Relationships between Hotel Room Pricing, Occupancy, and Guest Satisfaction: A Critical Discussion

In this document we will discuss about Relationships between Hotel Room Pricing, Occupancy, and Guest Satisfaction and below are the summary points of this document:- Hotel room pricing, occupancy, and guest satisfaction are interconnected factors in the hospitality industry. Guest satisfaction plays a crucial role in measuring the competitiveness and success of hospitality companies. Hotel room pricing influences customer satisfaction, and high prices can negatively impact guest satisfaction levels.

Hospitality management

Hospitality management
“Critically discuss the relationships between hotel room pricing, occupancy and
guest satisfaction”
It is examined that the hospitality industry is a wide concept that consists of lodging, Food and
service, event planning and traveling. In context to the hospitality sector, there are different
factors which are kept in mind at the time of availing the services such as hotel room pricing,
occupancy and guest satisfaction. Satisfaction of the guests is considered as the major aspects
that help to measure the competitiveness and the success of the companies in the highly
competitive market (Wikhamn, 2019). Therefore, in this paper, the discussion will be on the
concept of hotel room pricing, occupancy, and guest satisfaction.
Guest satisfaction in the hotel industry is a clear indication of the ability possessed by the
employees to offer an experience that is expected when they book a hotel. Recent studies have
shown that Price has an essential role in maintaining customer's quality perceptions. Hotel room
pricing is considered at the time of attracting customers. It is examined that if the hotel room
prices are high, then it would be difficult to attract more customers towards the services offered
in the highly competitive market (Madanoglu and Ozdemir, 2016). The role of pricing is related
to customer satisfaction. According to the American customer satisfaction index, it has been
stated that customer satisfaction is linked with the hotel room rates which have been enhanced
substantially from the past few years. The customer satisfaction with the hotels has been reduced
just due to the high prices which are proposed by the hotel industry. It has been observed that the
hotel room pricing policy have influenced the satisfaction level of the customers (Chen et al.,
2015).
In the present scenario, the customers avail services by evaluating the actual prices of the hotel
rooms. The prices of the hotel rooms keep on changing as it depends on the time of the day,
week or year. So, it can be said that the experience of the customers is concerned with the prices
that are offered by the different hotels to its customers. In other words, it can be said that the
guest may experience similar levels of services at the time of two hotel stays but at last, their
level of satisfaction depends on room rates. Furthermore, it can be stated that customers who are
staying in the hotel at the time of high occupancy can be less satisfied due to high rate of the
room but they can also be less satisfied with the services offered by the employees of the hotel in
which they are staying (Viglia, Minazzi, and Buhalis, 2016).
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Hospitality management
In the present era, it is essential to consider the satisfaction level of the customers so that it could
be easy to boost the market share. It is believed that if the customers are satisfied then the
positive impact can be seen on the repetitive purchases. The customers are satisfied if the
services offered by the hotel are reasonable and also affordable but many times the hotel guests
use the price as a quality of the services provided to the customers (Yazici, Köseoglu, and
Okumus, 2016). It is also perceived that if the guests are paying the high cost of the rooms then
they expect the management to provide high service quality. The high-quality services are
expected in terms of cleanliness, guest room items and employees behavior. Also, it is evaluated
that in relation to these factors the guests have narrow zones of tolerance and it directly affects
the satisfaction level of the customers. It is important that if hotel room prices are high, then it is
expected that the services offered by the hotel will be of high quality (Sharma and Srivastava,
2018).
In context to the price of the rooms, it is seen that it should be set by analyzing the competition
level in the market. According to statistic, it has been stated that the annual growth in the average
global hotel rates from 2010 to 2018 is enhanced. The room rates on the global platform were
enhanced by 3.7% in 2018. It was also due to the high occupancy rate which led to high room
rates.
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Hospitality management
(Source: Statista, 2019).
Generally, the high room's rates are charged when the demand and occupancy percentage is high.
Thus, it can be one of the reasons concerned with the satisfaction level of the guests. It can be
argued that there are situations when the occupancy level in the hotel reaches 100% and that time
the capacity utilization has a negative effect on the perception level of the customers in relation
to the service quality. It is essential for the hotel industry to focus on maintaining occupancy and
also room rates as these are the major aspects that directly impact the entire satisfaction level of
the customers (Ahrholdt, Gudergan, and Ringle, 2017).
It can be analyzed that there is a close relationship between hotel room pricing, occupancy, and
guest satisfaction. The initial step considered by the customers at the time of booking the hotels
is the price of the rooms. The customers emphasize on the room rates which are set by the
management. If the room rates are high then it can lead to less booking of the rooms and also it
will negatively impact the demand of the services offered to the customers (Zemke et al., 2017).
If the room rates are set high due to the high occupancy then it will generate dissatisfaction
among the customers who are not able to avail the services. But there is a close relationship
between the hotel room pricing and occupancy. If occupancy rate is high then it will result in the
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Hospitality management
high room rates and if it is low then the management will fix the room rates which are affordable
by the guests (Möhring, Keller and Schmidt, 2019).
Thus, it can be stated that it is important to maintain the room rate pricing so that large customer
base can be maintained. The room rates should be set by the hotel management by analyzing the
needs and wants of the customers. To attain success in the highly competitive market, the best
strategy that should be considered to maximize customer satisfaction is related to setting the
room prices at an affordable rate (Heyes and Lashley, 2017). Now day's customers get satisfied
when the room rates are low and good quality is offered to them at the time of their stay in the
hotel rooms. There can be a positive relationship between the quality of the services offered and
with the satisfaction level of the customers. If the hotel room pricing is high, then it is necessary
for the management to provide unique services, so that positive impact can be seen on the
satisfaction level of the guest (Bowie et al., 2016).
But there is also a close relation between guest satisfaction and also the prices paid for the
rooms. The price paid by the guests enhances and with the use of the high price, the customers
consider it as an indicator of maintaining the product quality in the highly competitive market.
The guest can feel comfortable at the time of paying the high price for the hotel rooms but at the
same time, they will expect that management of the hotel will provide quality services. However,
the case can arise in which at some price level, the negative price effect in relation the
satisfaction will start to outweigh the positive impact in relation to the quality of the services
offered by the hotel to its customers (Boella, 2017). Hence, it can also state that guest
satisfaction can become one of the negative factors in relation to the room prices. The outcome
in context to the room price in high occupancy can be considered as the indicator of sacrifice as
the prices of the rooms enhance initially. The hotel management, sometimes also enhances the
room rates due to high % of occupancy which can result in less satisfied guests.
Therefore, it can be stated that there is a close relation between hotel room pricing, occupancy
and guests satisfaction. In the hospitality sector, it is important to boost guest satisfaction so that
it could be easy to boost the growth in the highly competitive market. But there are some factors
such as hotel room pricing and occupancy that affect the satisfaction level of the guests. With the
increase in the hotel room rates, the customers have to think twice before taking the decision of
availing the services.
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Hospitality management
But the reason related to the high price can be related to a high occupancy rate which negatively
impacts the satisfaction level of the customers. So, it is important for the hospitality industry to
focus on maintaining the price of the rooms as it can help in boosting the customer base. The
nominal prices should be set so that it could be easy to maximize the satisfaction level of the
guests. Also, in relation to high occupancy, the prices should not be high as it can negatively
affect the satisfaction level of the guests. It can be concluded that the high satisfaction of the
guests can help to achieve success in the market.
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Hospitality management
References
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Boella, M., 2017. Human resource management in the hotel and catering industry. Routledge.
Bowie, D., Buttle, F., Brookes, M. and Mariussen, A., 2016. Hospitality marketing. Routledge.
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Sharma, S. and Srivastava, S., 2018. Relationship between Service Quality and Customer
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Statista,2019. Annual growth in average global hotel rates from 2010 to 2018.[Online].
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Wikhamn, W., 2019. Innovation, sustainable HRM and customer satisfaction. International
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Hospitality management
Yazici, S., Köseoglu, M.A. and Okumus, F., 2016. Identification of growth factors for small
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Zemke, D.M.V., Chen, Y.S., Raab, C. and Zhong, Y., 2017. Hotel design, guest satisfaction, and
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