Hotel Revenue Management: Impact of Familiarity and Information on Customers Perceptions of Fairness

Abstract

Hotels theoretically can charge as many different rates or prices as they want, but if customers view the hotels rate policies as unfair, they are unlikely to patronize the hotel in future as perception of price fairness play an important role in customer satisfaction and their behavior. Considering the importance of perceived fairness, it becomes essential to understand the major factors influencing customers fairness perception of RM pricing. The purpose of this study is to determine customer perceptions of fairness concerning pricing policies charged by the hotel industry and to examine how familiarity and Information approach in pricing policies affect customer perceptions of fairness. The study was conducted in a Hospitality context (e.g. Booking and staying in five star hotel) in order to examine the effect of Familiarity and Information on customer perceptions of price fairness. A quantitative approach was used to measure respondents level of knowledge and impact of information and the current study conducted a survey with scenario based situations. The research also used Qualitative primary research through structured open ended interviews to discuss in detail related to differential pricing strategies. The interviews were conducted with Revenue Managers/General Managers from a spectrum of hotels in India. The research indicates that the high levels of transparency and information will accept rules of variable pricing, and the benefits and problems associated with the practice. This research will inform management the strategies that seek ever-finer price discrimination through the use of customer databases and individually targeted price offers. Some customer segments may be amenable to variable pricing and will happily play along with the companys rules. Other groups may not understand such rules, and in these circumstances may distrust a company that practices variable pricing.

Keywords: Variable Pricing, Differential Pricing, Familiarity, Price, Non-Price Information, Revenue Management

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