Hedonic Price Models and Sun-and-Beach Package Tours: The Norwegian Case

Abstract

With the research on hedonic price theory serving as background, this study examined how the overall price of a sun-and-beach package tour was determined by choice of tour operator, choice of destination, hotel star rating, and a number of different attributes characterizing the package tour. In addition, the study drew attention to a particular problem in previous price hedonic tourism research: the possible endogeneity of the hotel star rating variable. To address this issue, a hierarchical regression procedure was adopted. This procedure permitted the tracing of the attributes’ possible indirect effects on overall package tour prices through the hotel star rating variable. The results help consumers identify those package tour attributes that they have to pay extra for as opposed to those that they do not, and at the same time provide tour operators with a useful instrument for strategic pricing.

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

“…Additionally, they show that the price is significantly affected by location, hotel size, distance to the beach and availability of parking. Thrane, (2005) points out in his study that the following attributes of the package tours had a significant impact on price: the type of tour operator and location, breakfast, restaurant, TV, type of room and distance from the beach. The major finding in Haroutunian, Mitsis and Pashardes (2005) study is that price variation is often more associated with the country of destination and the tour operator rather than the attributes of the holiday package.…”

Hotel Characteristics and Seasonality in Prices: An Analysis Using Spanish Tour Operators' Brochures

“…Indeed, prices play (at least) two crucial roles in the tourism sector. On the one hand, price is a key variable for the marketing mix of tourism firms: a lot of research has been devoted to the analysis of prices as signals of quality (Wolinsky, 1983;Milgrom and Roberts, 1986;HjorthAndersen, 1991;Caves and Greene, 1996;Jones and Hudson, 1996) and to decomposing the prices of tourism goods and services into the elements that give satisfaction to consumers (Hartman, 1989;Aguiló et al, 2001;Papatheodorou, 2002;Cox and Vieth, 2003;Espinet et al, 2003;Monty and Skidmore, 2003;Haroutunian et al, 2005;Thrane, 2005;Rigall-I-Torrent and Fluvià, 2007;Falk, 2008;Rigall-I-Torrent and Fluvià, 2011). On the other hand, prices allow tourism firms to bring together demand and supply: this role of prices is especially important in the tourism sector, since it contributes to the generation of revenue for non-storable products in the presence of low variable costs and high (fixed) capacity costs (Kimes, 2000;Talluri and van Ryzin, 2004;Phillips, 2005;Shy, 2008).…”

Expectation Formation in Case of Newer Hotels

“…In spite of this discrepancy, tourism research suggests that higher price signals higher quality and superior expectations. Equally, hedonic pricing research in tourism confirms that there is a positive relationship between price and quality, as signalled by the "star rating" and other attributes of a hotel (Monty and Skidmore, 2003;Thrane, 2005). Also, Crotts and Erdmann (2000) observe that the service expectations of airlines passangers is dictated by the price they pay.…”