The impact of hotel attributes on room rate in star graded hotels in Colombo, Sri Lanka

https://doi.org/10.35912/joste.v2i3.557
Published: Sep 1, 2021

Abstract:

Purpose: The purpose of this study was to examine how the availability or absence of different hotel attributes affect the room rate during a given period. This study identified the impact of various hotel attributes on the room rate.

Research methodology: Published data on available hotel attributes, and room rates of selected room categories of star-graded hotels in Colombo district, Sri Lanka, were gathered online through booking.com. The Ordinary Least Squares (OLS) method was used to estimate the impact of key determinants under hotel amenities, quality signals, and locational attributes.

Results: The results revealed eleven key attributes of the room rate in star-graded hotels, illustrating the positive impact from seven determinants and the negative impact from four determinants. Hotel class or star grade was the most significant determinant in the room rate, which generally determines the pricing behavior and service quality and most of the attributes and characteristics in a hotel. Availability of a business center, location of the hotel, fitness center/spa, total number of rooms in the hotel, room size, and view from room also significantly determined the room rate.

Limitations: Booking.com, as the most popular Online Travel Agent (OTA) used in Sri Lanka, it was assumed that the information is frequently updated. The study was extended for the hotels in the Colombo district, and hence, the results were based on the point data, which may not be an islandwide representation or year through data.

Contribution: As theoretical applications are underused in pricing and revenue decisions in the Sri Lankan hotel sector, results will lead to advance the decision making of practitioners, and this study will be a complement to the lack of literature in the field of revenue management in Sri Lankan context and may encourage future researchers laying an inspiring beginning.

Keywords:
1. Revenue management
2. Room rate
3. Attributes
4. Hotel
5. Determinant
Authors:
1 . A.C.I.D. Karunarathne
Department of Tourism Studies, Uva Wellassa University, Badulla, Sri Lanka
2 . D A C Silva
Department of Economics, University of Colombo, Colombo, Sri Lanka
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How to Cite
Karunarathne, A., & Silva, D. A. C. (2021). The impact of hotel attributes on room rate in star graded hotels in Colombo, Sri Lanka. Journal of Sustainable Tourism and Entrepreneurship, 2(3), 159–170. https://doi.org/10.35912/joste.v2i3.557
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Issue & Section
Vol. 2 No. 3 (2021): March
Articles
References

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    Anderson, C. (2010). Presenting and evaluating qualitative research. American Journal of Pharmaceutical Education, 74(8), 1-7.

    Anderson, F. (2013). Determining room rates in Sweden - a hedonic prices approach of the stockholm hotel market. (Master Thesis)

    Bull, A. O. (1994). Pricing a motel's location. International Journal of Contemporary Hospitality Management, 6(6), 10-15.

    Carvell, S. A., & Herrin W. E. (1990). Pricing in the hospitality industry: An implicit market approach. FIU Hospitality Review. 8(2), 27-37. Cornel University.

    Castro, C., & Ferreira F (2015). Effects of hotel characteristics on room rates in Porto: a hedonic price approach. AIP Conference Proceedings.

    Chen, C., & Rothschild, R. (2010). An application of hedonic pricing analysis to the case of hotel rooms in Taipei. Tourism Economics. 16, 685–694.

    Coenders, G., & Espinet JM, Saez M (2003). Predicting random level and seasonality of hotel prices: A latent growth curve approach. Tourism Analysis, 8(1), 15-31.

    Corgel, J., & Lane, J., & Walls, A. (2013). How currency exchange rates affect the demand for U.S. hotel rooms. International Journal of Hospitality Management, 35, 78-88.

    Corgel, J. B., Liu, C. H., & White, R. M. (2013). Determinants of hotel property prices. Cornell real estate and finance working papers. Center for Real Estate and Finance. Cornell University School of Hotel Administration.

    Díaz, M. R., Díaz, R. R., Voltes, A. C. R., & Voltes, C. I. R. (2018). Analysing the relationship between price and online reputation by lodging category. Journal of Sustainability.

    Fleischer, A. (2012). A room with a view: A valuation of the mediterranean sea view. Tourism Management, 33(3), 598-602.

    Hung, W. T., Shang J. K., & Wang, F. C. (2010). Pricing determinants in the hotel industry: Quantile regression analysis, International Journal of Hospitality Management, 29(3), 378-384.

    Ilina, E., Kobyak, M., & Russian, P. (2015). The competitiveness of hotel facilities. Theory and practice. Journal of Environmental Management and Tourism.

    Işık, C., & Bilici, N. (2016). The analysis of hotel room rates using hedonic model: the case of erzurum. International Conference on Eurasian Economies.

    Israeli, A. A. (2002). Star rating and corporate affiliation: Their influence on room price and performance of hotels in israel. International Journal of Hospitality Management, 21(4), 405-424.

    Ivanov, S. (2006). Management of overbookings in the hotel industry – basic concepts and practical challenges. Tourism Today, 6. 2006.

    Ivanov, S. H. (2014). Hotel revenue management: from theory to practice. Zangador Ltd. Varna. Bulgaria.

    Kefela, M. S., & Blomskog S (2014). Determinants of hotel room rates in Stockholm: A hedonic pricing approach. Bachelor Thesis.

    Kim, J. W., Jang, S, & Kang S (2018). Why are hotel room prices different? Exploring spatially varying relationships between room price and hotel attributes. Journal of Business Research.

    Kimes, S. E., & Wirtz J (2003). Has revenue management become acceptable? Findings from an international study on the perceived fairness of rate fences. Journal of Service Research, 6(2), 125-135.

    Kimes, S. E. (2003). Revenue management: A retrospective. Cornell Hotel and Restaurant Administration Quarterly, 44(5/6), 131-138.

    Latinopoulos, D. (2018). Using a spatial hedonic analysis to evaluate the effect of sea view on hotel prices. Tourism Management, 65, 87-99.

    Lee S. K., Jang, S. (2012). Premium or discount in hotel room rates? The dual effects of a central downtown location. Cornell Hospitality Quarterly, 53(2).

    Masiero, L., Heo, C., & Pan, B. (2015). Determining guests' willingness to pay for hotel room attributes with a discrete choice model. International Journal of Hospitality Management.

    Masiero, L., Pan, B., & Heo, C. (2016). Asymmetric preference in hotel room choice and implications on revenue management. International Journal of Hospitality Management.

    Monty, B., & Skidmore, M. (2003). Hedonic pricing and willingness to pay for bed and breakfast amenities in Southeast Wisconsin. Journal of Travel Research, 42.

    Napierala, T., & Lesniewska, K. (2014). Location as a determinant of accommodation prices: Managerial approach. 7th World Conference for Graduate Research in Tourism, Hospitality and Leisure. Istanbul, Turkey.

    Paschalis, A., & Ioanna A. (2017). The contribution of view to the price of tourist accommodation: A hedonic pricing model. Cities and regions in a changing europe: challenges and prospects. Panteion University. Athens. Greece.

    Pawlicz, A., & Napierala T. (2017). The determinants of hotel room rates: An analysis of the hotel industry in warsaw- poland. International Journal of Contemporary Hospitality Management. 29(1).

    Rosen, S. (1974). Hedonic prices and implicit markets: Product differentiation in pure competition. Journal of Political Economy, 82, 34–55.

    Ruijgrok, E. C. M. (2006). The three economic values of cultural heritage: A case study in the netherlands. Journal of Cultural Heritage, 7(3), 206-213.

    Sainaghi, R. (2011). Revpar determinants of individual hotels: Evidences from Milan. International Journal of Contemporary Hospitality Management.

    Schamel, G. (2012). Weekend vs midweek stays: Modelling hotel room rates in a small market. International Journal of Hospitality Management, 31(4), 1113-1118.

    Schwartz, Z., & Cohen, E. (2004). Hotel revenue-management forecasting: Evidence of expert-judgment bias. Cornell Hotel and Restaurant Administration Quarterly, Sage Publications.

    Shoval, N. (2006). The geography of hotels in cities: an empirical validation of a forgotten model. Tourism Geographies: An International Journal of Tourism Space, Place and Environment, 8(1), 56-75.

    Thrane, C. (2005). Hedonic price models and sun-and-beach package tours: The Norwegian case. Journal of Travel Research, 43, 302–308.

    Thrane, C. (2007). Examining the determinants of room rates for hotels in capital cities: The Oslo experience. Journal of Revenue & Pricing Management.

    White, P. J., Mulligan, G. F. (2002). Hedonic estimates of lodging rates in the four corners regions. The Professional Geographer, 54, 533–543.

    Zhang, H., Zhang, J., Lu, S., Cheng, S., & Zhang, J. (2011). Modeling hotel room price with geographically weighted regression.

    Zhang, Z., Ye, Q., & Law, R. (2011). Determinants of hotel room price: An exploration of travelers' hierarchy of accommodation needs. International Journal of Contemporary Hospitality Management, 23(7).

  1. Abrate, G., & Viglia, G. (2016). Strategic and tactical price decisions in hotel revenue management. Tourism Management, 55, 123-132.
  2. Anderson, C. (2010). Presenting and evaluating qualitative research. American Journal of Pharmaceutical Education, 74(8), 1-7.
  3. Anderson, F. (2013). Determining room rates in Sweden - a hedonic prices approach of the stockholm hotel market. (Master Thesis)
  4. Bull, A. O. (1994). Pricing a motel's location. International Journal of Contemporary Hospitality Management, 6(6), 10-15.
  5. Carvell, S. A., & Herrin W. E. (1990). Pricing in the hospitality industry: An implicit market approach. FIU Hospitality Review. 8(2), 27-37. Cornel University.
  6. Castro, C., & Ferreira F (2015). Effects of hotel characteristics on room rates in Porto: a hedonic price approach. AIP Conference Proceedings.
  7. Chen, C., & Rothschild, R. (2010). An application of hedonic pricing analysis to the case of hotel rooms in Taipei. Tourism Economics. 16, 685–694.
  8. Coenders, G., & Espinet JM, Saez M (2003). Predicting random level and seasonality of hotel prices: A latent growth curve approach. Tourism Analysis, 8(1), 15-31.
  9. Corgel, J., & Lane, J., & Walls, A. (2013). How currency exchange rates affect the demand for U.S. hotel rooms. International Journal of Hospitality Management, 35, 78-88.
  10. Corgel, J. B., Liu, C. H., & White, R. M. (2013). Determinants of hotel property prices. Cornell real estate and finance working papers. Center for Real Estate and Finance. Cornell University School of Hotel Administration.
  11. Díaz, M. R., Díaz, R. R., Voltes, A. C. R., & Voltes, C. I. R. (2018). Analysing the relationship between price and online reputation by lodging category. Journal of Sustainability.
  12. Fleischer, A. (2012). A room with a view: A valuation of the mediterranean sea view. Tourism Management, 33(3), 598-602.
  13. Hung, W. T., Shang J. K., & Wang, F. C. (2010). Pricing determinants in the hotel industry: Quantile regression analysis, International Journal of Hospitality Management, 29(3), 378-384.
  14. Ilina, E., Kobyak, M., & Russian, P. (2015). The competitiveness of hotel facilities. Theory and practice. Journal of Environmental Management and Tourism.
  15. I??k, C., & Bilici, N. (2016). The analysis of hotel room rates using hedonic model: the case of erzurum. International Conference on Eurasian Economies.
  16. Israeli, A. A. (2002). Star rating and corporate affiliation: Their influence on room price and performance of hotels in israel. International Journal of Hospitality Management, 21(4), 405-424.
  17. Ivanov, S. (2006). Management of overbookings in the hotel industry – basic concepts and practical challenges. Tourism Today, 6. 2006.
  18. Ivanov, S. H. (2014). Hotel revenue management: from theory to practice. Zangador Ltd. Varna. Bulgaria.
  19. Kefela, M. S., & Blomskog S (2014). Determinants of hotel room rates in Stockholm: A hedonic pricing approach. Bachelor Thesis.
  20. Kim, J. W., Jang, S, & Kang S (2018). Why are hotel room prices different? Exploring spatially varying relationships between room price and hotel attributes. Journal of Business Research.
  21. Kimes, S. E., & Wirtz J (2003). Has revenue management become acceptable? Findings from an international study on the perceived fairness of rate fences. Journal of Service Research, 6(2), 125-135.
  22. Kimes, S. E. (2003). Revenue management: A retrospective. Cornell Hotel and Restaurant Administration Quarterly, 44(5/6), 131-138.
  23. Latinopoulos, D. (2018). Using a spatial hedonic analysis to evaluate the effect of sea view on hotel prices. Tourism Management, 65, 87-99.
  24. Lee S. K., Jang, S. (2012). Premium or discount in hotel room rates? The dual effects of a central downtown location. Cornell Hospitality Quarterly, 53(2).
  25. Masiero, L., Heo, C., & Pan, B. (2015). Determining guests' willingness to pay for hotel room attributes with a discrete choice model. International Journal of Hospitality Management.
  26. Masiero, L., Pan, B., & Heo, C. (2016). Asymmetric preference in hotel room choice and implications on revenue management. International Journal of Hospitality Management.
  27. Monty, B., & Skidmore, M. (2003). Hedonic pricing and willingness to pay for bed and breakfast amenities in Southeast Wisconsin. Journal of Travel Research, 42.
  28. Napierala, T., & Lesniewska, K. (2014). Location as a determinant of accommodation prices: Managerial approach. 7th World Conference for Graduate Research in Tourism, Hospitality and Leisure. Istanbul, Turkey.
  29. Paschalis, A., & Ioanna A. (2017). The contribution of view to the price of tourist accommodation: A hedonic pricing model. Cities and regions in a changing europe: challenges and prospects. Panteion University. Athens. Greece.
  30. Pawlicz, A., & Napierala T. (2017). The determinants of hotel room rates: An analysis of the hotel industry in warsaw- poland. International Journal of Contemporary Hospitality Management. 29(1).
  31. Rosen, S. (1974). Hedonic prices and implicit markets: Product differentiation in pure competition. Journal of Political Economy, 82, 34–55.
  32. Ruijgrok, E. C. M. (2006). The three economic values of cultural heritage: A case study in the netherlands. Journal of Cultural Heritage, 7(3), 206-213.
  33. Sainaghi, R. (2011). Revpar determinants of individual hotels: Evidences from Milan. International Journal of Contemporary Hospitality Management.
  34. Schamel, G. (2012). Weekend vs midweek stays: Modelling hotel room rates in a small market. International Journal of Hospitality Management, 31(4), 1113-1118.
  35. Schwartz, Z., & Cohen, E. (2004). Hotel revenue-management forecasting: Evidence of expert-judgment bias. Cornell Hotel and Restaurant Administration Quarterly, Sage Publications.
  36. Shoval, N. (2006). The geography of hotels in cities: an empirical validation of a forgotten model. Tourism Geographies: An International Journal of Tourism Space, Place and Environment, 8(1), 56-75.
  37. Thrane, C. (2005). Hedonic price models and sun-and-beach package tours: The Norwegian case. Journal of Travel Research, 43, 302–308.
  38. Thrane, C. (2007). Examining the determinants of room rates for hotels in capital cities: The Oslo experience. Journal of Revenue & Pricing Management.
  39. White, P. J., Mulligan, G. F. (2002). Hedonic estimates of lodging rates in the four corners regions. The Professional Geographer, 54, 533–543.
  40. Zhang, H., Zhang, J., Lu, S., Cheng, S., & Zhang, J. (2011). Modeling hotel room price with geographically weighted regression.
  41. Zhang, Z., Ye, Q., & Law, R. (2011). Determinants of hotel room price: An exploration of travelers' hierarchy of accommodation needs. International Journal of Contemporary Hospitality Management, 23(7).