By Burl Hutchison, CRME, Manager of Revenue Optimization, Sabre Hospitality Solutions, and member of the HSMAI Revenue Management Advisory Board

From HSMAI's Revenue Management Advisory Board -- Customers want the best price they can get in any economy, but that statement holds particularly true in a downturn. Looking at many industries today, one may be left to believe that offering a low price is required to be successful. That works well if you can stand on the fact that you are the lowest cost provider and that you are willing to go to the lengths necessary to remain in that position. Selling on cost is an uncomplicated form of marketing. It doesn't require much thought or effort and it's quick to market, but it's not typically sustainable, nor do most of us strive to be the low-cost leader. Anyone can lower their price. We've probably all done it in one form or another in order to win business or gain market share, however it simply doesn't work well as a long term strategy.

Time and time again we have been shown the dangers and affects of cutting our prices. When you slash your prices, customers may perceive it as your admission that your prices were too high all along and that you've been gouging them. In good times, your customers may know that lower prices are possible. They may delay their buying decision or put you through rounds of negotiation to see just how low your prices can go.

Unfenced discounts may also give your customer the impression that your product is inferior. Long term discounting leads to lower margins, revenue and profit. So what can you do to keep or gain customers without discounting?

Basing your success on price alone ignores the fact that people don't make buying decisions based on price alone. Decisions are also based on value. Value is the one thing that separates one product from another and never before has the consumer looked more to that value in making their buying decision. This means that you must have some benefit other than price in order for the consumer to feel they have received any benefit from your product.

Learning how to establish and communicate your value proposition -- your differentiator -- is key to earning and keeping your customers. If your customers can't perceive the value that you provide then it probably doesn't exist.

If you are competing on price alone, you will likely never achieve maximum profitability. You will be forced to ride the constant rate roller coaster, reacting to the market and actions of your competitors. If price is one of your advantages, that's great; but you need something that will sustain that advantage and secure your relationships for the future. If it has been awhile since you sat down with other key stakeholders, especially those in sales and marketing, and discussed and solidified these success attributes, now is the time.

We need to look for ways to create meaningful value and significant impact for our customers. If you can build value on the front-end, price becomes less of an issue on the back-end.

Selling based on value requires that you do everything possible to communicate your value proposition to potential customers before price becomes an issue. Selling on value requires confidence that you can deliver on your promise. If you're unsure about the validity of your claims and the payback that the customer will be able to achieve, selling on value will be very difficult. In turn, establishing value isn't any easy task. It takes time to develop, sell and bring awareness to your value proposition. Items that are physical such as location or a historic building are a bit easier, however using a value proposition such as service or the beds in your rooms is much more difficult to achieve.

Begin by evaluating the value proposition of your competitors and determine what it is that you can do or offer that your competitors cannot. What sets you apart? If you can't find a unique value, then what can you do or offer that, though your competitors can do it as well, your offer is superior to theirs. While not an easy process, once established, your value proposition is something that you can play off of for years to come.

Your attributes must be tangible and true points of differentiation. Once you agree on a value proposition, make sure the hotel staff, marketing pieces, website, etc., sell the message at every possible touch point with your current and potential customers. Use testimonials to back up your offering and know what your customers are saying about you on social media sites such as Trip Advisor, Twitter and Facebook. These social media sites serve as an excellent platform in which to sell your value proposition with immediacy and a targeted approach. Tweets or posts on Facebook should be aimed at selling your value proposition. If you are a hip boutique hotel focused on young business travelers, your posts and offers should be directed at selling that uniqueness.

Like any effort, your value proposition must be analyzed. Do your customers perceive the value that you are offering? Do they put as much value in it as you do? Does it influence their buying decision and what does it take to keep them coming back for more? You must look through the eyes of your customers to ensure you are delivering the value that they bought into and that they can achieve and measure it. You must also create a means of continuous feedback to ensure you are closing the value gap.

When you discover what sets you apart and you sell it, you can put more focus on competing on your uniqueness rather than competing on price. When you have a value proposition that you can sell and that your customers recognize, that value can help to sustain you through almost any economic condition. The best way to avoid being just another hotel is to sell value to your customers.

About the Author

Burl Hutchison is the Manager of Revenue Optimization for Sabre Hospitality Solutions. In this role he is responsible for consulting with customers in the field of revenue optimization and how it interfaces with CRS, PMS, CRM and RMS systems. In addition, he provides guidance on best practices within the field of revenue optimization and manages a full service revenue-for-hire program. Burl previously held positions as Sr. Revenue Consultant for Carlson Hotels Worldwide, Revenue Manager for Summit Hotels and Resorts, Golden Tulip Hotels and Utell International. He has also held positions as Director of Sales for both full and limited service properties. Burl earned a degree in Hospitality and Human Resources Management from Bellevue University. He is also a member of the HSMAI Revenue Management Advisory Board.

About the HSMAI Revenue Management Advisory Board
The Revenue Management Advisory Board is responsible for providing leadership for HSMAI's Revenue Management Special Interest Group (SIG). The SIG is advancing the revenue management discipline by being its leading source for education, best practices exchange, thought leadership and networking for revenue management professionals, other sales and marketing professionals, and senior management in the hospitality industry. www.revmanagement.org

Members include:

• Chair: Warren Jahn, Ph.D., Revenue Management Training Consultant, InterContinental Hotels Group
• Vice-Chair: Scott Roby, Vice President, Revenue Management, Tarsadia Hotels
• Immediate Past Chair: Timothy Coleman, CRME, President, The Coleman Company
• Christopher Crenshaw, CRME, Director of Marketing Intelligence, Loews Hotels
• Jack Easdale, Corporate Director of Revenue Management, Gaylord Hotels
• Jon Eliot, CHA, CRME, Director, Revenue Optimization, Carlson Hotels Worldwide
• Bernard Ellis, CRME, Managing Director-Americas, IDeaS - A SAS COMPANY
• Tammy Farley, Principal, The Rainmaker Group
• Fred Heintz, CRME, Director of Group Strategy, Marriott & Renaissance Hotels of New York City
• Jay Hubbs, Director-Hotel Supplier Relations, Hotwire
• Burl Hutchison, CRME, Manager of Revenue Optimization, Sabre Hospitality Solutions
• Dan Kowalewski, Vice President Revenue Management Services, Wyndham Hotel Group
• Stowe Shoemaker, Associate Dean of Research, University of Houston/Conrad N. Hilton College
• Miguel Solis, CHA, CRME, VP Sr. Director Revenue Management, Hospitality Resource Group
• Trevor Stuart-Hill, CRME, President, Revenue Matters
• Paul Wood, CRME, CHBA, Senior Account Director, Sceptre Hospitality

Want to Learn More?
This topic will be addressed as part of the 10-part Revenue Management Webinar Series produced by the HSMAI University, HotelNewsNow, and STR. Begun February 23, 2010, and going through December, each month a webinar will cover various aspects of cutting edge revenue management in today's economy in conjunction with articles written by members of the HSMAI Revenue Management Advisory Board. If you're not able to attend a live program or the date has passed, archives are available. Also, these and other timely revenue management and Internet marketing topics will be the focus of the HSMAI Revenue Management & Internet Marketing Strategy Conference, co-located with HITEC, June 21 in Orlando, FL.