Front Desk

Big news: Discounting doesn't work

In case you thought the way to beat the competition is to underprice them, new research reinforces the notion that discounting room rates is a fool's journey. Cornell Hotel School professors Linda Canina and Cathy Enz just released an update of an earlier study that counsels against room rate discounting, no matter in what segment or market you operate.

Using numbers from 2004, the research showed that "when a given hotel discounted its room rates to a greater degree than did its competitive set, the result was decreased RevPAR compared to the competition." Put another way, discounting leads to higher occupancy but lower RevPAR. The reverse is also true: hotels that charge a rate premium compared to their competitive set have lower occupancies but higher RevPAR numbers.

To many people, this is a logical conclusion, but many owners and operators panic when times get a little tough. Resist the urge, and your property will perform better in the long run.

For a free copy of the report, go to www.hotelschool.cornell.edu/chr/research/centerreports.html

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