Predicting Random Level and Seasonality of Hotel Prices: A Latent Growth Curve Approach

Abstract

This article examines the effect on price of different characteristics of holiday hotels in the sun-andbeach segment, under the hedonic function perspective. Monthly prices of the majority of hotels in the five major tourist regions in the Spanish continental Mediterranean coast were gathered from May to October 1999, from the tour operator catalogues. Hedonic functions are specified as random-effect models and parameterized as structural equation models with two latent variables, a random peak season price and a random width of seasonal fluctuations. This model can be considered to be a latent growth curve model applied to seasonality rather than growth. Characteristics of the hotels were used as predictors of both latent variables in models fitted for each region separately. Hotel category, region, distance to the beach, availability of parking place, and room equipment have an effect on both peak price and seasonality. Three-star hotels have the highest seasonality and hotels located in the southern regions the lowest. This can be explained by a warmer climate in autumn in the southern regions. The model is fitted to the pooled data of all regions and expanded to include the effect of climate on prices. Hedonic functionsHotel pricing Seasonality Latent growth curve models Random-effect models the country such as culture, history, gastronomy, landscape, and monuments.The relevant attributes of holiday hotels include, among others, category, services and facilities available to guests (e.g. swimming pool, garden, television in the room), attributes of the region in which they are located and, given the particular segment aimed at, likely climate.The aim of this article is to study the effect on prices of the different characteristics or attributes of a holiday hotel in the sun-and-beach segment in Spain. This country constitutes the second tourist destination worldwide (Departament d'Indústria, 1999) and nowadays attracts mostly sun-seeking tourists, though the latest policies of both the industry and the government tend to foster other assets of

Do luxury room amenities affect guests’ willingness to pay?

“…Although a variety of approaches such as conjoint analysis (e.g., Goldberg et al, 1984), latent growth curves (e.g., Coenders et al, 2003), and quantile regression approach (e.g., Hung et al, 2010) have been applied, the hedonic pricing technique is one of the most widely employed technique for hotel room pricing from demand-side perspective. This technique views goods and services as collections of attributes or characteristics.…”

Basic characteristics of the fall tourism market

“…Many others discuss how to measure and analyze this phenomenon (e.g., Coenders, Espinet, & Saez, 2003;Goh & Law, 2002;Lundtorp, 2001;Nadal, Font, & Rossello, 2004). Fewer publications provide tourism marketers with the information they need to successfully increase visitation during non-peak periods to mitigate the effects of seasonality.…”

Hedonic Hotel Pricing and Quality Signals: Which are the Market Value Drivers in a Transition Phase?

“…High star ratings are a quality signal that consistently supports a premium pricing strategy (Bull, 1994;Israeli, 2002;Wu, 1999). Tour package studies also conclude that a hotel's star rating is an effective explanatory variable in their model (Aguiló, Alegre and Riera, 2001;Aguiló, Alegre, and Sard, 2003;Coenders, Espinet and Saez, 2003;Espinet, Saez, Coenders and Fluiva, 2003;Thrane, 2005). H 2 : A premium price relates to hotel star category, and a higher star ranking has a positive effect on price.…”

“…The critical discussion of previous studies focusing on the interaction among these quality measures informs the hypotheses. Carvell and Hervin (1990) and Coenders, Espinet and Saez (2003) stress the importance of hotel attributes. Although Espinet, Saez, Coenders and Fluiva (2003) list the relevant features of the hotel service provisions, the analysed studies indicate different roles played by some amenities (Monty and Skidmore, 2003;Thrane, 2007, White andMulligan, 2002).…”