Revenue Management and Length-of-Stay-Based Room Pricing

Abstract

From a theoretical perspective, it is unclear whether hotels should offer a discount to customers who stay for longer periods, while it is rather clear that customers feel entitled to such length-of-stay (LOS)-based discounts. Accordingly, the major theoretical contribution of this study is to provide empirical evidence of hotels’ LOS-based pricing practices. The findings revealed that on average, hotels charge more per night when the guests stay longer. The finding that hotels increase their room rates as LOS increases, suggests that hotel revenue managers may want to address the customers’ misinformed expectations of getting lower prices for longer LOS and/or devise pricing or communication strategies to deal with it.

The More the Merrier? Understanding How Travel Frequency Shapes Willingness to Pay

“…Our results deliver a clear message to RM professionals in the hospitality industry. In addition to information from the booking request, such as length of stay (Riasi, Schwartz, Liu, & Li, 2017), pricing models should track individual customers' purchase patterns.…”

“…Our results deliver a clear message to RM professionals in the hospitality industry. In addition to information from the booking request, such as length of stay (Riasi et al, 2017), pricing models should track individual customers’ purchase patterns. Specifically, our results show that customers who have traveled 6 times in the past 2-year period are willing to accept higher room rates.…”

The impact of dynamic price variability on revenue maximization

“…Moreover, the data collection process was limited to single night reservations for a 4-week window horizon. As shown by Riasi, Schwartz Liu, and Li (2017), length-of-stay is an important variable for hotel revenue management, and the analysis of its interaction with dynamic price trajectory can represent a further direction of analysis. Price fairness has not been measured directly but instead elicited indirectly.…”

RoomTetris in room committing: why the role of minimum-length-of-stay requirements should be revisited

“…The hotel can set a rate high enough to offset the revenue generated by a longer stay and does not have to turn away a guest when there is availability. Empirical studies of the relationship between prices and LOS are analyzed in Riasi et al (2017), which discovers in their context that longer stays are correlated with higher daily prices, contrary to the belief that quantity discounts should always be applied. Recently, Barros and Machado (2010) measure a declining average in the tourism LOS, and people tend to travel more often but with shorter vacations.…”