Determinants of hotel room price

TLDR

The hotel industry follows Maslow‑inspired hierarchy of needs, prioritizing room quality, location, and service. The study investigates how hotel class and room attributes—including quality, location, cleanliness, and service—affect room rates, using customer reviews as evidence. Regression models were constructed to analyze price determinants across the hotel industry and its various grade categories. Empirical analysis shows that room quality and location drive prices, while attribute effects vary by segment, suggesting hotels should tailor amenities to segment expectations.

Abstract

Abstract Purpose – This study aims to examine whether and how hotel class, attributes of the room, quality, location, cleanliness, and service influence room rates in hotels. Design/methodology/approach – Regression models were developed for the hotel industry and for various grades of hotels. Findings – Using data from New York, empirical findings suggest that room quality and location are important determinants of room price for the industry, but attributes that can influence room rates differ greatly among hotel segments. Practical implications – Hotels can reap benefits from understanding customers' specific expectation of a market segment and seeking to provide amenities accordingly. Originality/value – The quality of hotel attributes is evidenced through customer reviews on a travel advice website. The theory of the hierarchy of needs is supported in the hotel industry, namely, the ascending order of accommodation needs are the quality of a room, location, and service.