rates (Figure 6). There-
fore, the fluctuation in the rates offered by these
OTAs was highly noticeable. The maximum rate
offered by these OTAs was similar to those of
other channels, which rated Hotel X a 4.5-star
hotel from November 15, 2013 to January 10,
2014. The room rates of those OTAs that rated
Hotel X a 5-star hotel began to increase sharply
1 week before the assumed check-in date.
Bundling pricing fluctuation (with or without
breakfast)
The average room rate of those OTAs that did not
provide breakfast was higher than those of chan-
nels that provided breakfast (Figure 7). Mean-
while, the room rates that OTAs provided with
breakfast range from the lowest (HKD 1373) to
the highest (HKD 4350; Figure 8). This can pro-
vide information for either OTAs or hotel man-
agers to be informed of the room rates’ range
(with breakfast) for price benchmarking. The
maximum room rate without breakfast was gen-
erally higher than that with breakfast except for
rates 1 week before the assumed check-in date.
Both the maximum and minimum room rates
with breakfast increased sharply 1 week before
the assumed check-in date, whereas the maxi-
mum and minimum rates without breakfast
remained stable for 2 months. Previous studies
Sun et al.
Figure 4. Average room rates of all available OTAs. OTAs: online travel agencies.
Figure 5. Average hotel room rates based on star ratings.
reported that the bundle pricing strategy can
increase company profits (Kwon and Jang,
2011). However, bundle pricing with breakfast,
the most cost-effective option for customers,
may not increase the profits of hotels because
this option is cheaper than separate purchase.
However, the value gains from one purchase may
lead to positive word of mouth, which can benefit
the hotel. Furthermore, this may help hotels
maintain loyal customers in future.
‘Best rate guarantee’
A total of 24 OTAs (17 international, 5
regional, and 2 Chinese) offered their custom-
ers with a ‘best rate guarantee’. In this study,
‘best rate guarantee’ refers to the provision of
173
the lowest hotel room rate among all OTAs
on a specific day within the investigation
period. However, hotels provided several con-
ditions, such as early check-in and free Wi-Fi,
to convince their customers to avail their ‘best
rate guarantee’ promo. In this study, this guar-
antee was only compared with the lowest room
rate offered by all available OTAs on a specific
day. Table 2 shows that 16–17 international
Web sites, 4–5 regional Web sites, and 1–2
Chinese Web sites failed to fulfill their guaran-
tees within the following 2 months. In sum,
during the 2-month investigation period, in
most days, more than 90% of the OTAs did not
fulfill their ‘best rate guarantee’ promise. Only
in five specific days did 70% of the OTAs ful-
fill their ‘best rate guarantee’ promise.
174 Journal of Vacation Marketing 22(2)

Figure 6. Maximum and minimum hotel room rates based on star ratings.

Figure 7. Average room rates based on bundle pricing (with or without breakfast).

Overall, although the international OTAs
could reach more customers when distributing
products, they did not fulfill their ‘best rate
guarantee’. Likewise, the regional and Chinese
OTAs performed poorly in fulfilling such a
guarantee. The strategy that the majority of
OTAs apply seems to take advantage of the
words ‘Best Rate Guarantee’. From customers’
perspective, they may be easily connected in
mind that ‘Best Rate Guarantee’ equals to
‘Lowest Rate Guarantee’ and ignore several
other conditions such as early check-in that
hotels use to avail ‘Best Rate Guarantee’. This
strategy is tricky since it exploits customers’
own interpretation of ‘Best Rate Guarantee’.
Nevertheless, based on the popularity of online
comments appear on the Web sites of OTAs and
the significant effort of word of mouth, this
tricky strategy can be exposed soon (Wang
et al., 2015). Thus, in order for OTAs to have
a sustainable prosperous future, authenticity is
suggested to take into consideration when they
would like to guarantee ‘Best Rate Guarantee’.
Implications
This study provides three theoretical implica-
tions. First, this study investigates the fluctua-
tions in the hotel room rates offered by
different OTAs. Second, this study contributes
to modern pricing strategy research by analyzing
OTAs, star ratings, bundle pricing, and best rate
Sun et al. 175

Figure 8. Maximum and minimum room rates based on bundle pricing (with/without breakfast).

Table 2. OTAs that failed to fulfill their guarantees.

November November November November November December

Webcat 15, 2013 19, 2013 22, 2013 26, 2013 29, 2013 3, 2013

I 16 (66.7%) 16 (66.7%) 16 (66.7%) 16 (66.7%) 16 (66.7%) 16 (66.7%)

R 5 (20.8%) 5 (20.8%) 5 (20.8%) 5 (20.8%) 5 (20.8%) 5 (20.8%)
C 1 (4.2%) 2 (8.3%) 1 (4.2%) 2 (8.3%) 2 (8.3%) 2 (8.3%)
December 6, December 10, December 13, December 17, December 20, December 24,
2013 2013 2013 2013 2013 2013
I 6 (25.0%) 5 (20.8%) 17 (23.6%) 17 (23.6%) 17 (23.6%) 6 (25.0%)
R 1 (4.2%) 2 (8.3%) 4 (16.7%) 4 (16.7%) 4 (16.7%) 1 (4.2%)
C 1 (4.2%) 1 (1.4%) 2 (8.3%) 2 (8.3%) 2 (8.3%) 1 (4.2%)
December 27, December 31, January 3, 2014 January 7, 2014 January 10, January 14,
2013 2013 2014 2014
I 6 (25.0%) 6 (25.0%) 17 (70.8%) 17 (70.8%) 17 (70.8%) 17 (70.8%)
R 2 (8.3%) 1 (4.2%) 4 (16.7%) 4 (16.7%) 5 (20.8%) 5 (20.8%)
C 1 (4.2%) 1 (4.2%) 2 (2.8%) 2 (2.8%) 1 (4.2%) 1 (4.2%)
I: international OTAs; R: regional OTAs; C: Chinese OTAs; Webcat: Web site category; OTAs: online travel agencies.

guarantees. Third, the findings of this study are
in contrast to the perception of the traditional
last-minute sales mode for hotel room rates
offered by different OTAs.
Meanwhile, the findings of this research pro-
vide new practical insights into strategic hotel
management. The room rates offered by different
OTAs demonstrated huge fluctuations and vary-
ing published rates for an upscale hotel in Hong
Kong. For instance, Chinese OTAs continuously
charged HKD 1373 per night for this hotel within
3 weeks, which might have affected its reputa-
tion. Therefore, this upscale hotel should deter-
mine why several Chinese OTAs can post such
lower rates. Hotel managers should check their
hotel room rates offered by different OTAs in a
timely manner. One possible approach is to
develop a new system to track rate fluctuations
among different OTAs to ensure the appropriate
range of room rates. In other words, room rates
charged by different OTAs should not be too
high or too low. In addition, hotel managers can
improve collaboration with OTAs to maintain
their brand image and positioning because hotel
customers tend to avail OTA services that consis-
tently offer attractive room rates (Tso and Law,
2005). Moreover, the room rate charged by dif-
ferent OTAs is inconsistent with the star rating
given for the hotel. In other words, OTAs that
rated this upscale hotel a 5-star hotel charged the
same or even lower for those that rated it a 4.5- or
4-star hotel. Therefore, to better reflect the hotel
image and to maintain its image positively, hotel
managers must communicate with different
176
OTAs. Such communication ensures relatively
accurate descriptions of the hotel, including hotel
rating. On the other hand, western countries,
especially the United States, have relatively
high-rate parity. Gazzoli et al. (2008) found that
American OTAs outperformed their interna-
tional partners in terms of rate parity. The situa-
tion is not the same in Hong Kong or East Asia.
Thus, using this upscale hotel in Hong Kong as
an example, we suggest that hotels ensure rate
parity among their employed OTAs. Choi and
Kimes (2002) noted that a lack of rate parity
affects both customers’ perceived fairness of a
hotel’s pricing practices and its brand image. For
example, hotels can formulate standards such as
providing star rating references and applying to
different OTAs, gradually realizing rate parity
among different OTAs in future. Furthermore,
this upscale hotel also failed to fulfill its promise
to its customers who were expecting the lowest
room rate that they could find in Hong Kong,
given that certain third-party Web sites or OTAs
offered room rates that were lower than the pub-
lished rates on the official Web site of this
upscale hotel. Therefore, both the hotel itself and
its employed OTAs should refrain from making
promises that they could not fulfill. Furthermore,
both parties should ensure that their posted prices
would be fulfilled as promised. However, apart
from providing the lowest room rate, several
other approaches may be used to attract custom-
ers. For instance, hotels can enhance their attrac-
tiveness by highlighting unique aspects such as
themes and special events.
The findings of this study also provide implica-
tions for customers. Making reservations 2
months before the desired check-in date can help
customers secure an attractive deal. Although this
study found that bundle rates are more cost-
effective, Rohlfs and Kimes (2007) regarded that
separate purchase is more acceptable, reasonable,
and honest than bundle rates. Thus, when booking
hotel rooms, customers are suggested to compare
the bundle rates, such as those that include break-
fast, with separate purchase, and choose the more
cost-effective option. Finally, given that most
available OTAs also failed to fulfill their best rate
guarantees, customers should compare the room
rates offered by different OTAs to determine the
best rate.
Conclusions and limitations
By using an upscale hotel in Hong Kong as an
example, this study investigated the fluctuations
Journal of Vacation Marketing 22(2)
in the room rates offered by different OTAs.
These agencies were also assessed based on the
star ratings that they assign to hotels, their bundle
pricing strategies, and their best rate guarantees.
A total of 72 OTAs were identified in this study.
The last-minute sales mode was found to be rel-
atively uncommon in Hong Kong’s hotel indus-
try, although previous studies found that select
hotels applied lower rates to attract last-minute
customers (Carroll and Siguaw, 2003; Choi and
Mattila, 2003). All observed OTAs began to
increase their rates 1 week before the assumed
check-in date. The star ratings given by these
OTAs did not significantly affect their offered
prices. Meanwhile, bundle pricing (with or with-
out breakfast) was found to be very cost-effective
for customers. Finally, a total of 24 OTAs
offered their customers with a ‘best rate guaran-
tee’ but only a few fulfilled such promises. The
findings of this study could help managers
improve their strategies as well as teach custom-
ers how to obtain the best room rates during dif-
ferent periods.
This study also has several limitations. First,
the time-tracking period of hotel room booking
was only set to 3 months. Second, only the room
type with the lowest rate was investigated. Third,
although other factors (e.g. reputation and service
quality) could affect the perceptions of customers
toward OTAs, this study only investigated room
prices. The underlying reasons behind the fluc-
tuations in the offered room rates, such as those
by OTAs, remain unknown at this stage because
such reasons heavily depend on the relationship
between OTAs and hotels. Therefore, future
research could extend the time-tracking period
to half a year or longer to explain the reasons
behind the fluctuations in room rates. Addi-
tional room types and factors (e.g. time and day
of the week) could also be considered in com-
parative studies to evaluate the overall perfor-
mance of OTAs in terms of rate parity.
Declaration of conflicting interests
The author(s) declared no potential conflicts of
interest with respect to the research, authorship,
and/or publication of this article.
Funding
The author(s) disclosed receipt of the following
financial support for the research, authorship,
and/or publication of this article: This research
was partly supported by the grants funded by
the Hong Kong Polytechnic University [Grant
number: G-SB22].
Sun et al.
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