EMPIRICAL STUDY ON THE DETERMINANTS OF HOTEL ROOM RATES

Abstract

The strengthening of the global economy and the implementation of Tourism 2015 by the Singapore government has given a strong boost to Singapore’s tourism and hotel industry. This brings about a significant hike in room rates due to the shortage of hotel rooms and increased occupancy rates. This had attracted the attention of various hotel industry players to further explore into this area. Although many studies had been done relating to hotels, but there are limited number of studies that focus on the important determinants of hotel room rates, especially in the Singapore context. Therefore, this dissertation aims to find out how the location, physical attributes and the facilities and services provided by the hotel affects the pricing of hotel rooms. Factor analysis and regression models are used to determine the values or implicit prices of each hotel’s individual attributes. Empirical evidence collected shows that location is an important determinant of hotel room rates. Various location factors such as accessibility to the city centre and the characteristics of its nearby land uses affects the hotel room rates to a great extent. On the other hand, although the ratings of the hotel have the most significant impact the room rates, location is still the main factor that determines the types of hotel to be built. In conclusion, this study supports the view that hotels in Singapore follow a spatial hierarchy based on its distance to the city centre. The regression models generated are also useful in helping hotel operators to price their rooms according to its respective attributes.