Hedonic Pricing of Hotel Rooms

-------------------------------------------------

Willingness to Pay Extra for Love in Paris:
A Hedonic Approach to Pricing Hotel Rooms in Paris
-------------------------------------------------

ABSTRACT
Purpose – This study aims to investigate the impact of a variety of hotel amenities on the rates charged for hotel rooms in Paris
Methodology/Approach – The authors employ a hedonic pricing method and use online data obtained from 128 hotels from TripAdvisor.com and the hotels’ respective homepages
Practical implications – The findings can maximize utility by (1) helping consumers identify those amenities of hotel rooms that they have to pay for as opposed to those that they do not; and (2) providing hotel managers with a useful instrument for designing effective pricing and investment strategies
Originality/Value – This study is the first to apply the hedonic pricing method to the hotel industry in Paris to investigate influence of ‘traditional’ hotel characteristics and online ‘word-of-mouth’ reviews on hotel pricing
References

Andersson, D. E. (2008). “Hotel attributes and hedonic prices: An analysis of internet-based transactions in Singapore’s market for hotel rooms,” The Annals of Regional Science. Vol. 44(2): 229-40.

Antoniou, C., A. de Palma and N. Picard. (2010). “Econometric Models,” SustainCity. Working Paper 2.4, THEMA, Universite de Cergy-Pontoise, 1-27.

Bull, A. O. (1994). “Pricing a motel’s location,” International Journal of Contemporary Hospitality Management. Vol. 6: 10-15.

Cassel, E. and R. Mendelson. (1985). “The choice of functional forms for hedonic price equations: comment,” Journal of Urban Economics. Vol. 18: 135-42.

Chen, C.-F. and R. Rothschild. (2010). “An application of hedonic pricing analysis to the case of hotel rooms in Taipei,” Tourism Economics. Vol. 16(3): 1-10.

Cho, M. and S. Jang. (2008). “Information value structure for vacation travel,” Journal of Travel Research. Vol. 47(August): 72-83.

References: Andersson, D. E. (2008). “Hotel attributes and hedonic prices: An analysis of internet-based transactions in Singapore’s market for hotel rooms,” The Annals of Regional Science. Vol. 44(2): 229-40. Antoniou, C., A Bull, A. O. (1994). “Pricing a motel’s location,” International Journal of Contemporary Hospitality Management. Vol. 6: 10-15. Cassel, E. and R. Mendelson. (1985). “The choice of functional forms for hedonic price equations: comment,” Journal of Urban Economics. Vol. 18: 135-42. Chen, C.-F. and R. Rothschild. (2010). “An application of hedonic pricing analysis to the case of hotel rooms in Taipei,” Tourism Economics. Vol. 16(3): 1-10. Cho, M. and S. Jang. (2008). “Information value structure for vacation travel,” Journal of Travel Research. Vol. 47(August): 72-83. Espinet, J. M., M. Saez, G. Coenders and M. Fluvia. (2003). “Effect on prices of the attributes of holiday hotels: A hedonic prices approach,” Tourism Economics. Vol. 9: 165-77. “France remains the world’s number one tourism destination,” The official France website. Online access: www.france.fr/en/knowing/economy/overview/france-remains-worlds-number-one-tourism-destination (last accessed: 13 April 2012). Freeman, A. M. (1993). “The measurement of environmental and resource values – Theories and Methods,” Resources for the Future. Washington, D.C. Halvorsen, R. and H. Pollakowski. (1981). “Choice of functional form for hedonic price equations,” Journal of Urban Economics. Vol. 10: 37-47. Hartman, R. S. (1989). “Hedonic methods for evaluating product design and pricing strategies,” Journal of Economics and Business. Vol. 22: 185-203. Hung, W.-T., J.-K Israeli, A. A. (2002). “Star rating and corporate affiliation: Their influence on pricing hotel rooms in Israel,” International Journal of Hospitality Management. Vol. 22(4): 405-24. Kennedy, P. (1985). A Guide to Econometrics. Cambridge: MIT Press. Law, R., Q. Ye and Z. Zhang. (2011). “Determinants of hotel room price: An exploration of travelers’ hierarchy of accommodation needs,” International Journal of Contemporary Hospitality Management. Vol. 23(7): 972-81. Littlejohn, D. and S. Roubi. (2004). “What makes hotel values in the UK? A hedonic valuation model,” International Journal of Contemporary Hospitality Management. Vol. 16(3): 175-81. Lockyer, T. (2005). “The perceived importance of price as one hotel selection dimension,” Tourism Management. Vol. 26(4): 529-37. Monty, B. and M. Skidmore. (2003). “Hedonic pricing and willingness to pay for bed and breakfast amenities in Southwest Wisconsin,” Journal of Travel Research. Vol. 42: 195-99. Mulligan, G.F. and P.J. White. (2002). “Hedonic estimates of lodging rates in the four corners regions,” The Professional Geographer. Vol. 54: 533-43. Ogut, H. and B. K. O. Tas. (2011). “The influence of internet customer reviews on the online sales and prices in hotel industry,” The Services Industries Journal. Vol. 32(2): 197-214. Rosen, S. (1974). “Hedonic prices and implicit markets: Product differentiation in pure competition,” Journal of Political Economy. Vol. 82: 34-55. Sirmans, S. G., D. A. Macpherson and E.N. Zietz. (2005). “The composition of hedonic pricing models,” Journal of Real Estate Literature. Vol. 13(1): 1-44. Snyder, S. A, M. A. Kilgore, R. Hudson and J. Donnay. (2006). “Determinants of forest land prices in Northern Minnesota: A hedonic pricing approach,” Forest Sciences. Vol. 53(1): 25-36. Thrane, C. (2007). “Examining the determinants of room rates for hotels in capital cities: the Oslo experience,” Journal of Revenue and Pricing Management. Vol. 5(4): 315-23. “Tourism statistics at regional level,” European Commission eurostat. Online access: http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Tourism_statistics_at_regional_level (last accessed: 13 April 2012). “Tourism, a key sector in the French economy,” The official French website. Online access: www.france.fr/en/knowing/economy/overview/tourism-key-sector-french-economy (last accessed: 13 April 2012). Appendix