Discounting to Fill a Soft Shoulder
You are the revenue manager for a 240-room hotel near a convention center. A large citywide event was cancelled six weeks out, and your shoulder dates (Tuesday–Thursday) are running at 48% occupancy on the books versus a 71% budget for those dates. Your BAR is $219; the competitive set is averaging $189 on those dates. Transient leisure demand is soft midweek, and the group pipeline is thin. Your director of sales proposes a 25% off BAR flash sale through OTAs to drive volume. The GM is concerned about rate integrity and the cost of OTA commissions, which run 18%. Group base is 30% of the mix, and you have a loyal corporate transient base that books close-in at BAR.
1. Evaluate the OTA flash sale proposal on net revenue and rate-integrity grounds.
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Run the net: 25% off $219 is $164.25. After an 18% OTA commission, net is about $134.70 per room night - well below the $189 comp set average and below what you would likely capture from close-in corporate transient at BAR. The sale also risks rate-integrity problems: your loyal corporate base books close-in, and a public discounted rate teaches them to wait. The proposal drives occupancy but may not drive profit, and it is difficult to reverse once in market. Recommend against a broad OTA flash sale as structured. If discounting is necessary, target it: closed user groups, loyalty members, or a bundled package that protects the published BAR and avoids the full OTA commission.
2. Propose an alternative strategy for the shoulder dates and explain the tradeoffs.
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Recommend a segmented approach rather than a single lever. First, protect BAR for the corporate transient base and pursue targeted promotions to loyalty and local demand (closed-user-group rates, packages with F&B or parking) that avoid OTA commission and are not publicly comparable. Second, pursue small group and SMERF business for the specific dates - even at a modest discount, group business carries ancillary F&B and avoids commission. Third, consider a limited, time-boxed OTA promotion only if the dates remain soft two weeks out, sized to fill the remaining gap rather than the whole inventory. The tradeoff is complexity and slower booking velocity versus better net revenue and rate integrity. Set a floor rate you will not go below and a trigger date for escalating discounting.
3. What would you measure to know whether the strategy worked, and how would you avoid judging it too early?
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Measure net RevPAR (after commission and discount), not occupancy or ADR in isolation, and segment the results so you can see which channel produced which room nights. Track the corporate transient base separately to confirm you did not cannibalize BAR bookings. Set a review date - for example, 10 days before arrival - rather than reacting daily to booking pace, since close-in demand is noisy and early panic discounting is a common error. Compare actuals against the budget for those dates and against the comp set's rate movement. Judge the strategy on net revenue contribution and rate integrity, not on whether occupancy hit the original 71% target, which may no longer be achievable after the cancellation.