THE EFFECT OF FACTORS INFLUENCING THE PERCEPTION OF PRICE FAIRNESS TOWARDS CUSTOMER RESPONSE BEHAVIORS

With the intense rivalry in hotel industry globally and to increase their competitive advantage, most hotels operators are implementing revenue management concept or yield management to maximize sales and revenues. Revenue management is the ability of the hotel to sell the right product to the right customer at the right time with the right price through the right distribution channels. The concept was initiated and successfully implemented in the early 1990s by the airlines companies which then being adapted by most hotels since both industries have similar characteristics. Those characteristics are the ability to segment the markets, perishable inventory, product sold in advance, fluctuating demand, low marginal sales costs, and high marginal production costs. In implementing the concept, hotel operators need to maximize the room rates when the demand is high and to maximize the room sales when the demand is low. However, such practices often leads to unfairness issues that could jeopardize the relationship between the hotels and the customers and perception of price fairness is believed associated well with the customer response behaviors. This study empirically investigates the effect of the factors influencing the perception of price fairness on customer response behaviors. Four factors were being tested namely, a) treatment experience, b) price knowledge, c) price expectation, and d) price information. Using self-reported questionnaire survey among the four and five star hotel customers some meaningful insights on the issues investigated were obtained. Findings revealed the experience that customer gained throughout their staying in the hotel positively influence their response behaviors while knowledge that customers obtained pertaining to room rates negatively influence their response behaviors. Customer perceptions and judgments of price unfairness however will lead to negative emotional response like no action, self-protection, and revenge. These results not only provide the hotel operators in understanding of the customers’ behaviors but way to implement an effective revenue management in their operation.