Hotel managers have long toiled over a course of action that would help them preserve hotel revenue during diminished demand seasons. They have responded to this challenge by discounting hotel room rates to sustain revenue and the means by which they could determine how discounting could increase hotel financial performance. That revenue would otherwise be lost when supply of rooms exceeds the demand. Their need to find a procedure to aid them in solving hotel occupancy problems that threaten that revenue has been a source of discussion throughout the industry. However, most of the studies are more prescriptive and normative in scope rather than focusing on providing explanation of the behavioral pricing of hotel managers. This paper departs from previous studies in that it aims at providing an explanation of the discounting behavior and claims that discounting works in the short-term in the case of a perishable product (hotel rooms).
discounting; perishable products; dynamic industry; seasonality; equilibrium; hotel manager; average price approach
The Dick Pope Sr. Institute for Tourism Studies
Rosen College of Hospitality Management
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Number of Pages
Croes, Robertico R. and Semrad, Kelly J., "Discounting Works: A Structural Approach to Understanding Why" (2009). Dick Pope Sr. Institute Publications. 2.