In times of slack demand companies with perishable product (hotels) are often quick to offer discounts in an effort to stimulate occupancy.  But is this the right marketing strategy?

Large hotel chains with sophisticated revenue management systems can surgically modify pricing months in advance to minimize the disruption discounting can cause on the bottom line.  But what if you are a small luxury hotel?

The biggest problem with discounting is that it is the easiest strategy to copy.  Your competition discounts and you follow suit.  It’s a lose/lose situation.  Hotel rooms are only one part of the travel experience and discounting may not stimulate the added demand need to offset the price reduction.  In the end RevPAR suffers.

What do you think?  Safe travels – Madigan Pratt

AUTHOR: Madigan Pratt
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  • You’re right about it being a lose-lose. Discounting creates future expectations of further discounting if it does not at the same time empty the budgets of your clients, which if that is the case, they will not have any money to spend with you in the future even if you do continue to discount. It is an unfortunately vicious cycle.

    On another note, we were just about to post something like this over at when we saw your post. Great to know that more people are thinking about it.

    September 11, 2008
  • I think you have to weigh in on how much you can afford to discount. In the internet marketing world they always give stuff away as long as they do the math on the lifetime customer value. They are willing to give stuff away to get people on their list and then make their money from them down the road.

    September 15, 2008
  • This is an important topic, especially as we enter a period of economic instability. The proper reaction is to increase perceived value (which you cover in part 2). Cornell actually did some research on the effect of price cutting on hotels’ overall revenue, which I discuss here:

    October 27, 2008

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