Effects of revenue management on perceived value, customer satisfaction, and customer loyalty

Abstract

Revenue management aims to maximize financial performance by setting different prices for the same offerings. However, such practices may deteriorate the nonfinancial performance of customer relationship management such as perceived value, customer satisfaction, and customer loyalty. Furthermore, revenue management tends to set higher prices during periods of peak demand or congestion. Congestion may negatively affect service quality and result in lower perceived value, customer satisfaction, and customer loyalty. Thus, revenue management may have dual negative effects on customer relationship: objective price and occupancy rate simultaneously and negatively affect the nonfinancial performance of customer relationship. Using the panel data of 18 hotels from a Japanese hotel chain company within 16 months, this study reveals the dual negative effects, which, to the best of my knowledge, have never been shown by literature. Hotel companies, when employing revenue management, should consider the tradeoff between short-term profitability and long-term customer relationship.