The more the merrier? Understanding how travel frequency shapes willingness to pay Marta Nieto Garcíaa, Pablo A. Muñoz Gallegob, Óscar Gonzalez Benitoc Keywords: willingness to pay, travel frequency, reference price, dynamic pricing, room rates a University of Portsmouth, Faculty of Business and Law, Richmond Building, Portland Street, Portsmouth PO1 3DE. Telf. +44 02392 844028 Corresponding author:
[email protected] b Universidad de Salamanca, Instituto Multidisciplinar de Empresa, Edificio FES Campus Unamuno, 37007 Salamanca, Spain. Telf. +34 923294500 (3127)
[email protected] c Universidad de Salamanca, Instituto Multidisciplinar de Empresa, Edificio FES Campus Unamuno, 37007 Salamanca, Spain. Telf. +34 923294500 (3008)
[email protected] The more the merrier? Understanding how travel frequency shapes willingness to pay Abstract Customers’ evaluation of hotel prices has received increasing attention in hospitality research. Beyond the specific attributes of the offer, internal norms related to prior experiences affect customers’ response to price. Drawing on the behavioral price literature, this study investigates the effect of travel frequency and reference price on the formation of travelers’ willingness to pay (WTP) for accommodation. The study presents a novel methodological approach introducing the concept of instantaneous indirect effect. Results offer support for an inverted U-shaped relationship between travel frequency and WTP, mediated by the internal reference price. WTP reaches its peak when the customer has booked an accommodation six times in the past two-year period. The findings provide clear implications for practitioners. Monitoring customers’ travel frequency and integrating it into dynamic pricing models will create a better alignment of room rates with travelers’ WTP, which will make revenue management techniques more customer-centric and, ultimately, enhance profitability.