The purpose of this research is to verify that the Alchian and Allen theorem is an appropriate approach to explore the optimal bundling strategies of Taiwan star hotel service. We found that, the Alchian and Allen Theorem helps to explain different product portfolio strategies in different market segments. In this research, we apply the Alchian and Allen Theorem and two empirical approach, the OLS and 2SLS methods, to decipher the service portfolio strategy of the star hotels in Taiwan. We differentiate Taiwan into two market segments, Taipei City, as the high-end product segment, and the region outside Taipei City, as the low-end product segment. We find spa, gym, and swimming pool are three services that reduces the relatives prices of the hotel service and increase the hotel rate in the high-end product segment significantly. Interestingly, in the high-end hotel service segment, the higher the nominal hotel rate, the higher the turnover rate. In contrast, in the low-end hotel service segment, spa, gym, swimming pool, hot spring, pick-up service, restaurant, and scenic spot can reduce the relative price of the hotel service. However, the lower the nominal hotel rate, the higher the turnover rate. The empirical finding are consistent with the theoretical implication of the Alchian and Allen Theorem.