Hotel Room Pricing: Discount Strategies That Work – Part 1

If you think about it, figuring out your hotel room pricing isn’t always as simple as calculating costs and charging accordingly. Rack rates, group rates, corporate rates, package rates, early/advanced booking rates, seasonal/holiday rates – it’s no wonder it can be hard to keep your discounts straight.

It might be tempting to throw up your hands and throw out a number, but that’s no way to come up with an effective hotel room pricing discount strategy.

Work From The Top Down

The temptation might be to look around at your competition and fix your rack rate at a lower price in order to attract customers. Don’t do it. Customers don’t want cheap; they want value. It’s a whole lot easier to offer your target customers a discount off a realistic, fair rack rate. Trying to decrease an artificially low rack rate even more will not only cut your profit margin even thinner, it won’t appeal to the customers you want to attract.

Your hotel marketing plan is critical in this strategy. You want to market facilities, amenities, and services that are comparable or better than those of the competition, not appear to be offering your hotel as a low-budget imitation.

Once you’ve established your hotel as worth the comparable or even higher prices than the competition, then you can start attracting new customers – and keep previous customers coming back – with carefully targeted discounts and reward programs.

Don’t Get Caught in a Price War

So a new hotel has moved into town, and it seems to be gunning for you with steeply discounted prices. Stay above the fray and stick to your marketing plan. Playing “undercut roulette” risks your hotel slipping from being a sought-after facility to a cheap commodity.

Tough Times? Hang Tougher.

When the economy stalls, stay true to the values that made your facility worth your customers’ loyalty. Rather than cut expenses to the bone to maintain the profit margin, or slash rack rates artificially low, turn to those long-term customers. Remind them why they chose your hotel in the first place, and give your staff the flexibility to offer those customers special discounts or free services. Their word-of-mouth referrals will sustain your hotel through the roughest economic downturns.

Next time: Factors that help you decide which hotel room pricing strategies are best for you.

Make Smart eHotels™ a strategic part of your hotel room pricing and marketing plans. Contact us today!

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