Gap-alert? Quantity surcharge practices vs. guest expectations. (July 2018)

• Record Type: Journal Article
• Authors: Schwartz, Zvi; Riasi, Arash; Liu, Xuan
• Is Part Of: International journal of hospitality management. Volume 73(2018)
• Page Start: 108
• Page End: 115
• Publication Date: 2018-07
• Subjects: Revenue management -- Length of stay -- Quantity surcharge -- Misinformed expectations -- Hotel industry; Hotel management -- Periodicals; Restaurant management -- Periodicals; Food service management -- Periodicals; Hôtels -- Gestion -- Périodiques; Restaurants -- Gestion -- Périodiques; Services alimentaires -- Gestion -- Périodiques; Food service management; Hotel management; Restaurant management; Periodicals; 647.94
• DOI: 10.1016/j.ijhm.2018.02.010
• Languages: English
• ISSNs: 0278-4319

Abstract

Highlights: This study explores whether customers are aware of the hotel industry's quantity surcharging practice. The relationship between customers' room rate expectations and length of stay (LOS) is assessed. The results indicated that the longer the stay the deeper the discount customers expect. It is shown that there is a LOS-induced gap between the hotels' quoted rates and their customers' rate expectations. It was found that this gap widens as the LOS increases. Abstract: This study explores whether customers are aware of the hotel industry's counter-intuitive practice of quoting higher daily room rates for longer stays. We assess and characterize the relationship between customers' room rate expectations and length of stay (LOS), and contrast them with the industry's pricing practice of quantity-surcharges along a spectrum of stay periods. We find that most guests expect to pay less when they stay longer, hence the gap. Interestingly, we find that the longer the stay, the larger this LOS-induced gap between the hotels' quoted rates and their customers' rate expectations, and that the gap's rise is non-linear.