Faculty & Research
Cornell Study Says Customers Want Best-available-rate Pricing for Multiple Night Stays
Joe Strodel, Jr., 607-255-4646, js343@cornell.edu
FOR IMMEDIATE RELEASE:
Cornell Study Says Customers Want Best-available-rate Pricing for Multiple Night Stays
Ithaca, NY, May 5, 2005 -- A new report published by The Center for Hospitality Research at Cornell found that travelers preferred being given variable rates for their multiple night hotel stays, in contrast to the long-time industry practice of quoting a single, blended rate. The report, Best-available-rate Pricing at Hotels: A Study of Customer Perceptions and Reactions, was co-written by Kristin V. Rohlfs, School of Hotel Administration Ph.D. candidate, and Cornell Professor Sheryl E. Kimes, Ph.D.
Variable pricing is a popular revenue management technique that hotel managers use to set different nightly rates for the same room based on expected room demand. But the practice is confusing to customers. Best-available-rate (BAR) pricing attempts to reduce that confusion by guaranteeing that guests are quoted the lowest available rate for each night of a multiple-night stay. As a result, instead of paying the same price for each room-night, the guest would pay different prices each night.
The Cornell study surveyed 153 travelers to measure their reactions to BAR pricing. Respondents said that being given the best available rate for each night of their stay was more fair and honest than being asked to pay a single blended rate for a multiple-night stay.
However, customer reactions to non-blended and blended rates differed between frequent and infrequent travelers. Frequent travelers found no difference in fairness between blended and non-blended rates, while infrequent travelers perceived non-blended rates to be more favorable.
Key findings of the study:
- Managers should quote non-blended rates, such as those that accompany BAR guarantees. Managers should also pay close attention to the implementation of a BAR guarantee policy, as poor execution of a complex variable-pricing policy could compromise its acceptance.
- For multiple-night stays, customers preferred to be quoted individual rates, so that they know they are paying the lowest available nightly rates, rather than blended rates, which conceal the actual nightly rates.
- Managers should tailor the way that they quote rates and information to customers during the reservation process.
"The report really underscores that the consumer wants information presented in ways that differ from how the properties are currently delivering the information - clearly there is an opportunity here for the industry," said Jo-Anne Kruse, Executive Vice President, Human Resources, Travel Distribution Services Division, Cendant Corporation.
The report is available free of charge from the Cornell Center for Hospitality Research via the CHR website. To access the report, please click on: http://www.hotelschool.cornell.edu/research/chr/pubs/reports/.
About the Center for Hospitality Research
A unit of the Cornell School of Hotel Administration, The Center for Hospitality Research (CHR) sponsors research designed to improve practices in the hospitality industry. Under the lead of the Center's 40 corporate affiliates, experienced scholars work closely with business executives to discover new insights into strategic, managerial and operating practices. The Center also publishes the award-winning hospitality journal, the Cornell Hotel and Restaurant Administration Quarterly. To learn more about the CHR and its projects, visit http://www.thecenterforhospitalityresearch.org/.
CHR Partners and sponsors: AIG Global Real Estate Investment Corp., Cendant Corporation, Four Seasons Hotels and Resorts, HVS International, JohnsonDiversey, Inc., Kohinoor Group, Marsh's Hospitality Practice, Nestlé, Smith Travel Research, Southern Wine and Spirits of America, Inc., Taj Hotels Resorts and Palaces, and Thayer Group of Companies.
CHR friends: ARAMARK • DK Shifflet & Associates • ehotelier.com • Gerencia de Hoteles & Restaurantes • Global Hospitality Resources • Hospitality World • hospitalitynet.org • Hotel Asia Pacific • Hotel China • Hospitality Initiatives India • Hotel Interactive • Hotel Resource • International CHRIE • International Hotel and Restaurant Association • KPMG Japan/Global Management Directions • Lodging Hospitality • Lodging Magazine • Mobile MoneySaver • National Hotel Executive Magazine • PKF Hospitality Research • Resort+Recreation • The Resort Trades • RestaurantEdge.com • Shibata Publishing Co. • The Lodging Conference • TravelCLICK • UniFocus • WageWatch • Inc. • WiredHotelier.com