by • 6 February, 2009 • Well TravelledComments (0)1466

Luxury Hotel Marketing and Price Warfare: 2 Schools of Thought

In this global downturn, even consumers richer than King Midas are taking a deeper look, and more carefully weighing purchase decisions – much to the discomfort of marketers worldwide.

Every luxury brand fears the critical eye of the newly frugal consumer, but history has shown advertising is an indispensable necessity in recession. The famous formal test by McGraw-Hill in the 80’s, oft-remembered by marketing professors at UPenn’s Wharton School of Business, showed that brands that continued or increased advertising during the 1981-1982 recession experienced an avg. increase of 256% in post-recession sales, over those who didn’t.

But how much should the tenor of the time temper the tone – and message – of advertising? And how effective are price promotions? So often, two schools of marketing emerge in rough waters: that of the “Drop It Like It’s Hot,” and the “Quid Pro Quo” philosophy of added-value.

The “Drop It Like It’s Hot” approach means cutting room prices– this is the knee-jerk response to weakening demand. The “Drop It Like It’s Hot” price cut is tempting, particularly in times when headlines everywhere seem to broadcast the sinking prices of milk, cars, homes – you name it. But do price cuts motivate luxury travellers?

Low-balling your comp set a) signals emergency, b) slims down profit margins and RevPAR, c) gives guests a sense of “real” or “bottom” prices – prices which they will inevitably expect, even if subconsciously, when times are good again. To quote Terry Jicinsky, senior vice president of marketing at the Las Vegas Visitors Authority, “You don’t want to build a brand in today’s market based solely on a price that backs you into a corner.”

Finally, slashing prices doesn’t necessarily bring about a surge in demand.

Consider a “Quid-Pro-Quo” value-add strategy, which presents the consumer with greater value for their dollar. For example, a value-add promotion might offer a year of concierge service with the purchase of a condo; or free theatre tickets with hotel booking. Value propositions are:

  • Consistent with luxury brands: price cuts aren’t. Luxury is based on the premise that quality, not price, is the primary motivator.
  • Value-add packages flaunt offerings, and increase the total dollars spent on-site.
  • Value-add packages can also be more profitable than price cuts, particularly when partners (such as spa, theatres, etc.) can absorb some, if not most, of the cost of the freebies.
  • Motivates buyers more than price cuts alone, as it adds more “meat” to consumers’ choice. What is more appealing; a room with a free spa service, and free appetizer at the restaurant; or a 20% off coupon?
  • Value propositions are not mutually exclusive with discounting. The best examples here are credits. Ads for $200 off catch eyeballs with a low price, can be tied to a certain number of nights or other conditions, and highlight value in a packaging style that uses numerical values to get attention, paired with value-based content that preserves the integrity of hotel brands.

Before jumping to make rash price cuts, incorporate value-oriented marketing strategies to outmanoeuvre your comp set while maintaining your hard-earned luxury brand stature.

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