DP5038 Intermediaries as Bundlers, Traders and Quality Assessors: The Case of UK Tour Operators

Author(s): Sofronis Clerides, Paris Nearchou, Panos Pashardes
Publication Date: May 2005
Keyword(s): asymmetric information, intermediaries, middlemen, tour operators, tourism industry
JEL(s): L15, L83
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=5038

We study the intermediary role of tour operators in the market for package tourism. Intermediaries often arise in order to facilitate trade in markets characterized by asymmetric information. In the travel industry policy-makers have tried to address information asymmetries by providing hotel ratings. We argue that those ratings are not accurate indicators of quality. Ratings provided by tour operators are more informative and allow for international comparisons. Intermediation by tour operators provides a better matching of quality with price and therefore leads to a more efficient market outcome. There is, nonetheless, scope for government intervention to improve information provision.