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.     

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.     

The effects of beach characteristics and location with respect to hotel prices

This paper measures the effects of beach characteristics and hotel location with respect to the beach on sun-and-beach hotel prices by using a well-established hedonic perspective. The paper’s main results are that, after controlling for the relevant variables, location in front of a beach increases the price of a room in costal hotels of Catalonia by a figure between 13 and 17%, and that a Blue Flag increases the price by around 11.5%. The effects on hotels’ prices of other beach characteristics (such as beach length, width, sand type or beach services) are also estimated. With these estimates, the paper ranks beaches according to their characteristics and provides a setting to assess different policies regarding beaches from the point of view of hotels, such as regeneration, maintenance or achieving a Blue Flag award.     

Do luxury room amenities affect guests’ willingness to pay?

Intangible services have fewer cues to enable consumer evaluation compared to physical goods. Cues are therefore particularly important for highly intangible services, since they provide tangible evidence of quality. This study explores whether luxury brand room amenities can be used as cues for customers to evaluate a hotel. This study attempts to identify what items and amenities guests find most/least useful and to examine whether luxury brand room amenities can enhance customers’ evaluation of a hotel and increase willingness to pay based on positivity bias. Wi-Fi was regarded as the most useful hotel amenity, while telephone was regarded as the least useful amenity. This study found customers willingness to pay is affected by providing luxury brand room amenities. When luxury amenities were placed in the room, customers’ estimation of the room rate and their willingness to pay for it both increased. Moreover, about two out of five expressed a willingness to pay extra for an upgrade to access luxury brand room amenities. The findings of this study provide important implications for hotel practitioners.     

A comparison of destinations’ impacts on hotel rates

The impact of destinations’ attributes on hotel rates in different locations has been insufficiently compared the existing literature. This study sought to apply the hedonic pricing method to measure and compare how room prices are affected by factors that are both external and inherent to hotel companies. After collecting nearly all the data regarding hotel features that consumers can use to make choices about accommodations on the TripAdvisor website, different models were developed for each city and season. The results suggest that hotels in Barcelona are more dependent on external conditions than hotels in Madrid are. In addition, hotels in both cities are more affected by external conditions during the high season. This paper discusses these and other results, as well as their implications.     

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.     

The signaling and reputational effects of customer ratings on hotel revenues: Evidence from TripAdvisor

This study aims to examine whether customer ratings and online reviews affect hotel revenues, and if so, to quantify the effects. To achieve this objective, we articulate the mechanisms grounded on reputation theories whereby customer ratings exercise the influence on hotel performance through reputational and signaling effects. Using customer rating data from TripAdvisor and hotel revenue data from Texas, we estimate fixed effects regressions and adopt a regression discontinuity design to separate the signaling effect of customer ratings from reputational effect. We found that the signaling effect of a 1-star increase is an increase of 2.2–3.0% in hotel monthly revenues whereas the reputational effect of a 1-star increase is an increase of around 1.5–2.3% in hotel monthly revenues. Our findings are robust across alternative model specifications and provide insightful implications for hotels to manage their customer ratings.     

Big data hedonic pricing: Econometric insights into room rates’ determinants by hotel category

This research uses a big dataset of online prices published on Booking.com by three-, four- and five-star hotels located in Madrid (Spain). Data is broadened by other sources, resulting in a rich set of context-, hotel- and offer-based variables. This research aims to determine the impact of these variables on the online room prices set by one representative sample, featuring the total pricing behaviour as well as per hotel categories. The variables considered, their extent and the insight per category represent a novelty and complement the literature on demand forecasting and hedonic pricing, enabling the improvement of optimisation techniques. The models, based on regression analysis with random effects, reveal a significant impact of the variables on room prices and a clearly distinct behaviour for five-star hotels. This research contributes to the scientific community and practitioners by showing the pricing dynamics behaviour of an important urban destination by star rating.     

Government and social trust vs. hotel response efficacy: A protection motivation perspective on hotel stay intention during the COVID-19 pandemic

Based on protection motivation theory (PMT), this study conceptualizes a research framework to explain and examine customer intentions regarding hotel stays during the COVID-19 pandemic. Data were collected from 700 U.S. consumers via a crowdsourcing website in July 2020. Structural equation modeling was used to analyze the collected data for testing proposed hypotheses. The analytical results showed that the level of threat perceived by customers significantly reduced their intention to stay at a hotel. On the contrary, individual customer response efficacy significantly enhanced their intention to stay at a hotel. Additionally, both government and social trust, as well as hotel response efficacy, were found to significantly increase hotel stay intention by mediating the effects of threat perception and individual response efficacy. To the best of our knowledge, this study is one of the first attempts to apply PMT to explain customer hotel stay intentions during the COVID-19 pandemic.     

A room with a view—A valuation of the Mediterranean Sea view

Aesthetic view is one of the ecosystem services of the Mediterranean Sea which can be estimated using price differences in the hotel market. Hotels situated on the Mediterranean Sea charge higher prices for a room with a sea view than for a room without it. The value of this view in 10 major Mediterranean regions was estimated in this paper using a hedonic price method. Data on 2819 hotel rooms in high season and 2406 rooms in the low season were collected from Booking.com and fixed effects regression was used to estimate the model coefficients. Hotel room prices were found to be higher by about 10% for a room with a view than for one with no view specification. No significant difference was found between regions or season. These findings lend support to the fact that the view of the Mediterranean is equally valued in all regions.     

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.     

Intention to pay conventional-hotel prices at a green hotel – a modification of the theory of planned behavior

Numerous studies have employed the theory of planned behavior (TPB) to understand customers’ behaviors in various fields, but none has tested and extended the theory to explain customers’ decision formation to pay comparable regular-hotel prices for a green hotel. This is the first study designed to test and modify the TPB by including environmental concerns, perceived customer effectiveness and environmentally conscious behaviors, which are critical in explaining eco-friendly consumer behaviors. Salient belief items were identified using an elicitation method (focus group and open-ended survey). A survey obtained 389 respondents. Confirmatory factor analysis indicated that measurement items for all study variables had an adequate level of reliability and validity. The findings from the structural equation modeling showed that the proposed model had a satisfactory fit to the data and better predicted hotel customers’ intention than the original TPB. The results also indicated that all antecedent variables of intention significantly contributed to forming the intention to pay conventional-hotel prices for a green hotel. Respondents were happy to have minor inconveniences, e.g. reusing towels and using recycled products, and were keen to learn about the positive environmental attributes of green hotels. Benefit awareness was shown to be important in customer decision-making.     

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.     

Hotel revenue management and the Internet: The effect of price presentation strategies on customers’ willingness to book

A decision that is intrinsic to the application of hotel best available rate (BAR) pricing is how to present the BARs for individual nights within a multiple-night stay to prospective hotel guests. We discuss two alternative price presentation strategies, a blended and a nonblended rate approach, and examine their effect on customers’ willingness to pay in the context of Internet-based reservation requests. Study findings indicate that a nonblended rate presentation approach generates higher willingness to book ratings than a blended rate presentation approach. Furthermore, when it comes to nonblended rates, familiarity with BAR pricing moderates the effect of rate sequence on customers’ willingness to book.     

Determinants of a restaurant average meal price: An application of the hedonic pricing model

This study applies the hedonic pricing model to examine important attributes influencing average customer meal prices in restaurants in Seoul, Korea. Data from 185 restaurants were collected via Internet, phone interviews, site inspections, and ZAGAT Survey, and analyzed using OLS regression. The log-linear model was found to be most suitable for the data, and the proposed hedonic model accounted for as much as 73.7% of the variation in meal prices. The results indicate that food quality and décor were important determinants of restaurants’ average meal prices while service was not. Furthermore, the study found that a restaurant's location within the building (1st floor), the types of cuisine served (Japanese and Italian), parking facilities, private dining settings, franchising, and the number of blogger reviews (e-WOM) have significant effects on restaurants’ average meal prices. The model will provide useful information for restaurateurs in deciding effective menu pricing strategies.     

Determinants of willingness to pay to stay at a green lodging facility

The adoption of green initiatives is attracting increasing attention among tourism providers and researchers. One important dimension of travellers’ environmental concern is their willingness to pay higher rates for green travel products. This study determines the association between pro-environmental attitudes and beliefs, and willingness to pay a higher room rate at a green lodging facility. A survey of 388 travellers in Michigan, USA, revealed a positive relationship between environmental concern (measured using the New Environmental Paradigm scale) and willingness to pay for a green hotel room. Income was the only one of a series of socioeconomic, demographic and travel pattern variables to reach statistical significance. Additional evidence regarding consumer attitudes towards and concomitant behaviours with respect to travel and the environment is vital to the broader consideration of the sustainability of the tourism and hospitality sectors. Understanding of willingness to pay for green practices has important marketing and management implications.     

The relationship between price paid and hotel review ratings: Expectancy-disconfirmation or placebo effect?

Whilst there is extant research focusing on the link between hotel reviews and pricing there is scant attention paid to the impact of pricing on hotel review ratings. This paper presents a large scale study based on a novel dataset of more than 44,000 guest review ratings linked to the prices paid for rooms of an European hotel group. Through applying a panel regression analysis we reveal that expectancy-disconfirmation is generally stronger than the placebo effect and higher prices have a negative effect on review ratings, not only when assessing perceived value for money but also when evaluating perceived quality. We identify the trip and guest characteristics which impact on the price-review relationship. Findings provide hotel managers with key quantitative information for simultaneously calibrating quality and revenue targets. Substantial implications include an integrated approach for segmentation as a route to better manage pricing, revenue optimization and reputation.     

The appeal of sustainability in luxury hospitality: An investigation on the role of perceived integrity

This research investigates the effect of a luxury hotel's marketing communication strategy on consumers' willingness to book a room. In particular, the article compares two types of communication message: one that mainly highlights the hotel's attention to environmental sustainability and the other that focuses on customer service. The paper tests the hypothesis that a sustainability-focused communication leads to a higher willingness to book a room (compared to the customer service-focused strategy) because it increases consumers' perceptions about the hotel's integrity. Moreover, the study proposes that consumers' dispositional environmental concern magnifies this effect. One online and one realistic field experiment provide empirical evidence for the research hypotheses. This article contributes to the literature on sustainable luxury tourism and hospitality by proposing a novel theoretical framework, grounded in perceived hotel integrity, to explain why consumers might react positively when learning that a luxury hotel is committed to sustainability.     

Consumers’ willingness to pay for green initiatives of the hotel industry

This paper examines hotel guests’ willingness to pay a premium for environmentally friendly and sustainable practices of the U.S. hotel industry. Specifically, the goal of this research is to investigate the relationship between the level of U.S. hotel guests’ environmental concern, measured by the New Ecological Paradigm Scale (NEP) and their willingness to pay (WTP) a premium for hotels’ “green practices.” This study found that U.S. hotel guests with higher degrees of environmental concerns declare a higher willingness to pay premiums for hotels’ green initiatives. This avowed willingness supports the social identity theory and the means-end theory. In addition, based on the affect-based complementarity proposition, this study also examined the effect of hotel type on WTP in the U.S. hotel industry, and found that luxury and mid-priced hotel guests are more willing to pay premiums for hotels’ green practices than economy hotel guests.     

Determining guests’ willingness to pay for hotel room attributes with a discrete choice model

Hotel managers need to understand the marginal utility customers associate with a specific attribute of a hotel in order to effectively set up rate fences and to price their rooms accordingly. This study adopted a stated choice experiment and discrete choice modeling method to obtain hotel guests’ willingness to pay (WTP) for a specific set of room attributes within a single hotel property. The attributes include room views, hotel floor, club access, free mini-bar items, smartphone service, and cancellation policy. The study discovered that leisure travelers versus business travelers, and first-time visitors versus repeat visitors, perceive different WTP values for various attributes. These findings provide valuable information for hotel managers to segment their market and conduct revenue management practices in order to maximize revenue and profit. The results also demonstrate the value of discrete choice modeling in obtaining WTP for hotel room attributes.