Effects of Economic Factors on Demand for Luxury Hotel Rooms in the U.S.

Abstract

The purpose of this study is to estimate the effects of economic factors on the demand for luxury hotel rooms in the United States during the 16-year period . The average daily rate of six types of hotel rooms, gross domestic product and two recessions are considered as independent variables in the sample of the time series data set of 192 points to predict luxury room night stays of customers by ex-post data. Autoregressive Distributed Lag Model is employed to select the best model of luxury hotel demand on its determinants in the short and long run relationships. Findings indicate that in the long run, (1) the US residents would stay more nights in luxury hotels when their income increases; (2) the Canadian and UK might not visit or stay in the luxury hotels in the U.S. when their income or luxury hotel price increases; and (3) the German, Japanese, Korean and Chinese visitors would stay in the luxury hotels in the U.S. when their incomes increase no matter what the luxury hotel price increases. In the short run, the Chinese, Japanese, and Korean might not stay in the luxury hotels in the U.S. when their income or hotel price increases. The English would stay in the luxury hotels when their income or luxury hotel price increases. Finally, the two US economy recessions in 2001 and 2007-2009 do not affect the demand for luxury hotel rooms in the long run

Keywords

• Hotel room demand, Long-run elasticity, ADLM model, Luxury hotel