Recession-Proof Hotel Marketing, Part 2: The Price Game

For some hoteliers, the first reaction they have when facing an economic slowdown is to slash prices.

But is this really a good strategy?

If you look at historical data, the answer is clear: you should never, ever reduce prices as a quick-fix remedy.

All studies carried out in the wake of the 9/11 attacks in New York City showed that price cuts damage the long-term health of your business.  One report by Cornell University, titled “Hotel Pricing in a Networked World,” shares this insight:

“It should come as no surprise that discounting has a chilling effect on revenues. The discounting concept is based on the core micro-economic principle that reducing your price means that additional consumers will enter the market and you will sell more rooms.  The hotel industry has never been able to apply this principle successfully, and the CHR study demonstrates why this is so.

New consumers do not enter the market in response to hotel discounting.  Instead, current customers simply get more for less and revenues fall.“

So what should be your pricing strategy?

Try this: Leave your prices where they are, but increase your perceived value.

Instead of discounting, focus on building your overall value package.  Sell the experience – work to position your hotel as a destination.

Explore social media networks, and look for recurring themes of what guests like about your hotel.  Improve and showcase your specialties.  Put them at the core of your marketing efforts.

But never fall for the price cutting trap.