With the advent of online travel agents, prices became transparent, and hotels were forced to pay close attention to how they were priced relative to the competition in the market. Now, with the growing popularity of online ratings and reviews, consumers have additional information to use to evaluate the value of your hotel relative to your competitors’ properties. In order to continue to make profit-maximizing price and positioning decisions, hotel managers must understand how consumers use this new information with price to make a purchase decision.
As a follow-up to our first study, when we found a strong relationship between user-generated content, or ratings and reviews, and quality and value perceptions of hotel room purchases, Breffni Noone, associate professor at Pennsylvania State University, and I wanted to explore a bit further how consumers trade off these attributes with price. We designed a choice modeling experiment where we asked consumers to select the hotel they would buy from among a choice of three, with varying levels of attributes. By following the participants’ choice patterns, the value they place on each attribute and each level of each attribute can be statistically derived. As well, the likelihood that they would pick a hotel with a specific combination of attributes can be identified.