Faculty & Research
Best-available-rate Pricing at Hotels: A Study of Customer Perceptions and Reactions
Vol 5 No 7
By: Sheryl E. Kimes Ph.D. and Kristin V. Rohlfs
Executive Summary: Variable pricing, or demand-based pricing, is a popular revenue management technique by which hotel managers set different nightly rates for the same room based on expected room demand. Operational policies and procedures associated with variable pricing may be confusing to customers, especially if they are not familiar with the practice. Best-available-rate (BAR) pricing is an attempt to reduce that confusion and to guarantee that the guest is 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. Understanding customers' perceptions of a BAR policy can help hotel managers better apply revenue management tools that maximize revenue without compromising guest satisfaction. This study surveyed 153 travelers to measure their reactions to BAR pricing and their perception of its fairness, acceptability, reasonableness, and honesty. We found that for a multiple-night stay, customers prefer to be quoted individual rates for each night (non-blended rates) rather than the average price per night over the stay (blended rates). Overall, customers found individual rates to be significantly more fair, acceptable, reasonable, and honest than blended rates. 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. The findings of this study can help managers more precisely tailor the way that they give rates and information to customers during the reservation process. Respondents 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. To ensure that customers have positive perceptions of price fairness and honesty, 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 the poor execution of a complex variable-pricing policy could compromise its acceptance.
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- Best-available-rate Pricing at Hotels: A Study of Customer Perceptions and Reactions By: Sheryl E. Kimes Ph.D. and Kristin V. Rohlfs
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Other Reports or Articles You May Find of Interest
- An Examination of Revenue Management in Relation to Hotels' Pricing Strategies by Cathy Enz, Ph.D. and Linda Canina
- Evolution in Electronic Distribution: Effects on Hotels and Intermediaries
- Yield Management, by Glenn Withiam
About Sheryl E. Kimes Ph.D.
Dr. Sheryl E. Kimes is a professor of operations management at the School of Hotel Administration. From 2005–2006, she served as interim dean of the Hotel School and from 2001-2005, she served as the school’s director of graduate studies. Kimes teaches restaurant revenue management, yield management and food and beverage management. She has been named the school’s graduate teacher of the year three times. Her research interests include revenue management and forecasting in the restaurant, hotel and golf industries. She has published over 50 articles in leading journals such as Interfaces, Journal of Operations Management, Journal of Service Research, Decision Sciences, and the Cornell Hospitality Quarterly. She has served as a consultant to many hospitality enterprises around the world, including Chevy’s FreshMex Restaurants, Walt Disney World Resorts, Ruby’s Diners, Starwood Asia-Pacific and Troon Golf. Kimes earned her doctorate in Operations Management in 1987 from the University of Texas at Austin.
For more information visit http://www.hotelschool.cornell.edu/research/facultybios/faculty.html?id=43
