Title

Does Discounting Work in the Lodging Industry?

Keywords

hotels, discounting, rational expectations theory, error correction model

Abstract

The central intent of this econometric case study analysis is to examine the relationship between discounting room rates and hotel financial performance. The study provides a theoretical framework that investigates the fundamentals of discounting and empirically assesses the efficacy of the discounting process in the lodging industry. The study adopts an error correction model to properly account for the dynamics of the industry. The results indicate that the variables may be modeled as an integrated process and which are linked in the long run and also possess a short-term relationship. The research findings suggest that discounting works both in the short term and the long term only if the discount rate exhibits serial correlation or nonstationary tendencies.

Publication Date

8-12-2012

Original Citation

Croes, R. and Semrad, K. (2012). Does Discounting Work in the Lodging Industry. Journal of Travel Research. 51(5), 617-631.

Number of Pages

617-631

Document Type

Paper

Language

English

Source Title

Journal of Travel Research

Volume

51

Issue

5

College

Rosen College of Hospitality Management

Location

Rosen College of Hospitality Management

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http://dx.doi.org/10.1177/0047287511434114

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