The study examines diverse pricing strategies among six competing hotels in Tsim Sha Tsui East, Hong Kong, highlighting the significant impact of online reservation systems on competition. It analyzes room rate fluctuations and identifies strategies such as time-based, market-based, and rate fences employed by these hotels. The findings suggest that utilizing varied pricing strategies can enhance revenue generation and provide insights for customers seeking the best rates.

1. ENTER 2015 Research Track Slide Number 1
An Investigation of Hotel Room Reservation: What
Are The Diverse Pricing Strategies among
Competing Hotels?
Sunny Sun a,
Rob Law a,
Markus Schuckert a, &
Lawrence Hoc Nang Fong b,
a School of Hotel and Tourism Management
The Hong Kong Polytechnic University, Hong Kong
b Faculty of Business Administration
University of Macau, Macau

2. ENTER 2015 Research Track Slide Number 2
Agenda
• Introduction
• Literature Review
• Methodology
• Results
• Implications & Conclusions

3. ENTER 2015 Research Track Slide Number 3
Introduction
Hotels commonly sell their rooms by taking
advantage of Internet platforms (i.e., official and
third party websites) as popular distribution
channels.

4. ENTER 2015 Research Track Slide Number 4
Introduction
Online reservation systems make it easier for
customers
 to obtain information
 to make reservation for hotel rooms (O’Connor &
Frew, 2004; Guo, Ling, Yang, Li, & Liang, 2013).
However, they also make the competition fiercer
for the hospitality industry, particularly for hotels
that are
 located near one another
 close and then strong competition.

5. ENTER 2015 Research Track Slide Number 5
Introduction
Nevertheless, no study has investigated the
diverse pricing strategies among competing
hotels.
Therefore, the current study investigated the
price fluctuations of six hotels located near each
other by checking the hotel room rates indicated
on their official websites.

6. ENTER 2015 Research Track Slide Number 6
Literature Review
Hotel room revenue management
 Hotels often charge different prices for different
customers to sell as many rooms as possible per night
and to maximize revenue.
 In general, hotels apply three approaches: single rate
approach (or time based approach), rates by room type
approach, and rate fence approach (Lee & Ng, 2001;
Hanks, Cross, & Noland, 2002; Carroll & Siguaw, 2003) .

7. ENTER 2015 Research Track Slide Number 7
Literature Review
Hotel room pricing strategy
 Hotels have adopted the common practice of
frequently altering their room rates based on
seasonality,
Competitors (Chen, Chang, & Langelett, 2014).

8. ENTER 2015 Research Track Slide Number 8
Literature Review
Steed and Gu (2005) provided four major hotel
room pricing methods:
 cost-based,
 market-based,
 a combination of cost- and market-based,
 best practice-based pricing strategies.

9. ENTER 2015 Research Track Slide Number 9
Literature Review
• If different types of pricing strategies are applied,
unrealized potential revenue can be reduced to
achieve the goal of revenue maximization (Qi,
Law, & Buhalis, 2013).

10. ENTER 2015 Research Track Slide Number 10
Literature Review
However, regardless of the room rate pricing
strategies applied by hotels, revenue is restrained
by room capacity (Pan, 2007).
Therefore, making the best use of diverse pricing
strategies to maximize revenue is an important
lesson that hotel managers should learn.

11. ENTER 2015 Research Track Slide Number 11
Methodology
What: Hotel room rate information (basic room
type)
When: Nov 1, 2013 – Jan 16, 2014.
How: was collected from the official websites of
the six competing hotels in Tsim Sha Tsui East,
Kowloon, Hong Kong .

12. ENTER 2015 Research Track Slide Number 12
Methodology
 General information of six targeted hotels
Hotel Name Hotel Type Star-rating # of Rooms
Hotel ICON Independent hotel 4-star 262
Kowloon Shangri-la International chain hotel 4-star 688
Regal Kowloon Domestic chain hotel 4-star 600
Hotel Nikko International chain hotel 4.5-star 463
Royal Garden Domestic chain hotel 4.5 -star 420
Inter-continental International chain hotel 5-star 570

13. ENTER 2015 Research Track Slide Number 13
Results
Room rate fluctuations among the six hotels
0
500
1000
1500
2000
2500
3000
A: Hotel ICON B: Kowloon Shangri-la
C: Regal Kowloon D: Hotel Nikko
E: Royal Garden F: Intercontinental

14. ENTER 2015 Research Track Slide Number 14
Results
Hotel Name Pricing Strategy
Hotel A Time-based + market-based + rate fence (e.g., early-bird discount
but booked before a specific date and non-refundable)
Hotel B Time-based + market-based
Hotel C Time-based + market-based (more fluctuations)
Hotel D Time-based + market-based (more fluctuations)
Hotel E Time-based + market-based
Hotel F Time-based + market-based (set a higher rate at the beginning)
 Pricing strategies of the six hotels

15. ENTER 2015 Research Track Slide Number 15
Results
Period characterized by lower rates
Hotel Name Advance-Purchase
Hotel A Last 41 days – 10 days
Hotel B Last 75 days – 29 days
Hotel C Last 75 days – 31 days
Hotel D Last 75 days – 22 days
Hotel E Last 38 days – 21 days
Hotel F Last 31 days

16. ENTER 2015 Research Track Slide Number 16
Implications & Conclusions
This study investigated the room rate fluctuations
of six hotels and contributed to the literature on
pricing strategy.
Practically, employing diverse pricing strategies
may assist hotel managers in selling more hotel
rooms and generating a large amount of
unrealized revenue.

17. ENTER 2015 Research Track Slide Number 17
Implications & Conclusions
Some insights for customers
 Customers have many choices in obtaining the lowest
room rate in early reservations (i.e., 30-day advance
purchase).
 Hotel room rates fluctuate most when it is close to
arrival date.

18. ENTER 2015 Research Track Slide Number 18