Consumer perception of price fairness and dynamic pricing: Evidence from Booking.com

The extensive use of online travel agencies by hotels and their guests has amplified the number of consumers who directly experiment, appraise, and evaluate how dynamic pricing is implemented by hotels. Using data retrieved from an online travel agency, we trace how room rates change according to booking day, week of stay, and room type; and we build two measures of consumer perception of price fairness based on the customer evaluation of their stay at the hotel. We find that dynamic pricing has a negative effect on price fairness: differences in the room rate among the weeks of stay and among room types are major drivers of falls in price fairness, while changes during the booking period are more tolerated by consumers.