I frequently talk with hotel executives from General Managers and Directors of Sales & Marketing to Directors of Revenue Management about running promotions. I can’t tell you how much push back I get from hotels who say they don’t feel they have to run a promotion or discount their rates in any way. “Discount” really should be a four letter word. At least it is in the minds of most hoteliers and especially those running luxury properties.

Here’s the deal and some things to consider…

First and foremost, travelers of all types are looking for a value or a deal. This includes luxury travelers too. Think about the wealthiest people you know. If they are like all the ones I know, they are the biggest penny pinchers. They watch every dime they spend and will always ask for a deal, not understanding why they should have to pay retail. This is a big part of the reason they are able to acquire their wealth. Every consumer is looking for a deal, so be sure to show them price value through a promotion.

Another thing to consider is running a promotion doesn’t mean you actually have to discount your rate. How many times have you seen one of the major retailers or department stores market a 50% off sale? I can tell you they are not actually giving their customers 50% off their best available price; rather they are marking up their best available price in the days preceding the sale. After the sale discount they can achieve a desired price for the product they are trying to sell. This is retail and merchandising 101. There is a simple rule that I promote with my clients: yield your promotions to your rate, not your rate to your promotions. Think about it this way, if you are trying to achieve an ADR of $100 at the end of the day, then establish your rack rate at $125 and put a promotion against it offering 20% off, which will give you your desired $100 ADR.

One of the biggest mistakes I saw hoteliers make during this economic recession was to cut their rates. The big luxury brands were the biggest offenders. Competition and pricing has been cut throat the past couple of years. The competitor down the street dropped their rates then the guy next door did the same to match. You were left with no choice but to do the same. Four Seasons Hotels are typically around $400/night and Ritz Carlton about the same. I witnessed in most major markets one of the two dropping their rates to $250 and the other following immediately. It was smart to make their rates more competitive and potentially steal some market share from their 3 to 3.5 star competitors. I can tell you it did work. Problem is where they go from there, when the economy is rebounding and they want to get back to the rate levels before the bottom dropped out? They have hurt their long term rate integrity with their loyal customers who are now used to paying $250/night. Their customers are going to ask, “What has changed in the last year?” “Was there a remodel? New services or amenities?”

Wouldn’t it have been better for these hotels that just cut their rates to do the same, but through a limited time promotion? Ask yourself, if you had two similar hotels you were considering for a weekend getaway and one was $250/night and the other was $400/night, but offering a limited time promotion that got the price down to $250, wouldn’t you choose the hotel that appears to be a better value? Studies show that most consumers would choose the better value, if all other things were equal.

One last thing to consider is that running promotions creates opportunity. When you run a promotion you can participate in numerous merchandised marketing opportunities on the Online Travel Agent sites, like 48 Hour Sales, Last Minute Deals and market promotions supported through TV, Print, Radio and Email Marketing. Running a promotion also provides you with some compelling content for your Specials & Packages page on your website or that monthly email campaign you send out to your past guest database. Participating in promotions and 48 Hour Sales on the OTA’s also greatly improves your placement on these sites. In addition, it will drive incremental business you would not have otherwise seen. I regularly run 48 Hour Sales for my hotel clients on the OTA’s and match them on the hotel’s website. The numbers don’t lie. A hotel might typically average 6-10 room nights produced per day on Expedia for an average Tuesday and Wednesday, but when compared to another week where the property participates in a 48 Hour Sale, they jump to 40-50 room nights produced per day. Not to mention that their website production jumps the same.

Shouldn’t you be running promotions?