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The peculiar impact of higher room rates on customers' propensity to book

Zvi Schwartz (Department of Recreation, Sport and Tourism, University of Illinois, Champaign, Illinois, USA)
ChihChien Chen (School of Tourism and Hospitality Management, Temple University, Philadelphia, Pennsylvania, USA)

International Journal of Contemporary Hospitality Management

ISSN: 0959-6119

Article publication date: 9 February 2010

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1538

Abstract

Purpose

This study's goal is to examine how an intensified room rate signal affects customers' perceptions, their propensity to book, and consequently hotels' revenue maximization.

Design/methodology/approach

Subjects were asked to assess quality, sellout risk and the likelihood of getting a better deal based on an advanced booking scenario, where the signal's intensity was manipulated through the level of uncertainty. Analysis was conducted using a GLM multivariate procedure and a polytomous universal model.

Findings

The results suggest that high quoted rates might affect customers' perceptions, their propensity to book, and consequently the hotel's revenues. Surprisingly, the impact of the high room rate signal on the sellout risk perception reversed its direction with the intensified signal.

Research limitations/implications

The results imply that the maximal achievable revenue levels reported in a previous theoretical study ought to be re‐calculated because the assumptions used were not supported by the study's findings.

Practical implications

The study demonstrated yet again that price affects the booking decision beyond the monetary value. It sends a signal that affects several perceptions and shapes the consumers' booking decision. Moreover, the intensity of the signal might change the direction of the impact.

Originality/value

The study is a first attempt to examine price signal intensity and the impact of the signal's strength in an advanced booking environment. The theoretical and practical implications underscore the need to better understand the complex impact that price changes have on consumer reactions and consequently on the effectiveness of hotels' revenue management policies.

Keywords

Citation

Schwartz, Z. and Chen, C. (2010), "The peculiar impact of higher room rates on customers' propensity to book", International Journal of Contemporary Hospitality Management, Vol. 22 No. 1, pp. 41-55. https://doi.org/10.1108/09596111011013462

Publisher

:

Emerald Group Publishing Limited

Copyright © 2010, Emerald Group Publishing Limited