Price, UGC and the Business Traveler
By Kelly McGuire Vice President, Advanced Analytics, Wyndham Destination Network | October 05, 2014
Co-authored by Breffni Noone, Assistant Professor, Pennsylvania State University School of Hospitality Management
When revenue managers set prices, they consider their demand, their price and their competitors' prices. Consumers also look at a hotel's price and that of the competitors, but their goal is to assess the value of that purchase, understanding what they will get for the price they pay. Consumers have always had access to firm-generated information besides price like location, amenities and class of service, but with the advent of reviews and ratings, they now have access to user opinions as well. In order for hotels to set profitable pricing and positioning strategies, they need to understand how consumers assess value, specifically, which information they use, and how that information influences their value perceptions and ultimately, purchase behavior.
The use of price and non-price information like user generated content (UGC) to make a purchase decision could vary by segment. Business travelers, for example, which represent a significant and valuable source of business for many hotels, could behave very differently than other segments, impacting how managers would price or position the hotel to attract this valuable segment. In this article, we will present the results of a study that investigates how business travelers tradeoff between price and non-price information, and compare that to a previous study in a leisure context.
To understand how consumers use price and non-price information like user-generated content, we set up a choice modeling experiment. By tracking choice patterns across subjects, it is possible to understand how consumers trade off among the attributes, and how they value the attribute levels. We told the participants that the location amenities and hotel class were equivalent among the choices, and varied the price (low, medium, high), hotel brand (known versus unknown), the review sentiment (positive, negative), review language (emotional, descriptive), review content (about service or about the room), the aggregate rating (low, medium, high) and the TripAdvisor Rank (low, medium, high). Consumers were asked to select the hotel they would book from among three hotel choices with different mix of key attributes levels as described above. The first set of study participants were given a leisure context. The results of that study are covered in detail in this earlier article, and we will compare these results to the results of our second study on business travelers below.
Business Traveler Study
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