Two-

Two-Sided Market Economics &

MoreThailand.com

Pongsak Hoontrakul
Pongsak@Hoontrakul.com
January 2008

Two-
Two-Sided Markets
(Platform Market Competition)
• One-Sidedness same market population choose all products (razors,
razor blades)

• Two-Sidedness network effects cross market populations and each side

does not internalize the welfare impact on other side (document reader,
document writer)

• Two-sided (or more generally multi-sided1) markets are roughly defined as

markets in which one or several platforms enable interactions between end-
users, and try to get the two (or multiple) sides “on board” by appropriately
charging each side.

• Indirect Network Effects or Inter-Group Network Externalities

• Examples:
– Night Clubs with Men and Women
– eBay with Sellers and Buyers
– Credit Card Payment Systems with Merchants and Consumers
– Game Consoles with Game Developers and Consumers, etc.
– MoreThailand.com, MoreCityHotel.com & A2Zprotravel.com

Two-
Two-Sided Markets

Side A Platform Side B

Buyer Auction Site Seller

Reader Blog Site Writer

Player Game Hardware Game Writer

Traveler Portal Hotelier

Wants File File Sharing Has File

Employer Job Site Employee

Consumer Fulfillment Service Merchant

Women Dating Site Men

Modeled after: Parker, Geoffrey and Marshall W. Van Alstyne (2005), "Two-
Sided Network Effects: A Theory of Information Product Design,"
Management Science, 51 (10), p. 1495.

1
 Network Externalities

Benefit you
get from the
network

Number of people in the network

Group Size and Externalities Metcalf’s Law and

(n-1) = n2 – n
Matching: Total Value = n (n-

Two-
Two-Sided Network Externalities
Example

Benefit you
get
Size of
your group

Size of the
other side

Number of people

Two-Sided Networks - Total Value Is

Nearly Quadratic : 2n1+n2 – n1 – n2 -1

CUSTOMERS

B2C B2B2C
MoreThailand.com Affiliate Offline Online
& associate Agents Retailers
B2C Channel
websites
websites
Fig. 2: B2C and B2b2c
B2B
Business Concept and Distributors
Charts for
MoreThailand.com
MoreThailand.com &
A2ZproTravel.com Booking XML Web
from multiple suppliers Engine Interface Services
(SOAP
to multiple sale Interface)

channels

A2Z CORE SYSTEM

•Content Management
•Inventory Mgmt
•Reservation System
•Payment System
•Internal control

SUPPLY

Extranet XML Web service

Source: Hoontrakul
& Sahadev (2004)
THAI HOTELS WHOLE SALERS

2
 CUSTOMERS

MorecityHotel.com
& Associate websites

Fig. 3: B2C and B2B2C Booking

Business Concept & Engine
Charts for
MoreCityHotels.com
MoreCityHotels.com
& A2ZproTravel.com A2Z CORE SYSTEM
•Content Management
from multiple suppliers •Inventory Mgmt
•Reservation System
to multiple sale •Payment System
•Internal control
channels.

SUPPLY

Extranet XML Web service

Source: Hoontrakul &

Sahadev (2004) Asean HOTELS WHOLE SALERS DESTINATION PARTNERS
(B2B suppliers )

Figure 4: Channel Distributions for

Hotels & Rooms Inventory

Hotels, Resorts, Rooms..

Channel 4 Channel 3 Channel 2 Channel .l

Tour Wholesalers
operators
On-line
intermediaries

Travel agents

Customers/Traveler – Leisure, Business..

Two-
Two-sided B2B Platform Strategy (1) --
“both side on boards”
boards”

Demand E-Distribution Supply – Indirect Procure-ment E-

System (B2C, B2B2c)
• Two sided market concept
• Buyers single out for Asean
hotels
• Allows the distributing
partners to access content
and “real time” inventory
• Pre-negotiated prices and
contractual terms available
• Exclusionary contracts
• Predation Price Testing
Market set up
• Initial complementary tele-input
services for target private hotels
• Suppliers multi-homing via GDS,
IDS and others.(see ref.)
• Leveraging Thailand/Asean for
reciprocal hotel inventory basis
• Allows participant to buy and sell
from partners, benefiting from a
common set of suppliers.
• Minimizes inventory, provides a
clear and up-to-date view of market
demand

3
 Intermediary B2B Platform Strategy (2)
1. Achieving B2B platform interconnectivity to reaping network
externalities and lock-in effect
2. Differentiation: Proprietary / Self-Developed with “5 C”
2.1 B2B Commerce: Technological Niches (XML Web services
with OTA Std for connectivity, Web Extranet..
2.2 Collaboration (Sharing): Local content, knowledge (via RSS),
Reciprocal Inventory, Distribution..
2.3 Online Transaction Commerce: Web Service based Efficient
Digital Process for std. hotel room product…
2.4 Collaboration (Hotel Market Making) : Merchant Model
(Prepaid), Net Rate room Allotment, Tele-Input, ..
2.5 Communication: Low Cost Skype, Call Center, Travel
Knowledge Process Outsources (KPO) by empowering home
based travel agents (India) to handle travel advisory services.
2.6 Content: Growing and Exchanging Local Hotel Inventory,
DMS, SEO, SEM.. with our partners and others.

The Questions
• Do Inter-Group Network Externalities in Two-Sided
Markets Require New Insight and Render Previous
Analyses of Tying Less Applicable?
– Are There Additional Motives for Tying in Two-
Sided Markets?
– Implications for Antitrust Analysis
– The Role of Multi-homing
– Vertical vs Horizontal Integration
Conceptually, the theory of two-sided markets is
related to the theories of network externalities
and of (market or regulated) multi-product
pricing.

Example from computing industry: subsidizing

complementary goods (Divide and conquer)

• Firm A chooses to make its product incompatible with others

• Firm A subsidizes firms that produce complementary goods
• Alternatively, firm A subsidizes its division that sells complementary
goods
• As a result
– The value of firm A’s product increase
– The entry hurdle of firm A’s rivals increases
– Possible creation of market power, but action also has pro-competitive
justification

Tying of complementary products in the presence of

network externalities can be used to preserve and
create monopoly positions

4
 Conclusion
• MoreThailand.com, MoreCityHotel.com and
A2Zprotravel.com are integral parts of B2b2c hotel
reservation system for Thailand and Asean + 3
destination and travelers.
• Technically, the system is designed to electronically
connected via XML web services n OTA standard to any
platform (e.g. GDS, IDS..)
• Commercially, the company is marketed its products and
services in two-sided marketed concept.
• To leverage on less ICT savvy independent hoteliers, we
are welcome any business development discussion both
buy side and sell side for mutual benefits.
Tel.: 662 954 1689 Bangkok
Email: Reservation@a2zprotravel.com &
Pongsak@Hoontrakul.com

Reference :
Hoontrakul, Pongsak [2005*] ‘Value Revelation in Differentiated Goods in Travel
Industry, discussion paper, Sasin of Chulalongkorn Univ., Bangkok

Hoontrakul, Pongsak and Sunil Sahadev [2004*] “ICT Adoption Propensity in the Hotel
Industry: An Empirical Study”, Sasin of Chulalongkorn Univ., Bangkok
---------------------- [2006*] “Online Travel Intermediary: the Case of
www.MoreThailand.com”, International Journal of E-Business Research.
--------------------- [2008* forthcoming] “A2Z Professional Travel Ltd: online travel agency in
Thailand”, eTourism Case Studies: Management and Marketing Issues in eTourism”,
Chapter 11, Elsevier Publishing: Chennai, India

Rochet, Jean-Charles and Jean Tirole (2005) “Two-sided Markets: A Progress Report”,
IDEI and GREMAQ, Toulouse, France

Ryan, Peter and Pongsak Hoontrakul [2004*] ‘An economic analysis of the tourism
industry – implications for online travel business’, Chulalongkorn Journal of
Economics, Bangkok

* Downloadable freely at www.Pongsak.Hoontrakul.com

Pooling of talents for knowledge based

company

Vision:
Registered Capital: €1.6 Million “To improve productivity in
Operational: November 2002 the travel industry and
travel related businesses
Dr.Pongsak Hoontrakul through electronic
President and CEO
connectivity”

Nontana Thanabutchai Mission:

Managing Director “To develop A2Z Professional
Travel into a leading online
travel firm with an
Somyos Akahadsri
Chief Knowledge Officer
international outlook”

5
 MoreThailand.com represents
over 1,400 hotels nationwide

55% of hotels are in Independently

Bangkok and Owned and
Coastal resorts Operated Hotels

Bangkok Average number of rooms:

229 hotels 120 rooms

Pattaya / Koh Chang Average room rate:

130 hotels € 40

Koh Samui Star rated:

98 hotels 
to

Phuket / Krabi
315 hotels

Profiles of hotels based on no of rooms Profile of the hotels in terms of age

less than 50
less than 3 years 25%
above 250
18%
27%

3 to 6 13%
150 to 250
9% 50 to 100
100 to 150 34%
12% 6 to 9 19%

9 to 12 19%
Profile of Hotels in terms of room rent/hotel grade

12 to 15 9%
less than
above 5000 1000bht
1000 to 2000
14% 3%
4000 to 5000
19% 15 to 18 7%
12%

above 18 8%
3000 to 4000 2000 to 3000
21% 31% 0% 5% 10% 15% 20% 25%

Hotels’
Hotels’ Profile in our Sample
Source: Hoontrakul & Sahadev (2004)

Hotels’
Hotels’ Adoption of e-
e-Sale Distribution
120.00

100.00
100.00 94.68 100.00
86.19
80.00 73.40 78.7
68.10
60.00 59.6
50.00
43.63
40.00 43.6
29.79
22.34 25.54 27.71
18.09
20.00 18.09 22.3 19.19
4.26 15.96 14.9 13.81
4.26 1.06 8.50
0.00 5.31
1.1 1.1
1997 1998 1999 2000 2001 2002 2003 2004

adoption of e-mail based booking in hotels Adoption of instant web-site bookings among hotels
Adoption of e-intermediaries among hotels Adoption of GDS among hotels

Source: Hoontrakul & Sahadev (2004)

6
 Hotels’
Hotels’ Adoption of ICT facilities
80
71.27
70

60
49.00 49.9
50

40 38.34
35.0
30 26.3
21.32 24.5
20 18.13 21.2
16.7
10.6 13.8 13.9
10 12.5
4.25 6.37 8.3 9.3
1.06 1.06 1.06 1.1 3.2 6.5
2.0 3.3 4.4
0 1.0 1.1 2.2
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Adoption of internet centers in hotels Adoption of internet in rooms by hotels

adoption of ERPs in hotels Adoption of LAN in hotels
Source: Hoontrakul & Sahadev (2004)

All in family

www.A2Zprotravel.com family members

of online travel booking and content sites

END
I love emails.
Any comments are welcome
At Email : pongsak@hoontrakul.com