Hotel Pricing: Marriott International Case Proposal

Background of Study

Few people dispute the glamour and excitement associated with the hotel industry. Indeed, furnished rooms, excellent facilities, high-end services, exotic locations, adventure and top-notch amenities are commonly associated with the industry. However, all these services come at a cost to the customer. Setting a specific price may seem a simple and easy thing to do, but knowing the correct unit of exchange has often been a tough balancing act for many businesses. Indeed, the determination of the right pricing strategy comes with a lot of thought and consideration, especially when processing different types of information that influence a price formulation framework (Ivanov 2014).

Various hotels have approached pricing challenges differently. Broadly, they have adopted multiple strategies, such as the use of efficient revenue management models and the employment of technologically aided billing strategies (Pandian & Kalaivanthan 2016). They have adopted these pricing frameworks with the goal of maintaining and growing their market shares by making sure that their businesses get maximum revenue, while customers get the best value (Kozak & Kozak 2016). Although the above-mentioned facts largely represent common practice in the industry, different hotels today are grappling with the challenge of formulating the right pricing strategy to reflect changing market dynamics in the sector (Wood 2013). The same problem affects Marriott International group of hotels.

Research Problem

Founded in 1927, Marriott chain of hotels has grown as a diversified American multinational based in Washington D.C (Dhawan 2017). The hotel has more than 5,000 properties around the world that host millions of people annually. Although the multinational has enjoyed decades of success, it is grappling with the problem of adapting its pricing strategy to the changing market dynamics of the hospitality industry (Zheng 2014). For many years, the company has relied on a traditional pricing strategy pegged on different types of services it offers. The services are based on unique products in their traditional market segments. They include the classic luxury, distinctive luxury, classic premium, distinctive premium, classic select, distinctive select, classic longer stays, distinctive longer stays, and great American parks (Chon & Yu 2012). These product categories are increasingly buckling under the pressure of a more dynamic and competitive hotel and hospitality industry characterized by changing technology, shifting customer expectations, the emergence of substitute businesses, changing disposable incomes and the growing homogenous nature of the global society.

Purpose of the Study

Research studies done by Pandian and Kalaivanthan (2016) reveal that hotel guests often have varied tastes, interests, and expectations. The purpose of the proposed study is to demonstrate how managers in the hospitality industry can adapt to these changes through the manipulation of their pricing strategies. By doing so, they would be optimizing their pricing strategies, based on changing market dynamics.

Significance of the Study

The proposed study would be significant to the management of hotels because optimization of their pricing strategies would make them more efficient in their booking and cash flow management processes. The findings of the study would also be beneficial in helping such organisations to re-examine their marketing strategies by re-evaluating their pricing frameworks for every segment of the product they offer.

Research Aim and Objectives

Research Aim

To find out how Marriott Hotel can optimize its pricing strategy

Research Questions

1. How should Marriott’s pricing strategy adapt to technology changes in the hotel industry?
2. How should Marriott’s pricing strategy reflect changes in consumer tastes, preferences and expectations?
3. What are the effects of an increasing number of substitute businesses on Marriott’s pricing model?
4. What is the estimated effect of growing economies and rising disposable incomes on Marriott’s pricing framework?

Research Objectives

1. To find out how technology changes in the hospitality industry affect Marriott’s pricing strategy
2. To investigate how Marriott’s pricing strategy should respond to changing consumer tastes and preferences
3. To examine the effects of a growing number of substitute products on Marriott’s pricing strategy
4. To estimate the effects of growing economies and rising disposable incomes on Marriott’s pricing framework

Literature Review

Changing Trends in the Hospitality Industry

Several market analysts have said that change is the only consistent factor affecting business performance in the hospitality industry (Ivanov 2014; Pandian & Kalaivanthan 2016). Today, a shift in the behaviour and expectations of hotel guests are among the top reasons necessitating a review of hotel strategies and practices (Kozak & Kozak 2016). Zheng (2014) alludes to this fact by saying that today’s hotel guests are more concerned about building meaningful relationships and pursuing long-term and fulfilling relationships, as opposed to the “quick sale price models” that have traditionally characterized the hotel business.

Technology is also slowly changing guest experiences in the hospitality industry. Concisely, many establishments in the sector are realizing that their customer online and offline experiences are merging (Somervuori 2014). Conversely, there is a need to integrate their marketing and pricing strategies to reflect the convergence. Part of the change has been the need for hotels to move to cloud-based management systems because they provide the flexibility needed to scale their operations (McGuire 2016). Lastly, a new trend that is fuelling the need to reorganize business processes in the hotel industry is the realization that a one-size-fits-all strategy is obsolete. This trend aligns with the quest to personalize services for each customer segment. However, as Ivanov (2014) argues, it is difficult for hotels to do so without understanding their customers.

Since today’s hotel guests go through multiple channels of information processing before they reserve a hotel, the generalized pricing frameworks commonly associated with traditional hotel business models do not work. Collectively, these trends highlight the need for hotels to reevaluate important aspects of their marketing plans. Pricing is a crucial ingredient of this process because it defines the mode of interaction between hotels and their customers. Managers have used several theories and models to determine their pricing strategies. These models and theories are generally classified as revenue management frameworks.

Revenue Management Frameworks

Efficient Market Theory (EMT)

Two professors, Eugene Fama and Kenneth French developed the EMT model, which presupposes that market dynamics should be given first consideration when pricing goods and services. The pricing model also dictates that the value of a product should reflect market information relating to it at any given time. El Refaei (2014) says this model subtly highlights the difficulty of breaking away from underlying market conditions and economic forces when formulating the prices of goods and services. Although the EMT stems from a financial background, it has wide application in the hospitality industry (El Refaei 2014).

Dynamic Pricing Model

Several researchers have proposed the dynamic pricing model as an effective framework for determining the price of goods and services in the industry (Zhang, Li & Xiao 2013). It works by providing a flexible framework for accommodating varied price dynamics. One pillar of the model is a novel optimization framework, while the second one is a multi-class scheme. The latter is commonly applied in the airline industry (Zhang, Li & Xiao 2013). Gershkov and Moldovanu (2014) advocate for the adoption of this model by saying it helps to fill the research gap currently associated with pricing literature in the hotel industry. Zhang, Li, and Xiao (2013) add that it has the potential to significantly add to a hotel’s revenues.

Methodology

Research Approach

According to Creswell (2014), there are two main research approaches – qualitative and quantitative. The qualitative approach is commonly associated with the collection of subjective data, while the quantitative research approach is associated with numerical data (Domínguez & Hollstein 2014). The proposed research study will combine both research techniques through a mixed methods research framework. This strategy is informed by the multifaceted nature of the research topic under investigation. Indeed, pricing is both subjective and quantifiable in the sense that it involves the concept of cost (which is measurable) and quality (which is subjective, because hotels are service-oriented businesses).

Research Design

According to Leavy (2017), there are six main types of research designs in the mixed methods research approach. They include sequential exploratory, sequential explanatory, sequential transformative, concurrent triangulation, concurrent nested, and concurrent transformative techniques. The concurrent triangulation method will be used in the proposed study. It involves the use of two or more methods of data collection in one study (Creswell 2014). The purpose of doing so is to help the researcher to cross-validate the findings obtained from each source of information with the other. This way, there is an opportunity to corroborate the findings within the study structure because data collection occurs concurrently. Since both qualitative and quantitative methods of data collection have unique differences, the concurrent triangulation technique would be helpful in mitigating the weakness of one data collection strategy with the other. Similarly, it would aid in magnifying the strengths of one method with the other.

Data Collection

The data collection process for the proposed study would be based on the triangulation technique. This framework accommodates three sources of data: secondary research, interviews, and surveys. The three sources of information would primarily provide the evidence used to formulate the research findings by broadening the basis for data collection. The multiplicity of research information is selectively chosen to improve the quality of data obtained. These advantages are captured in the works of Watkins and Gioia (2015), which demonstrate that the triangulation technique is beneficial in crosschecking information from different types of sources. The triangulation technique aligns with the research design because both techniques allow the researcher to compare and contrast data. The three main sources of data are described below.

Interviews: Interviews will be the main source of qualitative research information in the proposed study. Evidence will be collected from 15 experts in the field of hospitality and management. The goal of seeking their input in the study is to contextualize the survey data, which is the second type of information to be collected in the study. Expert views would also be instrumental in understanding international best practices in hotel pricing. The respondents would be sourced from different marketing consultancy firms in the city. They would be sampled using the snowball technique because the researcher has initial contact with three professionals working as consultants. Using this sampling strategy, the initial contacts would help the researcher to recruit other participants in the study (Bernard & Bernard 2012).

Surveys: Surveys will be conducted on 200 employees of Marriott International to sample their views on the research questions. The surveys would involve structured questionnaires that gather the respondents’ views using a five-point Likert scale. Appendix 1 shows a draft of the proposed questionnaire. The respondents will be selected to participate in the study through a random sampling method. This technique is chosen for the proposed study because it contains minimal bias (Creswell 2014).

Secondary Research: Published research data would also form the body of research information that would be used in the proposed study. Particularly, credible research information would be selected for review. Books and journals would form the bulk of data for analysis. Credible websites would also be included in the research to provide complementary information. The purpose of including secondary research data in the study is to provide a basis for comparing the information obtained from the surveys and interviews with what other researchers have written or said about the research topic. The diagram below illustrates how the triangulation technique would define the data collection process.

Data Analysis

The data analysis process would be based on the use of the Statistical Package for the Social Sciences (SPSS) version 22. As insinuated by its name, this data analysis method is software-based and involves the use of advanced methods of statistical analysis. The SPSS technique will be used in the study because it has a high efficacy level based on its use of coding languages (Helen 2015). The justification for its use is also supported by its ability to analyse large volumes of data. This advantage is crucial because of the large-scale nature of Marriott’s operations. This statistical analysis software is also justifiably selected for use in the proposed study because it provides a platform for storing large volumes of data (Walliman 2015). This way, it would be easier for the researcher to refer to them during the data analysis process. The SPSS technique is also applicable to the proposed study because the researcher will be exploring different relationships between price and market dynamics in the study. Similarly, the technique would help to examine how the responses add or contribute to the realization of the research objectives. Using the SPSS software, statistical analysis instruments (such as graphs and bars) would form the main tools of data analysis.

Ethical Issues in Research

According to Brennen (2017), the use of human subjects in research often creates several ethical issues, such as informed consent, privacy, and treatment of data. These issues are discussed below.

Informed Consent: All the participants in the study will take part in it voluntarily. In other words, the researcher would not offer incentives or coerce them to give their views. This agreement would be stated in writing where all participants will be required to sign an informed consent form.

Privacy and Confidentiality: The privacy of the respondents who give their views in this study will be upheld because they will give their opinions on the questions asked anonymously.

Treatment of Data: The researcher will be the only person with access to information provided by the respondents. The data collected will be stored in a computer and protected with a password that would be privy only to the researcher. After completion of the research process, the data would be destroyed.

Appendix: Semi-Structured Questionnaire

Part A: Demographic Information (please tick on the appropriate box)

1. Gender
   1. Male
   2. Female
2. Age. How old are you?
   1. Younger than 20
   2. 21 years – 30 years
   3. 31 years – 40 years
   4. 41 years – 50 years
   5. 51 years – 60 years
   6. Older than 60 years
3. Work Experience. How long have you worked as an employee of Mariott International
   1. Less than 2 years
   2. More than 5 years
   3. More than 10 years
   4. More than 15 years
   5. More than 20 years
   6. Educational Experience
4. What is your highest educational qualification?
   1. Lower than high school
   2. No High school education
   3. High school
   4. Undergraduate level
   5. Master’s level
   6. PhD Level

Part B: Please state whether you agree or disagree with the following statements

1. Mariott’s pricing strategy does not reflect the effects of technology on the hospitality industry

2. Mariott’s pricing strategy is not flexible enough to accommodate changes in consumer tastes, preferences and expectations

3. The growth and spread of alternative accommodation arrangements has had an effect on Mariott’s pricing strategy

4. Mariott’s pricing strategy accommodates customers in growing economies and exploits their rising disposable incomes.

Reference List

Bernard, R & Bernard, H 2012, Social research methods: qualitative and quantitative approaches, SAGE, New York, NY.

Brennen, B 2017, Qualitative research methods for media studies, Taylor & Francis, London.

Chon, K & Yu, L 2012, The international hospitality business: management and operations, Routledge, London.

Creswell, J 2014, Research design: qualitative, quantitative, and mixed methods approaches, SAGE, London.

Dhawan, R 2017, Hospitality industry & Marriott international, Web.

Domínguez, S & Hollstein, B 2014, Mixed methods social networks research: design and applications, Cambridge University Press, Cambridge, MA.

El Refaei, A 2014, Clearing price economics: trading strategies, self-fulfilling prophecies and financial markets, GRIN Verlag, New York, NY.

Gershkov, A & Moldovanu, B 2014, Dynamic allocation and pricing: a mechanism design approach, MIT Press, New York, NY.

Helen, K 2015, Creative research methods in the social sciences: a practical guide, policy press, New York, NY.

Ivanov, S 2014, Hotel revenue management: from theory to practice. Zangador, Varna.

Kozak, M & Kozak, N (eds) 2016, Tourism and hospitality management, Emerald Group Publishing, London.

Leavy, P 2017, Research design: quantitative, qualitative, mixed methods, arts-based, and community-based participatory research approaches, Guilford Publications, New York, NY.

McGuire, K 2016, The analytic hospitality executive: implementing data analytics in hotels and casinos, John Wiley & Sons, London.

Pandian, V & Kalaivanthan, M 2016, Handbook of research on holistic optimization techniques in the hospitality, tourism, and travel industry, IGI Global, New York, NY.

Somervuori, O 2014, ‘Profiling behavioral pricing research in marketing,’ Journal of Product & Brand Management, vol. 23, no. 6, pp. 462-474.

Walliman, N 2015, Social research methods: the essentials, SAGE, New York, NY.

Watkins, D & Gioia, D 2015, Mixed methods research, Oxford University Press, Oxford.

Wood, R 2013, Key concepts in hospitality management, SAGE, London.

Zhang, Y, Li, K & Xiao, Z 2013, High performance computing, Springer, New York, NY.

Zheng, F 2014, Biotechnology, agriculture, environment and energy, CRC Press, New York, NY.