Price, which is one of the most important elements of the marketing mix, can be difficult to get right. Pricing too high, or low, can negatively impact on customer satisfaction and revenue. Adopting a pricing strategy is necessary to achieve desired sales objectives (Chan & Wong 2005).
Research indicates that whilst a price reducing strategy, which is commonly used in response to strong competition, may see short term gains, rarely does it attract and retain new customers (Chan & Wong 2005). In Hong Kong many hotels have reduced their room rates to remain competitive, however the above implies that hoteliers would do better to understand how their services and facilities influence customer satisfaction rather than simply reducing their room rates. (Chan & Wong 2005).
Customers are interested in value for money and research indicates that customers do not expect high quality hotels to match the prices of inferior hotels. There is a significant positive relationship between a customer’s perceived expectation of price and perceived expectation of quality (Chan & Wong 2005). When a customer’s perceived expectation of price is consistent with the standard and quality of service delivered then hotel room rate pricing from a customer perspective is considered fair, thus the customer perceives they have received value for money and are more likely to be satisfied with the transaction, regardless of what the actual room rate charges may have been (Chan & Wong 2005).
Hong Kong Hotel Market
The Hong Kong Tourist Board (HKTB) reported in 2003 that Hong Kong’s tourist market was heavily impacted by the SARS outbreak. After the outbreak, in an effort to restore the market the government of the Republic of China, relaxed travel restrictions, by introducing the individual visit scheme (HKTB 2003).
The Hong Kong Tourist Board reported in 2004, that the individual visit scheme has contributed to Mainland China now being Hong Kong’s largest market, with the...