Factors influencing willingness of customers of environmentally friendly hotels to pay a Price Premium

Purpose The purpose of this paper is to investigate the influence of customers’ environmental concerns, customers’ perceptions of a hotel’s environmental practices and of the hotels’ environmentally friendly images, on their willingness to pay a price premium to stay at environmentally friendly hotels. Design/methodology/approach The theoretical framework comprises both the Social Identity Theory and the Value-Belief-Norm Theory. The data was collected from a survey conducted to 454 customers staying at eco-friendly hotels in Spain. The research model is tested by using a structural equation modelling approach. Findings The findings illustrate that customers’ environmental concerns have a greater explanatory value on their willingness to pay a price premium than do their perceptions of the hotel’s environmental practices. Furthermore, these causal relationships are similar in magnitude when considering the mediating effects of the hotel’s environmentally eco-friendly image and the environmental practices. Practical Implications The empirical findings provide managers with a better understanding of how customers’ environmental concerns, and their senses of identification with environmentally friendly hotels, influence their behavioural intentions towards willingness to pay a premium. The findings help hoteliers to understand how to market their products in such a way that their environmentally friendly practices are not perceived as being achieved at the expense of any other set of benefits; few customers will appreciate a trade-off in benefits, particularly to oneself. Originality/Value The paper contributes to the literature by highlighting those cognitive processes that influence the customers’ willingness to pay a price premium to stay at environmentally friendly hotels. Hence, the study provides valuable information to hotel managers.