A look at Discounting

During low periods or  need periods hotels generally offer low rates, and offer even lower rates during distressed times. This is only of benefit if it generates additional demand and doesn’t trade down business that would have travelled anyway. During low and distressed times price does not typically equal increase in demand.

Price is the most effective and fastest way of influencing the customers’ perceptions of value. Rates that are too low can decrease your customers’ perception of value and it can project a “cheap image” of your hotel. It will also be hard to increase your rate once the market goes back up as it can be difficult to regain guests’ belief that the hotel is indeed deserving of this new price structure.

Correct Market Segmentation and Revenue Management will help you through these periods. By effectively managing your segments, you can apply discounted rates and profitable rates at the same time. Always remember that market segments respond to different levels of prices. Also, many guests consider added value and not just rate alone. If you understand your guests you can create packages that can help increase their perceptions of value and convince them to stay at your hotel. Instead of automatically lowering your rates, consider adding value first. For example, give breakfast; upgrade to next room category; discount to spa; discount to restaurants; free airport transfers, free laundry. Think of all the low cost things that you have to offer in your hotel that are perceived as high value to your guests. Add these things to your regular rate and offer them during off peak seasons, apply rate validity as needed.

Value add also draws the customer to a direct booking channel the hotel website and reduces commissions paid. There is a correct time and place for discounting and it is a valid strategy deployed by our industry. However, it is only of value if it is strategic.

Categories: Uncategorized