The effect of time on hotel pricing strategy

Abstract

Tourist product distribution over the Internet is encouraging companies to implement dynamic pricing policies. The aim of this article is to present an empirical model of the dynamics of room prices in tourist resorts on the Catalan coast. We estimate a discrete time duration model for the probability of a price change occurring at any particular time and a count model for the number of price changes occurring over the period. The results suggest that the largest marginal effects are caused by a change in the location, the hotel category and the market share.

Acknowledgements

This research has benefited from research grant ECO2008-06395-C05-01 from the Spanish Ministry of Educational Science.

Notes

¹The assumption of equality between the mean and the variance which gives rise to the Poisson model was rejected, for our data, at the significance level of 5% by means of the usual test for the alpha parameter (H ₀: α = 0).

²The total hotel supply in these 3 towns consists of 127 hotels.

³In fact, there was a price change in 7.95% of the weeks, because, as mentioned earlier, 34.67% of the hotels made more than one price change.