Algarve hotel price determinants: A hedonic pricing model

This study sought to assess customers' willingness to pay for a wide variety of characteristics and attributes of hotels in Portugal's Algarve region. After collecting nearly all the information available on TripAdvisor for hotels in this region, a hedonic pricing model was developed using a database of 9992 cases. The results suggest that – after standardisation – the most important variable shaping Algarve hotel room rates is the previous day's prices. When associated with a family-friendly hotel, star category and services have a greater value than beaches or golf courses do. Customers also appreciate some types of hotels, such as boutique, quaint or trendy hotels, but view others negatively, such as family-friendly or business hotels. Only the specific location of Falesia Beach adds value, although the Algarve is a desirable destination overall. Both destination and hotel managers can use the proposed method to analyse data for their region on customers' propensity to pay.     

Modelling growth and revenue for Swedish hotel establishments

This paper provides first estimates of the determinants of output growth of Swedish hotels based on establishment data. Growth of overnight stays is modelled as a function of initial size, age, type of accommodation, location and hotel prices measured as average revenues per guest nights. The empirical model accounts for potential endogeneity of hotel prices through the two-stage least absolute deviation model (2SLAD) and the instrumental variable quantile regression method. 2SLAD estimates show a positive and significant relationship between hotel prices and subsequent growth. The relationship is nonlinear with a decreasing impact as the price level increases. Growth of establishments is significantly higher for smaller and younger hotels. An important result is that city hotels, in comparison to tourist and other hotels – which are mainly located outside urban areas (in the mountains and at the sea) – exhibit significantly higher growth rates with a gap between 2.2 and 3.4 percentage points. Furthermore, the positive impact of hotel prices on growth is larger for high-growth establishments. Accommodation prices significantly decrease with the number of local competitors with a non-linear form and increase with size. City hotels and accommodation in the capital city have the highest revenues per guest night.     

After over 25 years of accrediting beaches,has Blue Flag contributed to sustainable management?

This paper examines the qualitative, quantitative, and geographical evolution (1987–2012) of the Blue Flag campaign and accreditation process in Spain, a leading coastal tourism destination heading the list of awards. The standard Blue Flag criteria for crowded, developed beaches are now adapting to new demands for natural beaches, but they still fail to capture essential sustainable tourism features, such as limiting user numbers, or preserving and restoring sand ecosystems. Given these shortcomings, some destinations are moving to alternative awards with a higher environmental commitment, such as EMS, ISO14001, and Eco-Management and Audit Schemes (EMAS). A cluster analysis of Blue Flag data for 983 beaches in Spain over 26 years revealed different behaviour patterns: established tourist areas that have always opted for the Blue Flag programme; tourist areas that adopted the Blue Flag early on but replaced it with ISO14001 and EMAS; recently developed destinations applying for the award to boost their tourism promotion; and tourist areas with no well-defined policy that have opted intermittently for Blue Flag. These profiles illustrate the different policies of Spain's Autonomous Regions, and they are useful for tourism managers to verify whether their destination's behaviour pattern contributes to sustainable tourism and matches strategic policies they have designed for them.     

Hotel roomrates under the influence of a large event: The Oktoberfest in Munich 2012

Surprisingly few studies deal with the implications of large events for hotel prices. We address this issue by modeling hotel prices in Munich under the influence of the Oktoberfest. By utilizing internet data from a metasearch provider for check-in dates prior to and during the Oktoberfest 2012, it is analyzed how the event affected the daily price level as well as price differentials between hotels. In general, average hotel prices are very volatile over time. Apparently, Munich hotels tend to set prices according to expected demand and vary those depending on the day of the week during the event. Ceteris paribus, roomrates are highest on Oktoberfest Friday and Saturday nights, followed by Oktoberfest weekdays and Oktoberfest Sunday nights, but there is a general and strong price-raising impact. Prices differ across hotels mainly due to the star category attributed to a hotel and the proximity to the event. Both price premia are time-dependent.     

Branding destinations versus branding hotels in a gaming destination—Examining the nature and significance of co-branding effects in the case study of Macao

This paper considers destinations and hotels operating within a gaming destination as co-branded experiential choice products. Specifically, it examines the overall and individual effects of visitors’ perceived brand equity of a gaming destination and their perceived brand equity of various hotels, including ‘flagship’ or branded hotels, in terms of influencing their reaction to a hypothetical brand loyalty scenario in which their intended and preferred hotel was unable to provide accommodation thus forcing them to either: (1) choose an alternate hotel in the destination and continue with the visit, (2) cancel the trip and choose another destination to visit, or (3) insist on staying at the preferred hotel but postpone the trip at another period. The study's expectation is that visitors’ response to such a hypothetical scenario is moderated by the relative influence of their perceived brand equity for the destination and for hotels. The emergent gaming destination of Macao is used as a case study for this purpose. The study's findings indicate that visitors’ overall destination brand equity perceptions—rather than hotel brand equity perceptions—is robustly significant when it comes to influencing visitors’ response to the brand loyalty scenario. Results of the study indicate several relevant implications for destination management organizations (DMOs) seeking to enhance their destination-branding efforts and for hotel operators, especially internationally branded hotel chains.     

Pricing determinants in the hotel industry: Quantile regression analysis

Due to the skewed distribution of hotel prices, quantile regression provides a more flexible and complete characterization of the determinants of the hotel prices at the higher and lower tail of the distribution. This study applies quantile regression approach to investigate the major determinants of hotel room pricing strategies. The ordinary least square regression is also used for comparative purposes. The data are drawn from 58 international tourist hotels in Taiwan and average room rate (ARR) is used as the proxy of hotel room price. The results of OLS and quantile regression share common characteristics but also have differences in some aspects. The OLS results reveal that number of rooms, hotel age, market conditions and number of housekeeping staff per room are the main attributes of hotel room rate. The quantile regression results further demonstrate that room number and the number of housekeeping staff per guest room do not significantly influence hotel price at the low price quantile. Hotel age and market conditions are only significant determinants in high-price category. Additionally, for the high-priced quantile hotels, the proportion of foreign individual travellers positively and significantly influences room price. The empirical results can help hoteliers in shaping investment and pricing strategies.     

Modeling hotel room price with geographically weighted regression

Insufficient attention has been given to hotel-room-price attributions and its mechanism in the lodging research field till now. This article examines how site and situation factors differently affect lodging industry and room prices. Comparative analysis of four hedonic price models has been conducted to investigate how these attributions influence room price of Beijing's hotels above star three. Spatial autocorrelation in hotel prices and in hedonic room price equation residuals were analyzed in this research too. Some conclusions can be found and summarized: according to the estimated results, for specific locales, the results expressed in a global model might be inaccurate. The fitting coefficient of geographically weighted regression demonstrates the importance of going beyond the global modeling framework when incorporating geographically weighted regression into hedonic price model. At last, an innovative method for determining the influence of a hotel's attributes at market rates on its’ values, or implicit prices was put forward by the authors.     

Taxing international tourism in West Africa

West Africa mass tourism focuses on Scandinavian, European, and United States tourists taking beach holidays during the winter months. Beach resort hotels seeking to attract international tourists are in a monopolistically competitive market structure. Localities, rather unsuccessfully, attempt to differentiate the sun/fun package which they offer from those of their competitors. Prices are locked into a small price range. In West Africa a general export tax rate of 10 to 15 percent of total tourist expenditures is incorporated in the industry's cost structure. The impact of adding two types of resort hotel taxes is considered: land taxes (lump sum) and bednight taxes (unit). An increase in hotel land taxes will not change the price or bednights offered by hotels. They will continue to operate at their initial output and price position. Whereas, added bednight taxes are an addition to unit cost and, therefore, will effect the output level and result in a new, slightly higher price and fewer hotel guests.     

Market accessibility and hotel prices in the Caribbean: The moderating effect of quality-signaling factors

The purpose of the paper is to investigate the influence of market accessibility on hotel prices and how this influence is moderated by various quality-signaling factors, such as online user ratings, “thumbs up” (recommendation) percentage, hotel class, and chain affiliation. Using a randomized sample of hotels in the Caribbean islands, we employ a three-level mixed-effect linear regression model to investigate the plausible relationship between market accessibility and hotel prices. After controlling for unobserved island-level and hotel-level characteristics, the model indicates that in most periods, low market accessibility (high flight costs) leads to lower hotel prices, and this influence is mitigated by well-established positive reputations as represented by the quality-signaling factors. Our findings imply that hotels should work to increase their reputations to help buffer the impacts of inaccessibility. In an effort to increase market accessibility, one course of action is to reduce airport landing taxes and fees.     

Are innovations relevant for consumers in the hospitality industry? A hedonic approach for Cuban hotels

This paper evaluates the impact of innovative activity in the hotel industry on the willingness to pay by consumers. To this end, we estimate a hedonic price function where innovation is identified indirectly through certain attributes that previous literature has linked with hotel innovativeness. The test is performed on a representative sample of Cuban hotels, considering a large number of attributes of hotels and rooms. To solve the usual problems of collinearity, a million alternative models are estimated by choosing the variables included in a random manner and obtaining the final coefficients by means of an internal meta-analysis. The results are completed with a variance decomposition analysis. The results highlight the importance of the attributes linked to innovation and internationalization on the determination of room prices in Cuban hotels: membership of international hotel chains, high quality offers, diversified rooms, and adaptability to specific needs of each client.     

A stochastic cost efficiency analysis of international tourist hotels in Taiwan

The one-stage stochastic frontier approach (SFA) is used in this study to simultaneously estimate cost efficiency scores and factors of cost inefficiency for 66 international tourist hotels in Taiwan during 1997–2006. An SFA model with three outputs and three inputs is defined. The three outputs are room revenue, food and beverage revenue, and other operation revenue while the three inputs are price of labor, price of other operation, and price of food and beverage. This model also takes into account five environmental variables, including dummy variable of the hotels located in non-metropolitan area, dummy variable of chain hotels, the number of tourist guides, the minimum distance from each hotel to Taoyuan international airport and the minimum distance from each hotel to Kaohsiung international airport. Empirical results show that international tourist hotels in Taiwan are on average operating at 91.15% cost efficiency. All nominal variables are transformed into real variables in 1997 prices by GDP deflators. Chain systems, tourist guides, and international transportation can significantly improve the cost efficiency of international tourist hotels in Taiwan.     

An application of repeat sales regression to distressed lodging prices

This study investigates the price discounts in financially distressed hotels. Using a sample of 2564 pairs of hotel transactions from 2003 to early 2016, the study employs a repeat sales regression approach to estimate the magnitude of the sales discount in financially distressed hotels. The findings of this study reveal a distressed sale discount of 28%, foreclosure discount of 27%, and a real estate owned (REO) sale discount of 30%, all relative to non-distressed transaction prices. More importantly, these distressed sale discounts are greater than the discounts observed in the existing residential and commercial real estate literature. The distressed prices are consistent with the observation that hotels are risky investments and investors will demand greater discounts to compensate them for acquiring financially distressed hotels.     

The exploration of hotel reference prices under dynamic pricing scenarios and different forms of competition

The reference price, used by consumers to evaluate market prices, has tremendous relevance in dynamic pricing. Reconciling current heterogeneous theories and studies on reference prices, this paper analyzes the impact of hotel price sequences on consumers’ reference prices through a lab and a field experiment. Experiment 1 tests the importance of retrospective price evaluations, while Experiment 2 evaluates the impact of three forms of competition: (i) simultaneous behavior, where firms adjust prices simultaneously; (ii) leader–follower behavior, where one firm acts as the leader; and (iii) independent behavior, where each player takes its rival's strategy as given and seeks to maximize its own profits. The results show that consumers decrease their reference price when competing hotels adjust their prices simultaneously. Relevant managerial implications are drawn for the hospitality industry, which is affected by the presence of online travel agencies that announce the daily rates offered by each competitor.     

The implementation of a world-famous tourism ecolabel triggers political support for beach management

Blue Flag (BF) is one of the most renowned tourism ecolabels in the world. Although this ecolabel is based primarily on environmental education and management, it is argued that its core strength is the capacity to trigger political will. This paper presents the BF implementation process in a country through application of a BF Readiness Matrix and interviews with key stakeholders in eight coastal municipalities in Colombia. The matrix used 87 items to assess the level of compliance of 12 beaches with each of the 33 BF criteria. The challenges faced in the implementation of BF are presented and discussed. Because they are not unique to Colombia, the results and conclusions are applicable to many low and middle-income countries that historically have not committed to the management of tourist beaches. The conclusions underline the capacity of BF to raise political will to support beach management and generate specific management actions.     

To Ban or not to ban rate parity,that is the question… or not?

Considering the heated debate in the hotel industry about the rate parity clause and the appropriateness of its ban to give rise to rate disparity, this article analyzes the hotel performance that has resulted from the rate parity prohibition established in some European countries, by looking into the market value of the hotels involved. The empirical analysis conducted on a sample of hotel companies trading on the stock exchange in Germany and France shows that the approval of the rate parity ban generates positive abnormal returns. However, an increase in risk is detected. It seems that, while the prospects of greater autonomy to set prices in the hotel industry and stronger competition in the online distribution industry are looked at positively, the hotels will have to deal with a customer’s potential higher perception of price unfairness, less control over its own brand and a greater likelihood of price wars.     

Do Blue Flag promotions influence tourists’ willingness to pay a price premium for coastal destinations?

The Blue Flag is a popular eco-label in tourism. This study aims at examining the effectiveness of Blue Flag promotion on tourists' willingness to pay a price premium to coastal destinations via two online experiments. Study 1 shows (n = 152) that the Blue Flag stimulates higher willingness to pay a price premium for coastal destinations directly as well as indirectly through self-congruity and destination brand identification. Study 2 (n = 160) used a new sample to enhance external validity and generalizability of the Study 1 findings. Study 2 shows that destination brand quality and destination brand identification serially mediate the effect of Blue Flag promotions on the tourist's willingness to pay a price premium. The findings suggest that destination managers should deploy the Blue Flag Logo in destination promotions to enhance self-congruence, destination brand identification, perceived destination quality, and the tourist's willingness to pay a price premium.     

The Response of Hotels to Increasing Food Costs due to Food Shortages

During 2008–2009 the hotel industry in Hong Kong had to respond to a steady price increase in general food items and in basic food commodities. As most hotels in Hong Kong predict their food cost budgets a year in advance, these sudden and unexpected increases in food commodities came at a time when there was a downturn in the global economy in the wake of the financial crisis and a worldwide influenza A (H1N1) epidemic. There have been articles published in hospitality and tourism journals that have discussed the issue of food cost and control in hotels resulting from poor storage and purchasing, portion control, and preparation and production methods. However, none of the previous studies has examined the sudden and rapid increases in the cost of foods and the impact that this has had on the hotel industry. The measures adopted by Hong Kong hotels of different tiers to control or reduce expected food costs are analyzed in this study. This study employed a cross-sectional exploratory design, encompassing in-depth personal interviews with food and beverage managers and executive chefs in high-, mid- and low-tier hotels in Hong Kong. Empirical findings revealed that mid- and low-tier hotels found the increases in commodity prices challenging and thus employed innovative methods to combat rising food costs. High-tier hotels were more concerned about satisfying customers' needs by maintaining high-quality food products and services. The findings indicate that hotels and restaurants at all points of the market adopted functional strategies to increase their efficiency and profitability. Based on the operating experience of existing hotels, this study demonstrates that enhancing the quality of suppliers' commodities, good staff communication and training practices, and innovative ideas can improve a hotel's financial situation.     

When quality signals talk: Evidence from the Turin hotel industry

This study analyzes the relationship between quality signals and price setting through the application of hedonic price functions. The model proposals also include variables relating to land use policies and tourism development strategies. A simultaneous equation model endogenously estimates quality signals. This method is appropriate for analyzing emerging urban destinations, as characterized by the presence of an expanding hotel industry. The results are based on a dataset of 145 hotels in Turin, Italy. The empirical findings reveal that reputation-based quality signals help explain tariff levels. Price proposals also include a premium for quality assured hotels, defining some limits of the current hotel classification system. The empirical evidence has significant marketing implications for the hospitality industry’s competitiveness, since the results clarify the impact of quality signals on price level.     

Quantitative Approaches for Location Decision Strategies of a Hotel Chain Network

Accommodation revenue and demand are affected by hotel location, leading a lot of research to perform theoretical, empirical and operational approaches to analyze and determine the ideal location of hotels. However, operational approaches such as mathematical modeling based optimization have not received sufficient interest in hotel location research while it has been widely used for various kinds of facility locations. Therefore, two mathematical models for opening of new hotels and the closing of existing hotels to a manage hotel chain network are developed using the demand estimation and existing hotel information. In this research, hotel demand is estimated based on the accessibilities to sightseeing, transportation, business points, and market share. Gaining and/or losing of demand and the agglomeration effect are introduced as the objective of two models. Proposed mathematical models are tested to design a hotel chain network with the real data in Seoul, Korea.     

You’re the Only One,or Simply the Best. Hotels differentiation,competition, agglomeration,and pricing

Drawing on competition, signalling and agglomeration perspectives, we investigate how vertical and horizontal differentiation influence price, and how hotel competition and agglomeration may moderate any such effects. We argue that vertical differentiation should include online reputation to complement category, and that hotel clustering can provide benefits for incumbents. Hypotheses are tested using quantile regression on a sample of 1870 hotels. In order to account for any service dimensions, an index of differentiation is estimated. We found that local competition and agglomeration moderates the relationship between differentiation and pricing. Furthermore, online reputation effects are more intense for low priced hotels. Indeed, when competition is intense, the positive effect of horizontal differentiation is lower for low priced hotels. Similarly, hotel clustering reinforces the impact of category on price, but it reduces the benefits of offering more services.