New Paper: Strategic and tactical price decisions in hotel revenue management

 New Research paper:
Strategic and tactical price decisions in hotel revenue management,
Tourism Management Volume 55, August 2016, Pages 123–132

Highlights

•The study proposes and empirically validates a dynamic pricing framework.
•Three groups of factors are identified in their strategic and tactic dimensions.
•The Shapley-Owen decomposition of R-squared is applied to price regression models.
•Results allow measuring the relative weight of pricing determinants.
•Contextual variables have a relevant role in short-run price variations.

Abstract

Dynamic pricing techniques allow using a number of variables in a tactical way compared to standard catalogue prices. This study merges in a conceptual model the relevance of the tactical and the strategic dimension of these variables, classified according to their tangible, reputational or contextual nature. To empirically validate the hypotheses, a database of 21.596 price observations was retrieved from booking.com. The study presents a hedonic price function, using the Shapley-Owen decomposition of the R-squared to elicit the importance of each group of factors. Further, a hierarchical cluster analysis measures the presence of heterogeneity across operators. The results show that online reputation is gaining importance over the traditional star rating. Despite the tangible variables remain of paramount importance, the findings suggest the relevant role of contextual variables in short-run price variations. The players operating in the tourism and hospitality industries should integrate these findings when designing pricing strategies.

Keywords

  • Dynamic prices;
  • Competition;
  • Online reputation;
  • Hedonic pricing model;
  • Shapley-Owen decomposition
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Graziano Abrate is a Researcher in Business Management at the University of Piemonte Orientale, Italy. His research focuses on the application of quantitative tools for service management, particularly in the area of pricing, demand estimation and efficiency analysis. He has published in several international journals, among which Tourism Management, International Journal of Hospitality Management, Regional Studies, Regional Science and Urban Economics, Industrial and Corporate Change, Journal of Productivity Analysis, Journal of Economic Psychology, Transportation Research E and IEEE Transactions on Power Systems.

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Giampaolo Viglia is a Senior Lecturer in the Faculty of Management of Bournemouth University, UK. His research interests lie in the areas of pricing, consumer anomalies and online reviews. Methodologically, he enjoys both quantitative studies and conducting experiments. His work has been published in a number of international journals, such as Journal of Interactive Marketing, International Journal of Hospitality Management, Journal of Economic Psychology, and The Service Industries Journal.