The discount effect of non-normative physical characteristics on the price of lodging properties

This study suggests that lodging properties with tangible attributes enabling them to be easily converted are more liquid than those that are specific to a limited number of contracts, and thus benefit from a price premium. Grounded in the integration of research on transaction cost and real estate in the hospitality context, this paper investigates the effects of non-normative physical characteristics of lodging properties on their price discounts. The deviation from the normative physical characteristics of an asset is the operational measure of asset specificity. We estimate the standardized residuals resulting from a hedonic valuation model on 10,722 lodging transactions in the U.S. from 1980 to 2008 to develop our measurement of price discount. Results show that deviations from the norm on the three physical characteristics used are significant determinants of the price discounts and that the significance of the normative characteristics of lodging properties varies across segments.