Background to our new report into hotels’ LOS discount strategies

Price adjustment is the bread and butter of day-to-day revenue management. Fluctuations in supply and demand, coupled with modern practices in dynamic rate-setting, make it all but inevitable for most hotels.

But it’s more than a reactive exercise; good revenue management is underpinned by a solid pricing strategy. This varies from one hotel to the next but many hotels include length-of-stay (LOS) discounts as a component.

These are rarely needed when demand is high. But by offering guests a discount in return for a guaranteed number of nights, this strategy can help drive up occupancy during periods of low demand.

So, how common a practice is LOS discounting? And what else can we say about the way hotels discount by LOS? Starting with the leading global chains, we have analysed the rates of over 50,000 hotels that we track on Rate Insight to find out in a report published today.

To establish if there’s a discount at each property, we compared three consecutive one-night prices with the price for a length of stay of three nights. So, for example, LOS-3 with an arrival date on 21st November would be compared with LOS-1 for 21st + 22nd + 23rd November. We did this for every room type separately, taking two-person, cheapest flexible rates.

The discount size is summarised at the hotel level by taking the median of the discounts, based on these sample sizes:

• Number of hotels with at least 30 future price dates advertised: 51,075
• Of those, hotels with LOS discounts, defined as those with at least 10 dates that have a discount for a longer LOS: 13,237

From this data, we investigated: the proportion of hotels that apply some sort of LOS discount; how often they are applied; how high those discounts are; and what we know about the types of hotels that deploy this strategy.

While there’s variation across the board, the importance of having a strategy for LOS discounts is underscored by the clear evidence that 15 highly successful international chains that we analysed have one.

How does your hotel compare? Download the report for a view of the landscape.