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Examining Room Amenities of a Hotel Influence on Guest Willingness to Pay

Rationale and Background for Research Topic

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Today, one can observe a rapid development of the service industries all over the world. Therefore, it is not surprising that customers constantly enhance their expectation regarding the quality of services in the sphere of the hotel business. This trend is accompanied by the ever-increasing rivals’ pressure. Striving to remain sustainable, hotel managers make every effort to improve the service to anticipate and fulfil clients’ needs. Moreover, understanding that satisfaction creates an intention to return, managers endeavour to exceed customers’ expectation with the goal to become positively distinguished among competitors, which promises financial sustainability.
Hence, considering that the hotel business currently endures the stage of fast evolvement, which suggests a transition from the old-fashion approaches, little is known about the aspects that increase customer’s willingness to pay (WTP). Researchers state that “hotel managers rely on personal experience, trial-and-error, benchmarking with competitors, or rule-of-thumb to determine the degree of variations in price” (Masiero, Heo & Pan 2015, p. 117). Nevertheless, services differ from products by comprising more composed tangible and intangible components (Heo & Hyun 2015). For instance, a corresponding study reveals that successful hotel performance requires “service and customer care; staff quality, which includes attitude, skill, and appearance; hotel product quality; revenue and profit; safety and hygiene; and cost efficiency” (Wang & Hung 2015, p. 94). The mechanics of action of these characteristics presently remained understudied.
Exploring the recent research that highlights what room amenities increase WTP and which ones decrease customers’ intentions to pay, as well as those that are treated indifferently, it is necessary to refer to the hedonic pricing technique. This technique “views goods and services as collections of attributes or characteristics” (Heo & Hyun 2015, p. 162). For example, customers may be willing to pay for the window view, hotel location, free parking, the quality of services, cleanliness, bedding, toiletries, the safety of the neighbours, and many other features. Hence, the study reveals that these attributes are perceived quite differently, that is, they possess the diverse amount of value, which is directly connected to WTP (Heo & Hyun 2015).
The value of attributes depends on several reasons. These reasons can be distinguished as those begotten by clients’ characteristics, and those that are not related to customers’ biological and social features. For example, “cleanliness would not lead to price variation between hotels” (Zhang, Ye & Law 2011, p. 976). At the first sight, this finding is entirely unexpected, because the previous researches detected that neatness was positively related to pricing. Undoubtedly, cleanliness remains one of the factors that visitors name in the first place when they describe their impression of a hotel, but it is not related to the price ranks. Taking into consideration the rationale, the development of the hotel businesses encourages owners to provide a neat environment to all guests regardless of room category (Zhang et al. 2011). In other words, customers may choose a cheap, middle-priced, or luxury room, but cleanliness is expected to be of the same high level in each room as well as on the hotel territory. Therefore, it is impossible to enhance prices due to the fact that rooms are neat. The same can be said about the luxury design of costly apartments of well-known brand-chains. Paying for a luxury room, clients take for granted that it is equipped in an appropriate mode. That is why it is not effective to set higher prices for luxury rooms because of their even more luxury interior.
Besides, customers’ willingness to pay is directly linked to the safety of the neighbourhood. In particular, hotels that are situated anywhere near military conflicts or terrorists’ attacks cannot charge much from their customers. What makes the things even worse is that this phenomenon works even in a case when safety is violated in the border state (Heo & Hyun 2015). In addition, an unsafe environment suggests the danger of nature pollution or epidemics. These are intangible assets that affect the value of hotels. Thus, this information must be taken into account by managers while setting the reasonable prices.
Scrutinizing the value of hotel attributes from the customers’ perspective, one should point out that the purpose of travelling is a quite important variable that redefines the choice of a room. Specifically, individuals who travel for leisure are more intend to spend additional amounts of money for luxury rooms and corresponding services. In contrast, people travelling for business prefer cheap or middle-priced hotels (Heo & Hyun 2015). Simply put, depending on the purpose of staying, customers assign different amounts of value to the same hotel attributes even if their biological and social characteristics are the same. This peculiarity is significant and should be considered while creating customer segments with appropriate pricing.
What is more, clients’ biological and social features become crucial while choosing the room price. In particular, the scholars detected that “female and younger travellers are more price-sensitive” (Guillet, Liu & Law 2014, p. 954). This peculiarity is, probably, connected with the fact that capital needs time to be accumulated and women, in general, receive smaller salaries than men. This difference in WTP also correlates with the appreciation of discounts: females and younger individuals are more perceptive for discounts (Guillet et al. 2014).
Without a doubt, the level of income is connected with the assigned value of hotel attributes. In particular, the researchers identified that “the most important attribute that affects customers’ willingness to pay for an economy hotel is its physical environment such as room size and set-up” (Zhang et al. 2011, p. 977). In this respect, the budget visitors cherish the presence of the basic commodities much more than convenient location or excellent services (Zhang et al. 2011). At the same time, customers of the midscale segment are ready to pay more for convenient location of a hotel and the surrounding well-developed infrastructure. Similarly, luxury hotel guests are ready to pay for good location and excellent quality of provided services (Zhang et al. 2011). The above-revealed findings can be supported by another research that states “hotel guests staying at the high-rated hotels would consider service and cleanliness as more important, compared to ones staying at low-rated hotels” (Rhee & Yang 2015, p. 583). This data helps to create customer segmentation to set adequate prices.
Hence, the information is general because little is known about individual preferences of each person. Besides, this data should be combined with the purpose of travelling and biological properties of guests. For example, women appreciate the presence of hairdryers or luxury toiletries more than men (Heo & Hyun 2015). In addition, it is necessary to mention that hotels’ modern initiatives to use eco-friendly materials and maintain environmental sustainability are also a part of intangible assets. However, only high middle class and high class guests assign a value to these initiatives and, as a result, are willing to pay more for the hotel’s environmental sustainability.
Another fresh tendency that, in contrast to eco-friendly materials and recycling, attracts the low and midscale segment, is P2P (Tussyadiah 2015). P2P is peer-to-peer accommodation, which is also known as ‘sharing economy’ (Tussyadiah 2015, p. 70). Sharing economy “offers platforms that bring consumers together to distribute their excess capacity of property resources among each other” (Tussyadiah 2015, p. 70). A simple example of P2P is equipping rooms with air mattresses, which means that more family members can stay together in the same room for the similar price. This approach has a number of positive implications. The most obvious is that it allows saving money. Moreover, it provides a new social experience of community sharing. Individuals do not have to separate from their family members or friends; they can care for one another, and share many activities together. Thus, it is not surprising that the sharing economy gains popularity and becomes an important part of a hotel’s attributes adding value to the accommodation.
Striving to comprehend the psychological mechanisms that underlie this growing popularity of P2P, one should refer to self-determination theory. This theory educates that human behaviour depends on intrinsic (‘for its own sake’) and extrinsic (instrumental) motivation (Tussyadiah 2015). In this regard, the sharing economy strengthens both kinds of motivation, because the guests of P2P experience positive emotions from doing something good for themselves and doing something good for others. As a result, clients’ positive experiences and elated mood engage them to return to the same hotel and increase their WPT.
The core idea of the successful hotel management is that “amenities should be changed or added to only when customers appreciate them and a hotel can expect better performance as a result” (Heo & Hyun 2015, p. 163). As it is seen from the reviewed studies, all findings are fresh and, considering the transition of a hotel business, managers struggle to derive practical implications out of the obtained theoretical knowledge.

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Research Question

This exploratory research utilizes qualitative methods to examine the impact of hotel amenities on customers WTP.

Research Aim

Given that the customers’ choice of low, middle scale, and luxury rooms resonates Maslow’s theory of needs (Zhang et al. 2011), it is necessary to identify what modern items clients consider to be essential and, thus, would be willing to pay more for. Besides, considering the role of the Internet in information sharing and customer segmentation, one should explore the effectiveness of collecting additional information about clients’ personal needs. This practical experience can be used to create the software for hotels that serves to conduct clients’ self-segmentation. The purpose of this research is to arm hotel managers with practical solutions of efficient price setting that should increase the revenues.

Research Objectives

  • Objective1: When customer segments are created, what are the best ways to connect potential clients with the respective level of services?
  • Objective 2: Regarding hotel business, how does Maslow’s theory of needs work in the framework of the Internet?
  • Objective 3: Given that the sharing economy saves money and does not refer to luxury sensations/experience, can P2P accommodation platform satisfy all hierarchy of needs?
  • Objective 4: Inspired by the sharing economy, would proposing the flexible choice of attributes to clients enhance intrinsic and extrinsic motivation to return?

Design and Methodology

The study is based on the qualitative research methods: face-to-face and online questionnaires. Face-to-face interviews will be conducted with hotel managers to learn their unique personal experience regarding the stated objectives. Online questionnaires will be proposed to customers on different social media platforms. The amount of samples should include not less than 200 individuals of different gender, age, nationality, and social background. The questions of the interview will be developed based on the stated objectives. Moreover, apart from decisions and preferences, it is important to obtain as much as possible information about demographic and financial characteristics of the sample. These variables are supposed to be essential for customer segmentation software. The obtained results will be calculated and presented in a form of chart-pies. A corresponding set of recommendations for hotel managers will be developed considering the received data.

Resources Requirements

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Before developing interview questions, it is necessary to assure that the needed personal and professional characteristics are formed. Specifically, it is appropriate to conduct a deeper research in the field of WTP and related theories, such as Maslow’s theory of needs, the self-determination theory, the hedonic pricing and other important theoretical aspects. Besides, it is important to learn the etiquette of recruiting managers for personal interviews and conducting them. In addition, one should create an engaging questionnaire and some reward system to attract online participants. Thereafter, the actual stage of the primary data collection can be started. The described approach simplifies the study because no requests for permission (except for interviews with hotel managers) should be obtained. To anticipate the corresponding issues, it is necessary to include to questionnaire the warning about the procession and use of information for research purposes. Besides, data can be processed with the help of Microsoft Word and Paint tools.

Action Plan and Timeline

I. Personal preparation.
1. Develop needed personal and professional skills;
2. Search for samples for face-to-face interviews.
II. Preparation of materials.
1. Create online questionnaire and posting it on social media;
2. Continue to collect theoretical information.
III. Practical stage: sample collection.
1. Conduct interviews with hotel managers;
2. Monitor the participation in an online questionnaire.
IV. Process mediated results to learn the direction of study.
1. Comprehend mediated findings;
2. Find resonating information in prior studies and literature;
3. Start writing research articles/reports.
V. Practical stage 2: continue online data collection.
VI. Process final results.
1. Create visuals that reveal findings (chart-pies, direct quotes from face-to-face interviews);
2. Establish practical recommendations;
3. Proofread a research article.
This plan is developed to anticipate the shortage of time. It assures smooth and logical transition between stages and leaves time space between medium stages for unpredictable circumstances.

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