A percentage-off discount versus free surcharge: The impact of promotion type on hotel consumers’ responses

Despite surcharges' recent popularity in the tourism and hospitality industry, academics and practitioners have yet to fully explore relevant promotional strategies. To better understand the implications of promotion types, this research considered how a “free resort fee” promotion differed from the more common percentage-off discount in influencing hotel consumers' responses depending on the pricing scenario (i.e., a high vs. low resort fee). Two experiments revealed that consumers' perceived attractiveness of the promotions did not differ; however, a percentage-off discount generally led to stronger booking intentions than a free resort fee. Comparatively, when the resort fee was high, the promotion exempting resort fees resulted in greater attractiveness and booking intention than a percentage-off discount. Experiments also revealed the mechanism underlying consumers’ affective reactions. This research contributes to the pricing literature and provides hospitality managers and marketers insight into ways to encourage positive consumer responses based on promotion types and situational factors.