Hedonic Price Models and Sun-and-Beach Package Tours: The Norwegian Case

Abstract

With the research on hedonic price theory serving as background, this study examined how the overall price of a sun-and-beach package tour was determined by choice of tour operator, choice of destination, hotel star rating, and a number of different attributes characterizing the package tour. In addition, the study drew attention to a particular problem in previous price hedonic tourism research: the possible endogeneity of the hotel star rating variable. To address this issue, a hierarchical regression procedure was adopted. This procedure permitted the tracing of the attributes’ possible indirect effects on overall package tour prices through the hotel star rating variable. The results help consumers identify those package tour attributes that they have to pay extra for as opposed to those that they do not, and at the same time provide tour operators with a useful instrument for strategic pricing.