In the April 23, 2009 Edition of the Wall Street Journal, there is an interesting article by Diana Ransom, entitled “Smart Ways to Cut Prices.”  Ms. Ransom’s theory is that while the pressure on businesses to reduce prices is hard to resist, if price cutting is too severe, the result is lower profits and loss of brand identity.  She goes on to list 5 strategies for small businesses to follow:

          “1.     Switch to Performance-Based Pricing;

          “2.     Offer Less-Expensive Products;

          “3.     Use Less-Costly Materials;

          “4.     Add Slimmed-Down Services;

          “5.     Offer Extra Services.”

While these may be good ideas for product-related businesses, the hospitality industry has really little choice in terms of discounting.   We can’t really do any of the first four alternative strategies, because the infrastructure of our “service” is already built into the bricks and mortar of the Inn.  Pretty hard to ask Inn vendors to switch their pricing of services to relate to the actual heads in beds strategy of Inns (alternative #1).  Likewise, it would be really hard for an Inn to lower the quality of either the rooms or the materials used in the Inn (alternatives # 2 and 3).  I suppose that we could move to lower thread count sheets, less expensive amenities, or lower grades of food in the dining room.  Even worse would be to unbundled some of the services and start to charge for “extras” (alternative #4).  Perhaps we could add a resort charge to each guest bill to cover the cost of making the gardens look nice? 

However, the last suggestion made by Ms. Ransom does sound very familiar.  Offering extra services is the same concept as Value Added that Innkeepers have been using forever to make their packages attractive to guests.  Here is a strategy that continues to make sense even in tough times rather than to just discount rates.  Packages can be designed with lots of added services and even gifts for the guest to make them different from the every day rack rates.  Since the room is then packaged with these additional services, even if discounts are built in, it does not impact the brand later on when the economy gets stronger.  It was just a package good for a specific time and based on a special theme.  Thus, the brand loyalty of the guest does not get impacted when, after a while, continuing rates at the Inn move back to normal levels or are increased. 

One savvy Innkeeper has been doing this for a long time.  Instead of just providing the additional services which make his Inn a standout, he makes sure that the guest understands that, of course, Wi-Fi is free at this Inn, as are fresh cookies and lemonade at check-in, and hors d’oeuvres at the Innkeeper’s reception before dinner.  Free is also the note on the computer/printer for guests to use to print out their airline boarding passes, and on all of the maps and other concierge materials that are available to the guests to get familiar with the area.  Tipping is discouraged at this Bed and Breakfast Inn, because it is included as part of the price, so the ubiquitous housekeeping envelope is replaced with a note in the Guest Book that no tipping is necessary.  Most of all, breakfast at this Inn is a fully plated and served 4-course meal, with food that is clearly special and noteworthy.  This is a far thing from the plastic plates and plastic foods available for “free” at the chain hotels. In fact, this Innkeeper is just doing a really good job of marketing his Inn by differentiating it from all of the chain hotels nearby who charge for all of this or offer “free” things with no real value.  

However, what Value Added is not, is just a bottle of champagne or a box of chocolates added to a room.  While these things are nice to set a romantic mood, they are too simple and easy to attract real business.  The goal is to package with a local partner who has something unique to offer; an experience that adds true value to a stay.  The guest might be able to find this on his own, but you have it all laid out for him to consider.  So, it is not just romance that sells anymore, it is clear value to the consumer and unique experiences.  Only you know how to do this in your area, so as the saying goes, “What are you waiting for?”  Add value and preserve your brand!

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