The document discusses the issue of discounting rates in the hotel industry. It analyzes three articles that examine discounting from different perspectives: financial, customer loyalty, and alternative strategies to filling rooms beyond discounts. While discounts attract customers, they can devalue a brand if overused and cause customers to doubt the quality of service. The document concludes discounts are a complex issue and hotels should focus on delivering excellent service and unique experiences rather than relying solely on discounting.

1. Jean-François Larissa
MATH 2001
Professor Smith
May 9TH, 2016
Synthesis
In the hospitality industry, customers are looking for excellent service. They want to you
to go above and beyond for their stay. Part of the population is willing to pay the extra price if
that translates into excellent service. Even though many want to experience excellent service, but
not everyone is willing to pay a high price for it. With the economy recessions and competition,
many hotel facilities have used different pricing strategies. One of their most used strategies is
discounting their rates. For the past few years, the subject of discounting has led to controversial
issues for the hospitality industry. Even though is creates monetary satisfaction for the
customers, it does not always guarantee brand loyalty or brand recognition. Discounts can
insinuate various things such as a new season is coming in, or it can insinuate that the product in
question is devalued. This can lead the customers to your brand and its value. Several articles
such as “Discounting in the hotel industry”, “How discounting damages hotel brands”, and “Can
you buy loyalty” illustrate the issue. With that being said, if a luxury hotel has high discounts
rates, will it create brand devaluation leading it to its destruction?
Pricing strategies are hard to grasp for hotels. “Discounting in the Hotel Industry” shows
the complexity of discounting in the hospitality world. Research shows that the customer’s
response to discounts can vary to positive to negative. These answers were taken after several
research and surveys. Refuting the idea of discounts is not what this article explains, but it shows

2. that there must be a limit to the discounts rates. It provides several solutions to this problem such
as fence rates or yield management pricing. An example of the fence rate is that if you purchase
the room for a specific number day, you will have a certain discount rate, but with a catch. The
catch is that some purchases are non-refundable. Aside from fencing rates, the article talks about
yield managing pricing. The basic idea of the yield management pricing is that the different
kinds of customers each have a different price (“Discounting in the hotel industry: a New
Approach”, Sheryl E. Kimes). The problem is that if a luxurious hotel lowers its price, what
makes it valuable now? People like to show off, they like the challenge of buying expensive
things. The article “Can you buy loyalty?” also talks about the drawbacks of discounting and
how it ruins a hotel brand. For examples it says: “If you offer lower prices you have to make up
for the shortfall by working harder than your competitors to make the same amount of money”. It
explains the consumer’s behavior regarding discounts. It costs more to gain a new customer than
to keep an old one. Loyal customers will stay loyal to your brand as long as the service is great
and you maintain it. Before getting into the details of discounts, understanding customer
behavior will help you determine how to discount in your hotel. As far as the “How can
discounts damage you brand” is concerned, its purpose as the same as the 2 previous articles. It
focuses on both financial and behavioral impact of discounts regarding the hotel industry. For
example, it says: “By leveraging price as the key point of differentiation between competing
hotel chains, customers are losing incentive, other than loyalty programs, to stick with one brand
(Ray George, “How can discounts damage you brand”).
All three articles have the same objectives, but have different perspective to illustrate the
problem. One article focuses on the financial point of view of discounts. It explains why
discounts exist and how it is perceived by the customers. It demonstrates the complexity of this

3. subject, and illustrates the different strategies behind pricing (“Discounting the hotel industry: A
new approach”). It explains how discounts can create brand devaluation financially. While the
other illustrates the impact of discounts on the customers through loyalty. It explains how it
affects their behavior regarding certain brands. According to the article “Can you buy loyalty?”
there is a psychology behind prices. The phrase that says ‘you get what you pay for” is a great
demonstration on the effect of discounts in hotels for guest. They start by explaining what
customer loyalty is and how it works (“Can you buy loyalty”). Since you paid a very low price
for your room, the experience and the service provided will reflect the price payed. That is why
they say too many discounts leads to brand destruction. They ask the hotels to focus on creating
brand loyalty by having excellent service, instead of using discounts to attract them. The last
article is different from the other 2 because it explains on what hotel should focus to fill out their
rooms, not only rely on discounts. The main idea is to increase revenue by selling all the rooms.
So order to do so hotels can focus on other things instead of discounting their rooms because it
does not always guarantee profit or break even. It demonstrates that hotel can try on selling the
experience instead of devaluing their brand with low prices. The article “How can discounts
damages your brand” is more focused on explaining the problem by staying more customer
based and with that adding more value to your service. For example, it says: “Despite the
overwhelming urge to discount to fill rooms, hotels should focus on developing and delivering
compelling points of difference that will lead to sustained brand and business success” (Ray
George, “How can discounts damage your brand”). In other words, the issue of discounting not
only affect the band with its employees, but also can affect the service followed by customers.

4. Methodology
Demographic Tallies:
In my survey I question 16 females, which represents 53% of my simple of 30 people. There
were 14 males questioned, representing 47% of my simple of 30 people.
Age:
 20-24 years old: 53%
 25-29 years old: 10%
 30-34 years old:3%
 35-39 years old: 3%
 40-44 years old: 7%
 45-49 years old:10%
 50 and up: 17%
Most of them were between the ages of 20 to 24 years old (53%). Ten percent of the participants
were between the ages of 25-29 years old. Seventeen percent of the participants were between
the ages of 50 and up.
Operation Definition:
The questions 3, 4,5,6,7 answered the operational definition for the cause.
The questions 8, 9, 10, 11 answered the operational definition for the effect.
The hypothesis is answered by question 12.

5. Results
Most participants agreed that high discounts rates can cause brand devaluation for a hotel. (M
2.4, 1.5 SD)
The statement “hotels use discounts as an incentive to attract guest” was overall well supported
by the participants. (M 1.5, SD 0.6)
On average, the participants had a neutral opinion regarding the fact that people associate high
hotel discounts rates with bad service. (M 2.9, SD 1.0)
Most participants supported that when a hotel has too many discounts, customers start having
doubts about the brand and the service. (M 2.2, SD 1.0)
The statement “you would most likely go to a well-known hotel brand even if there are no price
discounts” was supported by most of the participants. (M 2, SD 1.2)
Most participants stayed neutral on the fact that discounts play a big role in their quality and
choice of hotels. (M 2.7, SD 0.8)
On average the participants agreed that hotels lose customers because of lack of price
consideration. (M 2.4, SD 1.1)
Most participants had a neutral opinion towards the idea that a hotel brand loses value if prices
are too low. (M2.7, SD 1.4)
On average the participants disagreed that they would ignore bad service at a hotel brand as long
as the price is low. (M 3.6, SD 1.1)
Most participants agreed with the term “you get what you paid for” regarding discounted hotel
rooms. (M 2.5, SD 1.3)

6. Conclusion
The sampling method I used was randomized. I went to a plaza near my house and stood next to
Don Pan and Starbucks. I asked every 3rd person that walked by me to do the survey. The only
problem I faced was minor. One of the participants did not answer one of the questions. I asked
them why was the question was left unanswered. The reason why is because they forgot to
answer it. If I were to do another survey, I would post the survey questions online instead of
going somewhere to collect the data. It was an interesting experience. People were afraid to say
no to me and force themselves to do the survey.

7. Works cited
"Can You Buy Loyalty? The Downside of Discounts” np. Nd. Web. 29 Mar. 2016.
George, Ray. "How Discounting Damages Hotel Brands” HawkPartners. Nd. Web. 29
Mar. 2016.
Sheryl E, Kimes. “Discounting in the hotel industry: A new approach” Cornell
University. Nd. Web. 29. Mar. 2016