Multi-Stage Synthetic Hotel Pricing

Abstract

Kyungsuk Hyun KMACThis study presents a multi-stage synthetic model designed to aid hotel room pricing. The complicated factors used in this model include fixed and variable costs, profit goal, identification of market competition, factors needed to measure a differentiation price premium, price standard limits, and factors needed to develop discriminatory pricing for different segments of customers. The model framework can provide realistic perspectives of hotel room rates. A five-star international hotel was used to illustrate the application of this model by deriving actual price data. A critical step in this model was to develop the hotel's market premium price (MPP) based on consumer surveys. Factor analysis, ANOVA, and the Scheffé post-hoc tests were utilized in the analysis. The model provides new insights into hotel room pricing by offering a step-by-step process leading to room-pricing decisions for hotel revenue managers and marketers.

Pricing determinants in the hotel industry: Quantile regression analysis

“…They have to spend more time on price decision making (Kim et al, 2004). Pricing decisions can be difficult and are often speculative, owing to the uncertainties associated with dynamic environments (Kortge et al, 1994).…”

“…Koide and Ishii (2005) present a model to account for hotel room allocations with early discount, cancellations and overbooking. Kim et al (2004) develop a multistage synthetic model of hotel room pricing, and the model considers fixed and variable costs, profit goals, identification of market competition, factors needed to measure a differentiation price premium and price standard limits.…”

Estimating the price range and the effect of price bundling strategies

“…Setting the optimal price strategy is an important tool but is also a complex and arduous task for managers (Kim et al, 2004). There are few managers that have training in how to make strategic pricing decisions (Nagle et al, 2014), means that many firms make pricing decisions in reaction to market changes (Rao and Kartono, 2009).…”

“…As an attribute, price represents the level of quality that individuals may expect (Ceylana et al, 2014;Kim et al, 2014;Nicolau, 2009). Knowledge of how consumers respond to price and price changes is essential for firms making decisions concerning the price (Goldsmith and Newell, 1997;Kim et al, 2004). Price is the only element of the marketing-mix that generates direct revenue for a company (Eddin et al, 2013).…”

Why is a change of company pricing policy so hard to implement?

“…Over the years, room rate pricing has received continuous research attention in the hospitality management literature. While initially conceptual in nature (e.g., Gu, 1997;Kim, Han & Kyun, 2004), a wide variety of topics have been empirically investigated, such as 'oligopoly pricing' (e.g., Baum & Mudambi, 1995), 'price fairness' (e.g., Oh, 2003), 'pricing strategy' (e.g., Enz, Canina & Lomanno, 2004), 'online pricing' (e.g., Tso & Law, 2005), or, more recently, 'price determinants' (e.g., Zhang, Ye & Law, 2011), 'price modeling' (e.g., Zhang, Zhang, Lu, Cheng & Zhang, 2011), 'dynamic pricing' (e.g., Abrate, Fraquelli & Viglia, 2012), 'competitive pricing' (e.g., Becerra, Santaló & Silva, 2013), 'price cues' (e.g., Noone & McGuire, 2013), 'third party pricing' (e.g., Guo, Ling, Dong & Liang, 2013), and 'price bundling' (e.g., Repetti, Roe & Gregory, 2015). Despite the amount of research, little attention has been paid to room rate pricing as a 'strategic process': the human and social activity, influenced by its organizational and environmental context, which affects company performance.…”