Framing hotel strategies for demand uncertainty: The asymmetric effects of cancellation policies and F&B incentives

Abstract

This study examines how hotels manage demand uncertainty through two contrasting strategies: cancellation policies as loss-framed uncertainty reduction tools and food and beverage incentives as gain-framed coping mechanisms. Drawing on prospect theory, we argue that these approaches generate asymmetric behavioral responses with distinct temporal and revenue implications. The findings show that loss-framed uncertainty reduction initially suppresses demand by discouraging price-sensitive and uncertain customers; however, this negative effect is largely confined to the rooms department and diminishes over time. In contrast, gain-framed coping strategies stimulate in-stay consumption, encouraging guests to engage with additional hotel services and generating positive spillover effects that enhance revenue and profitability across other departments, including in subsequent periods. Overall, uncertainty reduction filters out volatile demand, whereas uncertainty coping enhances perceived value and stimulates consumption. These results underscore the importance of considering both temporal dynamics and cross-departmental effects when designing strategies to manage demand uncertainty.