Lodging, hotel, cancellation policy, personal fairness, procedural fairness, distributive fairness, utility theory, mental accounting


The objective of the study was to examine the relationships between the concepts of personal fairness and social fairness and hotel cancellation policies. These relationships will be explored using the framework of Prospect Theory in terms of consumer patronage (willingnessto-purchase and word-of-mouth). This study begins with a brief history of the development of the lodging industry in the United States from inns and taverns to the modern hotel industry that is a critical sector of the hospitality and tourism economy. Current statistics are provided regarding the U.S. and Central Florida hotel industry in order to provide both a national and local economic perspective. The study also provides relevant statistics regarding U.S. domestic traveller information. The included literature review consists of concepts of mental accounting theory, economic utility theory, prospect theory, personal fairness, social fairness, and consumer patronage. The study also discusses how the lodging industry is unique in its implementation of reservation cancellation policies when compared against other industries. Research regarding merchandise return policies is also discussed here. The study was designed to investigate three separate components of both personal and social fairness. The first component investigated the effects of hotel rate price increases and discounts on personal fairness when compared against an existing reference price. The second component studied the perceptions of social fairness on three established hotel cancellation policies. The third component introduces a treatment of distributive and procedural fairness violations as a moderator to observe the effects on consumer patronage for the same three hotel cancellation policies. iv The data were collected from 415 hotel guests staying in Central Florida hotels near the Orlando international airport using an experimental method which provided different written scenarios regarding hotel pricing and three different hotel cancellation policies. The data was then analyzed using Analysis of Variance (ANOVA), MANOVA and Tukey’s Post Hoc test to provide results that allowed the comparison of effects on each in terms of consumer patronage. The study results indicated that that price increases against established reference prices had a significant negative effect on consumer patronage whereas discounts of the same magnitude had a significant effect only in the middle range. Included smaller and large discounts did not have a significant effect on consumer patronage outside of the middle range. The study results also indicated that there was significant difference in consumer patronage between an Open cancellation policy and a 48 Hour Cancellation Policy. There is a significant difference in consumer patronage when a No Refund policy is compared against both the Open Cancellation Policy and the 48 Hour Cancellation Policy. The study results also show that a violation of either Distributive Fairness or Procedural Fairness has a significant negative effect on consumer patronage for both an Open Cancellation policy and 48 Hour Cancellation Policy. However, when Distributive Fairness or Procedural Fairness violations are introduced as a moderator, there is no significant effect on a No Refund Cancellation Policy. The study and its ensuing results are of importance to the academic community in that it provides additional scholarly support to both Prospect Theory and the theory of mental accounting and the roles that each plays in consumer behavior. From an industry practitioner perspective, the current results provide insight into hotel consumer’s attitudes regarding rate increases/ discounts and the implementation of the three different hotel cancelation policies. The v results can be utilized to provide justification and guidance in altering or establishing hotel cancellation policies that hotel consumers consider to be fair.


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Graduation Date





Parsa, H. G.


Doctor of Philosophy (Ph.D.)


College of Education and Human Performance

Degree Program

Education; Hospitality Education








Release Date

May 2012

Length of Campus-only Access


Access Status

Doctoral Dissertation (Open Access)


Rosen College of Hospitality Management


Dissertations, Academic -- Education, Education -- Dissertations, Academic