04. Hotel Discounting

Linda Canina and Steven A. Carvell, Hotel Administration, found that hotel demand in large cities responds more to personal income than to changes in hotel prices. After analyzing the demand for rooms at 480 city-center hotels in 22 top U.S. metropolitan areas for the years 1989 through 2000, the researchers found that discounting hotel rates during recessions does not increase demand enough to increase revenue and that raising rates during good economic times does not diminish demand. This study of the effect of consumer confidence on hotel demand provides the first known connection between demand and consumers’ future expectations for income. It indicates that consumer confidence, income, and prices are factors for hotel operators to consider when estimating expected hotel demand.

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