Analyzing the Dynamics of Destination Popularity and Accommodation Prices

This study analyzes the connection between destination popularity and traveler expectations of accommodation prices at hotels and vacation rentals. Guided by prospect theory, its primary goal is to assess whether the principles of loss aversion and diminishing sensitivity explain the influence of accommodation prices on destination popularity. The study extends prospect theory by proposing a competitive framework to identify cross-effects between hotels and vacation rentals in influencing destination popularity. An empirical analysis of 3,142 U.S. destinations shows that hotels display reverse loss aversion, whereas vacation rentals follow a pattern predicted by prospect theory. Reverse cross-loss aversion emerges in the effect of vacation rental prices on hotel-induced destination popularity, whereas prospect theory explains the effects of hotel prices on vacation rental-induced destination popularity. The finding that cross-loss aversion and cross-diminishing sensitivity influence the relationship between hotel prices and vacation rental-induced destination popularity extends prospect theory to a competitive framework.