Less is more: How psychology and AI are changing travelers' pricing decisions

Digitalization is rapidly transforming the hotel industry. Artificial intelligence, data-driven revenue management, and dynamic pricing are increasingly shaping how offers are designed and evaluated. Yet despite all these technological advancements, one key fact remains: in the end, it is still a person who clicks “Book.”

This is precisely where Prof. Dr. Kai-Markus Müller’s research comes in. The professor of consumer behavior and Chief of Behavioral Strategy at RateBoard investigates how people actually make decisions and why these decisions are often less rational than many people think.

His findings are particularly relevant for hotel managers, revenue managers, and marketing executives. This is because they show that successful pricing strategies should be based not only on data, but also on a deep understanding of human decision-making psychology.

Decisions are made more quickly and emotionally than expected

Many booking decisions are made in a fraction of a second. Neuroscientific studies show that our brain makes an initial assessment of an offer after just about 200 milliseconds. Shortly thereafter comes an emotional assessment, during which we decide whether we find an offer appealing or not.

This emotional aspect plays an exceptionally important role, particularly in the tourism industry. People view travel not merely as a product, but as an experience. Studies even show that, in the tourism sector, consumers are often more willing to pay higher prices than they are for traditional consumer goods. When on vacation, people often expect to pay higher prices as long as the experience is worthwhile.

For hotels, this means that guests do not make decisions based solely on rational considerations. Perception, emotion, and presentation can have just as much influence on booking decisions as price and service.

The “Less is Better” Effect in Tourism

A fascinating phenomenon in consumer psychology is the so-called “less-is-better” effect. This describes how, in certain situations, people prefer an objectively inferior offer when they consider it in isolation.

A classic example from research illustrates this principle: When people are asked to choose between three perfectly presented products, they often rate this selection higher than a larger selection of products in which some items appear damaged or inferior. Although the second option objectively offers more value, it is perceived as inferior.

The reason for this lies in how we perceive things. People often judge the quality of the overall picture rather than rationally weighing the individual components against one another.

Why having fewer options sometimes works better

This behavior can also be observed in the tourism industry. Various studies have simulated typical hotel situations to understand how guests evaluate offerings.

One example involves breakfast at a hotel. Participants were asked to evaluate two different breakfast options. The first option offered a smaller selection, but all the items were fresh and beautifully presented. The second option offered a wider selection, but included some less appealing items—such as juice from the previous day or a few unavailable options.

The result was clear: many participants rated the smaller, perfectly presented breakfast more highly. Although it objectively contained fewer items, the overall offering was perceived as being of higher quality.

This leads to an important insight for hotels: Guests often value clear, high-quality, and consistent offerings more than a large but inconsistent selection.

The Importance of Expectation Management

In addition to the structure of the offer, communication also plays a crucial role. Another experiment illustrates just how strongly expectations influence perception.

Participants were asked to evaluate the value of two travel offers. The first offer included a six-hour train ride. The second offer promised a shorter travel time of four hours but included a note stating that delays were common due to construction work. Although the second offer was objectively the better option, many participants rated the first offer higher. The possibility of delays negatively influenced their perception and reduced their willingness to pay.

For the hospitality industry, this means that guests are sensitive to uncertainty. Transparency is important, but at the same time, communication should be designed to build trust and manage expectations effectively.