Development of a model to examine the determinants of demand for international hotel rooms in Seoul
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The primary objective of this study was to develop an empirical model that accounts for factors affecting the demand for international tourist hotels, and that enables demand estimation and projection of demand, in the context of the metropolitan Seoul area.
Models were hypothesized to explain market behavior of selected segments of the hotel industry. Demand Model I accounted for international hotel demand incorporating such explanatory variables as price, trade volume and events. Both demand and price were treated as endogenous variables and the time-dependent error processes were all examined. Demand Model I was further expanded by incorporating segmentation variables. The inclusion of segmentation variables into the model in Demand Model II enabled the analysis of the interdependence of market segments that affects demand. Along with the incorporation of a time series structure, a system of equations was employed for Demand Model II.
The results indicated that the explanatory variables, which were own price, the number of events and the volume of trade, had a significant impact on international hotel demand. The results from the demand equations also revealed that the demand for a segment is significantly influenced by price and demand for other segments. A cross-segment substitution effect on the demand side is quite relevant for the international lodging market in Seoul and demand for a market segment fluctuates in the same direction as the total market demand changes.
From the price equations, the market price of lodging services was found to be related to demand and supply influences simultaneously. The results also indicated that seasonality and economic factors, such as exchange rates and consumer price index, have significant influence directly on international lodging prices. Such factors also were found to have indirect effects on the demand level.
- Doctoral Dissertations