The negative effect of scarcity cues on consumer purchase decisions in the hospitality industry during the COVID-19 pandemic

https://doi.org/10.1016/j.ijhm.2020.102815Get rights and content

Highlights

  • Scarcity cues decrease consumer purchase decisions during the COVID-19 pandemic.

  • Consumers perceive highly occupied services as less safe due to the pandemic.

  • Safety perception overrides quality and popularity perceptions in purchase decisions.

  • Customers’ reviews are more diagnostic than scarcity-safety inferences.

  • The effect of scarcity cues reduces in a contactless consumption context.

Abstract

Existing literature shows a positive effect of demand-driven scarcity cues on consumer purchase intentions. Hospitality businesses with high market demand tend to be preferred as consumers perceive these services to be popular and have superior quality. In this research, we demonstrate that, due to the COVID-19 pandemic, consumers form a novel inference about demand-driven scarcity cues: consumers consider scarce hospitality businesses to be less safe to consume. This new scarcity-safety inference in turn lowers consumer purchase intentions and preferences because the scarcity-safety inference is more diagnostic than scarcity-popularity and scarcity-quality inferences in the current pandemic. Furthermore, when consumers are presented with more diagnostic external information (e.g., customer reviews) or when the consumption context lowers safety concerns (e.g., order food online and consume at home), the main negative effect of scarcity cues on consumer purchase decisions is attenuated. These findings provide important managerial implications for hospitality businesses.

Introduction

The global hospitality industry has been hit hard by the COVID-19 pandemic. During the first quarter of 2020, the UK hospitality sector experienced a 21% drop in sales (UK Hospitality, 2020). In Australia, more than 30% of hospitality employees lost their jobs (The Canberra Times, 2020). Given this severe situation, it is important for hospitality businesses to understand how the pandemic has drastically changed people’s consumption behaviors. This understanding can help them take corresponding measures to minimize the devastating impacts of this pandemic on their operations (Alonso et al., 2020). Once seemingly mundane consumption activities such as dining at restaurants, travelling in trains or airplanes, or staying at hotels have been greatly curtailed due to health and hygiene regulations and consumers’ concerns about contracting COVID-19 in public spaces. Thus, consumers may change their ways of assessing the desirability of the hospitality services. For example, as numerous reports point out that coronavirus clusters start from popular hospitality venues (SBS News, 2020; The Guardian, 2020; Time, 2020), those venues with high occupancy rates may no longer be perceived as desirable options. This shift in perception may lead to different purchase decisions of consumers in the hospitality industry. Here, we propose and test a novel interpretation of scarcity cues that consumers have developed due to the COVID-19 pandemic.

Scarcity cues, particularly the demand-driven scarcity cues, are information that signals high service demand and low service availability (Huang et al., 2020). Scarcity cues are commonly adopted by consumers to infer service popularity and quality in their decision-making processes. For example, consumers prefer crowded restaurants to empty ones as they perceive crowded restaurants to serve better food (Hellofs and Jacobson, 1999). When consumers book a hotel on websites such as Booking.com or Agoda, they can easily see information about how many rooms are currently left or how many times the hotel has been booked in the past. Similarly, when reserving tickets online for entertainment shows, sport games, and cruise vacations, consumers are instantly exposed to the ticket availability information (e.g., “only 2 tickets left”). Since scarcity cues highlight the service popularity by the number of consumers who have chosen this service, consumers tend to perceive the service as being of better quality (Cialdini, 2009; Cialdini and Goldstein, 2004; He and Oppewal, 2018). These popularity and quality inferences can, in turn, increase consumers’ purchase intentions (He and Oppewal, 2018; Huang et al., 2020; Parker and Lehmann, 2011; Van Herpen et al., 2009).

In this research, however, we suggest that due to the COVID-19 pandemic, consumers make a novel negative inference about the demand-driven scarce cues. At a service venue, the more people a consumer interacts with, the higher the risk of contracting the coronavirus, even when the venue has strictly limited its operation capacity to meet the COVID-19 regulation. Consequently, consumers reduce their purchase intentions and preferences for scarce hospitality services because they feel less safe. Although the extant literature has well established the positive effect of scarcity cues on popularity and quality inferences and purchase intentions, we propose and demonstrate that the COVID-19 pandemic has led consumers to form a novel and more diagnostic inference about scarcity cues on safety, which overwhelms other inferences and lowers consumer purchase intentions and preferences for scarce hospitality services.

Our findings make several substantial contributions. First, we are one of the first to demonstrate the safety inference about scarcity cues which is most relevant to the hospitality industry. Existing literature shows that scarcity cues driven by high market demand lead consumers to infer popularity and quality. We demonstrate that consumers also infer scarcity cues for safety, and such inference is due to the COVID-19 pandemic and manifests in the hospitality businesses. Second, we add to the literature by showing the negative effect of scarcity cues on consumer purchase decisions. Prior research has mainly focused on the positive effect of scarcity cues while documenting some moderating conditions under which the positive effect can turn negative. For instance, consumers lower their preferences for scarce products when the product signals status (Van Herpen et al., 2009), when consumers have strong prior preferences (Parker and Lehmann, 2011), and when the purchase is for self (vs. others) (Wu and Lee, 2016). In this research, we show that during the current COVID-19 pandemic, the safety inference derived from scarcity cues completely reverses the established positive main effect of scarcity cues on purchase decisions. Drawing on the accessibility and diagnosticity framework (Feldman and Lynch, 1988; Lynch et al., 1988), we provide a conceptual explanation for the reversal effect and provide empirical evidence to support the mechanism.

Finally, we explore and identify ways for hospitality businesses to mitigate the negative effect of scarcity cues on consumer purchase decisions. When a service consumption context does not raise safety concerns (e.g., contactless consumption) or when other diagnostic external information exists such as customer reviews, the negative effect of safety inferences induced by scarcity cues on consumer purchase decisions is attenuated. These findings offer direct and important practical implications for hospitality businesses, which we will detail in the general discussion section.

Section snippets

Conceptual framework

When making purchase decisions, consumers rarely have complete information to evaluate the quality of the products or services; thus, they fill this information gap by using other quality-signaling contextual cues (Eagly and Chaiken, 1993; Gierl et al., 2008; Kirmani and Rao, 2000). This is especially the case when consumers lack expertise or familiarity with the product or service or when the information about a product or service is difficult to assess in terms of quality. Quality refers to

Study 1

The purpose of study 1 is to test our main prediction that scarcity cues will decrease consumers’ purchase intentions (H1) during the pandemic. We also examine the safety inference as the dominant underlying driver of popularity and quality inferences about this negative effect (H2).

Study 2

The purpose of study 2 is threefold. First, we attempt to replicate the main effect of scarcity cues on consumer purchase decisions in a different context: hotel booking, and with a different decision outcome: consumer choices. Second, we provide direct evidence for our proposition that the scarcity-safety inference is more diagnostic than scarcity-popularity and scarcity-quality inferences in purchase decisions. Finally, we test whether providing external information can attenuate the effect

Study 3

The purpose of study 3 is to conceptually replicate the findings of studies 1 and 2 such that the scarcity cues will decrease consumers’ purchase intentions (H1). Furthermore, we again test directly the safety perception as the underlying driver of this negative effect (H2). We attempt to test the moderating condition for the effect: the consumption context (H3). If the consumption context reduces the relevance of consumption safety, the effect of scarcity cues on purchase intentions will be

General discussion

In this paper, we find a new negative effect of scarcity cues on consumer purchase decisions in the hospitality industry due to the COVID-19 pandemic. Adding to the existing literature which has found convergent evidence that scarcity cues have positive impacts on consumer purchase decisions, we show that this new lay belief decreases consumer purchase intentions and preferences and drives them away from scarce services during the COVID-19 pandemic. Specifically, we show that consumers

Declaration of Competing Interest

The authors report no declarations of interest.

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