A recent discussion on Hospitality Net’s World Panel has reignited the debate over whether differentiating hotel pricing based on a traveler’s geographic location is a prudent revenue management strategy or an ethically fraught practice. The conversation stems from research suggesting that several major OTAs (Online Travel Agencies) appear to offer higher rates to users in more affluent regions—most notably the San Francisco Bay Area—compared to those in less affluent cities like Phoenix or Kansas City. According to SFGate, the discrepancies can be dramatic, sometimes reaching $500 more per night for the very same room and dates.
Such stark contrasts immediately raise questions about the use of location as a pricing variable. Some in the industry view it as a logical step in the evolution of revenue management, while others worry it could foster distrust and harm a hotel’s reputation if guests perceive it as unfair or discriminatory. Many experts weighed in on Hospitality Net’s World Panel, offering perspectives that highlight the complexities—and potential pitfalls—of geo-based pricing.
Historical Echoes and Technical Complexities
One commonly cited precedent involves an OTA discovered, around 15 years ago, charging higher hotel rates to Apple users than to PC users—presumably under the assumption that Apple users were more affluent. Max Starkov, a hospitality and online travel tech consultant who participated in the recent Hospitality Net discussion, sees parallels in the latest reports of OTAs offering different pricing based on location, describing it as a “one-to-many” tactic that broadly profiles consumers.
Starkov also notes that not every instance of high pricing is necessarily intentional discrimination. Sometimes, discrepancies are attributable to “cached ARI (availability, rates, and inventory)” issues, where rate updates lag behind real-time data. Either way, he points to the future of revenue management as AI-driven “one-to-one” pricing, which customizes rates to each traveler’s behaviors, loyalty status, and booking history. In his words, “One-to-One Pricing, supported by CRM, will allow hoteliers to automatically personalize pricing and product offering to the individual customer level.”
Intrinsic Value vs. Assumptions About Wealth
Niki Van den Broeck, another voice in the Hospitality Net discussion, emphasizes that a hotel’s rate strategy should reflect “intrinsic value” rather than operate on simplistic assumptions about affluence. She argues that while OTAs rely on massive datasets, they may lack the hotel’s deep local market knowledge. Van den Broeck suggests offering discounts to certain segments, rather than inflating prices for those assumed to be wealthier, to maintain guests’ trust. If travelers learn they’re paying more solely due to their home address, they may feel exploited and harbor long-term resentment toward both the OTA and the hotel.
A Familiar Concept in Other Industries
Not all experts see geo-based pricing as a bad idea. Mark Fancourt, Co-Founder at TRAVHOTECH, draws parallels to other industries, noting that it’s normal for fuel prices, airline fares, and insurance premiums to fluctuate based on the location of purchase or residence. Fancourt holds that, as personalization becomes more sophisticated, factors like “past willingness and propensity to pay” will also influence pricing. From his point of view, location is just one data point among many, and using it to optimize revenue isn’t inherently unethical—provided it’s handled transparently and with the consumer’s experience in mind.
Fencing Strategies vs. Blanket Price Hikes
Reflecting on a well-known segmentation tactic, Trevor Stuart-Hill points out that location-based offers—like “Florida resident rates” or “Hawaii’s Kama’aina” deals—are longstanding examples of fencing strategies intended to cultivate loyalty among local travelers. But when hotels or OTAs start tweaking unqualified retail pricing in ways that significantly disadvantage specific regions, questions of sustainability and fairness arise. He references an operator who lowered rates overnight to attract European travelers, then raised them again during U.S. daytime hours. While it might work short-term, Stuart-Hill cautions that VPN use, contractual parity clauses, and savvy consumers can quickly render such tactics unsustainable—and potentially controversial.
Another Layer of Segmentation
From another angle, Pablo Torres sees location-based pricing simply as an extension of everyday segmentation practices, such as corporate, wholesale, or group rates. In his view, hospitality revenue management is about targeting different segments with different willingness to pay, and geographic data can be useful—if handled ethically. Torres does, however, warn of ethical concerns: if guests sense they’re being charged extra with no added value, it can damage a hotel’s reputation. The key, he suggests, is communicating value and transparently explaining why certain rates apply.
Price Discrimination 101—But at What Cost?
Simone Puorto calls location-based price hikes “Price Discrimination 101.” From a purely revenue-driven perspective, if travelers in wealthier regions consistently pay more, raising rates can be profitable. However, Puorto probes the ethical dilemma: hospitality is an industry built on service and positive guest experiences, so if these measures feel predatory, they could alienate customers for good.
Similarly, Fabian Bartnick, Founder at Infinito, acknowledges that “geo-pricing is definitely a valuable tool in revenue management,” but underscores that it ultimately hinges on value perception. If travelers willingly pay higher prices and still feel they receive good value, it can be successful. Yet if they find out that other regions get far lower prices for the same product, or if the disparity seems arbitrary, loyalty and trust can erode.
When Location-Based Pricing Backfires
Potential backlash extends beyond individual disgruntled customers. Timothy Wiersma, Principal at Revenue Generation, LLC., warns that well-informed travelers or metasearch platforms might quickly reveal these discrepancies, encouraging people to book from a different region—or use a VPN—to obtain cheaper rates. Moreover, broad generalizations about an entire area being “rich” or “discount-seeking” can be inaccurate. The complexity multiplies in branded properties, where strict parity clauses often dictate that the same publicly available rate must be offered across different channels.
Along the same lines, Binu Mathews, CEO at IDS Next, deems the practice “highly discriminative,” arguing that rate disparities based on location can sow distrust and tarnish a hotel’s reputation. If travelers suspect they’re being gouged simply because of their zip code, they may feel morally outraged, sharing their experiences on social media and review platforms—potentially sparking a public relations crisis.
The Path to True Personalization
One consensus emerging from the World Panel discussion is that AI-driven, one-to-one pricing will increasingly supplant broad-brush, location-based tactics. The future of revenue management, many believe, lies in blending various data points: a traveler’s past booking behavior, loyalty status, browsing patterns, and real-time engagement. In such a model, a traveler might receive a personalized discount or upsell offer based on how many times they’ve visited the booking site in the last 24 hours or whether they’ve demonstrated an interest in premium amenities before—rather than merely targeting them because they reside in a generally wealthy region.
This approach could address many ethical concerns by showing travelers how rates reflect their individual preferences and loyalty, rather than perceived affluence. Yet it also underscores a broader truth: transparency remains pivotal. If hotels or OTAs fail to communicate the rationale behind customized rates, travelers might still perceive the system as arbitrary or manipulative.
Balancing Revenue with Reputation
Ultimately, the recent Hospitality Net World Panel discussion reveals two primary paths forward. The first is a continuation of location-based pricing as a segment-driven practice, grounded in the argument that it’s no different from other segmentation strategies. The second is a pivot toward highly personalized, data-rich pricing that accounts for a wide range of factors beyond location alone.
Whichever path revenue managers choose, the stakes are high. Hotels rely on long-term guest loyalty, and once a traveler feels unfairly treated, it can be challenging to win back their trust. Industry watchers caution that while geo-based pricing may yield short-term gains, it can quickly become “neither viable nor sustainable” if it sparks consumer backlash or violates parity agreements. In an era where social media amplifies negative feedback and comparison-shopping is a few clicks away, hoteliers and OTAs alike must tread carefully.
In the end, geo-based pricing may be best understood as a stepping stone toward more nuanced, ethically considered approaches. As artificial intelligence and advanced analytics become standard in hospitality, the industry has a real opportunity to move beyond broad presumptions about affluent cities or discount-centric regions. The question is whether hoteliers and OTAs can seize that opportunity—balancing the pursuit of revenue with a steadfast commitment to guest satisfaction and fairness—before potentially damaging public opinion tips the scales in favor of more transparent and equitable strategies.
