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Effect on Room Rates of the Meeting’s Space-To-Rooms Ratio of Upscale Hotels

  • Korea Real Estate Review
  • 2016, 26(4), pp.61-76
  • Publisher : korea real estate research institute
  • Research Area : Social Science > Law > Law of Special Parts > Law of Real Estate
  • Published : December 31, 2016

유현선 1 Seon-Jong Yoo 1

1건국대학교

Accredited

ABSTRACT

This study examines how hotel attributes and facility attributes affect room rates for upscale hotels, four and five-star hotels. The authors employ a hedonic pricing model and analyze data from seventy six hotels operating in six metropolitan regions of South Korea during 2014. To develop better statistical models, three alternative models are specified and estimated.; Model 1.1 only including hotel attributes; Model 1.2 including both hotel and facility attributes as the comprehensive model; and Model 1.3 exploring a non-linear relationship between the dependent and the main independent variable. In addition, two robustness tests are performed. One is to reestimate with only data from the Seoul Metropolitan Area, and the other is to reestimate after including three-star hotels in the data pool. The results indicate that hotel characteristics (the total number of hotel rooms competing in the local market, the total number of floors, and the number of parking spaces per room) positively influence Average Daily Rate (ADR) which is one of universally accepted indicators of hotel operating performance. In terms of facility attributes, the total F&B department revenue per occupied room and swimming pool dummy have significant positive impacts on hotel room rates. The main finding demonstrates that the meeting’s space-to-rooms ratio has a non-linear effect on hotel‘s ADR, posing a negative impact before passing a certain threshold. This study is expected to provide hotel owners and developers with new insights into investment strategies, by empirically exploring the importance of hotel facilities.

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