IDEAS home Printed from https://ideas.repec.org/a/sae/toueco/v27y2021i2p346-364.html
   My bibliography  Save this article

Predicting the direction of dynamic price adjustment in the Hong Kong hotel industry

Author

Listed:
  • Ibrahim Mohammed

    (162961University of Professional Studies, Ghana)

  • Basak Denizci Guillet

    (26680Hong Kong Polytechnic University, China)

  • Rob Law

    (26680Hong Kong Polytechnic University, China)

  • Wassiuw Abdul Rahaman

    (58835University of Ghana, Ghana)

Abstract

This study analysed dynamic pricing data of Hong Kong hotels within the last-minute 1-week booking window to determine patterns and direction of room rate changes and their association with hotel characteristics regarding tangible attributes, reputational variables and contextual factors. Findings show that room rates are more likely to increase than decrease or stay constant, and that, holding demand and market conditions constant, the likelihood of price increases (decreases), based on standard binomial probit regression, is positively (negatively) associated with size (tangible attribute), chain affiliation and star rating (reputational attributes), and seller density and location accessibility (contextual factors). These results confirm the importance of differentiation in pricing hotel rooms and indicate how hotel customers and revenue managers can combine these characteristics with predicted demand to anticipate the direction of room rate change in the last-minute booking window as the booking horizon approaches check-in.

Suggested Citation

  • Ibrahim Mohammed & Basak Denizci Guillet & Rob Law & Wassiuw Abdul Rahaman, 2021. "Predicting the direction of dynamic price adjustment in the Hong Kong hotel industry," Tourism Economics, , vol. 27(2), pages 346-364, March.
    • Handle: RePEc:sae:toueco:v:27:y:2021:i:2:p:346-364
    DOI: 10.1177/1354816620903900
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/1354816620903900
    Download Restriction: no
    File URL: https://libkey.io/10.1177/1354816620903900?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Yang, Yang & Mueller, Noah J. & Croes, Robertico R., 2016. "Market accessibility and hotel prices in the Caribbean: The moderating effect of quality-signaling factors," Tourism Management, Elsevier, vol. 56(C), pages 40-51.
    2. Youyi Feng & Guillermo Gallego, 1995. "Optimal Starting Times for End-of-Season Sales and Optimal Stopping Times for Promotional Fares," Management Science, INFORMS, vol. 41(8), pages 1371-1391, August.
    3. Mantin, Benny & Gillen, David, 2011. "The hidden information content of price movements," European Journal of Operational Research, Elsevier, vol. 211(2), pages 385-393, June.
    4. Guillermo Gallego & Garrett van Ryzin, 1994. "Optimal Dynamic Pricing of Inventories with Stochastic Demand over Finite Horizons," Management Science, INFORMS, vol. 40(8), pages 999-1020, August.
    5. Chris K. Anderson & Xiaoqing (Kristine) Xie, 2016. "Dynamic pricing in hospitality: overview and opportunities," International Journal of Revenue Management, Inderscience Enterprises Ltd, vol. 9(2/3), pages 165-174.
    6. Nourredine Selmi & R. Dornier, 2011. "Yield Management in the French hotel business," Post-Print hal-00616598, HAL.
    7. Becerra, Manuel & Santaló, Juan & Silva, Rosario, 2013. "Being better vs. being different: Differentiation, competition, and pricing strategies in the Spanish hotel industry," Tourism Management, Elsevier, vol. 34(C), pages 71-79.
    8. Xuanming Su, 2007. "Intertemporal Pricing with Strategic Customer Behavior," Management Science, INFORMS, vol. 53(5), pages 726-741, May.
    9. Matthew Lewis, 2008. "Price Dispersion And Competition With Differentiated Sellers," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 654-678, September.
    10. Richard H. Thaler, 2008. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 27(1), pages 15-25, 01-02.
    11. Richard A. Bettis & Constance E. Helfat & J. Myles Shaver & Arturs Kalnins, 2016. "Beyond Manhattan: Localized competition and organizational failure in urban hotel markets throughout the United States, 2000–2014," Strategic Management Journal, Wiley Blackwell, vol. 37(11), pages 2235-2253, November.
    12. Alberto A. Gaggero & Claudio A. Piga, 2011. "Airline Market Power and Intertemporal Price Dispersion," Journal of Industrial Economics, Wiley Blackwell, vol. 59(4), pages 552-577, December.
    13. Brian T. McCann & Govert Vroom, 2010. "Pricing response to entry and agglomeration effects," Strategic Management Journal, Wiley Blackwell, vol. 31(3), pages 284-305, March.
    14. Abrate, Graziano & Capriello, Antonella & Fraquelli, Giovanni, 2011. "When quality signals talk: Evidence from the Turin hotel industry," Tourism Management, Elsevier, vol. 32(4), pages 912-921.
    15. Dixit, Ashutosh & Braunsberger, Karin & Zinkhan, George M. & Pan, Yue, 2005. "Information technology-enhanced pricing strategies: managerial and public policy implications," Journal of Business Research, Elsevier, vol. 58(9), pages 1169-1177, September.
    16. Benkovskis, Konstantins & Fadejeva, Ludmila & Kalnberzina, Krista, 2012. "Price setting behaviour in Latvia: Econometric evidence from CPI micro data," Economic Modelling, Elsevier, vol. 29(6), pages 2115-2124.
    17. Abrate, Graziano & Viglia, Giampaolo, 2016. "Strategic and tactical price decisions in hotel revenue management," Tourism Management, Elsevier, vol. 55(C), pages 123-132.
    18. Garbarino, Ellen & Maxwell, Sarah, 2010. "Consumer response to norm-breaking pricing events in e-commerce," Journal of Business Research, Elsevier, vol. 63(9-10), pages 1066-1072, September.
    19. Dixit, Ashutosh & Whipple, Thomas W. & Zinkhan, George M. & Gailey, Edward, 2008. "A taxonomy of information technology-enhanced pricing strategies," Journal of Business Research, Elsevier, vol. 61(4), pages 275-283, April.
    20. Haipeng (Allan) Chen & Akshay R. Rao, 2007. "When Two Plus Two Is Not Equal to Four: Errors in Processing Multiple Percentage Changes," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 34(3), pages 327-340, June.
    21. Miguel Angel Ropero, 2011. "Dynamic Pricing Policies of Hotel Establishments in an Online Travel Agency," Tourism Economics, , vol. 17(5), pages 1087-1102, October.
    22. Marco Alderighi & Marcella Nicolini & Claudio A. Piga, 2015. "Combined Effects of Capacity and Time on Fares: Insights from the Yield Management of a Low-Cost Airline," The Review of Economics and Statistics, MIT Press, vol. 97(4), pages 900-915, October.
    23. J. Miguel Villas-Boas, 1999. "Dynamic Competition with Customer Recognition," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 604-631, Winter.
    24. Nancy L. Stokey, 1979. "Intertemporal Price Discrimination," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(3), pages 355-371.
    25. Lott, John R, Jr & Roberts, Russell D, 1991. "A Guide to the Pitfalls of Identifying Price Discrimination," Economic Inquiry, Western Economic Association International, vol. 29(1), pages 14-23, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Guizzardi, Andrea & Ballestra, Luca Vincenzo & D'Innocenzo, Enzo, 2022. "Hotel dynamic pricing, stochastic demand and covid-19," Annals of Tourism Research, Elsevier, vol. 97(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Abrate, Graziano & Viglia, Giampaolo, 2016. "Strategic and tactical price decisions in hotel revenue management," Tourism Management, Elsevier, vol. 55(C), pages 123-132.
    2. Aldric Vives & Marta Jacob & Marga Payeras, 2018. "Revenue management and price optimization techniques in the hotel sector," Tourism Economics, , vol. 24(6), pages 720-752, September.
    3. Christian Borgs & Ozan Candogan & Jennifer Chayes & Ilan Lobel & Hamid Nazerzadeh, 2014. "Optimal Multiperiod Pricing with Service Guarantees," Management Science, INFORMS, vol. 60(7), pages 1792-1811, July.
    4. Alderighi, Marco & Gaggero, Alberto A. & Piga, Claudio A., 2022. "Hidden prices with fixed inventory: Evidence from the airline industry," Transportation Research Part B: Methodological, Elsevier, vol. 157(C), pages 42-61.
    5. Ibrahim Mohammed & Basak Denizci Guillet & Rob Law, 2019. "Modeling dynamic price dispersion of hotel rooms in a spatially agglomerated tourism city for weekend and midweek stays," Tourism Economics, , vol. 25(8), pages 1245-1264, December.
    6. Loïc Lévi & Jean Jacques Nowak & Sylvain Petit & Hakim Hammadou, 2022. "Industrial legacy and hotel pricing: An application of spatial hedonic pricing analysis in Nord-Pas-de-Calais, France," Tourism Economics, , vol. 28(4), pages 870-898, June.
    7. Aldric Vives & Marta Jacob & Eugeni Aguiló, 2019. "Online hotel demand model and own-price elasticities: An empirical application in a mature resort destination," Tourism Economics, , vol. 25(5), pages 670-694, August.
    8. Kevin R. Williams, 2022. "The Welfare Effects of Dynamic Pricing: Evidence From Airline Markets," Econometrica, Econometric Society, vol. 90(2), pages 831-858, March.
    9. Kevin R. Williams, 2017. "Dynamic Airline Pricing and Seat Availability," Cowles Foundation Discussion Papers 2103R, Cowles Foundation for Research in Economics, Yale University, revised May 2020.
    10. Melis, Giuseppe & Piga, Claudio A, 2016. "Are all online hotel prices created dynamic? An empirical assessment," MPRA Paper 75896, University Library of Munich, Germany.
    11. Guizzardi, Andrea & Ballestra, Luca Vincenzo & D'Innocenzo, Enzo, 2022. "Hotel dynamic pricing, stochastic demand and covid-19," Annals of Tourism Research, Elsevier, vol. 97(C).
    12. Martin Petricek & Stepan Chalupa & Karel Chadt, 2020. "Identification of Consumer Behavior Based on Price Elasticity: A Case Study of the Prague Market of Accommodation Services," Sustainability, MDPI, vol. 12(22), pages 1-14, November.
    13. Negin Golrezaei & Hamid Nazerzadeh & Ramandeep Randhawa, 2020. "Dynamic Pricing for Heterogeneous Time-Sensitive Customers," Manufacturing & Service Operations Management, INFORMS, vol. 22(3), pages 562-581, May.
    14. Diego Escobari & Nicholas G. Rupp & Joseph Meskey, 2019. "An Analysis of Dynamic Price Discrimination in Airlines," Southern Economic Journal, John Wiley & Sons, vol. 85(3), pages 639-662, January.
    15. Hongmin Li & Woonghee Tim Huh, 2012. "Optimal pricing for a short life‐cycle product when customer price‐sensitivity varies over time," Naval Research Logistics (NRL), John Wiley & Sons, vol. 59(7), pages 552-576, October.
    16. Guizzardi, Andrea & Mariani, Marcello M. & Stacchini, Annalisa, 2022. "A temporal construal theory explanation of the price-quality relationship in online dynamic pricing," Journal of Business Research, Elsevier, vol. 146(C), pages 32-44.
    17. Kevin R. Williams, 2017. "The Welfare Effects of Dynamic Pricing: Evidence from Airline Markets," Cowles Foundation Discussion Papers 2103R2, Cowles Foundation for Research in Economics, Yale University, revised Jun 2021.
    18. Masiero, Lorenzo & Viglia, Giampaolo & Nieto-Garcia, Marta, 2020. "Strategic consumer behavior in online hotel booking," Annals of Tourism Research, Elsevier, vol. 83(C).
    19. Yannis Kerkemezos & Bas Karreman, 2020. "On the Benefits of Being Alone: Scheduling Changes, Intensity of Competition and Dynamic Airline Pricing," Tinbergen Institute Discussion Papers 20-042/VII, Tinbergen Institute.
    20. Wedad Elmaghraby & P{i}nar Keskinocak, 2003. "Dynamic Pricing in the Presence of Inventory Considerations: Research Overview, Current Practices, and Future Directions," Management Science, INFORMS, vol. 49(10), pages 1287-1309, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:toueco:v:27:y:2021:i:2:p:346-364. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.