OPTIMAL CHANNEL STRATEGIES FOR SERVICE PROVIDERS WITH AVAILABILITY OF OPAQUE PP CHANNEL

When the online travel agency ( OTA) introduces the opaque PP channel in her platform, service providers must decide whether to participate in this channel or not. Because the lower price in the opaque channel will attract more customers to buy, also induce some customers to flow into the opaque channel from the direct distribution channel, the trade-off should be considered in the operations management for OTA and service providers. In this paper, we study the optimal strategies for the service providers by integrating the customer segmentation and its preference towards different service providers under the single-channel and dual-channel cases. We find that participating in the opaque PP channel will be more profitable when the price is relatively high in the direct distribution channel; otherwise, service providers can obtain more profits without the opaque PP channel.