Are all online hotel prices created dynamic? An empirical assessment

Abstract

Abstract:Understanding how tourist firms set their online prices is important due to their growing reliance on Online Travel Agencies (OTA). Little is known, however, about whether differences exist in the online pricing approaches adopted by hotels using an OTA. The article tests, using a big data approach, whether the diffuse narrative of a pervasive presence of dynamic pricing provides a realistic description of hotels' pricing behavior and thus challenges the view that dynamic pricing should be considered the prevailing norm for the industry. The evidence suggests a heterogenous attitude across hotels, with uniform pricing being more widespread in most hotels of our sample, namely, the 3-star or less, while dynamic pricing is more likely applied in higher quality hotels.

Much Ado About Nothing? Online Platform Price Parity Clauses and the EU Booking.com Case

“…Our short-run analysis confirms the existence of a certain degree of price sluggishness. 12 Despite the common wisdom that online prices should promptly adjust to any possible external shock, convincing evidence of the scarce propensity of hotels to change their prices was also obtained by Abrate and Viglia (2016) and Melis and Piga (2017). More generally, similar results on uniform pricing and sticky adjustments are also documented in the context of retail markets by Gorodnichenko, Sheremirov and Talavera (2018), DellaVigna and Gentzkow (2017), and Cavallo (2017), inter alios.…”

“…Moreover, a higher review score on Booking.com may signal better managerial practices, including revenue management (Hollenbeck, 2017). Finally, high-star rated hotels are more likely to engage in active pricing (Melis and Piga, 2017).…”

Dynamic pricing in different Spanish resort hotels

“…Other studies include real data but do not estimate any demand behavior variation across the booking horizon (Aziz et al, 2011; Bayoumi et al, 2013), the typical way of customer segmentation. Finally, other empirical papers confirm the use of dynamic pricing practices in the sector studying the information of hundreds of hotels located in different destinations (Abrate et al, 2012, 2019; Melis and Piga, 2017), most of them use the hedonic pricing model to assess the variable that affect prices.…”

The effect of the Las Vegas Strip on hotel prices: A hedonic approach

“…While there is a paucity of investigations that include square footage of room, many have included hotel-level characteristics such as "hotel size" (often proxied by the number of hotel roomse.g. see Balaguer and Pernías, 2013;Becerra et al, 2013;Chen and Chang, 2012;Hung et al, 2010;Mohammed et al, 2019;Zhang et al, 2011b) and "hotel quality," proxied as a star rating (Andersson, 2010;Bull, 1994;Espinet et al, 2003;Israeli, 2002;Kuminoff et al, 2010;Melis and Piga, 2017;Rodríguez-Algeciras and Talón-Ballestero, 2017;Sánchez-Pérez et al, 2019;Thrane, 2005). We include both of these hotel-level characteristics here and expect their effect to be positive.…”