The Impact of Search Cost Reduction on Seasonality

This study explores how online booking affects seasonality, measured as the variation in hotel bed-places net occupancy rate between peak and off-peak periods. We first develop a formal model illustrating that, as a result of the reduction in search costs brought about by the internet, competitive pressure strengthens. This effect is stronger in the peak period than off-peak, thus leading to an increase in seasonality associated to online booking. We then test our finding in a sample of 18 countries over the 1997–2007 span; the empirical results support the notion that the use of the internet causes an increase in seasonality. A set of policy implications conclude the work.