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CEJOR (2008) 16:43-66 DOI 10.

l007/sI0100-O07-0O42-y

ORIGINAL PAPER

Pricing strategies for perishable products: the case of Vienna and the hotel reservation system hrs.com
Jorg Schiitze

Published online: 8 January 2008 Springer-Verlag 2008

Abstract Consider a retailer who sells perishable products for which there is uncertain demand. Yield management with dynamic pricing is a standard practice that firms use for revenue management. For perishable products, recent analysis has focused on the distribution of flight capacity, referred to as ticket sales. Other nonstorable, non-trans portable, immaterial hospitality products include hotel capacity. The article discusses the extent to which hotel pricing strategies vary within the internet distribution system hrs.com. This study focuses on the distribution of hotel rooms available for booking on the internet for Vienna and gives an outlook to Euroland capitals. The main research interests are the underlying pricing models and the setting ofthe end price. Data was taken from hrs.com, which is the most important specialist for hotel room internet distribution in Germany according to recent studies by KMPG and others. The results include the identification of different pricing strategy clusters with regard to hotel category and hotel availability over a 22-day period for Vienna and one city from all Euroland countries (the capitals were studied for all cases except for the Netherlands, for which data was collected for Amsterdam). The study took the arrival days Mondays, Tuesdays, Wednesdays and Thursdays into account, and used data for all these days from the 11th of July, 2005, to the 10th of October, 2005, for Vienna, and the first and the last of these dates as a comparison base for the other Euroland cities. Keywords E-commerce Perishable product Yield management Dynamic pricing Internet distribution system Hospitality Room rate

J. Schutze (IS]) Department of Business Education and Development, University of Graz. Universitatsstr. 15 RESOWIGl, Graz 8010. Austria e-mail: joerg.schueize@gmail.com

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1 Introduction The internationalization of former local and regional markets via internet usage has been revolutionizing the distribution of many products and services. Due to the ease of data access and relevance, recent research into business models and pricing strategies has been focused on a few important hotel groups. Hotels can use different channels to distribute hotel rooms (Fastbooking.com 2005, p.4): - The hotel's/hotel group's distribution system - Global Distribution System (GDS, principal companies are Sabre, Galileo, Worldspan, and Amadeus, which provide global connectivity and service to travel agents (Lewis 2005. p.45) and. partly, sell directly via the internet as well) - Internet Distribution System As a result ofthe increasing use of internet distribution systems, data access to hotel room prices for small and medium-sized companies on the internet has improved. According to KPMG, internet distribution systems offer in most cases better prices than traditional travel agents, who work via a GDS, direct calls to the hotel or use of the hotel's own web site (Geo 2005, p.l). A number of companies offer internet distribution systems. According to the 2(X)4 Travel Sector Spotlight Report, hrs.com is the hotel room specialist with the highest sector reach (Nielsen and Netrating 2004, p. I), in most cases offering better prices for the same hotels than hotel.de, expedia.de and ehotel.de (Arbeiterkammer 2005, p. 1). According to the German version of the Financial Times, hrs.com is the hest known online service in Germany: the hrs.com sites are accessed around 300 million times per month (Kwapik 2005. p.2). Therefore, this study uses hrs.com as a data collection base. Hrs.com. a Colognebased company, offers more than 180,0(K) hotels worldwide. In 1999 about half of the bookings came from Germany (Marcussen 1999, p.l31), now hrs.com has offices in London. Paris and Shanghai and provides an intranet solution for enterprises, hrs.com claims to have contracts with more than 12,(X)0 companies (hrs.com 2006). Half of its business in 2004 came from companies (Ohnsmann 2(X)4. p.2). Hotels participating in hrs.com determine the offered hotel room capacity and prices up to one year in advance but have access to the system to change their prices according to their needs. The research uses data based on room rates for certain dates, each of which were monitored over a 3-week period for the Viennese hotel market with an outlook to all Euroland capitals. For the Netherlands. Amsterdam, as the economic center, was studied instead of Den Haag. Data for these additional cities were collected for the first and the last day ofthe study. 2 Significance of the study On the one hand, the end price strategies utilized by a hotel can significantly impact the profitability of a hotel's operation. Any additional room rate and/or higher room rate earned contributes directly to the profitability of the hotel. There are no additional expenses involved, with the exception of any commission expense, in this case to hrs.com, and possibly higher variable costs (Collins and Parsa 2005, p.3). ^ Springer

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On the other hand, knowledge of the usage of snch strategies could lead to a further increase in time-sensitive booking, with clients trying to get the lowest price possible. With the high availability of pricing data accessible on the intemet, it is possible for consumers to find out the pricing strategies used by firms and to develop strategic responses (Zhou et al. 2005, p. 1). O'Conner surveyed the prices over different distribution channels for international hotel chains: The price at which a product is offered for sale has been identified as one of the key motivators for encouraging customers to buy online (O'Conner 2002, p. 1). Due to possible bias, resulting from no clarification of the collection period and only five sets of alternative dates, the results might not offer much insight (Tso and Law 2005, p.4). The use of the hrs.com service to offer a specified room arrangement for a defined arrival date can been seen as part of a complex decision within a hotel management strategy. The success of a hotel, i.e., yield, is not part of the analysis due to the limitations of the data being collected. These limitations are mainly the following: Only data from one service on one distribution channel is collected. On the hrs.com platform no data is available for the deals which took place. Only the joining or the withdrawal of an offer can be observed. Non-availability of rooms previously available on hrs.com could be due to multiple reasons. A booked hrs.com room arrangement often includes the following option: The room arrangement is reserved free of charge until 6 p.m. on the arrival date. Customers who do not show up on the booked arrival date are not charged.

Judging from research into major scientific research platforms (springerlink, business premier, ebsco, ingenta), this is the first analysis of hotel pricing strategies based on the intemet distribution system hrs.com over the open booking period with a focus on the underlying pricing model. 3 Fundamentals of pricing Hotels offer the same rooms to different types of guests (i.e., business customers). An important decision to be made is whether to accept a booking request and generate revenue now, or to reject it in anticipation of a more profitable booking request in the future (Goldman et al. 2001. p.2). Offered capacity for a specific date on hrs.com obliges the hotel to accept bookings. There are various room pricing approaches. These range from statistical models to common-sense best practices. No commonly accepted approach exists. Hotel room pricing refiects the complexity of human activities and environmental circumstances (Emmett and Gu 2005, p.3). Dynamic pricing is a standard practice that firms use for revenue management. For perishable products, recent analysis has focused on the distribution of flight capacity, referred to as ticket sales. Perishahle product/service yield management assumes the following common product/service characteristics: ^ Springer

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a day when the product/service becomes available after which it becomes unavailable, ages or perishes, a fixed number of units/a limited capacity, the possibility to segment customers according to their price sensitivity. The mechanism employed is the time of booking (Weatherford and Bodily 1992, p.831).

Hotel capacity is a non-storable, non-transportable, immaterial hospitality product (Henschel 2005, p.80f). One of the two most used general business models in ticket sales, mostly for airline ticket sales, uses dynamic pricing: Pricing strategies based on yield management systems, such as early discounting, and limited early sales for perishable products which are capacity constrained (Desiraju and Shugan 1999, p.lf). Based on yield management the remaining ticket capacity is priced dynamically (Gallego and van Ryzin 1994, p.lO17; Zhao and Zheng 2000, p.387f; Zhou et al. 2005, p.4; Perakis and Sood 2004, p.4). Dynamic pricing models represent demand as a controllable stochastic point process with price-dependent intensity (Perakis and Sood 2004, p.4). The other type of model assumes that hotel customers can be categorized into different classes {e.g., leisure and business travelers) and focuses on the allocation of capacity among these classes (Henschel 2005, p.393; Zhou et al. 2005, p.4). Fencing and best-price strategies describe major industry concepts for reacting to Ihe ongoing process of increased room rate harmonization over different distribution channels. The Interconti Group has started to offer only six different rates for their rooms, for example, while Mariott has introduced a single price policy (Geo 2005, p.2). The general hotel room pricing methods are competition-driven pricing (marketcompetition driven approach) (Nagle and Holden 1995, p.9; Henschel 2005, p.392f), co.st-based pricing (financially driven approach) and customer-driven pricing (market-customer-driven approach). Hospitality revenue management can be described as a method that aims to sell the right inventory unit to the right customer, at the right time and for the right price (Kimes 1989, p.l5f). hrs.com lists only one room per hotel per date per location on a request for a single room. This makes it difficult to distinguish between customer groups, taking into account price level, service level, and location of a hotel room offer. Therefore, the product distribution concept of hrs.com provides only restricted data on each booking customer for the selling hotel, similar to low cost airlines (start and destination point, day of travel, days left before the day of travel, accepted price) (Spann et al. 2(X)5. p.2OWe will focus on the underlying pricing model and distinguish between three basic approaches.

3.1 Dynamic pricing The first pricing strategy can be described as dynamic pricing, in which the remaining ticket capacity is priced dynamically. This pricing strategy is used by hotels with Springer

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a market-competition focus (Fig. 1). We can state the following hypothesis for the research: Hi: Hotels on the internet distribution system hrs.com use dynamic pricing 3.2 Pre-fixed constant pricing The other main pricing approach is based on a categorization of different customer types (e.g.. business and leisure traveler classes) and focuses on the alkxation of capacity among these classes with the strategic use of service levels and add-on packages. Therefore, the second pricing approach, fixed pricing, could be divided into a global single price policy and a policy with fixed pricing per stay, where the price is set according to historic or expected demand. The governing principle behind this pricing approach is cost-based pricing and/or historic customer-driven pricing (Fig. 2). H2: Hotels on the internet distribution system hrs.com use pre-fixed constant prices per stay. 3.3 Pre-fixed mixed pricing The governing principle behind this pricing approach is cost-based pricing and/or historic customer-driven pricing. This third pricing approach consists of a combination of different pricing approaches: Constant and decreasing prices for arrival dates are used for uncertain or expected low demand with a last minute bonus for the remaining capacity. In analogy to airline ticket sales, it can be expected that hotels will use increasing prices for expected high demand, incorporating an early booking bonus
Pricing Dynamic

CASE unclear if 1 uncljr 02


1
TIME

Fig. 1 Dynamic pricing patterns

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J. Schutze Pricing Prefix constant

2 0 - - - * - - - -
15

00

CASE

constjnt #1 constant #2
1

TIME
Fig. 2 Pre-fixed constant pricing; typical patterns

(Koenigsberg et al. 2004, p.lfO (Pig- 3). Therefore, we can state the following hypothesis: : H3: Hotels on the intemet distribution system hrs.com use pre-fixed mixed prices per stay. The pre-fixed constant pricing and pre-fixed mixed pricing approaches are independent of the market and/or the remaining capacity monitoring, whereas dynamic pricing adapts to one or both of those two factors (Fig. 3, Table 1).
Pricing Prefix mixed

at

ro

^0

OD 1

TME
Fig. 3 Pre-fixed mixed pricing: typical patterns

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Pricing strategies for perishable products Table 1 General pricing strategies Pricing strategy Dynamic Pre-fixed constant Pre-fixed mixed Description

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Price selling according lo remaining capacity and/or market situation as the difference between expected demand and real demand (Engelmann 2004, p.56f) Global single price policy Season-dependent constant pricing Increasing pricing Decreasing pricing Constant pricing , "

The three main pricing strategies are as follows Hotel capacity is a non-storable, non-transportable, immaterial hospitality product (Henschel 2005. p.SOfO- Due these characteristics, hotelsas with airlines in recent yearsare expected to increasingly use dynamic pricing when distributing this perishable product to maximize their yield. Due to its perishable character, the activity in price changes for hotels using dynamic pricing can be expected to change increasingly as the arrival date approaches. Therefore, we can state the following hypothesis: Dependent on the existence of dynamic pricing on the internet distribution system hrs.com: H4: Dynamic pricing hotels increase the frequency of price changes with the approach of the arrival date. 4 Research methodology The subject of this paper is an empirical study over 3 months focusing on typical travel days for business as well as for leisure. Mondays, Tuesdays, Wednesdays, and Thursdays were chosen as such typical week days in order to include business customers and to exclude hotels only offering weekend stays. The analysis focused on one-night stays in a single room in 3, 4 and 5 star hotels offered on hrs.com. 4.1 Collection time and pricing patterns To find a reasonable point for data collection, important issues included a minimal data change regarding offered hotel room capacity. Business customers are expected to book during business office times, at least on workdays. Therefore, it is not probable for them to book or cancel on Saturday evenings. For the vast majority of private customers. Saturdays, especially Saturday evenings, are work-free and followed by a work-free day (Sunday). These times are often used for social life. It is also important to consider how likely it is for the hotel capacity to be added or canceled or the properties of the capacity to be changed on Saturdays. Typically, the hotel management is responsible for these above tasks and also for assigning work ^ Springer

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schedules for the hotel. Due to the above-mentioned importance of Saturday evenings for social life and the usual absence of important business matters at weekends, we assume that the hotel management is unlikely to be on duty on Saturday evenings and therefore the hotel capacity data is not likely to be changed at that time. In conclusion, the relevant parties for supply and demand of hotel capacity are less likely to act on Saturday evenings. For these reasons, data collection on Saturday evenings can be regarded as a good choice. To be able to gain insight into the pricing approaches used, data of hotels withdrawing their offer within the monitored 22-days prior to the arrival date were not included in this study. Therefore, all data sets range over the full monitored 22-day period. As a result, the study takes into account 4 prices collected on the last four Saturdays before the arrival date over a 22-day period. In order to gain insight into the pricing trends, we first analyze the price difference between the collection dates (Table 2). Afterwards we can combine the found differences between the consecutive collection dates using the defined symbols. The differences in pricing from one collection date to the next can be described as follows: As a mixture of the three given price changes, 27 possible pricing patterns over the 22-day period can be distinguished. Example on hrs.com: On the 17th September 2CX)5 a room in a certain hotel for one night arriving on the 10th of October costs 100 Euros. Therefore, the price 23 days prior to arrival is 1(X) Euros. On the 24th September, 16days prior to arrival, the price has dropped to 90 Euros. On the 1st of October, 9 days prior to arrival, the price is still90Euros. On the 9th of October, 2 days prior to arrival, the price has risen to 100 Euros. Therefore, we find a decreased price between 23 and I6days prior to arrival, the price being held constant when checked 9 days prior to arrival, and finally increased to 100 Euros. We can summarize this as follows: 1. Observation 2. Observation 3. Observation decreasing price constant price increasing price

Resulting price pattern: T = A By taking the general price trends into account, such pricing patterns are grouped into increasing, decreasing, mixed and constant pricing trends. These groupings are as follows (Table 3): In order to gain a comparison base for the analysis of Viennese data, data was collected for the following cities: Amsterdam, Athens, Berlin. Brussels, Dublin, Helsinki,
T^ble 2 Symbols for price changes between collection p^^^ ^^ Unchanged Decreased Increased ^^^^^ collection dates Symbol

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Pricing strategies for perishable products Table 3 Categorization of pricing patterns into pricing trends Pricing trends Increasing
==A = A = = AA A== A = A AAA AA =

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Decreasing
==T

Mixed
= TA = AT T = A A= T TA = AT = TTA AAT TAT ATA TAA ATT

Constant =

= T = =TT T == T= T TTT T T=

Lisbon, Luxemburg, Madrid, Paris and Rome. The two monitored arrival dates were Monday, 11th of July 2(X)5, and Monday, 10th of October 2005. The price data for these two dates was collected on the last four Saturdays before these dates. For example, the collection dates for the arrival day Monday, 11th of July are the 18th of June, 25th of June, 2nd of July and 9th of July, as shown in Fig. 4 part a.
countdown
5
1

10
1

15
1

20

25

n lltt

Jul 1

Aug 05

Aug 25 arnvaldate

Sep 14

Okt 04

Fig. 4 a Collection dates for Monday, 1 Ith of July, b Data coUeclion points for Vjennait Arrival dates and remaining days before arrival date (countdown)

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The collection took place on all Saturdays from the 23th of April, 2005, to the 8th of October, 2(K)5. Therefore, the study includes the period starting on Monday, Uth July, 2005, and ends with Monday, 10th October, 2(X)5. Data for Vienna includes all Mondays, Tuesdays, Wednesdays and Thursdays in the given time frame. For the following please refer to Fig. 4 part b. Data collection took place on Saturdays starting at 6 p.m. It usually took 4 h, dependent on the server response time and internet-related speed limitations. The study includes all hotels on hrs.com which offered a room for 4 consecutive data collection points in a 3-week time frame with the last available booking day 2 (for Mondays) to 5 (for Thursdays) days prior to the arrival date. A data set therefore includes four prices over a 3-week period. 5 Results and discussion 5.1 Collected data overview The study consists of 5,454 data sets for Vienna (53days) and 1,765 data sets for the other Euroland cities. These 1,765 monitored price development periods for the Euroland cities include the data of 1,120 hotels. The 1,120 hotels consist of 433 three star hotels, 533 four star hotels, and 154 five star hotels, as shown in Table 4: 5.7./ Hotel category The 5,454 monitored price development periods for Vienna include the data of 181 hotels. The 181 hotels consist of 64 three star hotels, 100 four star hotels and 17 five star hotels, as shown in Table 5:
Tttble 4 Euroland cities without Vienna-collected data sets and hotel category Hotel category 3 stars 4 stars 5 stars Total Percentage of hotel count 35 Hotel counl 64 100 17 181 Data sets 1.715 3053 686 5.454 Percentage of data sets 31 56 13 100

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9 100

Table 5 Vienna-collected data sets and hotel category Hotel category 3 stars 4 stars 5 stars Total Percentage of hotel counl 39 48 14 100 Hotel counl 433 533 154 1.120 Data sets 676 839 250 1.765 Percentage of data sets 38 48 14 100

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5.1.2 Hotel availability The number of available hotels on the last collection day 2,3,4 or 5 days before arrival date is shown in Fig. 5: As can be seen in Fig. 5 the number of available hotels on hrs.com for the given period was volatile. The minimum of offered hotels in the middle of September was probably due to a peak in the number of company trainings traditionally taking place in Austria in September and/or a peak in holiday makers in Vienna. Due to the usage of different distribution channels, hotel policy, being sold out, etc., the hotels contracted by hrs.com were not available on hrs.com for all ofthe 53 monitored arrival dates. The hotels were categorized according to their availability (Table 6): mostly available: for at least 37 (minimum) out of 53 monitored periods often available: available between 26 (min.) and 36 (max.) out of 53 monitored periods poorly available: available for less than 26 periods out of 53.

Table 7 gives an overview ofthe availability for the 181 Viennese hotels. 5.2 Pricing patterns 5.2.] Price .setting: Results for Euroland cities without Vienna For the Euroland cities without Vienna, Table 8 shows the price patterns found.

Fig. 5 Viennaavailable hotels for monitored arrival dates Table 6 Viennese hotels availability categorization according to the number of open booking periods Category Count Number of open booking periods Minimum Excellent availability Average availability Poor availability 59 62 60 37 26 1 Maximum 49 36 25 Mean 42 31 20

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54 Table 7 Viennese hotels: availability and hotel category Availability category Hotel category and hotel count Three star Excellent availability Average availability Poor availability Total 14 20 30 64
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Five star 12 4 1 17

Sum 59 62 60 181

33 38 29 100

Categorized pricing patterns for Euroland cities without Vienna Pricing trend pricing pattern Constant Decreasing Increasing Mixed

1,118(100%)

=^ T - T= TT T == T= T TT= TTT

148(37%) 103 (26%) 21 (5%) 92 (23%) 20 (5%) 12(3%) 2(1%)

== A = A = = AA A ^A = A AA^ AAA

58(41%) 35 (25%) 8(6%) 32 (23%) 3 (2%) 3(2%) 3(2%)

= TA = AT T= A TTA TA = TAT TAA A^ T AT = ATT ATA AAT

24 (22%) 15(14%) 15(14%) 5(5%) 18(17%) 4(4%) 2(2%) 10 (9%) 7(7%) 1(1%) 5(5%) 1 (1%) 107(100%)

Total 1,765

1.118 (100%)

398 (100%)

142 (100%)

As shown in the Tahle 8. all 27 pricing patterns were found for Euroland cities without Vienna. As only two pricing patterns were observed, we can neither distinguish the general price setting strategy for each individual hotel, nor distinguish whether an observed increased or decreased price is part of a dynamic pricing strategy. According to the interpretation for the mixed pricing pattern, hotels nsing a pre-fixed mixed pricing pattern, however improbable, will be regarded as dynamic pricing hotels. The existence of dynamic pricing leads us to the Hi. Hi: Hotels on the intemet distribution system hrs.com use dynamic pricing. We could find dynamic pricing for 107 out of 1,765 observed cases. Therefore, we can state without further investigation into the Viennese data: ResultiA: Dynamic pricing takes place on the intemet distribution system hrs.com. Since dynamic pricing takes place on the intemet distribution system hrs.com, we will further investigate the matter with; ^ Springer

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H4: Dynamic pricing hotels increase the frequency of price changes with the approach of the arrival date.

6 Price setting: results for Vienna For Vienna., Table 9 shows the price patterns found. As shown in the Table 9, all 27 pricing patterns where found. Since we monitored up to 52 out of 53 price settings, we can analyze the individual hotels for their pricing strategy. The abbreviations for the four categories are given in Table 10. 6.1 Pre-fixed constant pricing per stay The Viennese hotel availability and used pricing for the pricing strategy pre-fixed constant pricing is shown in Table 11. Regarding H2: Hotels on the internet distribution system hrs.com use pre-fixed constant prices per stay.

Table 9 Categorized pricing patterns for Vieona Pricing trend Coostant pricing pattern = Decrea.smg Increasing Mixed

3.431(100%) == T = TT T== TT = TTT

498(41%) 59(5%) 219(18%) 37 (3%) 5(0%)

== A

195 (35%) 38 (7%) 82(15%) 19(3%) 7(1%) 4(1%)

= TA = AT

91 (34%) 40(15%) 5(2%) 28(11%) 11 (4%) 10 (4%) 19 (7%) 8(3%) 3(1%) 3(1%) 4(2%) 266(100%)

= T = 337 (28%)

= 4 ^ 207 (38%) = AA A == A= A
AA =

T = A 44(17%)

TTA
TA =

T = T 50 (4%)

TAT TAA
A= T AT =

AAA

ATT ATA AAT

Total 5,454

3,431 (100%)

1,205(100%)

552 (100%)

Table 10 Abbreviations for categorized pricing behavior

Behavior Increasing Constant Mixed Decreasing

Abbreviation i

c m
d

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56 Table 11 Viennese hotel availability and used pricing for pre-fixed constant pricing Hotel availability Used pricings Global single price policy Season-dependent constant pricing Total Poor Average Excellent

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J

All

17 (77%) 5 (23%) 22(100%)

8 (73%) 3 (27%) 11(100%)

11 (85%) 2(15%) 13(100%)

36(78%) 10(22%) 46(100%)

We can state: Result H2: Viennese hotels use pre-fixed constant prices per stay: Global single price policy and season-dependent constant pricing.

6.2 Dynamic pricing The pricing behavior ofthe Viennese hotels using dynamic pricing is shown in Table 12. The abbreviations are explained in Table 10. The classification of dynamic pricing hotels only depends on the existence of mixed strategies. These could be found with all above shown hotels. Regarding H\: H]: Hotels on the internet distribution system hrs.com use dynamic pricing. We could find dynamic pricing for 60 out of 181 hotels (Table 14). Therefore, we can state: Result HIB: Dynamic pricing is a widely used strategy for Viennese hotels on hrs.com. The three main combinations of pricing found are: dc for decreasing and constant, idc for increasing, decreasing and constant and ic increasing and constant, as found in the following Table 13: . , Regarding H3:
Table 12 Viennese hotel availability and pricing behavior for dynamic pricing Hotel availability used pricing icna idem idm im dm dcm Total ,i Poor Average Excellent All

0(0%) 7(44%) 1(6%) 0(0%) 0(0%) 8 (50%) 16(100%)

1(4%) 13 (57%) 1(4%) 0 (0%) 1(4%) 7 (30%) 23 (100%)

1(5%) 15 (68%) 0(0%) 1(5%) 0(0%) 5 (23%) 22(100%)

2(3%) 35 (57%) 2(3%) 1(2%) 1(2%) 20 (33%) 61 (100%)

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Pricing strategies for perishable products Table 13 '^ennese hotel availability and used pricings for pre-fixed mixed pricing strategy Hotel availability used pricing dc d Poor Average Excellent All

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i ic idc
Total

13(59%) 2(9%) 0(0%) 2(9%) 5 (23%) 22(100%)

15 (54%) 0(0%) 0(0%) 7 (25%) 6(21%) 28 (100%)

9 (38%) 0(0%) 1(4%) 4(17%) 10(42%) 24(100%)

37 (50%) 2(3%) 1(1%) 13(18%) 21 (28%) 74(100%)

Table 14 Summary of Viennese hotel availability and used pricing strategie.s Hotel availability used pricing strategies Dynamic pricing (Icm, idem, idm, im. dm, dcm) Pre-fixed constant pricing (c) Pre-fixed mixed pricing (Idc, dc, d, ic, i) Total Poor Average Excellent All

16 (27%) 22 (37%) 22 (37%) 60(100%)

23 (37%) 21 (36%) 60 (33%) 13 (22%) 46(25%) 11(18%) 28 (45%) 25 (42%) 75 (41%) 62(100%) 59(100%) 181(100%)

H3: Hotels on the intemet distribution system hrs.com use pre-fixed mixed pricing per stay. We can state: Result H3: Pre-fixed mixed pricing is a widely used pricing strategy for Viennese hotels on hrs.com. The summary of hotel availability and hotel pricing strategy are given as follows (Table 14): Important result; All three pricing strategies are used by Viennese hotels on hrs.com. 6.3 General price change activity If we have a look at the data collection points as days remaining prior to the arrival date, for Mondays these are the days 23,16,9,2 days prior to arrival, for Tuesdays these are 24,17,10,3 days prior to arrival, for Wednesday 25,18,11,4 days prior to arrival and forThursdays 26,19,12,5 days prior to arrival. We can calculate the mean price activity by categorizing the found pricing, which underwent price changes between the data collection points. If a change was made, a price activity has been set and this is denoted with 1; if no price change was made it is denoted with 0. In the following Fig. 6, we find the chart showing the hotel pricing strategy and the price changing activity for Euroland cities and Vienna;
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<N _ O

8
-\^
^ \

c^ o

0.15

o o

in o o

o
O -

Legend EurolanO Vienna


1

100 Fig. 6

200

300 Countdown (h)

400

500

600

Price changing activity and hotel pricing strategies 5-23 days prior to arrival

In general, Euroland cities show a similar behavior in terms of the fraction of price changes taking place in comparison to Vienna.' As follows we further analyze the price changes for Vienna using the defined hotel pricing strategies dynamic and pre-fixed mixed: Regarding H4: Dynamic pricing hotels increase the frequency of price changes with the approach of the arrival date. After a comparison ofthe first and the last countdown data collection point for all four queried weekdays, we can state (Fig. 7): Result H4: Dynamic pricing hotels increase the frequency of price changes with the approach ofthe arrival date. The price change behavior of the different hotel availability clusters is given as follows in Fig. 8: The visual findings indicate that all three availability clusters follow a similar tendency; About 3 weeks (23-26 days) prior to arrival, for all hotel availahility clusters, we find approx. 10% price activity set. A few days (2-5 days) before arrival, we find approx. 20% price change activity, independent ofthe hotel availability cluster. The following bar chart is used to analyze the hotel availability cluster and hotel pricing strategy for the differences in price activity set (Fig. 9): We find a similar proportion of price activity level for the different hotel pricing strategies: the pre-fixed mixed pricing strategy cluster shows a price activity of approx. 10% while the dynamic pricing strategy cluster shows an activity level of approx. 30%.
Future in-depth statistical analysis will use an increased data base to account for the multiple dependencies (working day classes, week classes, hotels, etc.)

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Legend Dynamic Prefix mixed 100 200 300 Cotintdovm (h) 400 500 600

Fig. 7 Fraction of price changing activity and hotel pricing strategies 5-23 days prior to arrival for Vienna

Legend Poor aval lability Average availability Excellent availability 0 100 200 300 400 Countdown (h) 500 600

Fig. 8 Price change activity and hotel availability 5-23 days prior to arrival

Tbe price cbange behavior of the different hotel category clusters (3-5 star hotels) is given as follows in Fig. 10: The visual findings indicate that all three hotel category clusters follow a similar tendency: About 3 weeks (23-26days) prior to arrival, for all hotel category clusters, we find approx. 10% price activity set, with the 5 star hotels being less price active. A few days (2-5 days) before arrival, we find approx. 20% price change activity with the 4 star hotels being more price active. A bar chart (Fig. 11) is used to analyze the hotel category cluster and hotel pricing strategy for the differences in price activity set.
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J. SchOtze 0,5Availability D Poor B Average O ExceHert

*- 0,4

Prefix constant

Prefix mixd

Dynwnic

Hotel price strategy Fig. 9 Hotel pricing strategy cluster: availability and price activity

Legend 3-sEar holals a-stsr noteis 5-siar hotels I 100

300 Countdown (h)

Fig. 10 Price change activity and hotel category 5-23 days prior to arrival

We find a similar proportion of price activity level for the different hotel pricing strategies: The pre-fixed mixed pricing strategy cluster shows a price activity level of approx. 10% while the dynamic pricing strategy cluster shows an activity level of approx. 30%. 6.4 Relative price change i

We analyze the relative price change of the pricing pattern for the pre-fixed mixed and the dynamic pricing cluster. For that purpose we use the mean modulus of ail price
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Pnlix conitani

Prefix mixed

Dynamic

Hotl pric strategy Fig. 11 Hotel pricing strategy cluster hotel category and price activity

o _

oo \
0 to -

CN

Legend o -
0

Prefix mixed
100 200 300 Countdown (h) 400 500 600

Fig. 12 Mean modulus of relative price change and hotel pricing strategy 5-23 days prior to arrival

changes for the analyzed data sets. All pricing patterns are categorized into the pricing strategy clusters pre-fixed mixed and dynamic. The pricing strategy cluster and the mean modulus of relative price change is given in Fig. 12. ^ Springer

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0
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Legend Poor availability Average availability Excellent availability 100 200 300 Countdown (h) 400 500 600

Fig. 13 Mean modulus of relative price change and hotel availability 5-23 days prior to arrival

We find the same general falling trend for pre-fixed mixed pricing and for dynamic pricing. While the pricing pattern for the pre-fixed mixed pricing strategy starts witb an average of about I/IO price change activity 23 days prior to arrival, the pricing pattern ofthe dynamic pricing strategy shows about 1/5 price changes at the beginning of the monitored period. The mean modulus of relative price change of the different hotel availability clusters is given in Fig. 13. The visual findings indicate that all three availability clusters follow a similar trend: about 3 weeks (23-26days) prior to arrival, for all hotel availability clusters, we find approx. 2% mean modulus of relative price changes, with the poor availability cluster showing a lower mean modulus of relative price change. A few days (2-5 days) before arrival, we find approx. 4% mean modulus of relative price change, with the poor availability cluster showing a lower mean modulus of relative price change. A bar chart is used to analyze the hotel availability cluster and hotel pricing strategy for the differences in mean modulus of relative price changes (Fig. 14): We find a similar proportion of mean modulus of relative price changes for the different hotel pricing strategies: The pre-fixed mixed pricing strategy cluster shows a price activity of approx. 2% while tbe dynamic pricing strategy cluster shows approx. 5% mean modulus of relative price changes, with a lower figure for the poor availability cluster and a higher for the excellent availability cluster. The mean modulus of relative price change ofthe different hotel category clusters is given in Fig. 15. The visual findings indicate that to a certain extent all three hotel availability clusters follow a similar trend: about 3 weeks (23-26days) prior to arrival, for all hotel category clusters, we find approx. 2% mean modulus of relative price changes with
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Fig. 14 Hotel pricing strategy cluster: hotel availability and mean modulus of relative price change

Legend 3-star hotels '^-star hotels 5-star hofels


100

200

300 400 Counldown (fi)

500

600

Fig. 15 Mean modulus of relative price change and hotel category 5-23 days prior to arrival

the 5 star hotel cluster showing a lower mean modulus of relative price changes and the 4 star hotel cluster showing a higher mean modulus of relative price changes. A few days (2-5 days) before arrival, we find approx. 3-5% mean modulus of relative
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i

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Fig. 16 Hotel pricing strategy cluster: hotel category and mean modulus of relative piice change

price change with the poor availability cluster showing a lower mean modulus of relative price change and the 4 star hotel cluster a higher mean modulus of relative price change. The following bar chart is used to analyze the hotel category cluster and hotel pricing strategy for the differences in mean modulus of relative price changes (Fig. 16); We find a similar proportion of mean modulus of relative price changes for the different hotel pricing strategies: The pre-fixed mixed pricing strategy cluster shows a mean modulus of relative price change of approx. 2% while the dynamic pricing strategy cluster shows 5% mean modulus of relative price changes with a higher figure for the 5 star hotel cluster.

7 Conclusion The purpose of this paper is to analyze pricing strategies for perishable products: It focuses on Vienna and the internet distribution system Hotel Reservation System hrs.com. The results include the identification of different pricing clusters with regard to hotel category and hotel availability over a 22-day period for Vienna and cities from all Euroland countries, mostly the capitals. A general comparison of used pricing patterns and price change activity in the countdown to the arrival date showed the similarity of the Viennese hotel market on hrs.com with the aggregated hrs.com data from Euroland capitals. As a result of all found pricing patterns, Viennese hotels could be categorized according to their pricing strategies. The used pricing strategy clusters were identified as dynamic pricing, pre-fixed constant pricing and pre-fixed mixed pricing.
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For Vienna, the results include: Dynamic pricing cluster: Dynamic pricing is a widely used strategy for Viennese hotels on hrs.com. Pre-fixed constant pricing cluster: Viennese hotels use pre-fixed constant prices per stay: Global single price policy and season-dependent constant pricing. Pre-fixed mixed pricing cluster. Pre-fixed mixed pricing is a widely used pricing strategy for Viennese hotels on hrs.com. Dynamic pricing hotels increase the frequency of price changes with the approach of the arrival date.

Therefore we summarize: Three pricing strategies are used by Viennese hotels on hrs.com: dynamic pricing, pre-fixed constant pricing and pre-fixed mixed pricing .All three are widely used according to the results ofthe study. The dynamic pricing and pre-fixed constant pricing were found to differ in relation to the number of price changes made, the mean modulus of the relative price changes made.

Apart from giving insight into the application of general packaging options, most imporiantly the study gives Viennese hotels the opportunity to decide when to commence, stop or continue to use internet distribution channels like brs.com, whether to review their general pricing strategy, whether to review their own fraction of price changing activity in comparison to the peer hotels in terms of availability and hotel category, whether to review their percentual price changes in comparison to their peer hotels in terms of availability and hotel category.

This study provides the first framework of a series for the analysis of the collected data, which include room rate, breakfast price, location information (distance to the center, the airport, the next station, and the motorway). This study could provide the base for future research with an extension ofthe observed period, a larger geographical coverage, the inclusion of more distributors and/or distribution channels and inclusion of estimations of previous demand based on an annual comparison. References
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