Quality externalities among hotel establishments: what is the impact of tour operators?

Abstract

This paper is about quality decisions in a vertical structure where competitive producers sell to powerful retailers. Specifically, we focus the analysis on the role played by a tour operator (TO) on quality investments when distributing the capacity of a given tourist destination. We emphasize the presence of quality externalities among hotel establishments, and see that sometimes a TO distribution can provide a solution to the tragedy of the commons in qualityprovision. Thus, we analyze what implications do vertical relations have for quality in this industry, and then derive some policy recommendations. This paper is about quality decisions in a vertical structure where competitive producers sell to powerful retailers. Specifically, we focus the analysis on the role played by a tour operator (TO) on quality investments when distributing the capacity of a given tourist destination. We emphasize the presence of quality externalities among hotel establishments, and see that sometimes a TO distribution can provide a solution to the tragedy of the commons in qualityprovision. Thus, we analyze what implications do vertical relations have for quality in this industry, and then derive some policy recommendations