Pricing determinants in hotels: The case of luxury, upscale, and mid-scale price segments

Abstract

Investigating the role of pricing and revenue management is a continual concern as successful businesses rely on sound financial management. This paper examines the pricing objectives, strategy determinants, and strategies employed by hotels while taking managerial concerns into account. The study determines managers’ key pricing concerns and investigates value-informed pricing strategies, making comparisons against the findings of past research to address calls for further investigations. Employing an embedded mixed methods research approach, the study used structured questionnaires and semistructured interviews to gather data from hotel managers influential in price setting. Overall, the study indicates similarities and differences in price determination factors in the hotel industry. Formality in determining prices suggests that pricing is integral to hotel management and hotels employ different pricing strategies depending upon the pricing objectives and strategy determinants. A significant finding is that upscale hotels place high importance on pricing due to intense competition related to their wider product portfolio in comparison to luxury and mid-scale hotels and tend to rely on competition-based pricing. Although exploratory in nature, the results are valuable and provide compelling practical implications and suggestions for future research. Hotel managers can benefit from the wider issues stressed in the paper related to short-term versus long-term, firm-based versus market-based, and relationship versus revenue considerations.