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Five Alternatives to Discounting Prices
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July 14, 2009 - The issue of whether or not to discount is becoming increasingly contentious as companies struggle to compete in an ever more strained market.  Should revenue managers in the travel industry reduce prices to stimulate demand?  What are the alternatives?  And what damage could be done?  EyeforTravel research has shown that this is a crucial issue facing revenue managers today.  

The 2001-2002 price cuts did long-term and short-term damage to the hospitality industry.  Hotels lowered rates to stimulate demand and increase occupancy, but this was quickly copied by the competition, rendering it ineffective.  Even now, it’s still the norm for Hawaiian hotels to give the 3rd night free.  

In any economic downturn, revenue managers need to react quickly and adjust their strategies to reflect current conditions.  And the decisions your revenue management department make now, will affect your profitability for years to come.  Simply culling prices will have a negative effect on profitability and will delay your ability to benefit when things do pick up, plus it could do irreparable damage to your brand.  So what are the alternatives to discounting?  

This issue will be examined in-depth at EyeforTravel’s Revenue Management and Pricing in Travel conference, being held on September 16-17 in Chicago.  As well focusing on the latest pricing trends, the event will also look at aligning distribution with RM, coping with inaccurate forecasts, generating ancillary revenues and finding and retaining talented revenue managers.  For more information click here:  http://events.eyefortravel.com/tdsusa/revenue-management 

What are the alternatives for revenue managers who don’t want to simply reduce their prices? 

  1. Focus on Generating Ancillary Revenue: Increasingly, airlines are unbundling their core product and focusing on growing ancillary revenues.  United Airlines alone expects to make $1.2 billion this year through fees and charges, which will certainly go some way in boosting their bottom line. 
  2. Consider Using Opaque Channels: These channels become even more relevant in a downturn, especially to the business traveler.  They offer a way to get rid of distressed inventory without having to discount.  Plus, you can sell inventory whilst maintaining rate integrity.  
  3. Be Smarter at Discounting: More than ever before revenue managers need to work closely with marketing to create innovative and profitable promotions and discounts.  How do different customers view different types of discounting?  And how can you create a perceived discount by including an extra amount ‘free’? 
  4. Take a Closer Look at Customer Segments: If you segment your customers by price sensitivity, you can then gauge the likely effect discounting will have on their current and future purchases.  Despite the economy, there are still customers out there who do not expect a discount, so work out ways to appeal to this high-value segment. 
  5. Find New Ways to Add Value:  Rather than slashing prices, offer value-added components to your customer.  Your customers will feel they are getting more value for their money and you also differentiate your product. This requires creativity and focus for both revenue managers and the marketing team, as they work together to create packages and promotions.  
To request a PDF brochure with full conference details click here: http://events.eyefortravel.com/tdsusa/revenue-management/more-information-logix.asp   

Revenue Management and Pricing in Travel is being held on September 16-17 at the Westin on Michigan Avenue in Chicago.  Speakers include: Hilton Hotels, Carlson Hotels Worldwide, Midwest Airlines, Orbitz, American Airlines, Wyndham Hotels, IHG, Joie de Vivre Hospitality, Continental Airlines, Isle of Capri Casinos, The Venetian and Preferred Hotel Group.  For a full list, click here: http://events.eyefortravel.com/tdsusa/revenue-management/speakers.asp   


 
Contact:

Helen Raff 
VP North America 
EyeforTravel 
+44 (0) 207 375 7582 (UK) 
helen@eyefortravel.com
 

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