Room rate inconsistency across channels: lay of the land, the impact on booking behavior and revenue optimization
Date
2023
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Publisher
University of Delaware
Abstract
Existing research focuses on analyzing and comparing the pros and cons of rate parity and disparity, and points out the rationality of the coexistence of the two. This dissertation is the first try to thoroughly discuss the implementation of these two price strategies and the outcomes from the perspectives of hotels, distribution channels (particularly online distribution channels), and hotel consumers. It discussed how price strategy and brand integrity are related, what consumers think about rate parity and disparity, and whether online channels that enforce rate disparity can actually increase demand quantity. I believe this comprehensive and multifaceted research represents a breakthrough in the management of online distribution channels and pricing strategies for the hotel sector. The findings of this dissertation provide a practical reference for the revenue optimization of the hotel and online distribution channels. ☐ Through three chapters, this dissertation aims to explore hotel rate parity/disparity across online distribution channels global-wide, its relation to hotels’ brand equity dilution, hotel consumers’ response (booking intention) to it, as well as the sample hotels’ practical performance when the rate disparity is enforced among the online travel agents (OTAs). The three chapters that are included in the proposed dissertation structure will explore the different but related aspects of the main topic as follows: ☐ Chapter I mainly focuses on the rate parity/disparity performance among global hotels, and connect the result to brand equity dilution in the hotel industry. More specifically, this chapter will identify rate parity status and rate disparity levels of hotels in multiple popular travel destinations, determine contextual predictors of rate parity and different levels of disparity, and test if the identified levels and relations are universal or destination specific. The predictors to rate parity or disparity, as well as the levels of disparity, will be explored and determined. Meanwhile, a major motivation that has to do with recent calls in industry and academia is to move revenue management from merely tactical (short-term) decisions to a more strategic (long-term) approach. Through the rate parity/disparity performance comparison among samples, this chapter is expected to find the hidden relations between such rate strategies (parity/disparity) and brand integrity and contribute a concrete, empirically supported example of how hotels could relate the fundamental revenue management tactical price decision of parity with long-term strategic considerations. ☐ Chapter II in general is going to test consumers’ responses to the hotel rate disparity. It is common that, OTAs in China like to sell hotels at lower than standard rates to attract demand, such practices lead to rate disparity. It is well established that there are some advantages and disadvantages to hotels and OTAs when it comes to the rate parity/disparity dilemma, and this chapter will be the first attempt to explore this topic from the consumers’ side. It assesses consumers’ perceptions and booking intentions regarding rate disparities through an online survey. The premise of this study is that it believes consumers will react to the rate disparity differently. For instance, a group of consumers might prefer room rate disparity across distribution channels because of the potential benefit of finding a lower rate, but some others might prefer strict rate parity because it reduces confusion, uncertainty, and the cost of searching for better rates. Besides, this chapter will go deeper to explore the extent of rate disparity that is able to move consumers between channels and hotels, hopefully, determine the range of disparities that holds such effectiveness. In addition, whether consumers think the rate disparity affects their perception of hotel brand image will also be included in the survey, corresponding answers will provide insights into the potential impact of rate disparity practices and levels and brand equity, which could support the findings of chapter I from a different angle. ☐ Chapter III focuses on testing with real data, how the practices of rate parity and disparity impact distribution channels as well as the hotels’ demand, and the shifting of demand between channels and hotels. Five branded hotels in China contributed their actual business data including the reservation details from the main OTAs for this study, in the hope of finding answers to the following questions: 1) whether the impact of rate disparity on the demand attraction varies between low and high seasons; 2) Whether rate disparity can bring revenue optimization to OTAs and hotels and to what extent. ☐ In general, this dissertation will analyze hotels, OTAs, and hotel consumers in the context of rate parity and disparity, aiming to identify and better understand various aspects of this less-studied revenue management domain.
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Keywords
Business strategy, Distribution channel, Hotel brand integrity, Pricing, Rate parity, Revenue management