Learn the benefits and challenges of LOS discounts for mid-scale hotels, and best practices for yield management. (original) (raw)

Last updated on Jun 28, 2024

What are the benefits and challenges of implementing length of stay discounts for mid-scale hotels?

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Length of stay (LOS) discounts are a common pricing strategy in the hotel industry, especially for mid-scale hotels that cater to leisure travelers. But how effective are they in increasing revenue and occupancy? And what are the potential drawbacks of offering lower rates for longer stays? In this article, we will explore the benefits and challenges of implementing LOS discounts for mid-scale hotels, and share some best practices for different hotel types and markets in the context of yield management.

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• Benefits: 1. LOS discounts incentivize guests to book for longer durations, filling rooms for more nights. 2. Even with a slight discount per night for longer stays, the overall revenue generated can be higher. 3. Guests who enjoy extended stays might develop a stronger connection, fostering repeat business and positive WOM. 4. Longer stays help predict demand patterns more accurately, allowing for better inventory management and staffing allocation. Challenges: Discount offered might reduce the nightly room rate while longer stays might discourage guests seeking shorter stays. Surge in longer bookings could limit room availability for shorter-stay guests. Guests might exploit the discount. Extended stays require additional services.

• Yield management, also known as revenue management, is a pricing strategy used to maximize revenue by dynamically adjusting prices based on demand, inventory availability, and market conditions. It involves forecasting demand and optimizing pricing to achieve the highest possible yield or revenue.

• First of all this word discount is incorrect. Now hotels work on dynamic pricing models. Hence it is rates calculated based on current and forecasted occupancy and thus rates.so where is the question of discounting and from what value. Quoting MLOS rates allows locking in occupancy for duration and ensure revenue. However, if not strictly implemented it can be detramental strategy. Guest might book on MLOS rates and check out early, defeting the purpose of MLS pricing. If they do check out then front office should know what rate to rever too for the stay period.

• LOS discounts are implemented to incentivize guests to extend their stay, thereby increasing occupancy rates and maximizing revenue. By offering discounts for longer stays, mid-scale hotels can better utilize their inventory and generate additional revenue during periods of low demand.

How to implement LOS discounts?

The effectiveness of LOS discounts depends on various factors, such as the hotel type, the market segment, the seasonality, the demand elasticity, and the competitive landscape. Therefore, there is no universal approach to implementing LOS discounts. However, some general guidelines that could be followed include segmenting customers by purpose of travel, booking channel, and price sensitivity; monitoring occupancy and revenue performance; testing and measuring the impact of LOS discounts; and communicating them clearly and consistently across all distribution channels. For instance, you may offer more generous LOS discounts to leisure travelers who book directly on your website than to business travelers who book through a third-party platform. Additionally, you may increase your LOS discounts during low season or weekdays and decrease them during high season or weekends. Furthermore, you can use a control group of similar hotels that do not offer LOS discounts to compare their results with yours. Finally, you can use catchy slogans, attractive images, and social proof to promote your LOS discounts on your website, email, and social media.

• Implementing LOS discounts involves: -- Analyzing historical data and demand patterns to identify periods of low occupancy. -- Determining appropriate discount levels based on market conditions and competitor pricing. -- Promoting LOS discounts through various marketing channels, such as the hotel website, online travel agencies (OTAs), and email campaigns. -- Monitoring the effectiveness of LOS discounts and adjusting pricing strategies as needed.

What are the benefits of LOS discounts?

Mid-scale hotels can benefit from LOS discounts in many ways, such as increasing occupancy and revenue by attracting customers seeking longer stays and lower rates. Additionally, it can reduce costs and risks by minimizing check-ins and check-outs, while improving operational efficiency and inventory management. Moreover, LOS discounts can enhance customer loyalty and retention through a positive guest experience and more opportunities for upselling and cross-selling. Finally, it can help build a competitive advantage and brand reputation by providing more value and quality to customers.

• The benefits of implementing LOS discounts for mid-scale hotels include: -- Increasing occupancy rates by attracting guests who are willing to stay longer to take advantage of discounts. -- Maximizing revenue by filling vacant rooms during periods of low demand. -- Enhancing guest satisfaction by offering value-added incentives for extended stays. -- Improving forecasting accuracy and revenue management capabilities by encouraging guests to book longer stays in advance.

Mid-scale hotels may face some challenges when it comes to LOS discounts, such as decreased profitability and yield from lower ADRs, a diluted brand image, reduced flexibility and control, as well as competition and cannibalization from other hotels. These discounts may also lead to customers who are less loyal and more likely to switch to other hotels, as well as a reduced ability to adjust to changing market conditions and customer preferences. Additionally, customers may be looking for more variety and options than what your hotel can offer.

• However, there are also challenges associated with implementing LOS discounts, such as: -- Potential revenue loss if discounts are too steep or offered during peak demand periods. -- Difficulty in maintaining pricing consistency across different distribution channels. -- Risk of cannibalizing revenue from full-price bookings if guests opt for longer stays to take advantage of discounts. -- Complexity in managing inventory and availability restrictions to prevent overbooking or underselling.

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