Achieving Maximum Revenue and Profits with Three Discounting Disciplines

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JDA Software outlines three guiding principles for rate discounting heading into the busy travel season

As the dust settles and the hotel industry looks toward recovery heading into the traditionally busier summer months ‒ and beyond ‒ hoteliers should revisit their discounting strategies to avoid revenue losses and gain greater value for their properties. JDA® Software Group, Inc. (NASDAQ: JDAS), The Supply Chain Company®, outlines three pricing disciplines to help companies achieve greater return on investment and win the pricing war during high and low-demand periods.

Throughout 2009 and much of 2010, the industry scraped to survive under sub-par economic conditions. Hotel managers turned on the discounting fire hose and sprayed out incentives to keep their properties full. But amid recovering demand, smart hotel managers and pricing decision-makers need to step back, take a breath and turn the fire hose to the off position.

“No matter how the economy bounces back, discounting will still be an important component of the hotelier’s pricing strategy. As companies move past operating in panic mode, they can now focus on bringing back pricing discipline and identifying bad habits perpetuated during the downturn,” said Bill Kotrba, vice president of industry strategy, JDA Software. “It’s time to taper off dependence on knee-jerk reactions and apply a higher level of restraint in offering discounts on a day-to-day basis.”

In order to help capture maximum revenue and profit for every hotel, JDA has identified the three guiding principles to apply when considering discounting strategies:

  • Price segmentation: Hoteliers should ensure that any discounts are sufficiently fenced and targeted so that they are only offered to the individuals for whom they are intended. Undisciplined or poorly enforced segmentation has cost the industry billions of dollars. Offering a 10 percent discount to members of a specific group may help address a gap in bookings on certain nights. But if every customer claims a supposedly “targeted” discount, or if discounts can be applied on top of other deep discounts, profitability will suffer dramatically. To capture maximum revenue per available room, hotels need to ensure discounts are targeted and group membership requirements enforced.
  • Do the math: Sloppy, inconsistent discounting occurs when managers fail to think through the strengths and weaknesses – and financial outcomes – of their pricing strategies. Simply put, a proposed discount must drive enough new bookings to offset the rate decrease. The same analysis applies to rate increases. For example, to maximize revenue during the 2012 Olympics, UK-based hotels need to apply this analysis when it comes to rate increases. Certainly demand will be high, but past Olympics have shown that hotels are prone to overreach, increasing prices too much and ending up with empty rooms during the Games. Hoteliers that blindly follow competitors up or down the price ladder end up losing out on the potential upside special events can deliver.
  • Keep all of the money: Don’t pay someone else big commissions to unload your distressed room inventory. The rise of instant, online comparison shopping has led consumers directly to discount travel channels when they’re looking to book a room. That can make attracting attention to a hotel’s own site very difficult as the likes of Expedia and Laterooms become the preferred booking portal. Rather than immediately releasing rooms with channel partners who charge commissions, hoteliers need to find creative ways to drive discount seekers back to their direct website. Reaching customers directly, at the very least, lets a hotelier keep 100 percent of a discounted room rate.

“Good discipline around segmentation, creative marketing strategies and basic discounting practices doesn’t require a big investment,” stated Kotrba. “And hotels that ultimately make investments in pricing systems and software can achieve a far greater return when they already understand and practice these basic elements.”

To download the full whitepaper, Three Guiding Principles for Rate Discounting, click here. For more information on JDA Pricing and Revenue Management, visit http://www.jda.com/revenuemanagement.

Additional JDA Pricing and Revenue Management Resources

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About JDA Software Group, Inc.
JDA® Software Group, Inc. (NASDAQ: JDAS), The Supply Chain Company®, is a leading provider of innovative supply chain management, merchandising and pricing excellence solutions. JDA empowers more than 6,000 companies of all sizes to make optimal decisions that improve profitability and achieve real results in the discrete and process manufacturing, wholesale distribution, transportation, retail and services industries. With an integrated solutions offering that spans the entire supply chain from materials to the consumer, JDA leverages the powerful heritage and knowledge capital of acquired market leaders including i2 Technologies®, Manugistics®, E3®, Intactix® and Arthur®. JDA's multiple service options, delivered via the JDA® Private Cloud, provide customers with flexible configurations, rapid time-to-value, lower total cost of ownership and 24/7 functional and technical support and expertise.

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This media alert contains forward-looking statements that are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally accompanied by words such as “can,” “will,” “ensure,” “help,” “enable” and “expect” and other words with forward-looking connotations. In this press release, such forward-looking statements include, without limitation, remarks that implementing certain discounting strategies can provide certain benefits to companies, such as increased return on investment, revenue and profit. The occurrence of future events may involve a number of risks and uncertainties, including, but not limited to: (a) certain strategies may not perform exactly as anticipated; (b) there may be implementation and integration problems associated with our solutions and strategies; and (c) other risks detailed from time to time in the “Risk Factors” section of our filings with the Securities and Exchange Commission. Additional information relating to the uncertainty affecting our business is contained in our filings with the SEC. As a result of these and other risks, actual results may differ materially from those predicted. JDA is not under any obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements, whether as a result of new information, “JDA” is a trademark or registered trademark of JDA Software Group, Inc. Any trade, product or service name referenced in this document using the name “JDA” is a trademark and/or property of JDA Software Group, Inc.

JDA Software Group, Inc.
14400 N. 87th Street
Scottsdale, Ariz. 85260
Spark Communications
jda(at)sparkcomms(dot)co(dot)uk
+44 (0)207 436 0420

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