Hotel Industry Demand Curves

Abstract

This research extends previous work on understanding hotel demand by focusing on the demand curve. Specifically, attention is directed toward the slope of the curve indicating the relationship between average daily rate (ADR) and the number of rooms sold - the price elasticity. Also, we investigate shifts in the curve caused by demand determinants such as changes in income, the extent is represented by income elasticity. Our findings are consistent with estimates produced by others for short-run elasticity, but we report sometimes noticeable differences between long-run and short-run elasticity. Price and income elasticity are considerably larger for higher quality hotels as indicated by the chain scale in which they operate. Elasticity tends to increase with data disaggregation. Higher elasticity is generally found for individual chain scales and cities compared to the nation.