Hotel Room Rate Discounting During Recessionary Times: Effects by Hotel Class

Abstract

Previous research regarding the costs and benefits of hotel room rate discounting during recessionary times has produced mixed results and recommendations. However, it has become clear that virtually all hotels offer discounted room rates during economic recessions, regardless of the conclusions of research studies, and that includes the recession that began in 2020. Media reports have indicated that certain rogue hotels are quick to offer discounted room rates during the early months of recessions, and therefore, operators of other hotels in their competitive set feel compelled to follow the lead, perhaps regretfully. This study found that while virtually all hotels offered discounted room rates during the recession of 2008 and 2009, there was variability in discounting during the early months of the recession. As a result, we sought to explore recessionary variability of room rate discounting, and to provide an empirical, nuanced perspective regarding the effectiveness of such discounting. Notably, we found the effectiveness of recessionary discounting varied depending on the class of hotel, with higher class establishments experiencing different outcomes from discounting than hotels categorized as relatively lower class properties.