Faculty & Research
An Examination of Revenue Management in Relation to Hotels' Pricing Strategies
Vol 5 No 6
By: Cathy A. Enz Ph.D. and Linda Canina Ph.D.
Executive Summary: Most hotels in the United States use revenue management, regardless of their pricing strategy relative to their competitive set. However, revenue management is executed more closely on average by hotels that price above their competitive set than by those who price below their competitive set.
A study of over 6,000 hotels in all market segments found that virtually all hotels adjusted their rates in association with changes in occupancy. Although revenue management was nearly universal, hotels in certain market segments were less likely to adjust rates with occupancy and some simply did not do so. Mid-market hotels were heavily involved in revenue management, for instance, while many economy-segment properties apparently did not use this strategy.
When the sample was divided according to pricing strategy, revenue management remained a nearly universal strategy. With regard to pricing strategy, some properties maintain their rates at a premium to those of their immediate competitors, while other hotels set room rates slightly below those of competitors (and others, much lower). Hotels that priced below competitors demonstrated strong use of revenue management, as did hotels that set their room rates above those of their competitors. The chief exception to the use of revenue management was certain groups of economy hotels. At the other end of the scale, luxury properties that price well below their competition constitute another group that does not seem to be applying revenue-management strategies.
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Other Reports or Articles You May Find of Interest
- Understanding Switchers and Stayers in the Lodging Industry by Iselin Skogland and Judy Siguaw, Ph.D.
- Why Discounting Doesn't Work: The Dynamics of Rising Occupancy and Falling Revenue among Competitors, by Cathy A. Enz, Ph.D., Linda Canina, Ph.D., and Mark Lomanno
About Cathy A. Enz Ph.D.
Cathy A. Enz is the Lewis G. Schaeneman Jr. Professor of Innovation and Dynamic Management and a full professor in strategy. She recently served as Associate Dean for Industry Research and Affairs, and served as the Executive Director of the school’s Center for Hospitality Research from 2000-2003. Dr. Enz has published over eighty journal articles, book chapters, and three books in the area of strategic management. Her research has been published in a wide variety of prestigious academic and hospitality journals such as The Administrative Science Quarterly, The Academy of Management Journal, The Journal of Service Research, and The Cornell Hospitality Administration Quarterly. Dr. Enz teaches courses in innovation and strategic management. In addition, she developed The Hospitality Change Simulation, a learning tool for the introduction of effective change, which is available as an online education program of e-Cornell. Three additional courses in hospitality strategic management will be available through e-Cornell in 2008. Dr. Enz also presents numerous executive programs around the world, consults extensively in North America, and serves on the Board of Directors of two privately owned hotel companies. Prior to her academic activities, Dr. Enz held several industry positions including strategy development analyst in the office of corporate research for a large insurance organization, and operations manager responsible for Midwestern United States customer service and logistics in the dietary food service division of a large U.S. health care corporation. Dr. Enz received her Ph.D. from the Fisher College of Business at Ohio State University, and taught on the faculty of the Kelley School of Business at Indiana University prior to arriving at Cornell in 1990.
For more information visit http://www.hotelschool.cornell.edu/research/facultybios/faculty.html?id=27
About Linda Canina Ph.D.
Linda Canina is an associate professor in the School of Hotel Administration's Finance, Accounting, and Real Estate department. There, she teaches undergraduate and graduate courses in corporate finance. Canina also serves as editor of the Cornell Hospitality Quarterly. Her research interests include asset valuation, corporate finance and strategic management. She has expertise in the areas of econometrics, valuation, IPO's, payout policy, mergers and acquisitions, options and the hospitality industry. Canina's current research focuses on strategic decisions and performance, the relationship between purchased resources, human capital and their contributions to performance, the relationship between various liquidity measures and profitability, and measuring the adverse selection component of the bid/ask spread. Her recent publications include: "Agglomeration Effects and Strategic Orientations: Evidence from the U.S. Lodging Industry" in the Academy of Management Journal. Canina's other work has appeared in the Journal of Finance, Review of Financial Studies, Financial Management Journal, the Journal of Hospitality and Tourism Research, and the Cornell Hotel and Restaurant Administration Quarterly. She holds a Ph.D. degree from New York University.
For more information visit http://www.hotelschool.cornell.edu/research/facultybios/faculty.html?id=10
