Effectiveness of Discount Incentives in Carbon Reduction: Impact of Customer-Perceived Value Sacrificed for Green Hotels

Abstract

To improve carbon reduction efficiency, green hotels adopt cash discount incentives to encourage green customer behavior. However, the effectiveness of these incentives in promoting green customer behavior has been controversial. Prior studies argue that customer participation in green hotel practices typically involves specific sacrifices (e.g., inconvenience, lesser quality, or less luxury), going against the hedonism of tourism. Therefore, in the context of hotel carbon reduction, this study adopts mathematical modeling to investigate the impacts of customer-perceived experience sacrifice on the effectiveness of cash discount incentives. By performing backward reasoning, the study obtained the optimal pricing decisions of a green hotel, and based on which the study also observed the impact of effective discount incentives on hotel performance. It was found that cash discount incentives are effective if discounts are higher than the experience sacrifice value perceived by customers, and vice versa. Furthermore, (a proportion of) total cost savings can moderate the relationship between customer-perceived sacrifice and the effectiveness of discount incentives. The study also found that effective discount incentives always help a green hotel increase profit and occupancy, whereas whether these incentives help to reduce total carbon emissions depends on various factors that interact with each other. Findings provide a reference for green hotels to make optimal decisions on discount incentives.