Sources of price elasticity of demand variability among Spanish resort hotels: a managerial insight

Abstract

Purpose The purpose of this paper is to use demand behavior estimation to find the sources of price variability among resort hotels at different Spanish destinations. Design/methodology/approach This paper estimates online demand functions during high season for seven four-star resort hotels located at different Spanish destinations. Different price elasticity values are compared, and different factors affecting price elasticity are analyzed. Findings The main findings indicate that most of the high season periods display elastic demands, but factors such as a central location at a resort, recent refurbishments, the availability of additional facilities/services and a hotel targeted at the couples and/or half-board segments make the demand more inelastic; the Tenerife hotels had the most price-elastic demand; during the closest booking periods to the date of stay, the demand is usually more elastic; and a higher number of local competitors pushes down hotel prices. Originality/value This paper highlights the managerial implications of focusing on more profitable demand segments for hoteliers. This is especially useful for the development of revenue management software aimed at improving forecasts.