Hotel customer feeling satisfied with transparent pricing.

Decoding Hotel Pricing: How Transparency Builds Trust and Boosts Satisfaction

Elliot Brynn in Business & Economy August 2025 • 4 min read.

"Uncover the secrets to winning customer loyalty in the hospitality industry through transparent pricing strategies and why it matters now more than ever."

In today's competitive service industry, particularly within hospitality, tariff modulation (TM)—adjusting prices based on demand and other factors—has become a prevalent strategy. While TM can optimize revenue, it also carries the risk of customer dissatisfaction (DIS) if perceived as unfair or opaque. This is where the concept of transparency of tariff information (TTI) comes into play, acting as a potential counterbalance to the negative perceptions associated with TM.

The rise of digital platforms and increased consumer awareness have amplified the importance of pricing transparency. Customers now have more tools than ever to compare prices and scrutinize hidden fees, making it crucial for hotels to communicate their pricing strategies openly. When hotels clearly explain the rationale behind their pricing, it can mitigate negative reactions and foster a sense of trust. This proactive approach not only addresses potential dissatisfaction but also enhances the overall customer experience.

Recent research focusing on the Tunisian hospitality sector sheds light on the intricate relationship between tariff modulation, transparency, and customer dissatisfaction. The study explores how TTI can directly reduce DIS and moderate the adverse effects of TM. It delves into the nuances of customer perception and the strategic implications for hotel management, offering valuable insights for enhancing customer loyalty and profitability. Understanding these dynamics is essential for any hospitality business aiming to thrive in an increasingly transparent marketplace.

The Delicate Balance: How Transparency Counteracts Dissatisfaction

Hotel customer feeling satisfied with transparent pricing.

Tariff modulation, while a valuable tool for revenue optimization, can easily backfire if customers feel they are being taken advantage of. Transient tariffs, which vary based on factors not immediately apparent to the customer, are particularly prone to generating dissatisfaction. This negative perception arises from two primary sources: reference price theory and fairness theory.

Reference price theory suggests that customers evaluate prices relative to their expectations based on past experiences. When a hotel alters its prices without clear justification, it disrupts these expectations and can lead to a sense of unfairness. Fairness theory, on the other hand, posits that customers assess the fairness of an exchange by comparing what they receive (the 'gain' component) to what they sacrifice (the 'give' component). If the perceived ratio is skewed, dissatisfaction ensues.

Reference Price Theory: Disrupted expectations lead to dissatisfaction when prices change unexpectedly.
Fairness Theory: Customers assess fairness by comparing gains and sacrifices; imbalance leads to negative perceptions.

Transparency of tariff information (TTI) directly addresses these concerns by providing customers with the rationale behind pricing decisions. By openly communicating the factors influencing price adjustments, hotels can enhance perceived fairness and maintain customer trust. This proactive approach transforms potentially negative interactions into opportunities to build stronger relationships and foster loyalty.

Strategic Implications: Adapting to Customer Heterogeneity

Ultimately, this research underscores the importance of dynamic customer segmentation, highlighting the need for hotels to adapt their TM and TTI strategies to diverse customer profiles. By understanding the unique needs and expectations of different customer segments, hotels can tailor their pricing communication to maximize satisfaction and minimize potential dissatisfaction. This targeted approach not only enhances the customer experience but also strengthens long-term loyalty and profitability. The future of hospitality lies in transparent, customer-centric strategies that build trust and foster lasting relationships.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: 10.1016/j.jretconser.2018.10.004, Alternate LINK

Title: The Effect Of The Interaction Between Tariff Modulation And Transparency On The Customer'S Dissatisfaction: The Case Of Tunisia

Subject: Marketing

Journal: Journal of Retailing and Consumer Services

Publisher: Elsevier BV

Authors: Imen Zrelli, Haykel Demnati, Moez Ben Yedder

Published: 2019-03-01

Everything You Need To Know

What is tariff modulation (TM) and why is it used in the hospitality industry?

Tariff modulation (TM) is the practice of adjusting prices based on demand and other factors. In the hospitality industry, it's a prevalent strategy used to optimize revenue. Hotels use TM to adapt to fluctuating demand, events, and seasonality. While TM can be beneficial for revenue generation, it can also lead to customer dissatisfaction (DIS) if not handled transparently. Therefore, balancing revenue optimization with customer satisfaction is a key challenge for hotels.

How does transparency of tariff information (TTI) affect customer dissatisfaction (DIS) related to tariff modulation (TM)?

Transparency of tariff information (TTI) directly addresses customer dissatisfaction (DIS) by providing customers with the rationale behind pricing decisions. By openly communicating the factors influencing price adjustments, hotels can enhance perceived fairness and maintain customer trust. TTI counteracts the potential negative effects of tariff modulation (TM) by giving customers a clear understanding of why prices change. This reduces the likelihood of customers feeling misled or unfairly treated, which in turn boosts satisfaction and loyalty.

What are the main reasons customers become dissatisfied with hotel pricing, and how does this relate to reference price theory and fairness theory?

Customers often experience dissatisfaction due to unexpected price changes and hidden fees. This dissatisfaction stems from two key psychological principles: reference price theory and fairness theory. Reference price theory explains that customers have price expectations based on past experiences, and unexpected price increases disrupt these expectations leading to dissatisfaction. Fairness theory suggests that customers assess the fairness of an exchange by comparing the 'gain' to the 'give'. If the perceived ratio is unfavorable, dissatisfaction occurs. Therefore, TTI helps to clarify the 'give' side of the equation, by explaining the factors influencing the price, mitigating the negative impact of TM.

Why is dynamic customer segmentation important in the context of tariff modulation (TM) and transparency of tariff information (TTI)?

Dynamic customer segmentation is crucial because it allows hotels to tailor their tariff modulation (TM) and transparency of tariff information (TTI) strategies to different customer profiles. By understanding the unique needs and expectations of various customer segments, hotels can customize their communication about pricing to maximize satisfaction and minimize dissatisfaction (DIS). For instance, a business traveler might prioritize price transparency and predictability, while a leisure traveler may be more price-sensitive. Adapting TM and TTI to these diverse needs enhances the customer experience and strengthens long-term loyalty and profitability by creating more meaningful interactions.

In what ways can hotels build customer trust and enhance satisfaction through transparent pricing strategies?

Hotels can build customer trust and enhance satisfaction by openly communicating their pricing strategies, and the rationale behind price adjustments. Transparency of tariff information (TTI) involves clearly explaining the factors influencing pricing, such as demand, seasonality, and special events. This approach addresses potential dissatisfaction (DIS) by fostering a sense of fairness and preventing negative perceptions associated with transient tariffs. By proactively communicating the factors behind tariff modulation (TM), hotels transform potentially negative interactions into opportunities to build stronger relationships, resulting in increased customer loyalty and positive reviews. This proactive approach builds trust and boosts customer satisfaction, leading to a more loyal customer base.