Blended Pricing and Fairness Perceptions: Managing Intrastay Rate Variability in Hotel Bookings

Abstract

Dynamic hotel pricing often produces sizable variation in nightly rates within a single reservation, creating a communication challenge for revenue managers. Drawing on mental accounting, reference-dependent evaluation, and processing fluency, we examine how the magnitude of intrastay rate variation and the format of price presentation jointly shape consumer responses. Across two experiments, we test whether nightly rate variation affects perceived price fairness and booking intentions, and whether a blended pricing strategy—displaying a single average nightly rate—can mitigate adverse effects. Study 1 shows that greater intrastay variation lowers perceived fairness, which in turn reduces booking intentions; Study 2 demonstrates that when variation is high, a blended (vs. itemized) display improves perceived fairness and booking likelihood by reducing cognitive burden and enhancing fluency. We also calibrate our stimuli to reflect real-world volatility observed during peak periods and mega-events, thereby strengthening ecological validity and clarifying the boundary conditions under which display format matters most. Collectively, the findings redirect attention from absolute transparency to the way consumers mentally organize and process volatile prices, offering actionable guidance for digital booking environments marked by algorithmic pricing and heightened transparency: Carefully designed blended displays can preserve pricing flexibility while sustaining fairness perceptions, consumer trust, and conversion rate.