During the summer season, as people are booking their summer vacations, they’re deciding how long to stay away. Many believe that by booking a longer hotel stay they will get a “deal.” However, research from the University of Delaware’s Alfred Lerner College of Business and Economics shows that hotels actually increase their pricing for longer stays, despite what their guests may believe.
The paper, “Gap-Alert? Quantity Surcharge Practices vs. Guest Expectations,” co-authored by Zvi Schwartz, chairperson for UD’s Department of Hospitality Business Management, Arash Riasi, Ph.D. Class of 2018, and Xuan Liu, M.S. Class of 2018, looks at this gap between consumer expectation and hotel pricing and what that means for vacation-goers. This is the second phase of research on this topic from the authors; they previously studied this gap in an article published in Cornell Hospitality Quarterly.
In this most recent paper, researchers explored further the idea that a gap exists between surcharge practices and guest expectations in U.S. hotels. Riasi, now a credit strategy manager for Marlette Funding, was working towards his doctoral degree in financial services analytics when he decided to focus his studies on the hospitality industry. He partnered with Schwartz and Liu, now at Hilton’s Revenue Management Cluster in China, to work on a continuation of previous research.
“The hotel industry practices quantity surcharging, showing that, on average, hotels in the U.S. quote a higher daily rate when guests stay for a longer duration,” the researchers wrote.
They surveyed 600 respondents online and compared these responses to the findings of a survey from their earlier research. Riasi used his expertise in financial services analytics to recommend an uncommon approach to analyzing the data. This allowed the team to better compare and contrast the information from these two data sets. They used this data analysis to study how much guests expect room rates to change for stays beyond one night, and if a gap exists between customer expectation and pricing practices, how that gap “behaves” during different ranges of stay.
The researchers found that only a small number of consumers are actually aware of the practice of quantity surcharging at hotels. In fact, most consumers expect the opposite and believe that the longer they stay at a hotel, the deeper the discounts they will receive. The researchers note that it is likely that the hotel industry is aware of the gap between customer expectations and their pricing practices. However, without more awareness and pushback from consumers, the practice of quantity surcharging is unlikely to change.
“Sometimes, hotel pricing practices are in contrast to what customers think is reasonable or fair,” Schwartz said. “For example, we take it for granted that in periods of high demand, hotels charge more, but why? The only reason is that they can. We live in a society that embraces these practices. Not just in hotels but really in every industry: When they face higher demand they increase prices.
“What we found with hotels is similar to when you go to the supermarket, and assume that if you buy larger packages you will save money,” Schwartz continued. “But you don’t always save. We just want customers to be aware that this gap exists.”
He explained that the next time that consumers go to book a long vacation stay at a hotel, they shouldn’t assume they’ll be paying a lower daily rate because of the longer stay.
“The best thing for consumers to do is try to assess whether [the surcharge] is reasonable or if you are being overcharged,” Schwartz advised. “Just talk to the hotel and sometimes they will be responsive. In low demand periods, they might work with you.”