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Strategic Revenue Management and the Role of Competitive Price Shifting

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March 7, 2012

Strategic Revenue Management and the Role of Competitive Price Shifting

This paper examines whether stable competitive pricing positions yield better average annual RevPAR growth than do price shifts either upward or downward, as compared to competitors? positions.

Using property level data on average daily rate (ADR) and average annual RevPAR growth, this study found two contrasting price-shifting strategies.

For hotels that were lower priced relative to their competitors in 2007, the most popular strategy was to make price shifts to higher price categories in both 2008 and 2009.

In contrast, the most popular strategy for hotels that originally positioned themselves above the competition was to move to lower price categories in both 2008 and 2009.

Although RevPAR fell for all hotels during this period, the strategy of shifting to a higher price category was the most successful in terms of average annual RevPAR growth over the three-year period of this study.

On the other hand, a shift to lower prices was least successful in delivering RevPAR growth.

Overall the results suggest that upward shifts in relative prices are the best way to achieve higher RevPAR growth, and maintaining price stability is the next most viable positioning strategy in terms of RevPAR.

Source: Center for Hospitality Research – Cornell School of Hotel Administration

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