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An investigation of pricing and profitability in the short-stay accommodation industry in Tasmania

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Marsden, A (2012) An investigation of pricing and profitability in the short-stay accommodation industry in Tasmania. PhD thesis, University of Tasmania.

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Abstract

Accommodation providers worldwide are readily observed to adopt a variety of pricing
strategies. However there has not previously been an academic study of pricing in the
Tasmanian industry. This thesis aims to provide a systematic study of the decisions made by
short-stay accommodation providers in Tasmania, and the implications of these decisions on
their profitability. Information on the Tasmanian short-stay accommodation industry was
obtained from a survey of firms in this industry using a questionnaire designed by the
researcher. The use of this method generates a novel data set, one that provides a broad
overview of the practices in the industry. Data that would otherwise not be observable were
obtained. Notably, innovations in the design of the questionnaire allowed the investigator to
directly identify the elasticity of demand in sub-markets. Cost variables are likewise
identified.
Data generated by the survey allow the following three analyses to be conducted:
1. The survey data reveal that firms in the short-stay accommodation industry use
direct price discrimination by assessing the price sensitivity of groups of customers.
These groups are identifiable by the firm and are based on the booking process chosen
by the customer, whether they are a corporate or leisure customer and whether they
are a repeat or first-visit customer. This result provides evidence that firms use third
degree price discrimination in practice.
2. An analysis of the determinants of the firm’s elasticity of demand is conducted. It is
found that increases in the star rating (quality) of the firm reduces the elasticity of
demand and an increase in the competitiveness of the environment in which the firm
operates increases the elasticity of demand.
3. An analysis of the determinants of firm profitability is conducted. The analysis
reveals that the use of the website Wotif.com by the firms is an important determinant
of profitability in this industry. However the star rating of the firm, whether or not it is the winter season, and the proportion of customers who make their bookings at the
door are also found to be key determinants of profitability.
The conclusions from this study are of practical as well as academic interest. As with many
regional areas, the short-stay accommodation industry in Tasmania is an important
component of the local economy. Firms’ pricing decisions will be an important determinant
of their profitability. The success of these firms is of interest to their local communities and
policy makers. The findings of this thesis are thus useful in informing policy discussion and
analysis.

Item Type: Thesis (PhD)
Keywords: Prices - profit - microeconomics - industial - organisational - tourism
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Date Deposited: 17 Aug 2012 04:54
Last Modified: 11 Mar 2016 05:53
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