Hotel Cancelation Policies, Distributive and Procedural Fairness, and Consumer Patronage: A Study of the Lodging Industry

ABSTRACT

Hotel cancelation policies (CancPols) are designed to minimize losses for the lodging companies. Liberal CancPols have resulted in revenue forecasting errors and eventual loss of revenues. The current study investigates the effect of different CancPols on consumer patronage and willingness to pay. In addition, the effects of distributive and procedural fairness in hotel CancPols are addressed. Results indicate that there is no loss of consumer patronage between open option policies and 48-hour CancPols. No-refund policies were found to be too restrictive and affected consumer’s patronage. Consumer patronage was also significantly affected when fairness policies were violated.

KEYWORDS:

• Hotels
• revenue management
• cancelation policies
• distributive fairness, procedural fairness

Additional information

Notes on contributors

Scott J. Smith

Scott J. Smith, PhD, is Assistant Professor, School of Hotel, Restaurant and Tourism Management, University of South Carolina, Columbia, SC 29208, USA (E-mail: [email protected]).

H.G. Parsa

H.G. Parsa, PhD, is Barron Hilton Professor of Lodging Management, Fritz Knoebel School of Hospitality Management, Daniels College of Business, University of Denver, Joy Burns Center, 2044 E. Evans Ave., Denver, CO 80208, USA (E-mail: [email protected]).

Milos Bujisic

Milos Bujisic, PhD, is Assistant Professor, Ohio State University, College of Education & Human Ecology, Department of Human Sciences, 115B Campbell Hall, 1787 Neil Avenue, Columbus, OH 43210, USA (E-mail: [email protected]).

Jean-Pierre van der Rest

At the time of writing this paper, Jean Pierre van der Rest, PhD, was a professor and director at the Research Centre, Hotelschool The Hague, International University of Hospitality Management, Brusselselaan 2, room 208, 2587 AH The Hague, The Netherlands. He is currently an Associate Professor with the Business Administration, Deputy Head of Department, Department of Business Studies, Institute of Tax Law and Economics, Leiden Law School, Leiden University, Steenschuur 25, Room B3.05, 2311 ES Leiden, The Netherlands (E-mail: [email protected]).