Searching the most valued attributes at hotels: an application of hedonic pricing analysis in the Balearic Islands

Abstract

[eng] Hotel rooms can be conceived as a bundle of tangible and intangible attributes that provide overnight accommodation for travellers visiting a destination away form home. According to hedonic pricing theory, a hotel room is valued for the utility that each of its attributes offers to travellers. The value or implicit price of these attributes can be disentangled and revealed through hedonic price regressions. This project contributes to the hedonic pricing literature estimating the most valued attributes of hotel rooms located in the Balearic Islands. In contrast to previous studies developed in the Mediterranean region, the empirical application benefits from two improvements. On the one hand, data from TripAdvisor’s website is used to capture the dynamic pricing strategies taking place in the market through the computation of average prices, as well as to obtain a complete set of explanatory variables including attributes, services and facilities describing both, hotels and hotel rooms. On the other hand, beyond using ordinary least squares regressions to estimate the hedonic price function, quantile regression methods are also used to characterize the behaviour of independent variables at specific points along the price distribution. The results indicate that attributes such as minibar, suites, restaurant, spa, babysitting or location, entail a significant positive value on the rate of a hotel room.