Journal of Economic Perspectives: Vol. 20 No. 4 (Fall 2006)
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Markets: The U.S. Lodging Industry
Kalnins, Arturs. 2006. "Markets: The U.S. Lodging Industry." Journal of Economic Perspectives, 20(4): 203-218.
The U.S. lodging industry appears highly competitive. Ownership concentration appears to be low. Fixed costs are high relative to variable costs and unused rooms cannot be stored for future sale, so price-cutting should be attractive. However, this paper argues that, unexpectedly, oligopolistic market structures in many local lodging markets, combined with behavioral norms of cooperation, sustain profits in what might otherwise be an industry of cutthroat competition. I describe the patterns of competition and cooperation in the U.S. lodging industry, summarizing theoretical arguments, empirical research, descriptive statistics from industry and government sources, and anecdotal evidence from the trade press and from interviews conducted with managers of over 200 properties nationwide.
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