Online hotel demand model and own-price elasticities: An empirical application in a mature resort destination

Aldric Vives, Marta Jacob and Eugeni Aguiló
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Aldric Vives: University of the Balearic Islands, Spain
Marta Jacob: University of the Balearic Islands, Spain
Eugeni Aguiló: University of the Balearic Islands, Spain

Tourism Economics, 2019, vol. 25, issue 5, 670-694

Abstract: Pricing is a basic strategic tool in hotel revenue management (RM). This study proposes a particular demand function model for resort hotels for measuring their own-price elasticities, along with the different seasonal demands, and across the booking horizons. The model is applied to the online transient demand for two hotels in Majorca – a well-known, mature mass tourism destination – in order to estimate and compare different elasticities, which could be used by RM departments to correctly manage prices in the short run and establish optimum pricing strategies (over the medium and long run). The results show that the two hotels display completely different own-price elasticities during high season, while during low season, demand is quite inelastic at both hotels; secondly, common price variations among seasons or hotels may sometimes be an erroneous pricing strategy, such as the common early booking strategy. The model is easily adaptable to different hotels.

Keywords: booking time; hotel demand; own-price elasticity; pricing; revenue management (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:toueco:v:25:y:2019:i:5:p:670-694

DOI: 10.1177/1354816618800643

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