Abstract
The article provides new information on hotel prices and services in 26 European cities and investigates hotel price determinants. In a two-step estimation procedure, the authors first quantify the price effect of single room and hotel services and then examine the relationship between accommodation prices and city characteristics. They find that hotel services differ significantly from city to city and that room characteristics such as size, breakfast, air conditioning, and free-cancellation options are services for which customers are willing to pay a significant markup. Moreover, the service content of accommodation is negatively correlated with the value of the city center where the hotel is located: increasing competition on the European market seems to be producing partial price convergence via adjustment of service and quality content, so that cities with higher factor costs tend to cut service quality while “cheaper” towns improve it.
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