An impact of pricing methods on the formation of financial results and performance of entities operating in the hotel industry of the Russian Federation
Kondrat'eva Z.A.Financial University under Government of Russian Federation, Kursk Branch, Kursk, Russian Federation zak.rf@mail.ru
Importance The article reviews approaches to optimal pricing through lower costs and competitors' prices, higher competitiveness of services for boosting profit of hotel businesses. Objectives The research assesses performance indicators of the Russian hotel businesses and analyzes methods of pricing for services. I also evaluate the elasticity of demand through prices and determine how prices influence income of hotel businesses in Russia. Methods Using a coefficient analysis, I evaluated the efficiency of the hotel industry, conducted an operational analysis of the break-even price, assessed the financial strength of hotel business. When formulating the demand function, I applied methods of point elasticity, correlation and regression analysis. Results Demand for hotel services through prices was proved to be inelastic. Price growth bolsters gross income, with price growth and inelastic demand leading to higher profitability of services. Conclusions and Relevance Notwithstanding a higher pace of growth in prices for hotel rooms during 2004–2014, their relative occupancy had been decreasing. There was a concurrent drop in profitability indicators of operations, being much lower than the average ones in the national business sector. Whereas outbound tourism indicators in Russia will continue to grow within the coming years, there should be new services that are needed in the market to ensure high profitability. The findings can be used to compare target indicators of hotel businesses' performance, which the Russian Government used to formulate such programs as The Development of Domestic and Outbound Tourism in the Russian Federation, The Development of Culture and Tourism.
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