More than half of today's consumers never or rarely pay full price when they shop, 57 per cent use discounts and buy items on sale, and 90 per cent say they will continue to look for discounts and sales in the same way even if their economic situation improves.
LONDON – Hoteliers are becoming wary of discounting and frequent sales as they evaluate the long-term effects on brand perception, a survey of European hoteliers carried out by Hotwire.com reveals. Seventy-five per cent of hoteliers indicated that discounting is having a negative impact on their brand.
Five years ago, as the recession hit and consumers began tightening their purse string, hotels have responded with discounts and sales. Consumers have quickly become addicted as shown by the Hotwire ‘Britain on Sale’ report released earlier this year: more than half of today’s consumers never or rarely pay full price when they shop, 57 per cent use discounts and buy items on sale, and 90 per cent say they will continue to look for discounts and sales in the same way even if their economic situation improves.
Consumers have become hooked on sales causing some hotels to worry that maybe they’ve gone too far. “Hoteliers are concerned that if their brand is seen as ‘always on sale’, it will be devalued and end up going the way of other companies and industries where consumers are never prepared to pay a premium,” said Michelle Rosinsky, senior manager at Hotwire.com commented. She added: “We’re not expecting that hoteliers will suddenly give up on discounting, because it is still an effective way to increase occupancy; however, we believe they’ll become more selective about the channels they use, the value of discounts and the timing of their offers. Discounting will become more last-minute and increasingly they will utilise opaque sites and mobile.”
Whilst most hoteliers offer the same deals via mobile as through other channels, mobile is becoming a popular way to offer exclusive discounts targeted mostly at last-minute customers. Twenty-one per cent of hoteliers are offering mobile-only discounts. Altogether, 40 per cent of hoteliers discount on mobile more than they did a year ago.
Over the years, hoteliers have become increasingly more sophisticated in the way they manage discounting, responding fast to changing occupancy levels. Most recently some introduced super last minute discounts for those booking on the same day. Whilst this is still a new tactic, one in 20 hotels offers the deepest discounts in the last 24 hours. Twenty-eight per cent offer the biggest discounts within seven days. It seems that as the actual date of stay becomes closer hotels feel more comfortable discounting since there is a lower change of any long-term damage due to the fact that they likely wouldn’t have sold that room elsewhere.
As discounting has become more popular, so has ‘opaque’, a model known among consumers as ‘secret hotels’. The leading opaque provider, Hotwire.com, is seeing a strong demand among European hoteliers and consumers. It has doubled its revenue in the past twelve months. “Hoteliers see opaque as one of the safest methods for discounting, because the name of the hotel is not disclosed until the customer has paid. It helps hoteliers to reach the desired occupancy without making any of its premium customers aware that the hotel is available on Hotwire. Seventy-five per cent of hoteliers told us that brand protection is one of the reasons they use opaque,” said Rosinsky.
The new consumer
Hoteliers are dealing with a new type of customer: one that’s less loyal, more price-conscious and more savvy in finding a deal. It’s a consumer that rarely pays a full price – nearly a third (30%) of travellers say they never or rarely buy a hotel room that hasn’t been discounted. “In this environment, discounting is a necessity for hoteliers, but as most of them now realise, they need to be careful how it’s done, because there are some inherent risks. It’s about choosing the right way at the right time for the right type of customer,” Rosinsky concluded.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.