Examining the relationships between market indicators and hotel pricing approaches

Abstract

Hotels are employing revenue management (RM) to improve profitability by efficiently managing the effects of capacity, as well as the effects of performance factors to model consumer behavior. This empirical paper discusses the extent and use of different pricing approaches and their success in this multichannel environment. Do hotels consider the effect of different pricing strategies? We compare the impact of the RM factors on the main pricing techniques and by using a hotel chain scale. Based on a sample of revenue managers’ responses, the results of this study confirm that while traditional pricing techniques are an old applicable approach, they are still used extensively. The empirical results show an association among distribution channels and dynamic pricing (DP) strategies, albeit the relationship is not such robust concerning traditional pricing techniques. From a practical standpoint, hotels would advance consumer-centric strategies to bargain competitive rates in the market. The results indicate that more than half of the respondent properties transact business through a type of opaque mechanism, but not for the luxury category. Empirical analysis by chain scale illustrates that in practice, most companies are adopting different pricing techniques considering the period and the market hurdles. Small chain hotels mainly implemented some form of traditional pricing techniques or the opaque mechanism, while the DP approach is more consistent with large chain hotels. This implies that the current environment of available data on the pricing optimization left of any provision of the consumer’s willingness to pay is challenging and distresses the hotels’ promotion of product segmentation.