Eco-Labeling and Price Premium : Does a Sustainable Tourism Label Affect Hotel Room Pricing?

Voluntary eco-labeling programs have gained popularity in the tourism industry as initiatives for encouraging businesses to adopt sustainable practices. Yet, for these program to appeal to businesses, it is crucial that they generate positive market benefits for participating businesses. In this paper, we study the effect of adopting a “sustainable label” on prices in the hotel sector. We use data collected from Booking.com and covering 6,500 hotels across 12 touristic European cities. We find that adoption of the sustainable label is associated with a price premium of 7% - 9%. However, point estimates of this premium vary across cities, from a low of 3% in Brussels to a high of 27% in Oslo. As a novel contribution, we show that the eco-label generates a quantitatively and statistically significant price premium only in cities where tourism demand is high and number of label adopters low. We discuss the practical implications of these results for consumers, businesses, and regulators in the tourism industry