The Luxury Letter Blog


Luxury Hotel Marketing and Price Warfare: 2 Schools of Thought
February 3, 2009, 2:42 pm
Filed under: Uncategorized

By Monique Smith, Senior Adviser, Criterion Global


In this global downturn, even consumers richer than 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 the tests of time have shown advertising is an indispensible 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?
Added value marketing presents travellers with a greater sense of choices. Jitendra Jain, thought leader E-Commerce Manager at Starwood Hotels & Resorts in Dubai, is gaining a following for this groundbreaking choice-based theory of hotel marketing. Jain’s concept of the “Experience Engine,” allows guests to “build” individualized experiences by bundling “experience units” (meals, spa service, sports diversions, etc.). Personalizations, and freedom of choice, will become the new luxury, replacing the Amenities Races of years past. Until Experience Engines are status quo, intelligent e-marketing of value-add incentives can offer guest personalization and generate ROI.
For instance, incorporating dynamic content delivery into your booking site will customize your conversion process for each visitor, increasing conversions. Smart online media buying can target specific promotional ads based on behavioural cues, catalysing your prospecting, increasing conversions, while accurately measuring response and returns on your marketing investment.
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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4 Comments so far
Leave a comment

Nice infoo,

Thanks

Comment by Joko Riantoro

Thank you Joko! For more information on luxury hotel marketing, we will soon be publishing a white paper on luxury resort best marketing practices in June, 2009. Stay tuned to our website for more info!

Comment by criterionglobal

It is very helpful artical.visit http://www.lgdcom.com/ for more details about luxury advertising LUXURY HOTEL MARKETING AND PRICE.

Comment by joana

I needed to thank you for this very good read!! I definitely loved every bit of it.
I have you book-marked to check out new stuff you post…

Comment by price hotels




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