Introduction

When hospitality businesses offer experiences at greatly reduced prices on platforms such as Groupon and Wowcher, do they still attract customers who choose to pay full price? This question delves into whether discounted deals lead to continued full-price bookings, or if they serve as a mere traffic generator to introduce the business to potential customers.

Understanding the Discount Strategy

The primary goal of offering heavily discounted experiences is to drive product awareness and attract new customers. Many hospitality businesses, especially those with limited availability or low occupancy, offer these deals to fill seats or rooms. By attracting a large number of potential customers who may not have otherwise engaged with the business, the hope is that some of them will upgrade to full-price bookings. However, the effectiveness of this approach can vary significantly depending on the business and the context in which the discount is offered.

Impact on Full-Price Bookings

Several factors contribute to the impact of discounted experiences on full-price bookings:

Incentive for New Customers: These deals can serve as a valuable tool to introduce new customers to the business. For example, a 55% discount on afternoon tea at a 5-star hotel in London might attract people who are not familiar with the hotel's offerings. Even if the customer ultimately chooses to pay full price for a subsequent visit, the discount served its purpose of drawing them in initially. Frequent Customer Loyalty: Some discount providers, such as Groupon, can influence repeat business. Regular customers who initially try the business via a discount might continue to frequent the venue if they have a positive experience, leading to full-price bookings in the future. Competition and Price Sensitivity: In competitive markets, such as urban areas with multiple high-end hotels, offering discounts can help capture market share. However, if the market is less competitive, the business may not see many full-price bookings as a result of the discounts.

Tailored Discount Strategies

Businesses often tailor their discount strategies to specific demographics or timeframes. For instance, a hotel might offer a weekend discount through a platform like Groupon to drive weekend bookings. Additionally, they may use other promotional channels, such as affiliate programs, group senior citizen discounts, or hotel concierges, to offer further discounts without reducing the overall business. This approach allows the business to maintain a wider range of prices and sales.

Comparing to Airline Strategies

The strategy of offering discounted experiences is similar to that of airlines. Airlines often release last-minute deals to fill unsold seats. If demand for a particular flight is low, they will open a limited number of discounted seats. As more people book the full price, the inventory resets to higher prices. Hospitality businesses operate in a similar manner. They release discounted experiences to attract initial interest and hope that such interest will lead to full-price bookings in the long term.

Conclusion

While discounted experiences on platforms like Groupon and Wowcher can attract a significant number of new customers, the impact on subsequent full-price bookings is not always guaranteed. Businesses need to carefully consider their marketing strategies, target demographics, and competitive landscape to optimize these discounted deals for maximum effectiveness. Ultimately, the key is to strike a balance between attracting new customers and maintaining a robust base of loyal patrons willing to pay full price.