Module Name: Rooms Management

Module Code: TH5BA390

Student ID No.: 21517885

Date of Submission: 18-11-2021

A1 Question: “Each guest has a price. It is imperative to understand consumer behaviour to offer the
right price at the right time through the right channel while monitoring the demand and adjusting
rates”. Evaluate this statement in light of the theories and concepts discussed.

This essay deals with understanding the different patterns of consumer behaviour which is necessary
in order to offer a good deal at the right time. Along with right time, it is also important to identify
the appropriate channels while monitoring demand and trying to adjust the prices which is also
discussed briefly in this essay. Consumer behaviour has an effect on how visitors pick out hotels,
restaurants, and amusement within the hospitality business. Consumer behaviour is particularly
complicated and important in the hotel industry. Therefore, it is important to understand the
various pricing strategies adopted by hotels and then evaluate and analyse the effect of hotel room
pricing on consumer behaviour. There is a need to identify the correct distribution channel and its
impact and also evaluate how different seasonality of hotels effects consumer behaviour, demand
and overall revenue. Furthermore, this essay also deals with Revenue management and
optimization.

Customers' choice of hospitality service is heavily influenced by personal and interpersonal variables.
Requirements and motivation are among the personal elements, as are impression, learning,
personal traits, lifestyle, and self-concept. Cultures and subcultures, peer influences, socioeconomic
classes, influencers, and the family all have an impact on interpersonal interactions. Customers
sense value and fairness in the pricing they pay when this is done. Sérgio Dominique-Ferreira, et al.
(2021) stated that trends play a significant role in consumer behaviour since they have such a short-
term impact that it is hard to predict how long they will continue. As a result, the company's revenue
and profit potential are increased. Customer satisfaction may lead to guest loyalty. However, some
make the argument that even though a customer is pleased with the top quality of the hotel
experience provided but due to different expectations of customers, they may not necessarily
return. Consumers typically have more believe in other consumers than they do in sellers (Nieto et
al., 2014). Service quality has been identified as one of the most important and winning factors
influencing consumer behaviour in the hospitality business, with a great predictive capability for
client loyalty intentions.

When it comes to pricing hotel rooms, it's important to get the most revenue from every room.
According to research, guests are often willing to pay more than a flat rate if they find an additional
benefit opportunity (Victor and Bhaskar, 2017). Since hotel rooms are a non - durable asset, hotel
managers are attempting to maximize revenue by implementing numerous strategies to achieve
optimum prices. Customers, on the other hand, can strategically modify their purchase behaviour as
they desire to pay as little as plausible. "A hotel is always better off if it can prevail price
differentiation among customers with different price exposures." Pigou stated. Hotel room costs
vary depending on numerous traits and characteristics such as the hotel location, size, grade, age,
reliability, distance to airports, transit terminals, and tourist sites, according to discussions within the
hospitality and tourism industry (Soler and Gemar, 2018). Hotel pricing structures use categorization
as a neutral indicator of service availability and establishment quality, based on regional limits
(Becerra et al., 2013). While hotels develop and implement various discount strategies to attract
customers, particularly during a recession, both hotels and customers appear to prefer dynamic
pricing (Xie and Kwok, 2017). The best cross pricing strategies are determined by the customer
population's constituents as well as factors such as consumer price levels and dedication. Hotel
qualities like star quadrant and size influence the degree of inter-temporal price variation. The
structure and behavioural patterns of the consumer population influence inter-temporal hotel
pricing strategies. For example, consider that the reservation date is a working day then, people can
expect a dynamic decreasing pricing strategy, and when the reservation date is a weekend, they can
expect a flexible increasing pricing strategy. When there are minimal hotels with an equivalent star
rating available in a city, prices rise, and vice versa.

In the hospitality industry, price elasticity of demand is seasonal in nature, with high and low
seasons. Due to higher occupancy rates, hotel room costs do not appear to be affected by the
quantity of demand during peak seasons. This leads in inelastic demand for rooms during peak
seasons compared to low seasons. As a result, the demand for rooms exhibits increased response
and flexibility to raising prices in low seasons. High offerings during the off-season will reduce profit
margins, whereas low pricing will increase demand, especially during the low seasons. More
specifically, the issue of service bundling as a method for segmenting customers based on their
aversion to constraints (limited stay, flexible pricing vs fixed pricing, etc.) is a significant issue that is
a vital component of hotels' marketing and distribution strategy (Beerli-Palacio et al., 2020).

Hotel booking trends have definitely shifted away from direct bookings and toward indirect bookings
over the last decade. As a consequence of technology developments, these emerging modes of
communication have influenced consumer preferences (Cantallops and Salvi, 2014), allowing
consumers to rate one another (Jalilvand and Samiei, 2012) causing them to gain or end up sharing
information about a company, product, or brand (GómezSuárez et al., 2017). Customers read online
travel intermediaries as providing a wide range of options at reasonable prices. Because of the
uncertainty associated with making virtual reservations, studies show that consumers frequently use
different risk-aversion strategies when shopping online (Hua, Morosan, & DeFranco 2015). Some
customers, for example, believe that better deals will appear if they wait before making online
reservations. More than 50% of tourists now book or research hotel reservations online. And over
80% of all online reservations are routed through franchisee-operated websites. Chen et al. (2011)
looked into how deal seeking visitors use search and booking techniques of hotel cancellation
restrictions while making reservations. Travelers on the lookout for better prices continue to look for
ways to save money on their reservations. Because each booking channel has its own set of costs,
shifting consumer behaviour back and forth in time can have a significant impact on a hotelier's net
income. Therefore, it is important to understand consumer behaviour to deliver the right offers,
monitor demand, and adjust prices through the right channels.

In the hotel industry, there is a heavy dependence on electronic Word Of Mouth (eWOM), which
leads to a notable shift in tourist behaviour (Cantallops and Salvi, 2014). According to past study,
consumers consider eWOM as far more trustworthy than conventional media (e.g., television, radio,
print advertisements, etc.) (Cheung and Thadani, 2012). This believe between supplier and customer
is generated by the mutual benefit of growing the line of awareness in the deals and offers. Oyo,
TripAdvisor, and Booking.com, for example, allow clients to browse and compare prices without
having to visit a physical location, resulting in the growth of online travel agencies. In the literature,
several approaches to reservation system and pricing have been employed, including surveying,
experimentation, and modelling (Zhang et al., 2019). Surprisingly, studies that use actual data from
multiple sources and use a variety of channels, mediators (such as online travel agencies) and direct
channels (such as hotel websites), are rare (Zhang et al., 2019). However, given the scale of
competition and service distribution networks, hoteliers may face new issues as prices become more
transparent and widely available with less dispersion.
With the upcoming pricing issues, comes the responsibility of revenue management. Pricing is the
most fundamental strategic tool in RM (Cheng et al., 2011). Strategic planning is really just
determining how often diverse customers are ready to pay, which can simply be accomplished by
assessing and managing the supply and demand for one’s guestrooms. When availability varies from
the occupancy that maximizes revenue, a revenue manager can adjust demand by different rate
(Vives et al., 2018). To optimize revenue in periods of temporarily heightened demand Revenue
Managers should seek to eliminate discounts rather than increasing their rack rates. When a room is
reserved and hence removed from inventory, Revenue Manager's revenue optimization strategies
of visitor inventory do not end. The front office and its front desk staff are mostly responsible for
greeting, registering, and assigning guests to their desired rooms upon their arrival. The front office's
ability to adopt revenue optimization methods upon visitor's arrival has a significant impact on a
hotel's revenue generation.

Consumer behavior examines how consumers make purchase decisions. Recognizing what
consumers desire, what they're prepared to spend, how they choose what to purchase, and how
they accomplish the purchase decision are indeed part of all that. Because of the nature of the
hospitality industry, prices of individual rooms can and should change not only every day, but also
every hour, based on demand. After all, an unsold room achieves nothing, thus pricing your rooms to
maximise occupancy is frequently a better strategy than selling them individually to maximise profit.
Before travelling, price-conscious travellers frequently visit the websites of hotels and intermediaries
several times. These best deal-seeking customers are likely to notice that accommodation
rates fluctuate significantly over time as a result of revenue management strategies. Studies
demonstrate that the consumers' tendency to book is influenced by the room rate fluctuation
pattern they witness while looking for a good bargain. Hoteliers must strike a balance between
revenue and accommodation. In the low seasons, demand elasticity is substantially higher,
necessitating a better grasp of the price and demand function. Thus, to achieve revenue
optimization level in hotel industry, one needs to implement the ideal pricing strategies required to
sell his property's amenities to the right customers at the right time and through the most
appropriate channel.

Word Count- 1583

References

‌Becerra, M., Santaló, J. and Silva, R. (2013). ‘Being better vs. being different: Differentiation,
competition, and pricing strategies in the Spanish hotel industry’, Tourism Management, 34, pp. 71–
79.
‌
Beerli-Palacio, A., Martín-Santana, J.D. and Román-Montoya, C. (2020). ‘Complementary services at
hotels in accordance with their pricing strategy and the price sensitivity of tourists’, International
Journal of Hospitality Management, 87, pp. 102-458.

‌Chen, C.-C., Schwartz, Z. and Vargas, P. (2011). ‘The search for the best deal: How hotel cancellation
policies affect the search and booking decisions of deal-seeking customers’, International Journal of
Hospitality Management, 30(1), pp. 129–135.

Cheung, C.M.K. and Thadani, D.R. (2012). ‘The impact of electronic word-of-mouth communication:
A literature analysis and integrative model’ Decision Support Systems, 54(1), pp. 461–470.

Dominique-Ferreira, S., Rodrigues, B.Q. and Braga, R.J. (2021). ‘Personal marketing and the
recruitment and selection process: Hiring attributes and particularities in tourism and hospitality’,
Journal of Global Scholars of Marketing Science, pp. 1–21.

Gómez-Suárez, M., Martínez-Ruiz, M.P. and Martínez-Caraballo, N. (2017). ‘Consumer-Brand

Relationships under the Marketing 3.0 Paradigm: A Literature Review’, Frontiers in Psychology, 08.

Hua, N., Morosan, C. and DeFranco, A. (2015). ‘The other side of technology adoption: Examining the
relationships between e-commerce expenses and hotel performance’, International Journal of
Hospitality Management, 45, pp. 109–120.

Nieto, J., Hernández-Maestro, R.M. and Muñoz-Gallego, P.A. (2014). ‘Marketing decisions, customer
reviews, and business performance: The use of the Toprural website by Spanish rural lodging
establishments’, Tourism Management, 45, pp. 115–123.
‌
Martins, N., Dominique-Ferreira, S. and Lopes, C. (2021). ‘Design and development of a digital
platform for seasonal jobs: Improving the hiring process’, Journal of Global Scholars of Marketing
Science, pp. 1–18.

‌ etricek, M., Chalupa, S. and Chadt, K. (2020). ‘Identification of Consumer Behavior Based on Price
P
Elasticity: A Case Study of the Prague Market of Accommodation Services’, Sustainability, 12(22), pp.
9452.

Reza Jalilvand, M. and Samiei, N. (2012). ‘The impact of electronic word of mouth on a tourism
destination choice’, Internet Research, 22(5), pp. 591–612.
‌
Serra Cantallops, A. and Salvi, F. (2014). ‘New consumer behavior: A review of research on eWOM
and hotels’, International Journal of Hospitality Management, 36, pp. 41–51.

Soler, I.P. and Gemar, G. (2018). ‘Hedonic price models with geographically weighted regression: An
application to hospitality’, Journal of Destination Marketing & Management, 9, pp. 126–137.

‌Victor, V. and Bhaskar, M. (2017). ‘Dynamic Pricing and the Economic Paradigm Shift–A Study Based
on Consumer Behaviour in the E-commerce Sector’, International Journal of Scientific and Research
Publications, 7, pp. 242–47.

Vives, A., Jacob, M. and Payeras, M. (2018). Revenue management and price optimization
techniques in the hotel sector. Tourism Economics, 24(6), pp.720–752.

‌Xie, K.L. and Kwok, L. (2017). ‘The effects of Airbnb’s price positioning on hotel performance’,
International Journal of Hospitality Management, 67, pp. 174–184.

Zhang, J., Yin, M., Han, J. and Aroskar, R. (2019). ‘Why is asset-light strategy necessary? An empirical
analysis through the lens of cost stickiness’, Tourism Management Perspectives, 32, pp.100-571.