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

Scott J. Smith

International Journal of Revenue Management, 2016, vol. 9, issue 2/3, 108-126

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.

Keywords: revenue management; prospect theory; pricing; discounting; lodging industry; hotel rate increases; consumer behaviour; willingness to purchase; hotel rate discounts; hotels; hotel management; hotel industry. (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijrevm:v:9:y:2016:i:2/3:p:108-126

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