Making Friends with Discounting
By Jeremy McCarthy Group Director of Spa & Wellness, Mandarin Oriental Hotel Group | December 25, 2011
"Discount" is the dirty word of the hospitality industry. For the last ten years, spas and hotels have held discounting as the absolute last straw in any marketing campaign. Unfortunately, the recession of the last few years has forced spas and hotels to exhaust any and all options to get consumers in the door. Loathsome though we were to do it, the economic situation became severe enough to bring us all to our last resort efforts, discounts included.
The spa industry in particular, has had a love-hate relationship with discounting over the past decade. In other words, the consumers have grown to love discounts, and the industry professionals have grown to hate them. In fact, in the last ten years of attending industry conferences and seminars, I can't think of one where industry professionals didn't eschew discounting in favor of "value-adding" strategies that leave the pricing integrity of the spa intact.
So where does this hatred of discounting come from? And can the spa industry continue to keep discounting at arm's length when consumers are already cutting their spa spend due to the economic pressures of the day? Can spas afford not to discount, when competing against deeply discounted deal aggregators such as Groupon, Living Social or Rue La La?
These are important questions to answer when consumers report "finding deals" as the #1 reason they use websites to search for information on spas. And Groupon, just in the last twelve months, has sprinted past Facebook and Spafinder as one of the most popular websites consumers use to find spa information (30% growth over last year according to a recent report by Coyle Hospitality Group.)
Looking at the rise in popularity of websites like Groupon, it would be easy to imagine a future where nobody pays full price. After all, why pay full price for anything if there is always a deal to be had on the internet? For this reason, some argue that Groupon is not sustainable, and is dragging the industry down (the discounts and commissions are so substantial that it is very difficult for a spa to be profitable while running one of these promotions.) But there seems to be no shortage of spas that are desperate enough to gain some market share by slashing prices, at least for a short term event.
The debate around these discount websites is in full swing, with industry professionals on one side cautioning that spas who participate are trading long-term sustainable growth for short-term cash flow (and devaluing the entire industry in the process.) But there are success stories too: spas who say their business was brought back to life by the power of the Groupon masses.
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