Discounting – a double-edged sword in the world of hotel revenue management.

NB: This is an article from Topline Revenue, one of our Expert Partners

Many hoteliers view it with caution, fearing it will erode profitability and tarnish their brand. But what if I told you that discounting isn’t inherently evil? In fact, it can be a powerful tool when wielded with finesse. Let’s dive into the art of discounting and why you might be approaching it wrong.

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Discounting: The Good, the Bad, and the Misunderstood

Discounting has a notorious reputation, but it’s time to set the record straight. When used strategically, it can boost revenue, attract new guests, and even enhance guest loyalty. Let’s unravel the nuances of this often misunderstood strategy.

The Traditional View of Discounts:

The Discount Stigma

Traditional wisdom has led many to believe that discounts are a sign of desperation, a last resort to fill empty rooms. This mindset often comes with a sense of defeat – “If we have to discount, we must be doing something wrong.”

The Dark Side of Discounts

Discounts, when mismanaged, can indeed spell trouble. Blindly slashing prices can lead to lower profit margins, brand erosion, and an unintended expectation of perpetual discounts from your guests.

Why Discounting Isn’t Always a Bad Strategy:

Now, let’s shift gears and explore why discounting can be a valuable tool in your revenue management arsenal.

Attracting New Audiences

Discounts can act as a magnet for new guests who might not have considered your property otherwise. It’s a foot in the door, an opportunity to showcase your exceptional service, and a chance to turn first-time visitors into loyal customers.

Filling Off-Peak Periods

Every hotel faces the challenge of off-peak periods. Instead of letting rooms sit empty, strategically timed discounts can fill those gaps, ensuring you’re not leaving money on the table.

Enhancing Guest Loyalty

Discounts aren’t just about price; they’re about value. When you offer discounts that enhance the guest experience – think spa packages, dining credits, or room upgrades – you’re not just winning bookings; you’re winning hearts and building loyalty.

The Art of Strategic Discounting:

Now that we’ve established that discounts have their merits, let’s delve into the art of applying them strategically.

1. Segmentation is Key: Not all guests are created equal. Tailor your discounts to specific market segments or guest personas. Business travellers, leisure seekers, and long-stay guests each have unique needs and expectations.

2. Timing is Everything: The timing of your discounts is critical. Avoid knee-jerk reactions to low occupancy. Plan ahead and use discounts as a proactive tool to stimulate demand during targeted periods.

3. Value-Added Discounts: Instead of straightforward price cuts, consider value-added discounts. Offer perks like complimentary breakfast, spa vouchers, or free parking to sweeten the deal without compromising your ADR.

Discounting Done Right: An Asset, Not a Liability

In conclusion, it’s time to dispel the myth that discounting is always a bad strategy. When approached strategically, discounts can be a powerful asset in your revenue management toolkit. They can attract new audiences, fill off-peak periods, and enhance guest loyalty. The key lies in understanding your guests, timing your discounts wisely, and adding value rather than just reducing prices.

So, dear hoteliers and revenue managers, let’s redefine the narrative on discounting. It’s not a sign of weakness but a strategic move that, when executed with expertise, can elevate your revenue game.

Read more articles from Topline Revenue