What drives customers’ decision-making? The question has long fascinated Harrah Hotel College assistant professor Chih-Chien Chen, whose efforts aimed at demystifying consumer behavior have caught the attention of the hotel and resort industry.
Her research, rooted in revenue management concepts, considers consumer behavior as it relates to purchasing. The topic is of particular interest to an industry relentless in its efforts to fill rooms, restaurants, showrooms and casinos.
“Hotels are constantly playing with their price structures and trying to understand the variables that work for or against these price structures,” says Chen, who explored the effects of an expanding online customer review landscape in a recent Journal of Travel and Tourism Marketing article.
One factor that affects consumer behavior, according to Chen, is their level of awareness. “Consumers, particularly in the U.S., understand that online room rates fluctuate over time,” she says. “For this reason, they are continuously debating whether to wait for prices to drop or to jump on a price because they feel they are at risk of losing a room.”
So, what makes a consumer take that final leap and book a room, especially when so many online booking options are available? One influencer is a hotel’s cancellation policy.
As part of a study recently published in International Journal of Hospitality Management, Chen tested a variety of cancellation models, examining penalty fees, dates, and times to see how these affect the booking behavior of potential guests. “Traditionally, hotels have adopted a one-size-fits-all cancellation policy,” Chen says, “in which customers accrue standard penalties for cancelling within 24 or 48 hours of their reservation.” She thought departing from this model might make a difference.
And so it did. Chen’s big research takeaway: Consumers are drawn to hotels that take a more nuanced and — you guessed it — more lenient approach when it comes to cancellations.
Although Chen writes about human behavior as an academic, the subject carries personal meaning for her. “When I was little, I was always very curious,” says Chen, who grew up in Taiwan before leaving to study in the U.S. and earning a doctorate at the University of Illinois Urbana-Champaign. “I liked to observe people, and I liked to inquire.”
Chen’s inquiring mind has led her to explore other research questions, including how perceptions of room occupancy influence consumers’ decision of whether or not to book. In a study published in the Cornell Hotel and Restaurant Administration Quarterly, she explored the idea of integrating shaded diagrams for online room selections, much like the diagrams used when choosing concert or airplane seats.
“On a direct level, you are selecting a room, but indirectly, you are seeing how many rooms are booked,” Chen says. “I believe the introduction of that occupancy information will affect the customer’s behavior. The idea is that when rooms seem scarce, the less consumers care about price.”
Chen advises hotel managers to remain “creative and fluid” with respect to pricing strategies. Hotels seem to be taking note. “One year after we published the article regarding occupancy rates, we’ve seen this room-selection model being used online in smaller hotels,” she says.
It would seem reasonable for someone whose research focuses on hotel stays to occasionally take a break, book a nice room, and enjoy a proper getaway. But like the hospitality industry, Chen’s mind works 24 hours a day. “I’m always writing down research questions,” she says, “even when I’m on vacation.”