Is Black Friday Harmful To Hotels?

Team Hoo
22nd November 2021

Black Friday is fast approaching, meaning everyone is looking for the biggest and best deals around. It's a period where prices are slashed across every single industry, and many businesses report impressive sales figures. To give some context as to how important Black Friday is for certain industries, 30% of all retail sales occur between it and Christmas day. 

There are definitely some industries that benefit from it, but there are others that don't. Specifically, we're looking at the travel sector and hotel businesses. Hotel owners are expected to offer discounted rates on rooms to attract lots of customers. Indeed, some holiday-goers wait until Black Friday to book hotels, specifically to save money. In theory, you'd think this is a great thing as it can increase sales and boost your occupancy rates. 

So, where do the potential problems lie?

Eating into gross operating profit (GOP) margins

Primarily, the issue is that Black Friday sales can often eat into hotel profit margins. You discount your rooms so heavily to compete with everyone else that you might end up losing money. To make matters worse, the GOP in the hotel sector is on the decline. It was a mere 18.2% in 2020, with occupancy levels of 36.6%. Neither of these figures is great, yet it is believed that profit margins are going to get narrower and narrower. 

The simple fact is that it's becoming more and more expensive to operate a hotel. Therefore, hotel owners want to do everything they can to keep their profit margins as wide as possible. Seemingly being 'forced' to participate in Black Friday is hurting them, meaning lots of rooms are being sold - yes - but at vastly discounted rates. Whose to say those rooms wouldn't have sold at closer to their normal rates later in the year anyway?

Competing against larger chains

Following on from the above, we have to recognize that there are almost two types of hotels people can choose to book. On one hand, you have smaller hotels from independent owners. Many of you reading this will fall into this category. On the other hand, you have massive chains that are backed by billionaire owners. They possess more money and firepower than smaller hotels, meaning they can afford to enter the Black Friday sales and slash their prices. 

You can already see how harmful this can be to smaller hotels on the market. If the big chains are discounting, you almost feel compelled to do the same - or miss out on sales. Thus, we end up with the problem discussed above; smaller profit margins, meaning you make less money. 

What's the solution?

Black Friday travel discounts can be detrimental to hotels, so what is the solution? Many of you reading this will look at it and feel as though you have no choice. It's either a) you offer mass discounts and secure occupants, but at a lower rate so you make less money. Or b) you don't discount your rates and everyone books into your rival hotels, leaving you with lots of unoccupied rooms and reducing your profit margins even more. 

However, what if the solution doesn't lie in mass discounts, but in providing a personalised approach to hotel rates. This is an approach that's gaining popularity in the sector, and it revolves around providing you and your guests with more control. 

How does it work?

Well, it can work in a couple of ways, one of which is a simple off-site booking system. You can keep listing your hotels on sites like Booking.com or wherever, as well as providing rates on your actual website. However, you can also join sites like hoo, which let you list your hotel for consumers to find. Sounds like every other hotel listing site, right? Well, the catch is that guests will submit offers for your hotel rooms, rather than paying the full price. 

Let's say you have a room that's advertised for £90 per night. A consumer can find your room on one of these websites, contacting you with an offer for, say, £70 a night. You're then able to accept or counter their offer until you reach an agreement. It could mean you sell the room for £80 a night, instead of £90. The reason this is effective is that you can fill up unoccupied rooms without visibly discounting them. It lets you accept a bit less for a room - making the customer feel like they're getting a bargain - without needing to slash the price as dramatically as you would on Black Friday. 

Another idea is to use loyalty discounts for recurring customers. When people book rooms with you consistently, they can unlock perks that mean they get slightly discounted prices. Again, it means that you can still sell some rooms for their full price, but a select few can unlock secret discounts. This also encourages more people to stay with you regularly, so they can get better room rates. 

In both examples, you're avoiding a mass discount across your hotel. This can help you keep your profit margins as wide as can be, while also encouraging more people to book rooms in your hotel. 

Overall, Black Friday can be harmful to a lot of hotels, particularly smaller and more independent ones. Bigger chains rarely see any damage because they can afford to set discounted rates across the board. While Black Friday and Cyber Monday can help you see an increase in bookings, you have to measure up the costs. Are you going to lose money or decrease your profit margins by giving into Black Friday? If the answer is yes, it's maybe time to skip this tradition this year. 

Instead, hotels should focus on a more personalised approach for customers. Look at discounts on a customer by customer basis, rather than giving them to everyone. You'll find that this can actually improve your profits, boost occupancy rates and inspire loyalty. As the travel sector continues to heal following the last two years, you need to do everything you can to prevent your business from further decreasing its profit margins. 


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