Cornell Study Highlights Hotel Discounting Pitfalls
ITHACA, NY | A new report published by The Center for Hospitality Research at Cornell is challenging executives to rethink their hotel discounting strategies. The study, which used data drawn from over 6,000 hotels for the period of 2001 through 2003, found that: Discounting relative to the competitive set does, in fact, raise occupancy, but hotels in direct competition experience higher revenues when they maintain their price structure and do...
ITHACA, NY | A new report published by The Center for Hospitality Research at Cornell is challenging executives to rethink their hotel discounting strategies. The study, which used data drawn from over 6,000 hotels for the period of 2001 through 2003, found that:
Discounting relative to the competitive set does, in fact, raise occupancy, but hotels in direct competition experience higher revenues when they maintain their price structure and do not discount to fill rooms.
Why Discounting Doesn't Work: The Dynamics of Rising Occupancy and Falling Revenue Among Competitors, was written by Cornell Professors Cathy A. Enz and Linda Canina, together with Mark Lomanno, president, Smith Travel Research.
Results also suggest that hotel managers who choose to discount prices may encounter resistance when attempting to raise prices at a later date. “Raising prices later may be quite difficult for hotels that discount because customer expectations have changed,” Enz remarked.
The report shows that the dynamics between price and occupancy remain quite stable from segment to segment, but the degree to which higher relative prices produce dramatic or gradual relative drops in occupancy does vary by segment. In addition, for 2003, small relative price increases did not enhance relative RevPAR for some segments.