Procedural fairness concern in tourism supply chain: The case of a dominant OTA and a sustainable hotel

Abstract

Environmental tourism has drawn widespread attention and has encouraged hotels to use sustainable materials or equipment in rooms to attract environmentally conscious consumers. Hotels must cooperate with the Online Travel Agent (OTA) to increase sales. This paper considers a hotel’s procedural fairness concern when the environmental sales effort is the OTA’s private information. An OTA decides the level of environmental sales effort and whether to afford the commission decision right to the hotel. The hotel decides the room price and environmental effort. Equilibrium solutions show a positive minimum environmental cost in the centralized model at which both the hotel and OTA can achieve the optimal channel profit. In the decentralized model, we find that when the hotel only considers his profit, the OTA always imposes commission. When the hotel has procedural fairness concern, however, the optimal choice scheme exists whereby the OTA relinquishes his right to make a decision regarding commission.