Does Discounting Work in the Lodging Industry?

    Authors

    R. Croes;K. J. Semrad

    Comments

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    Abbreviated Journal Title

    J. Travel Res.

    Keywords

    hotels; discounting; rational expectations theory; error correction; model; AUTOREGRESSIVE TIME-SERIES; UNIT-ROOT; COINTEGRATION ANALYSIS; PERISHABLE PRODUCTS; DEMAND; TOURISM; PRICE; REGRESSION; VECTORS; HOTELS; Hospitality, Leisure, Sport & Tourism

    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.

    Journal Title

    Journal of Travel Research

    Volume

    51

    Issue/Number

    5

    Publication Date

    1-1-2012

    Document Type

    Article

    Language

    English

    First Page

    617

    Last Page

    631

    WOS Identifier

    WOS:000307449000008

    ISSN

    0047-2875

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