The price transparency afforded by the advent of the online travel agents (OTAs) had a profound impact on the way that revenue managers think about price. Instead of focusing on their own demand and price, price transparency forces revenue managers to also consider the impact of competitors’ pricing on their demand. With social media and online review sites came the next major shift in pricing – value transparency. Consumers now have easy access to detailed consumer opinion through review sites, OTAs and even hotel websites. In order to continue to price effectively, revenue managers need to understand how consumers are using this user generated content (UGC) with price, to make a hotel purchase decision.
To help revenue managers understand how value transparency will impact their pricing decisions, my colleague, Breffni Noone, Associate Professor at The Pennsylvania State University, and I recently conducted a research project designed to get at the way that consumers evaluate hotel room purchases in a social world. We designed scenarios based on a typical online purchase of a leisure stay and manipulated the price (low and high relative to an established reference price), the aggregate rating (low or high out of five) and the review sentiment (mostly positive or mostly negative). This gave us eight scenarios, described in Figure 1. Read more
Published in: http://blogs.sas.com