Hospitality Products and the Consumer Price–Perceived Quality Heuristic: An Empirical Perspective

Abstract

For hospitality products such as restaurants and hotels, can the price–quality heuristic be effective? Three propositions which show how the consumer uses the price–perceived quality in the hospitality industry are developed. Factors influencing these propositions are the ratings, the brand name, and word-of-mouth. The propositions are empirically validated and the findings will point to several ways that hospitality managers and owners can realign programs and reallocate resources to raise profitability levels and reduce costs. Primary among them are the development and articulation of whether to upgrade to meet the rating criteria, whether to invest in the brand name or to address public perception through viral marketing.

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