The effect of idiosyncratic price movements on short- and long-run performance of hotels

It is a common belief that businesses performance should not be evaluated by immediate fiscal returns, but rather based on an extended time horizon. While the literature implies that pricing decisions may exert lagged as well as contemporaneous effects on performance, a limited number of empirical studies have focused on such effects. The current study investigates effects of idiosyncratic price movements on short-run and long-run hotel performance, where idiosyncratic price movements refer to the changes in individual hotels’ room rates unexplained by price competition, product differentiation, and market conditions. By analyzing spatial panel data from the Houston lodging market between 2005 and 2014, we find that idiosyncratic price movements enhance hotel performance in the short-run and that adverse effects followed in the long-run. Findings of the study and implications for practitioners are discussed along with suggestions for future research.     

Vertical inequity in the tax assessment of lodging properties

Property taxes constitute a significant expense for owners of lodging properties. Both the real estate literature and the hospitality literature suggest that property tax inequities exist within various taxing jurisdictions and several models for measuring these inequities have been proposed. Measurement of vertical inequity can produce evidence of inequitable assessments that property owners may be able to use to challenge their properties’ assessed values. This study applies several statistical models to measure vertical inequity for hotel properties using sample data. The sample consists of 872 hotels sold between 1999 and 2004 in Florida. The results indicate that vertical inequities do exist in this sample, with lower valued properties being assessed at a higher proportion of market value than higher value properties. The results make the case that owners of properties in lower value ranges should carefully monitor the assessment process to minimize their property tax expense.     

The dynamic interactions between hotel room rates and international inbound tourists: Evidence from Singapore

Recognizing the possible existence of mutual interactions between hotel room rates and the number of international inbound tourists, this research note investigates the short-run and the long-run dynamic interactions between these two variables for Singapore. It tests for the existence of any cointegrating relationship between them using the bounds testing approach to cointegration. The causal effects between them are tested with Granger causality test. We find no evidence that Singapore's hotel room rates and international inbound tourists are cointegrated. The results also suggest that there is a bi-directional short-run causal relationship between these variables.     

Weekend vs. midweek stays: Modelling hotel room rates in a small market

Using a hedonic model, we estimate the willingness to pay for different hotel characteristics for a small market environment. We uniquely collected a data set from a meta-booking engine including their detailed customer review ratings compiled from numerous individual hotel search engines. We argue that meta-search engines are well suited to gather prices to be used in hedonic models. In our estimation, we distinguish hedonic models for single room stays during the week potentially relevant for business travellers and double room stays during the weekend intended for leisure. Important determinants of hotel room prices are popularity ratings (derived from customer reviews), the hotel star rating, weeks of advance booking, and certain hotel characteristics such as express checkout, room service, or Internet access. A number of important characteristics such as wellness offers or wireless Internet in the rooms are insignificant pointing to the conclusion that these may be regarded as standard attributes and do not fetch additional economic value in terms of higher consumer willingness to pay.     

Identification of the reactions of hotel managers to new competition

This paper arises out of research carried out recently on the impact of a new hotel on the other hotel businesses which are operating in the same market. To ascertain the possible reactions of hotel managers to new competition and the relative importance of alternative price and non-price strategies a postal survey of 250 three-and four-star graded hotels across the U.K. was undertaken. It was found that a change in published tariff rates is regarded as being relatively unimportant whilst sales promotion is given the highest priority. Disaggregation of the sample by hotel size and occupancy rates does not reveal any significant changes in the relative importance of possible strategies. While the survey indicates that both non-price and price competitive strategies are seen by managers as essentially complementary, nevertheless, price competition in the form of secret discounting of published room rates to mass market intermediaries (tour operators and travel agents) and corporations is particularly important. While price discounting is the ‘private’ face of hotel competition much more research is needed on both the ‘public’ and ‘private’ nature of competition in the hotel industry and how these inter-link.     

Do competitive strategy effects vary across hotel industry cycles?

We use metropolitan-level panel data of international tourist hotels (ITHs) in Taiwan to examine whether competitive pricing, quality and advertising effects differ across two business cycle phases of the Taiwanese hotel industry. Following Chen et al.’s (2014. Tourism Econ. 20 (3), 655) conclusion, the Taiwanese hotel industry over the period 2000 to 2010 is divided into two regimes: a high-growth regime (2007–2010) and a low-growth regime (2000–2002 and 2004–2006). We adopt the approach proposed by Enz et al. (2009. Cornell Hospitality Q. 50 (3), 325) on competitive strategies by computing the difference between the value of each hotel and its competitive set on merits of average daily rate, service quality and advertising expenditure. The empirical results indicate that: (1) Competitive pricing strategy has a positive influence on ITHs’ room revenue per available room (RevPar) in the high-growth regime (HGR). (2) Competitive pricing and service quality strategies are positively associated with RevPar in the low-growth regime (LGR). Moreover, service quality improvements relative to the competitive set lead to an increase in occupancy for ITHs in the LGR.     

The determinants of hotel room rates: Another visit with Singapore's data

In this research note, volatility clustering modeling framework is used to examine the determinants of hotel room rates in Singapore. Using monthly data from January 1985 to June 2009, GARCH-M(1, 1) is identified as the appropriate model used to capture volatility clustering. The results suggest that total inbound tourists and economic performance have positive effects on hotel room rates. The main findings are (a) the occurrences of terrorist activities in the neighboring countries have negative impacts and (b) the volatility of hotel room rates has a positive effect, on hotel room rates.     

The Channel That Offers the Lowest Online Room Rates: A Case Study of Hotels in Hong Kong

Online distribution channels increasingly serve as platforms hotels can use to offer competitive room rates to attract price-sensitive customers and maximize yield. Capturing the lowest and highest daily room rates over a 360-day period from five of the most popular online travel agencies, and two batches of data showing the lowest room rates over 28 days from a last-minute bookings website, this study compares the lowest prices offered. The results indicate that no single online channel outperforms the others in any of the hotel star-rating categories, and that the last-minute reservation service provides the lowest hotel room rate across different star ratings.     

Does better service induce higher profitability? Evidence from Taiwanese Hospitality Industry

We adopt Wang et al. (2006) service quality measure to examine how the qualities of various hotel services affect hotel's profitability using panel data in the Taiwanese international tourist hotel sector. The empirical results indicate that there is a non-linear relationship between food and beverage service quality and hotel profitability, while the effect of room service quality on hotel profitability is not significant.     

Globalization or localization of consumer preferences: The case of hotel room booking

The purpose of this study is to investigate potential differences in attitudes between Chinese and Western tourists towards various hotel room reservation policies. The study is meant to help the revenue managers of international hotel companies make informed choices on whether to pursue a globalized or a localized approach in the design of hotel room rates and rate restrictions. Three ranges of room prices and four types of rate restrictions are evaluated. The rate restriction policies considered are: a) rule type, b) advance requirement, c) refundability, and d) changes allowed. The results of customer surveys show that the Chinese and Western respondents do not express significantly different preferences concerning room rates, advance requirement, rule type, or refundability. They differ significantly only concerning the changes allowed policy. This result indicates that revenue managers of international hotel companies can take a globalized approach in designing rate restrictions. The identification of these customer preferences provides hotel revenue managers with empirical data on the attitudes of culturally diverse consumers, and this information can enable the design of hotel pricing policies that attract consumers in the global market.     

Destination characteristics that drive hotel performance: A state-of-the-art global analysis

The increased market saturation and competition in both domestic and international tourism destinations have renewed interest among hotel operators in identifying the key drivers of hotel performance. This paper presents a comprehensive analysis of the determinants of hotel performance and their relative importance across multiple tourist destinations. We employ a two-step estimation method to identify key determinants of hotel performance, using a rich sample of international hotels. Our empirical analyses show that the main drivers of hotel performance are the quality of the educational system, government support, disposable income, and number of international arrivals within a tourism destination. Results indicate that the most important barriers to hotel performance are the competition among accommodation providers, tax rate and fuel price. We argue for the need for hotel providers to develop strategies that take cognisance of the key drivers and barriers to enhancing hotel performance in an ever-changing global tourism sector.     

Determinants of revenue per available room: Influential roles of average daily rate,demand, seasonality and yearly trend

Determining price per room to be charged to customers is an important decision to be taken by hotel management. Hotels frequently change their room rates based on the demand of room, occupancy rate, seasonal pattern, and strategies undertaken by other hotels on pricing. We formulated four models to analyse how various influencing variables, such as hotel price, demand, yearly trend and monthly seasonality influence hotel revenue per available room (RevPar). To analyse a case, we used monthly accommodation statistics for Sweden taken for Swedish Agency for Economic and Regional Growth and Statistics from January 2008 to July 2017. We carried out data analysis using both multiple regression and Multivariate Adaptive Regression Splines (MARS) model and found that application of MARS can help establishing a nonlinear relationship of RevPar with other determining variables in a superior way. We also proposed the possibility of developing a better forecasting model using MARS.     

Multiattribute Decision Making Analysis for Customer Preference of Tourist Hotels

This study focuses on perception of hotel attributes that affect the selection of tourist hotels. These hotel service attributes are further categorized into seven hierarchies: business image, hotel location, service attitude, room service, beverage and food service, hotel facilities, and hotel environment. These hierarchies include twenty-seven evaluation items. Analytic Hierarchy Process method and multiple attribute utility function have been utilized to evaluate customer preference of hotels. Then, we conducted a thorough perception consciousness investigation of service quality to assess customer evaluation and preference of service attributes, which led to an understanding of the factors that affect hotel selection     

How demand uncertainty and market concentration affect long-term price instability

The object of this paper was to investigate the long-term influences of demand uncertainty and market concentration on price instability in the hotel industry. We applied 1996–2008 price and room revenue data collected by Taiwan's Tourism Bureau to test the following two hypotheses: (1) demand uncertainty is negatively associated with price instability in the hotel industry; (2) the market concentration is negatively associated with hotel price instability. We constructed a two-stage price instability model and the estimate results produced the following two findings: First, the uncertainty in room demand significantly contributed to the price instability. Second, the effects of market structure on price instability were heterogeneous across different levels of price instability distribution. Notably, when the distribution of price instability moved from lower to higher quantiles, the relationship between market concentration and price instability altered from positive to negative.     

Financing behaviour of Portuguese SMEs in hotel industry

In this study, using panel data models, we analyze whether the capital structure decisions of SMEs in the hotel sector follow the predictions of Pecking Order and Trade-Off theories. The results suggest that these theories are not mutually exclusive in explaining the capital structure decisions of SME hotels. The results obtained indicate that these firms follow a hierarchical order in their selection of financing sources, corroborating the assumptions of theory. The results also show that SME hotels adjust the level of actual debt towards optimal debt ratio as well as size, asset tangibility, growth opportunities, non-debt tax shields, and risk influence debt. These results suggest that the financing behaviour of SME hotels is in agreement with the predictions of theory. Therefore, Pecking Order and Trade-Off theories contribute to explaining the financing behaviour of SMEs in the hotel sector.     

Weekly occupancy fluctuations in Yorkshire and Humberside hotels 1982–1984: patterns and prescriptions

In this article it is argued that the formulation of planning policy for tourism in general, and the hotel industry in particular, requires detailed information on the temporal characteristics of visitor flows in relation to the capacity of the industry to accommodate them. In this light, a detailed analysis is performed on weekly fluctuations in visitor flows to hotels in Yorkshire and Humberside, as revealed by daily occupancy returns in 99 hotels over the study period.Clear temporal and spatial patterns are identified and linked with differences in market orientation, between areas, between hotels and between different seasons.Stepwise regression analyses relating occupancy performance to a range of hotel characteristics confirms the importance of market orientation and identifies other correlates of weekly occupancy pattern.Finally, the marketing and planning implications of the results are discussed, and different marketing options for improved occupancy performance are outlined.     

Profiling satisfied and dissatisfied hotel visitors using publicly available data from a booking platform

We develop a set of models for predicting hotel visitor satisfaction and the probability of complaints about various service aspects. Our empirical analysis is based on 3630 reviews from one of the Dubai hotels. We identify profiles of visitors who are likely to be dissatisfied with the hotel service and need special attention, as well as of visitors, who are likely to be satisfied with the service and, therefore, do not require extra attention. The predictions are based on observable characteristics of visitors, thus making it possible for hotel managers to apply the models in their everyday work. Using content analysis we also reveal specific problems that different groups of visitors encountered and infer which of the problems has the highest impact on the overall satisfaction with the hotel.     

Effect of monumental heritage sites on hotel room pricing

This study measures the effect of historic monuments on hotel room pricing in Seville, Spain. A hedonic model including classic explanatory variables and the city’s heritage site was specified to explain hotel room rates. Variables related with heritage sites were determined to explain room rates and an iso-values map was obtained for the rates of a ‘standard hotel’ to show the impact of historic buildings on hotel rates. The maps display the area of influence of the heritage site. These results may be of interest to entrepreneurs, consumers, or the administration, among others, due to it permits them to determine which location maximizes rates.     

The effects of Airbnb on hotel performance: Evidence from cities beyond the United States

Although Airbnb's impact on hotels has been quantified for major hotel markets in the United States, these effects have not been quantified in international hotel markets. Accordingly, the purpose of this study is to examine the effects of Airbnb listings on key hotel performance metrics in an international context. In particular, we examine the effects of Airbnb listings on hotel revenue per available room (RevPAR), average daily rate (ADR), and occupancy rate (OCC) in major international hotel markets, namely London, Paris, Sydney and Tokyo. The results show that Airbnb listings in these major cities have been increasing more than 100% year over year and that the effect of Airbnb on hotel RevPAR and OCC is negative and statistically significant. In particular, a 1% increase in Airbnb listings decreases hotel RevPAR by between 0.016% and 0.031% in these hotel markets. The implications of these findings for destinations and hoteliers are discussed.     

Game theoretic pricing models in hotel revenue management: An equilibrium choice-based conjoint analysis approach

This paper explores a game-theoretically founded approach to conjoint analysis that determines equilibrium room rates under differentiated price competition in an oligopolistic hotel market. Competition between hotels is specified in terms of market share functions that can be estimated using multinomial logit models of consumer choice. The approach is based on choice-based conjoint analysis that permits the estimation of attributes weights (“part-worths”) for an additive utility formulation of the utility function. From this, room rates that equilibrate the market, conditioned on the differences in services and facilities offered by competing hotels, can be determined. The approach is illustrated by an example.