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Relationship between hotel rate increases and discounts and consumers' willingness-to-purchase: a prospect theory perspective

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  • Scott J. Smith

Abstract

The objective of this research study was to determine the effect of hotel rate increases and discounts against a reference price in an effort to determine if consumer willingness-to-purchase rises and fall accordingly with the changes. The results of price increases against a reference price indicated that as the rates rose, a consumer's willingness-to-purchase decreased in direct relation to the magnitude of the increase. The results for rate discounts when compared to an established reference provided a non-linear relationship, and at certain levels provided no significant change in a consumer's willingness-to-purchase. This is an interesting finding that there is a nonlinear relationship between hotel rate discounts and consumers' willingness to pay. It explains some of the dilemmas faced by hotel managers with reference to hotel rate discounts and increases.

Suggested Citation

  • Scott J. Smith, 2016. "Relationship between hotel rate increases and discounts and consumers' willingness-to-purchase: a prospect theory perspective," International Journal of Revenue Management, Inderscience Enterprises Ltd, vol. 9(2/3), pages 108-126.
    • Handle: RePEc:ids:ijrevm:v:9:y:2016:i:2/3:p:108-126
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    Cited by:

    1. 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.

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