Purdue University Graduate School
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posted on 2022-07-24, 18:33 authored by Yunmei BaiYunmei Bai


This study aims to investigate three aspects of pricing strategy in the lodging industry. The three aspects are competition, consumer response, and entry-level employee pricing training. Competition forces hotels to adopt appropriate pricing strategies to differentiate their products from competitors. Consumer reaction is key to testing the feasibility of a pricing strategy and thus can instruct hoteliers on how to implement the pricing practice. Pricing training of entry-level employees ensures long-term pricing stability and efficiency. These three aspects together could provide a comprehensive framework that provide industry practitioners with pricing strategies and recommendations for competitors, consumers and employees. 

Firstly, we developed a game theoretic model to examine under what circumstance should hotels adopt add-on pricing. According to the results, add-on pricing could generally improve hotels’ revenue as compared to the traditional all-inclusive pricing. The optimal add-on pricing strategy for higher-valued hotels is to initiate the add-on pricing, regardless of whether competing hotels will follow or not. While, for lower-valued hotels, they should insist with the all-inclusive pricing even though competing hotels initiated the add-on pricing. 

Secondly, this study investigates consumer reaction toward add-on pricing in practice. Add-on pricing could trigger both positive and negative effects on consumers’ booking intention. Based on the Transaction-Acquisition Utility theory, this study empirically tested and showed that add-on pricing improves consumers’ booking intention as compared to all-inclusive pricing. Consumers’ perceived acquisition utility can be increased due to customization effect.  Consumers’ perceived enjoyment and information overload are the positive and negative driver toward perceived transaction utility. 

Finally, the third part of this study is to identify the factors that affect the training of pricing performance of entry-level employees in the lodging industry. Students enrolled in the Revenue Management and Profit Maximize course in spring 2022 at College of Hospitality, UNLV were recruited to participate this experiment. Based on the results, for entry-level employees, training outcome of data management and pricing basics, as well as employees’ pricing application skills are crucial to basic level pricing performance. When the pricing tasks become more advanced, besides data management and pricing basics, training outcome of inventory management also plays a role. In addition, in-person training could ensure higher training effectiveness for advanced pricing topics. 

This study provided a combined “distribution channel – consumer– employee” continuum of pricing in the hospitality industry. Theoretically, this study can shed light on examining hotel pricing strategy under channel competition, as well as understanding consumer behavior under Transaction-Acquisition Utility Theory. Empirically, this study offers industry practitioners a set of takeaways from strategy making, operation implementation, to employee training.


Degree Type

  • Doctor of Philosophy


  • Hospitality and Tourism Management

Campus location

  • West Lafayette

Advisor/Supervisor/Committee Chair

Chun-Hung (Hugo) Tang

Advisor/Supervisor/Committee co-chair

Jiong Sun

Additional Committee Member 2

Alei (Aileen) Fan

Additional Committee Member 3

Richard Ghiselli

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