THE DETERMINANTS OF HOTEL ROOM PRICE IN PHILIPPINES: A STRUCTURAL EQUATION MODELING ANALYSIS

Abstract

This study analyzed determinants of hotel room prices in the Philippines using the Structural Equation Modeling (SEM) and assessed how these price determinants affects the economic performance of hotels. Specifically, it aimed to describe hotel characteristics based on STR classification, determine key performance indicators (KPIs) of all Philippine markets, correlate hotel characteristics with hotel pricing and with key performance indicators (KPIs); and key performance indicators (KPIs) with hotel pricing. Lastly, a comprehensive structural equation modeling (SEM) was used to determine hotel industry price determinants. Using an aggregated and quantitative anonymize property level data STR provided, researchers selected 88 hotels active with STR. The study revealed that most hotels in the Philippines are economy in terms of class; chain-owned in terms of hotel operation; located in urban areas; and with 150 – 299 rooms in terms of size. Hotel price was significantly predicted by all hotel characteristics aside from operation. Pricing was also significantly predicted by hotel key performance indicators (KPIs)—average daily rate (ADR), revenue per available room (RevPAR), and occupancy. The structural equation modeling (SEM) revealed that key performance indicators (KPIs) such as average daily rate (ADR), revenue per available room (RevPAR), and occupancy were main determinants of hotel pricing. Further, data showed that hotel characteristics such as operation, class, location, and size code mediated the influence of key performance indicators (KPIs) on hotel pricing. Results of this study contribute to widening existing studies of hotel room pricing which hospitality executives may use as reference to come up with appropriate pricing strategies