Kyung Ho Kang, Laura Stein, Cindy Yoonjoung Heo, Seoki Lee
International Journal of Hospitality Management
During my research which I described here: link, I found that 67% of respondents stated that they care about environment but only 32% were willing to pay more for product or service that is eco-friendly. Therefore, I wanted to compare the results of my study with others.
Green initiatives are becoming part of firm’s operations as environment is said to be more and more degraded. Also in hotel industry, most of the biggest hotel chains have environmental sustainability in their top priorities. Visible eco-friendly solutions as solar panels, low flow shower heads or recycling beans have not only good impact of environment but might also gain attention from conscious customers. Looking into the future, hotels could not only save millions of dollars by “going green” but also became a social channel for change due to high visibility around the world. However, some hotels are still resistant to invest in green technologies, as benefits are often intangible (like improvement in brand reputation) or are entirely doubtful.
Even the academic society is divided. The study conducted by Lonely Planet showed that 88% of travellers consider sustainability as important factor (Shugg et al, 2007), but while some of the travellers are willing to pay more to support environmental practices (Masau and Prodeaux, 2003), others think that hotels are responsible for environment and are obligated to fund those sustainable investment using own resources (Gustin and Weaver, 1996). The two theories that can support the view that customers might be willing to pay more are: the social identity theory and the means-end theory and theory of planned behaviour as well as attribution theory that are in contrary.
The social identity theory (Tajfel and Turner, 1968) emphasizes the fact that people tend to associate themselves with companies whose “identities are enduring, distinctive and capable of increasing their self-esteem” (Bhattacharya and Sen, 2004). Of course, customers who have more concerns about environment are more likely to identify with company that invest in green initiatives. A higher degree of convergence between customer and company because of common concern for environment leads to higher willingness to pay premiums for those eco-initiatives.
The means-end theory (Gutman, 1982) customer decides to purchase certain product or service (mean) in order to achieve desired values (end). Taking it on the ground of environmental needs, green practice can bee seen as distinctive feature of product or service. Customers who are more concerned for environmental issues may be more likely to purchase green products or service to satisfy their personal value, self-esteem.
Theory of planned behaviour (Ajzen, 1991) states that there are several factors like individual’s ability, knowledge and opportunity to engage in environmental issues beyond personal concerns for this issue that influences the attitude towards environmentally friendly products.
The attribution theory (Jones and Davis, 1965) states that when customers evaluate certain green initiatives and they perceive it as e.g. profit enhancement (not as public service) their willingness to pay for those initiatives may became negative.
So basically, the theory says that customers should be willing to pay more, when companies are doing it for public benefit and customers are well-educated. The question is to what extend the reality reflects the theory.
Creyer and Ross (1997) in their study of 280 customers, supported the thesis that firm’s ethics has significant influence on customers purchasing intentions and customers are willing to pay higher price to reward ethical beahviour of a firm.
Dutta et al. (2008) showed that restaurant customers are willing to pay up to 10% or more for companies engaged with green practices in US. In India customers motivation for paying more were health concerns and visibility.
Gustin and Weaver (1996) found a positive correlation between customers attitudes toward hotels’ pro-environmental practices and and purchase intentions. However, this study doesn’t reflect the exact willingness to pay more, but just increase in purchase intentions.
Keng, et al. (2012), conducted e-mail survey with two questions “Are you willing to pay more to stay at a hotel that is making efforts to be environmental sustainable” and “What is the extra percentage of your hotel bill that you are willing to pay to support hotel’s efforts to be environmentally sustainable? a)0%; b)1-5%; c)6-10%; d)11-15%; e)16-20%; f)>20%”. Out of 9000 emails, 611 decided to take part in this survey. 30% (134 respondents) stated that “they would pay more” (question 1). When they were asked how much they are willing to pay; 66% stated that they are willing to pay more than 0 (so two times more than for 1st question). From those 66%; 37% were willing to pay an extra 1-5% and it was the largest group. The interesting is fact that those 30% that are willing to pay more based on the first question almost reflects 32% from my study. The other interesting fact that was derived from this study is fact, that people with higher income were less willing to pay more for green initiatives. The lower income people are more sensitive to environmental issues as they are more influenced by environmental problems.
Those studies show that in general there is a group of customers that are willing to pay more for firm’s environmental initiatives but on the other hand, this group is still too small to raise the rates because of this reason.
Main Article: Kong, H. K., Stein, L., Heo, C., Y., Lee, S., 2012. Consumers’ willingness to pay for green initiatives of the hotel industry
- Ajzen, I., 1991. The theory of planned behavior. Organizational Behavior and Human Decision Processes 50 (2), 179–211.
- Bhattacharya, C.B., Sen, S., 2004. Doing better at doing good: when, why, and how consumers respond to corporate social initiatives. California Management Review 47 (1), 9–24.
- Creyer, E., Ross, W.T., 1997. The influence of firm behavior on purchase intention: do consumers really care about business ethics? Journal of Consumer Marketing 14 (6), 421–432.
- Dutta, K., Umashankar, V., Choi, G., Parsa, H.G., 2008. A comparative study of consumers’ green practice orientation in India and the United States: a study from the restaurant industry. Journal of Foodservice Business Research 11 (3), 269–285.
- Gustin, M.E., Weaver, P.A., 1996. Are hotels prepared for the environmental consumer? Journal of Hospitality and Tourism Research 20 (2), 1–14.
- Gutman, J., 1982. A means-end chain model based on consumer categorization processes. Journal of Marketing 46 (2), 60–72.
- Jones, E.E., Davis, K.E., 1965. The attribution process in person perception. In: Berkowitz, L. (Ed.), Advances in Experimental Social Psychology 2. Academic Press, New York, pp. 220–266.
- Masau, P., Prideaux, B., 2003. Sustainable tourism: a role for Kenya’s hotel industry. Current Issues in Tourism 6 (3), 197–208.
- Shugg, J., Hewitt, H., Cohen, C., Stanford, A., Wood, N., 2007. Travellers’ pulse survey. http://www.tourism.australia.com/content/News%20Centre/Travellers PulsePublic.pdf
- Tajfel, H., Turner, J.C., 1986. The social identity theory of intergroup behavior. In: Worchel, S., Austin, L.W. (Eds.), Psychology of Intergroup Relations. Nelson-Hall, Chicago, pp. 7–24.
Author: Mateusz Konopelski