Value or Discount? What works and why
By Scott Thomas
Groupon, Living Social, Woot, SmartBargains, Name Your Own Price, Cheap Fares, Last Minute Deals, Bargain Travel, and the list goes on and on. Whether we like it or not, we’re all influenced by things around us, and the loudest voices in marketing at the moment are those screaming “Get [whatever you want] at a discount.”
Value vs. Price?
We came across an article a few days ago that really brought this home. It was an article by a woman telling of her first visit to a B&B. She intended the article to be a glowing commentary on the website that helped her locate the B&B, but the article drew such telling contrasts between her B&B visit and her “bargain” hotel stay the night before, we couldn’t help seeing the difference in value.
Traveling on a tight budget, the woman and her daughter looked for places to stay. The first night was in an inexpensive hotel, the second in a similarly priced bed & breakfast.
While the hotel price fit the budget, it smelled of cigarette smoke, was tiny and “dingy”. When she overslept, the housekeeper awakened her to let her know she had to get out.
Fortunately, the next night was an entirely different experience. The B&B was located much closer to the area the woman wanted, was clean and attractive, and she was greeted by a friendly and courteous host. The list of amenities will sound familiar to B&B owners:
- Free juices and water
- Entertainment system
- Free WiFi
- Cable TV
- DVD collection
- Access to the owner’s iTunes collection
- and, of course, breakfast
The price? A few dollars less than the smoky hotel! Now that is a demonstration of value over price (and in this case, it was even a lower price).
This scenario, with a few local variations, is played out in virtually every location in America, and, no doubt, elsewhere as well. B&B’s usually provide charming accommodations, at a variety of price points, with a long list of included items that are often either unavailable, or only available at an additional charge, at the nearby hotels. Naturally, price can vary greatly, depending on the location, the particular properties involved, amenities provided, etc., but in many cases a B&B provides much, much more, for the same or lower cost than a hotel.
Does discounting work?
Even so, with the drumbeat from the media of “discount, discount, discount” we in the B&B industry are constantly asked to give more, and discount our rates. Despite being priced below local hotels, we feel this constant pressure at our Freeport Maine Bed & Breakfast. Yet study after study has shown that discounting does not bring in enough additional business to offset the discount. In other words, discounting, by itself, can only result in loss of revenue.
How does that work? The math makes it clear. If we discount a room rate by 10%, in order to make up the lost revenue from the discount, we must increase the number of rooms sold by 11% just to break even. To actually increase revenue we need even more volume. That means you must couple the discount with publicity that will increase occupancy by more than 11% for every 10% of discount given. For most small properties, that publicity isn’t going to happen, because advertising is too expensive for their budget.
More exposure is the best answer
One thing stands in stark contrast between the smoky hotel and the cheerful B&B in our example: the B&B is clearly the “better way to stay.” That should be the emphasis of any publicity or marketing. Thankfully, the Professional Association of Innkeepers International (PAII) and several partners, have created a campaign called “Better Way to Stay“, attempting to bring attention to this fact.
The first campaign from Better Way to Stay, called “B&B’s Kick Gas“, and responding to the sharp increases in gasoline prices, will include a variety of creative ways to spend less on gas, from free gas card giveaways to packages with alternative travel options.
We’re delighted to see such a large effort to promote B&B’s as a better alternative. While we think the sensitivity to gas prices presents an opportunity, the optional “giveaway” part seems a bit too much like discounting for our taste. Fortunately, innkeepers can choose to creatively participate.
When we combine the story of the woman contrasting her irritating hotel stay with her pleasant B&B stay with the study results showing the ineffectiveness of discounting, we think the message is clear: We need to get the word out about the great value offered at a bed & breakfast!