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Zero price effect on hotel demand: Evidence from a discrete choice experiment

Lookup NU author(s): Dr Tom Lane

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Abstract

A Choice Experiment is employed to analyze the effect of a free night promotion on hotel demand in the setting of a relatively underdeveloped area in China. Results from Error Components models show evidence in favor of a non-rational “zero price effect” (ZPE): with total price and all other aspects equal, people tend to choose the hotel which offers one free night. In addition, free pricing is shown to have stronger effects in diverting preferences than a trivial price (1 RMB). However, it is not the only successful psychological pricing strategy; its effects do not significantly differ from those of a materially equivalent discount. Building upon recent methodological innovations using Choice Experiments to study pricing strategy, this paper is the first to extend the technique to study the ceteris paribus ZPE. Our findings can help hotels make use of the ZPE to attract consumers.

Publication metadata

Author(s): Zhang X, Grisolia J, Lane T

Publication type: Article

Publication status: Published

Journal: Tourism Management

Year: 2023

Volume: 96

Print publication date: 01/06/2023

Online publication date: 29/11/2023

Acceptance date: 18/11/2022

Date deposited: 05/09/2023

ISSN (print): 0261-5177

ISSN (electronic): 1879-3193

Publisher: Elsevier

URL: https://doi.org/10.1016/j.tourman.2022.104692

DOI: 10.1016/j.tourman.2022.104692

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