For me, as a newcomer to the hospitality industry, it seems as though discounts have become more and more prevalent since the start of the economic downturn. However, are these discounts really a well thought out strategic plan or could hoteliers be tarnishing their own brand?
It is, I suppose, subjective, everyone is going to have their own opinions as to the effectiveness of discounting and adding value, but from where I am sitting it seems as though offering discounts may not be the way forward and that, whilst it can increase short term bookings, it will not offer a sustainable long term plan.
From a business perspective I guess that adding value – the enhancement of value offering – is all about repeat custom, whereas discounting is more likely to draw in new customers. This article, written by Paul Lamberg says “…loyal customers and their repeat purchases are the cornerstone of your long-term successful business.”
His reasoning is that it is more expensive to gain new customers than it is to keep existing ones, while this expense might not be in the form of advertising, by offering a 2-4-1 dinner or 25% off the total bill you are subjecting yourself to addition costs thus reducing the total profit made. However, it is easy to argue that 50% of something is better than 100% of nothing, and to this I agree, yet by adding a little extra value you could retain close to 100% of everything.
Furthermore, discounting is a very competitive game, if one day you decided to offer 25% off, your competitor can easily respond to this by offering a more desirable 30%. With added value, it is a little more difficult to imitate, a personal touch can go a long way in a customer’s eye and without actually visiting your premises competitors will be less aware of the moves you are making.
Again, this is my perspective and I would love to hear your thoughts on the above, if you would like to get in touch with myself, Richard, you can contact email@example.com.