The Pricing Behaviour of Firms in the On-line Accommodation Market: Evidence from a Metropolitan City

The widespread diffusion of on-line travel agencies has opened the possibility, for hoteliers, to update continously quality and prices offered along the advance booking. We study firms’ pricing behaviour in a business-oriented environment considering time series of daily best available rates for 107 hotels in Milan, over a period of 9 months, from 0 to 28 days of advance booking. Throught a panel-VAR approach we assess if the typical planning of the price trajectory, including dummies for holidays and fairs as covariates. Results suggest that strategies put into effect by firms reflect some of the basic principles of the online revenue management. Price trajectories are planned considering both firms expectations on the prices they hope to charge last-minute, and their need to guarantee price stability along the advance booking. Fairs and holidays show a different impact on price dynamics. While the response caused by an ”holiday shock” tends to be flat, room rates during fairs raise in the immediate future, then accommodate to the equilibrium in about three days.