Adoption of Covid-19 safety certification and pricing strategy in the hotel industry

Sauveur Giannoni, Sylvain Petit, Louinord Voltaire, Philippe Chagnon and Jean Ralph Marvensky Paul

Applied Economics, 2024, vol. 56, issue 15, 1723-1747

Abstract: The tourism sector has voluntarily undertaken several initiatives to boost customer confidence in response to the COVID-19 pandemic. For example, in the hotel industry, three different strategies have been implemented: sending no COVID-19 safety signal; sending a moderate signal through a charter; or sending a strong signal through a label. This study aims to identify the main drivers of the hotels’ choice among these strategies and to analyze the influence of their choice on price setting. We estimate a system of three equations (hotel pricing, star rating, COVID-19 safety signal) on a sample of 418 rated hotels in the Hauts-de-France region. Results support three main findings: 1) star rating positively correlates with COVID-19 certification; 2) COVID-19 certification has a strongly negative impact on hotel prices; 3) star rating moderates positively the effect of COVID-19 certification on prices. Furthermore, error terms between the star rating level and COVID-19 certification equations are strongly correlated. Hence unobserved common factors play a role in the adoption of these quality signals. Our findings are consistent with the idea that managers implementing safety signaling strategies are more worried about recovery speed after lockdowns.

Date: 2024
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DOI: 10.1080/00036846.2023.2177596

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