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  Posted by Center for Promoting Education and Research

The Pricing for Same-Day Arrival  in The Hotel Industry

According to the IBIS World Industry Report (2017), the U.S. hotel industry generated of the total revenue of $182.4 billion, and it will increase at an
annualized rate of 2.5% to $206.5 billion over the five years to 2022. The average room rate was $123.97 in 2016, an increase from $106.23 in 2012 and $101.70 in 2011(Smith Travel Research, 2017). Effective hotel room pricing is crucial to the success of hotel’s ability to maximize revenue; hotels have unique product characteristics: perishable inventory, relatively fixed capacity, time-varied demand, and relatively high fixed costs (Kimes,1989). A hotel’s price is indeed one of the main impacts on customers’ anywhere using their mobile devices, and veteran customers develop strategies to find the best deals based on their observation of room rates over time (Carrington,2013; Chen & Schwartz, 2008; Lee, Bai,&Murphy,2012).

A common topic of concern in the hotel industry has become the last-minute booking, as the need for more knowledge about late booking travelers becomes more significant. Several researchers have examined subjects related to travelers’ last-minute information search, booking, and decision behaviors (e.g.,Chen &Freimer,2004; Chen & Schwartz,2013; Jerath, Netessine, &Veeraraghavan,2010). However, little is known about hotels’ pricing decision policies and practices for a last-minute booking, although there has been a pressing need for extensive empirical research about the impact of timing on revenue management systems (Schwartz,2008).

The Impact of same day arrival pricing strategy

The objective of this study was to recognize the impact on pricing dynamics that elements such as reservation channels, price decision makers, and pricing for same-day and very late (after 11 PM) same-day arrival guests. The data was collected via a random sample from a list of 3,000 hotels provided by Smith Travel Research, with 283 responses being analyzed. Though this is an exploratory study, it fills a need in the hospitality literature for empirical research, as it reveals hotels’ pricing patterns for same-day arrival guests. This study enables managers and scholars to form a better understanding of hotels’ actual pricing for same-day arrival guests. Researchers can thus have a starting point for developing models that can empirically demonstrate what pricing strategies are effective for same-day arrival guests.

Recognizing these gaps in the hospitality revenue management literature on last-minute booking, this study attempted to understand the dynamics between reservation channels and pricing decision makers, and the actual pricing of same-day and very late (after 11 PM) same-day arrival guests
for weekdays, weekends, high-season and lowseason. Further, this study attempted to investigate the pricing differences of same-day and very late (after 11 PM) same-day arrival guests among different market segments (i.e., small, medium, vs. largely sized hotels and brand affiliated vs. independent operation hotels).Finally, this study focused on the practices and policies of the hotel’s revenue leaders in terms of last minute bookings.
The results of this study will enable scholars and managers to gain a better understanding of hotels’ pricing practices for same-day arrival guests, thus
providing researchers with a starting point by providing information for developing further models or theories that could empirically demonstrate pricing strategies for same-day arrival guests. While the results should be useful for hotel chains, the independent hotel owner, and management team will most greatly benefit from this information to implementing pricing policies and practices to optimize revenue and profitability.