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Sustainable Tourism Products Distribution:
Optimal Pricing and Branding Strategies
Malgorzata OGONOWSKA
Malgorzata.Ogonowska@gredeg.cnrs.fr
sustainable tourism: every tourism activity that preserves for a long time the local natural, cultural and social resources, contributing to the well-being
of individuals living in those tourist areas
(Associazione Italiana Turismo Responsabile)
2 segments of demand co-exist:
• demand for ecologically responsible tourism products
• demand for traditional products

Considered literature contributions:
• sustainable tourism
• tourism intermediation & price discrimination strategies

ISSUE:
May these segments be served by the same intermediary and what pricing strategy should it implement in order
to distribute different types of products?
Given the demand characteristics should it create separate brands for this purpose?
i indicates the agent’s position on the

The MODEL
• n heterogeneous agents uniformly distributed on a segment (Hotelling distribution)
o m of them are willing to purchase sustainable tourism product according to their utility
function:

uiS

PS

i

g

o (n-m) are interested in traditional tourism products according to their utility function :

uiT

i

• according to the degree of demand heterogeneity the intermediary can develop 3 distribution
strategies:
n( P
)
T
o commercialisation of traditional tourism products only
agents on the market
2
Intermediary's profits are:
1

(

)

2

o commercialisation of both types of products
on the markets
(n m)
Intermediary's profits are: 2
P
T
( NE E )

(

2

)

2
(n m)( P
T

P2
T

P
T

o commercialisation of sustainable tourism products only
market
n( PS PS2
PS gPS c 2 )
Intermediary’s profits are:
3

)

m

and
PS
n( Ps

m( Ps

PS 2
g)

g)

PS

agents

gPs c

Pt - price of the traditional product
- quality of sustainable tourism product
- quality of traditional tourism product
g - tourist’s sensibility to environmental concerns
c – sustainable tourism product’s additional cost
corresponding to investment in maintaining the
ecological quality standards

P
T

n

segment
PS - price of the sustainable tourism product

2

Profits increase when

and n increase

– the sustainable tourism product‘s
quality is lower then the quality of
traditional one
– the sustainable tourism product is
a “high quality” luxurious product;
If PS is too high => case 1
Profits decrease when c increase and
increase with n, m and g

agents on the

ANTICIPATED RESULTS
- Optimal distribution, pricing and branding strategy for the intermediary depending on demand
heterogeneity;
• If demand heterogeneity is low, the intermediary will develop only one brand on one market;
• If demand heterogeneity is high, the intermediary will serve both segments of demand and:
o will develop only one brand, if the ecologically conscious consumers do not bother that
the firm distributes also traditional “polluting” products;
o will develop two separate brands in order to serve both segments of demand on two
different markets, if the ecologically aware consumers are very sensible to sustainability
issues and will not purchase any product from an intermediary who distributes also
“polluting” products.
 An additional cost will occur for the intermediary corresponding to creation of
new “ecologically responsible” brand, maintaining its quality and confidentiality
of its parent company.
-Implications in terms of social welfare of each distribution strategy; Guidelines for the authorities,
administration on the forms of enhancement policies to implement.

Profits increase when n, g and increase;
and decrease when c increase

References:
Budeanu, A. (2005). Impacts and responsibilities for sustainable
tourism: a tour operator's perspective. Journal of Cleaner
Production 13: 89Claude, D. & Zaccour, G. (2009). Investment in Tourism Market and
Reputation. Journal of Public Economic Theory 11(5): 797-817
Cracolici, M. F., Cuffaro, M. & Nijkamp, P. Tourism Sustainability and
Economic Efficiency - A Statistical Analysis of Italian Provinces.
Working Paper
Hotelling, H. (1929). Stability in competition. Economic Journal 39: 4057
Shen, H. & Zheng, L. (2010) Environmental management and
sustainable development in the hotel industry: a case study from
China. International Journal of Environment and Sustainable
Development 9(1/2/3): 194-206
Stokey, N.L. (1979). Intertemporal Price Discrimination. Quarterly
Journal of Economics, August 1979: 355-371
Weaver, D. B. (2005). Comprehensive and Minimalist Dimensions of
Ecotourism. Annals of Tourism Research 32(2): 439-455
World Commission on Environment and Development (1987). Our
Common Future. Oxford, Oxford University Press.
Zhao, W. & Zheng Y-S. (2000). Optimal Dynamic Pricing for Perishable
Assets with Nonhomogeneous Demand. Management Science
46(3): 375-388

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