Discounting Is Not the Answer
Creative ideas, promotions and marketing are effective alternatives to discounting your prices. Maximising revenue from existing bookings and adding value to your guest's experiences will ensure more repeat business and optimised profits.
While hoteliers suffer sleepless nights the debate continues as to whether they should discount prices in light of the economic climate. In reality, it has never been more important to revisit your revenue and pricing strategies. Research shows that discounting prices can have both long and short term negative effects and when one hotel discounts prices, the competition soon follows. This renders the activity purposeless and can potentially damage future profitability. This isn´t to say that Revenue Managers cannot respond to the down-turn appropriately with calculated alternatives that will ensure sustainability during these challenging times. Creative thinking and marketing is certainly key - but where should hoteliers focus their efforts?
Hotels will always approach the concept of "special offers & promotions" differently according to their budget and clientele. A hotel in Melbourne is currently offering the chance to win a SMART car if you choose to host your conference, meeting or exhibition at the hotel. This promotion is used to incentivise potential clients into booking this venue above the competition. Of course, many hotels will not have the budget to offer such a prize but this does not mean the concept wouldn´t work on a smaller scale. A spa resort in Thailand is currently offering a weather guarantee too all guests at the hotel during the rainy season. If there is a full day of rain guests are entitled to gain a full refund in credits for treatments at the hotel´s spa.
Generating ancillary revenue is a further innovative way of optimising your hotel´s profits-maximise revenue from your existing bookings rather than culling your prices in an attempt to gain more reservations. Offering local tours and activities have proven to boost revenue, this also serves to add value to your website in terms of content. Remember, guests generally choose destination before hotel. Therefore adding web page content that relates to the destination (and your relationships with it through tours and activities) will only have a positive influence on a potential guest´s choice. The new pages will also be indexed by the search engines and should enhance your overall online visibility for new search terms.
Using opaque channels is a simple way to get rid of distressed inventory and best of all you can maintain rate integrity. An opaque channel makes parts of the online sales process hidden, for example the hotel name. By using opaque channels you can offer prices that are significantly lower than published rates. Hotels can price discriminate between those customers who are sensitive to service characteristics and those who are not and profit from such discrimination. Taking a look at your customer segments can also be beneficial in establishing how to tackle discounts and special offers. Customers vary in terms of price sensitivity; there are still potential guests who do not expect discounts! Make sure you consider this fragment of potential guests.
Hoteliers must adapt revenue management and pricing strategies to take advantage of new trends in customer behaviour and distribution. For that reason, appropriate representation on GDS channels and IDS channels will increase electronic sales for suitable hotels. The number of reservations being generated through these channels is growing steadily. GDS and IDS account for 60% of online bookings so for suitable hotels, there couldn´t be a better time to invest. Hoteliers must remember the majority of potential guests are not brand loyal nor do they have a fixed booking pattern; they simply book from the hotel offering them the best deal. The unpredictability of such behavior means that hotels must maintain a presence on all possible distribution channels if they want a sizeable share of the online market.
Creative ideas, promotions and marketing are effective alternatives to discounting your prices. Maximising revenue from existing bookings and adding value to your guest´s experiences will ensure more repeat business and optimised profits.