How Does Respect for the Environment Affect Final Prices in the Hospitality Sector? A Hedonic Pricing Approach

Abstract

Hedonic pricing theory states that the price of a room is determined by a set of characteristics (e.g., structural, location, and environmental) of the establishment. Set within the framework of this methodology, and using raw data from the Quality, Productivity, and Competitiveness in the Hospitality Industry for Andalusia project, this article discusses the impact on room pricing of hotels implementing environmental sustainability measures based on a sample of 232 hotels (3-, 4-, and 5-stars) in Andalusia (Southern Spain). This sample is statistically representative of hotel accommodations in the region. A distinguishing feature of this study is the creation of a variable derived from the replies given by hotel managers to a questionnaire designed by the authors. The questionnaire presented questions about the measures the managers implemented in their establishments to improve environmental sustainability. The use of this variable in the semilogarithmic hedonic model suggests that the prices of hotel rooms are 5.15-percent higher for each environmentally sustainable measure implemented in the hotel; in some cases, the price increase could be as much as 36.05 percent. Other variables that were also introduced in the model yielded estimates consistent with those obtained in previous studies.