Connecting Search Marketing to Hotel Revenue Management: Conjoint Analysis as a Methodology to Evaluate the Optimal Online Travel Agency Commission Fee

Abstract

A growing amount of travel is booked through third-party Internet booking sites where the booking commission the hotels are charged is subject to negotiation. The fee varies, depending, among other things, on the search position a travel offering is advertised. In this paper we demonstrate how to quantify the value of the placement on the third-party search results page, and thus how to assess the appropriate placement associated fee taking the benefit of this position into account. A sample of 5,968 stated booking choices by 1,492 respondents on a fictitious online hotel booking website was analyzed using choice-based conjoint analysis. The empirical results support past observations and claims that the position of a hotel on the search page of a booking site has significant impact on the likelihood of being booked. We find, however, that this placement-based probability depends on the specific attributes of a hotel. The major contribution of this paper is the methodology we offer demonstrating how to determine the monetary value of various search results positions (listing on an online travel agent (OTA) site) for different hotel properties.