Here’s the situation:  You’re the GM of a small luxury hotel.  Demand is soft in your market and your chief competitor started offering huge discounts.  How can you compete? (Sound familiar?)
Matching discounts won’t stimulate demand and you’ll end up in a lose-lose situation (see Hotel Discounting – Part I ).  On top of that, deep discounting will diminish brand integrity making it harder to achieve premium pricing in the future.

To weather the storm you take a page from marketers of other luxury products such as Lexus, BMW and Mercedes-Benz.

  • You offer a modest price reduction letting travelers know you’re sympathetic to their current situation and are willing to give them a break.
  • You offer some value added amenities with a high perceived value but a relatively low out-of-pocket cost.

For example a $100 drink certificate will only cost you around $30.  Depending on your spa arrangement a free couples massage which has a very high perceived value may not cost you much at all.

One of our hotels offers guests a free one-day car rental.  The rental company gives it to the hotel for free in hopes of getting guests to take it for several days.

Put yourself in your guest’s shoes.  You’re a luxury traveler and you have a choice between two hotels.

  • One is offering 5 nights for the price of 3 (a 40% discount).
  • The other is offering a 10% discount along with a free couple massage, a free one-day car rental and a $100 drink certificate.

Our experience with affluent travelers leads us to believe some will opt for the 40% discount.  However many others will wonder what’s wrong with the hotel that it has to discount so much.

By providing not so costly value-added amenities you compete effectively, maximize RevPar in a down environment, maintain the integrity of you brand and attract quality guests you can grow into loyal customers.

What do you think?  Safe travels – Madigan Pratt

AUTHOR: Madigan Pratt
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