Is premium pricing strategy a viable option to pursue higher revenue performance? A case study of relative pricing strategy in the Singapore lodging market

Abstract

Is premium pricing strategy a viable option to pursue high revenue performance? A case study of relative pricing strategy in the Singapore lodging market. by Xiarong Chen Dr. Billy Bai, Examination Committee Chair Associate Professor Tourism & Convention Administration Department, College of Hotel Administration University of Nevada, Las Vegas This is an exploratory research paper on how relative pricing affects an individual hotel’s revenue performance in the Singapore lodging market. First, it measures the REVPAR effects for both a discounting and premium pricing strategy at a local hotel against its competitive set. The findings conclude that a premium pricing strategy is a better way to improve REVPAR performance due to the inelastic nature of the demand curve for hotel rooms in the Singapore market. The findings also show that there is a price limit to a premium pricing strategy, beyond which the growth of REVPAR stagnates because customers were willing to seek for alternatives in the market. Second, the study concludes that pricing strategies have little impact on guest satisfaction levels or customer loyalty as long as service standards were maintained. In fact, customers were willing to tolerate increased pricing up to a limit for high standards of service. This paper therefore recommends that premium pricing be adopted as a strategy by mid-tier hotels to increase REVPAR performance in both good and bad economic times.