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The effect of location on hotel pricing

May 04, 2012 | Hotel Marketing

A new study published by the Cornell Hospitality Quarterly finds that hotels located in center city business districts can charge higher rates and earn more money - but this is true only during high season.

The study, "Premium or Discount in Room Rates? The Dual Effects of a Central Downtown Location," by Seul Ki Lee and SooCheong (Shawn) Jang, is the featured article in the May 2012 issue of the Cornell Hospitality Quarterly and is available at no charge by special arrangement with Sage Publications, which publishes the CQ on behalf of the Cornell School of Hotel Administration. The article can be read through the Cornell Center for Hospitality Research website. CQis available by subscription through Sage Publications, which is making this article available at no charge for a limited time.

A new study published by the Cornell Hospitality Quarterly (CQ) finds that hotels located in center city business districts can charge higher rates and earn more money - but this is true only during high season.

The premium value of a central business district (CBD) location is generally accepted by the hotel industry with the idea that even though the CBD is crowded, the hotels there see higher demand, can price higher, and achieve greater profitability. However, in a study of hotels in Chicago's Loop, Lee, a professor at Temple University, and Jang, of Purdue University, discovered that the high-rate, high-profit scenario occurs only during high season. When demand is low, on the other hand, the hotels engage in rate-based competition that is intensified by the presence of so many hotels. Thus, they found that hotels see higher premiums in the peak season and steeper discounts in shoulder seasons, as a result of competition with nearby hotels. This brings into question the current models of the location premium for CBD hotels.

Get the full story at Cornell University

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