Discounting doesn't create demand.
This is a hotel industry truism that has taken a deeper hold in the wake of the COVID-19 pandemic when revenue managers seem to have fully embraced the concept that a race to the bottom in terms of pricing only hurts their bottom line without putting more heads in beds.
But in an increasingly competitive and difficult environment, what tools do hoteliers have to put themselves ahead of their competition?
I would argue that chief among them should be the perception of value, which I hope we all understand at this point is significantly different from the idea of being cheap. It's a practice as applicable at the top of the chain scales as it is for the least expensive economy hotels. If you're not 100% firm on your understanding of what truly represents value, I think it's easiest to conceptualize it as the difference between what you're giving and what you're getting.
If you spend a lot and get a lot in return, that's essentially the expected value of the transaction. If you spent a little and get a lot, then you walk away feeling like you got good bang for you buck or have a value surplus. If you spent a lot and get a little, then you have the feeling of negative value in a transaction — essentially, you feel like you've been ripped off.
In the hotel context, this all relates back to experience — as most things do. So the equation of value is as simple as: How much did I spend versus how good and significant was the experience?
Over the next year or so, at least, finding ways to provide that surplus of experience without significantly increasing costs is going to be the key to outperformance in the hotel industry.
This is an industry that in recent history has been hyperfixated on numerical performance for understandable reasons, but the concept of value requires both a focus on the dollars and cents of the business along with the long-held fundamentals of guest experience. Those fundamentals include friendly and welcoming customer service; a comfortable bed and a good night's sleep; a general sense of convenience and lack of friction. These are all things that are not only achievable even at minimally staffed properties, but are things that are going to be the biggest drivers of guests perceptions of your property — in relation to how much they spent to stay there.
So I guess this is all a reminder to not take your eye off the ball. Focus on the things that matter to your guests, and take the time to learn enough about your guests so you know what those things are.
Let me know what you think on LinkedIn or via email.
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