Study Shows Futility Of Discounting Rates

NEW YORK— The results from a study of nearly 1,000 guests from 46 U.S. states conducted during December and January for the Hospitality Sales and Marketing Association International Foundation has shown only 2.6% of customers chose hotels based on “free room” type offers. A more traditional focus on “previous favorable experiences” (11.6%) as well as the impact of regular room rate (15.1%) and location (27.7%) were highlighted amongst the most influencing factors. “Although such offers can be lucrative, they most likely will not impact hotels occupancy and profitability in the long run, or even in the short run,” said Rohit Verma, an associate professor of operations management at the University of Utahs David Eccles School of Business. “Free rooms will only make a very small impact.” Matthew Maxwell, CEO/Amateo, which develops a guest relationship optimization system for the hospitality sector, said, “Price based competition, particularly in the case of extreme discounting or the offer of free rooms, will not generate a competitive advantage for a hotel operator.” Maxwell noted customers using the Amateo system as an alternative to engaging in price competition, can build guest profiles in order to deliver targeted offerings to specific guest segments. Amateos Guest Relationship Optimization product suite standardizes historical guest data stored in multiple hotel property management systems and facilitates revenue generating applications.