"Nothing to lose" or "something to win": A study of consumer's choice behavior towards uncertain hotel upgrade

Meng Deng, Purdue University

Abstract

This study is derived from an actual hotel upgrade scenario of a hotel revenue management (RM) consulting firm, which offers consumers a conditional upgrade that can only be confirmed on the day of the guest's arrival. The main concept behind this solution is that it offers a deep discount which is not guaranteed. Because of the relative novelty of this RM strategy, as well as the difficulty of predicting consumer response when uncertainty is involved, the likelihood of a consumer accepting this offer is critical for the success of the business. The purpose of this study is 1) to investigate consumer behavior in a specified hotel upgrade scenario and 2) to suggest a "zero cost" solution to improve the company's revenue based on its current business model. Statistical results showed that framing from the perspective of "nothing to lose" would significantly increase consumers' willingness to book (WTB). Moreover, it is found that providing information regarding upgrade probability would improve a consumer's WTB. However, focus groups such as loyal customers as well as hotel guests who had previous upgrade experience were not found to behave differently when compared to regular groups. Managerial and Theoretical implications are discussed at the end of this work.

Degree

M.S.

Advisors

Jang, Purdue University.

Subject Area

Marketing|Behavioral psychology|Recreation

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