Price determinants of individual hotels: evidence from Milan

Abstract

Purpose

This article aims to identify average room rate (ARR) determinants of individual firms located in a destination.

Design/methodology/approach

The sample is composed of 72 individual firms, operating in the 3‐5 star category; data were collected using financial statements and questionnaires. Independent variables are searched along “what” (product) and “where” (location) dimensions.

Findings

The empirical findings identify four main significant and relevant determinants related to the “what” positioning – number of rooms, number of employees, number of employees per room, years since the last refurbishment – and confirm the relevance of location, and especially the centrality inside the destination.

Practical implications

Empirical findings show the relevance of strong advantage (disadvantage) of location (where) that might compensate disadvantage (advantage) in the strategic positioning (what). Inside the determinants, the results suggest the importance of a broad commercial policy, able to differentiate the served targets, in order to optimise occupancy and, if possible, prices.

Originality/value

The paper suggests the usefulness of taking into greater account the link between destination and local firms as an important determinant of performance and explores what are key success factors for individual (not affiliated) firms.

Citation

Sainaghi, R. (2011), "Price determinants of individual hotels: evidence from Milan", Tourism Review, Vol. 66 No. 4, pp. 18-29. https://doi.org/10.1108/16605371111188713