Authors: Israeli, Aviad A.; Brown, J. Randall

Source: Tourism Economics, Volume 10, Number 1, 1 March 2004 , pp. 5-22(18)

Publisher: IP Publishing Ltd

Abstract:

Pricing decisions in the hospitality industry are subject to a number of different and competing considerations, including economic (profit), marketing (what price will guarantee a sale), yield, wear and tear on the facility, the owner's preferences, and the manager's preferences. Since a manager balances all these conflicting considerations in determining his or her own preferences, the manager's preferences should be used as the starting point for generating a pricing policy. Specifically, the manager's preferences for the two substitutable attributes - the number of rooms sold and the average room rate - are modelled using the Constrained Choice Table (CCT) to collect the specific preferences and the Linear-Fractional model to fit linear indifference curves with non-constant rates of substitution (unequal slopes) to the CCT data. This model combined with the marginal cost per room is used as a starting point to develop and evaluate different pricing policies. The consequences of using an average room rate, same value room rate pricing policy for two different types of managers, one occupancy level sensitive and the other average room rate sensitive, are evaluated.

Keywords: DECISION MAKING; PREFERENCES; HOSPITALITY; YIELD; SERVICE

Document Type: Regular paper

DOI: http://dx.doi.org/10.5367/000000004773166565

Publication date: 2004-03-01

More about this publication?

• Tourism Economics, published bimonthly, is a peer-reviewed journal devoted to the economics and finance of tourism worldwide. Articles address the components of the tourism product (accommodation; restaurants; merchandizing; attractions; transport; entertainment; tourist activities); and the economic organization of tourism at micro and macro levels (market structure; role of public/private sectors; community interests; strategic planning; marketing; finance; economic development).

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