Abstract
Revenue Management (RM) has been regarded as one of the most researched areas in hospitality operations management study. RM is the practice of dynamically pricing a perishable product and selectively allocating scarce capacity across segmented demand and distribution channels, while taking into account customers’ profitability and value, in an effort to maximise gross total revenue and therefore improve profitability. A number of studies have tentatively looked into customers’ fairness perceptions of revenue management decisions, yet there is no reported empirical research that examines the impact of hotel revenue management on customers’ behavioural intentions in a real dynamic service encounter. Hence, the thrust of this research is to examine the impact of pricing practices on three customer groups: those who accept a reservation offer, those who decline a reservation offer, and those who are denied a reservation request. To bridge this gap, this research seeks to contribute to knowledge by investigating the relationship between hotel revenue management practices and the implications of this on customers’ behavioural intentions. In order to gain a richer and deeper understanding of the effects revenue management has had on customers’ behavioural intentions, a case study approach was adopted. An inductive exploratory single case study was conducted in a UK leading budget hotel chain. In depth data was collected based on a mixed methods approach and divergent data sources were used including semi-structured interviews with executives at the hotel chain and customers, observation, documentation, and a web-based survey completed by the visitors of the chain’s website. The research results in significant findings relating to customers’ perceptions to RM practices and the impact of these practices on their behavioural intentions. The findings are encouraging and suggest that the adoption and implementation of RM practices has great potential in the budget hotel sector under the following conditions: provide sufficient information on pricing and inventory control strategies to assist customer education about RM practices; and view RM as an integrated management practice to balance revenues/profits and customer relationships. This research provides several theoretical contributions to the literature and offers important implications for hospitality managers. The key contribution of this research indicates that the price paid for a room has a direct and positive effect on behavioural intentions of customers who have successfully made a booking. However, customers who declined a reservation offer or were denied a reservation request because of the quoted price, displayed negative behavioural intentions. To conclude, it is recognised that the generalisation of the findings is context-specific to the budget hotel sector and therefore is restricted. A number of areas for future research are identified to extend the boundaries of this research.