Differentiation and pricing strategies for hotels in sun and beach destinations

This paper develops a theoretical model for oligopolistic competition in the hotel industry for sun and beach destinations. The aim of the model is to identify in which cases the market structure is biased towards luxury hotels with high-quality investment levels or towards medium and low-quality hotels with cheaper prices. The willingness to pay and the number of customers in each income-level segment and hotels' location are the most relevant factors in understanding the market structure. These determinants of market structure are relevant not only for market participants but also for policymakers with responsibilities in designing tourism policies.