Abstract:
While conventional pricing strategy involves sellers to decide price of a hospitality product,
hospitality service providing companies carry the risk of capacity underutilization in many
occasions when fixed costs are already incurred. Pay What You Think Fair (PWYTF) pricing
mechanism motivates tourists to pay a fair price for unutilized capacity, thereby, increasing sales
and profit for marketers. This study shows that PWYTF pricing mechanism with a concrete
reference price of customer can generate significantly higher revenue and profit for a long period
of time. We have conducted three experiments to show that PWYTF pricing strategy is a
profitable and sustainable pricing solution for hospitality service providing companies to
increase revenue during off-season as well as underutilization of hired capacity. This study opens
a new avenue in pricing methods used in hospitality industry and contribute in significant way
both in academic and practice.
