Avoid Hotel Price Cuts With These 5 Tips

At first, many hoteliers might have tried to focus on providing value to their loyal clients by giving excellent service, great amenities, and following-up with them. For many though, these efforts are not nearly enough.

Before giving hotel rate discounting a try though, it might be a good idea to look into relevant historical facts. Economic downturns and recessions are not a new phenomenon. Sure, many younger hotel revenue managers today might have focused more on keeping up with demand instead of stimulating it because their experience mainly occurred during the good times.

A look at the hotel price cuts from 2001-2002 reveal that this yield management strategy had short-term and long-term consequences. Instead of boosting profitability, it did just the opposite because it had damaged the entire hotel sector. When one hotel tries to increase occupancy by cutting their price, this is quickly copied by their competition. Once it happens, the trend is hard to stop and it might affect the organization for many years to come.

Fortunately, there are effective hotel revenue management alternatives that can increase RevPAR and increase hotel sales even during the bad times. Among these include:

1. Concentrate on Increasing Ancillary Hotel Profits – follow the example of airlines. A significant part of their revenue comes from fees and various charges. For example, United Airlines expects to derive $1.2 billion from ancillary revenue alone.
2. Consider Opaque Channels – these types of hotel distribution channels become more useful during an economic downturn. It will help sell excess hotel rooms without the lure of a discount.
3. Use Smart Discounting – drastic price cuts are not on the same league as smart discounting. Innovative and profitable packages can be created by the yield management team.
4. Study Customer Segments More Deeply – divide your customer base according to price sensitively. Afterwards, gauge how discounting will affect your hotel operations over the short and long term.
5. Think of Ways to Add Value – value-added factors are important to the customer. They need to feel that they are getting their money’s worth from your hotel. Provide value effectively and see achieve profit optimization.

Should hotel revenue management team go for hotel rate discounting to rev-up demand? While it goes against the better judgment of many yield managers, this option is becoming increasingly hard to resist. But with the tips above, there is no reason for you to resort to price cuts.