What is discount pricing?
Discount pricing is a strategy in which you offer your hotel rooms at a lower price to draw guests, boost demand, increase sales volume, or decrease perishable inventory. This pricing strategy can be applied temporarily for promotional purposes or over an extended period to help position your hotel.
The most common types are percentage discounts, fixed amounts, discounts for bundled services like a package, or seasonal promotions.
What are the benefits of using discount pricing strategies in your hotel?
There are many benefits of implementing discount pricing strategies – let’s explore them in more detail.
Increased occupancy
During low season or periods of low demand, discount prices can help motivate guests to visit your hotel. Since hotel inventory is perishable, discounts can help fill rooms that would otherwise stay vacant. Implementing this pricing strategy can drive in more revenue and increase occupancy rates in off-peak periods or slower days.
Staying competitive
Discounts are a wonderful way to remain competitive, especially with cost-conscious guests. By offering a price lower than your competition, you can entice guests to choose your hotel instead of another one in your comp set.
Reaching new segments
Discounts are an excellent way to attract new guests and appeal to segments you've never reached. If your prices tend to be high, cost-sensitive guests will not stay with you. Temporarily changing your prices can help these customers understand your value proposition, allowing you to bridge the gap between segments and ensure more loyalty.
Increasing the ROI on your marketing
Discounts are an excellent way to drive conversions in your marketing campaigns because price is one of the most relevant factors that motivates guests to book. By applying discounts, you can increase the return on investment by creating targeted marketing campaigns, which can help create a buzz around your property.
Building loyalty
One of the most challenging parts of the lead generation process is converting leads into customers. With this pricing strategy, there is less barrier to entry, which ultimately helps build your loyal customer base and drive repeat business.
Keeping cash flow stable year-round
Due to the perishable nature of hotel inventory, discounts can help generate revenue to maintain cash flow and cover fixed costs. This approach leads to financial stability year-round. The seasonality of the hospitality industry implies finding ways to bring in guests year-round, and discounts are a terrific way to boost profitability.
Boosting revenue
Discounted rates may mean your margins are lower but think of it as a means to an end. If you're increasing occupancy by offering lower rates, you might contribute to higher overall revenue. Once you get guests through the door, you can encourage them to spend on services and amenities using upsell software.
Examples of discount pricing strategy
Let’s look at some examples of how this strategy can be applied effectively.
Last minute bookings
You can encourage last-minute bookings and boost your direct bookings by offering discounts for reservations made through your website. It reduces the dependency on third-party channels and helps sell inventory that would otherwise be unused.
Read more: OTA vs. Direct bookings: which is better for hotels?
Promotional campaigns
To get the word out about your hotel, you can create a promotional campaign to attract new customers, boost brand awareness, or even increase demand for a certain period. You can add an extra discount to encourage bookings even more.
Package deals
Bundling services and amenities with accommodation lets you create attractive deals for guests that are still profitable for your hotel. Package deals also raise awareness about your hotel’s services and amenities. This approach can increase your hotel’s bottom line by boosting the average guest spend.
Group bookings
By offering discounts for group bookings, you can encourage group travel and events, leading to higher occupancy rates and increased ancillary revenue. Group travel can be more profitable for your hotel – you don’t have to put in as much time or effort to get these bookings once you have a reputation as a good hotel for group events. Companies and travel agents will promote you within their respective collectives.
Learn more about the importance of hotel group business and how to manage them.
Negotiated rates
You can also negotiate discount rates for corporate businesses, travel agencies and OTAs. In this case, you get more bookings and create a steadier stream of business by diversifying your channels. Plus, corporate clients tend to travel more often.
Off-season bookings
Seasonal discounts can help attract guests during periods of low demand. You can also offer discounts on certain days of the week, like Tuesdays and Wednesdays. You may even consider throwing in an extra day for free to appeal to guests without fixed travel dates. The longer guests stay with you, the higher the chances of getting added revenue from other services.
Membership programs
Loyalty members and other membership programs will appreciate discounted rates to encourage repeat bookings. At the same time, it can boost customer loyalty. Guests can get better rates when they become members of your loyalty program, which is a great way to improve guest loyalty in your hotel.
Conclusion
When implemented strategically, discount pricing can help drive revenue, boost profitability and reach new segments. All while building loyalty and increasing occupancy year-round. However, it’s important not to over-rely on this strategy because it may eat into profitability or threaten your brand image by undermining its perceived value.
The key is to find a balance between using discounts to boost demand while still being loyal to your brand’s value proposition.
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