Factors Influencing Hotels’ Room Charges: A Case of Rawalpindi-Islamabad in Pakistan

Abstract

The hotels charge various prices for rooms rented even in same locality and this is because of the fact that they provide various services for their customers. Customers also consider various characteristics when booking a hotel. Some hotels have more facilities than others. This study estimates the impact of various influencing factors on the room rates of hotels in Islamabad and Rawalpindi. We applied hedonic pricing model and used panel primary data obtained from 20 hotels for the time period 2010 to 2015, through questionnaire. We applied panel data technique namely random effect model. The results show that the star rating, availability of shuttle bus service within and outside the city, average number of conferences, gym, security guards, hotel location, online reservation, presence of garden and cafe have significant impact on hotel room rates. Online reservations, hotels located within city center and distance from airport have negative relationship with hotel room rates. The hotel owner should give priority to the security related attributes for customer satisfaction. The results of this paper will also be helpful for other hotels in Pakistan to consider the hotel attributes while charging for room rates.