Although competition in the lodging market is often highlighted by researchers and practitioners, there has been little discussion of price competition among hotels and the related strategic implications. Meanwhile, literature suggests that when products are differentiated by quality, the outcome of simultaneous price discounts may not be symmetric. Hotels are clearly differentiated in terms of quality and their room rates are likely to be dependent on neighbors’ room rates. Suspecting that hotels may engage in asymmetric price competition, the current study utilizes a spatial econometric model to test for such asymmetry in competition among hotels. Result of the analysis shows significant spatial cross-dependence among the hotels’ room rates regardless of seasonality. More importantly, the findings indicate that lower-quality hotels are forced to discount deeper in the low season, conforming to the preceding literature on price competition.
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