Abstract: Considering the rising commission rate due to hotels’ overreliance on Online Travel Agent (OTA) and the large amount of operating cost due to establishment of hotel’s direct channel, a Stackelberg game model is established to investigate a hotel’s channel selection strategy among the single-direct-channel strategy, the dual-channel strategy and the single-OTA-channel strategy. In addittion, the hotel’s pricing strategy and the OTA’s optimal commission rate are also explored. Results show that when the operating cost and the commission rate are both small, the dual-channel strategy dominates. When the operating cost is small and the commission rate is large, the single-direct-channel strategy dominates. When the operating cost is large, the single-OTA-channel strategy dominates regaedless of the commission rate. For the OTA, a higher commission rate does not necessarily generate more profit. Moreover, the OTA’s decision on the optimal commission rate is related to the operating cost of the hotel, the highest commission rate stipulated in the hotel industry, and the customers’ preference to the direct channel. In addition, if the operating cost is small, then the dual-channel strategy is the equilibrium strategy for the whole supply chain; otherwise, single-OTA-channel strategy is the equilibrium strategy.

Key words: hotel direct channel; online travel agent distribution; operating cost; pricing strategy; channel selection strategy