Strategic price positioning for revenue management: The effects of relative price position and fluctuation on performance

Emerging price optimization models systematically incorporate competitor price information into the derivation of optimal price points. While consideration of competitor pricing at this tactical level is essential to maximizing short-term revenues, the long-term impact of competitive price positioning on revenue performance should not be overlooked. This study examines the effect of two key dimensions of strategic price positioning - relative price position and relative price fluctuation - on the revenue performance of 6998 US hotels over an 11-year period. It finds that revenue performance is strongest for hotels that price higher than the competition and maintain a consistent relative price over time. Implications for revenue management practitioners are discussed. © 2013 Macmillan Publishers Ltd.