The more, the merrier? Understanding how travel frequency shapes willingness to pay

Marta Nieto-Garcia, Pablo A. Muñoz-Gallego, Óscar González-Benito

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    Abstract

    Customers’ evaluation of hotel prices has received increasing attention in hospitality research. Beyond the specific attributes of the offer, internal norms related to prior experiences affect customers’ response to price. Drawing on the behavioral price literature, this study investigates the effect of travel frequency and reference price on the formation of travelers’ willingness to pay (WTP) for accommodation. The study presents a novel methodological approach introducing the concept of instantaneous indirect effect. Results offer support for an inverted U-shaped relationship between travel frequency and WTP, mediated by the internal reference price. WTP reaches its peak when the customer has booked an accommodation six times in the past two-year period. The findings provide clear implications for practitioners. Monitoring customers’ travel frequency and integrating it into dynamic pricing models will create a better alignment of room rates with travelers’ WTP, which will make revenue management techniques more customer-centric and, ultimately, enhance profitability.
    Original languageEnglish
    Number of pages15
    JournalCornell Hospitality Quarterly
    Early online date19 Jan 2020
    DOIs
    Publication statusEarly online - 19 Jan 2020

    Keywords

    • willingness to pay
    • travel frequency
    • reference price
    • dynamic pricing
    • instantaneous indirect effect
    • room rates

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