Promo Codes are Costing Hotels Millions!

By Michael Toedt - Managing Director at Dailypoint Gmbh

Visit us at HITEC booth 2246
18 November 2015

I'm sure you know that little box for rate or promo codes on a hotel's booking engine. Chains and individual hotels alike use these codes to promote special services to their guests. Corporate clients are given access to special rate codes and thus better prices. Guests get discounts as part of special promotions. But is this still an intelligent and modern marketing approach in the Big Data era?

In an article on this possibility to book a hotel has been heavily criticized as outdated and too costly. It is indeed costing hotels millions. Let me explain why this is the case: During one of my speeches we also touched the topic of "smart couponing" and discussed rate codes. Quite a number of participants said that before booking a hotel they always searched the web for promo codes and that most of the time they were successful. This might sound strange for the older generation, but Internet-savvy clients grasp at these opportunities.

Just go to Google and enter "promotion codes starwood hotels". I received 164,000 search results with discounts of up to 40%!

This experiment should show every conscious hotelier that promo codes are outdated and should be banned from hotel websites. But what is the alternative?

This brings us back to "smart couponing". What it means is to issue customized discount codes with a specific value and an expiry date. When the code is used the booking engine verifies its validity, value and any applicable restrictions.

To do this intelligently, a system that covers the entire marketing cycle and collects data from all relevant systems such as the PMS, the e-mail management system, the website, etc., is required. A centralized database knows exactly what each individual guest is doing. This is the basis for smart couponing!

It also gives you the possibility to send vouchers to a selected target group, e.g. newsletter subscribers, who have not booked within a certain period of time from subscription. It also helps you to add value to a birthday message, or to encourage a guest to book, if he had fallen out of his usual booking rhythm. Further, it enables retargeting, i.e. when a guest has come back to the site after some time. On average, 30% of the customers take more than one day to actually make a hotel booking; in case of last minute trips the booking phase can even take up to six days. This gives a hotel quite some time to turn a prospective customer into a booker. The prerequisite is, however, a marketing-oriented IT strategy. And this is the real crux of the matter, as less than one per cent of the hotels have the technical possibilities, which have long become standard for the OTAs. Thus, hotels leave the field to companies like Airbnb and with hardly any resistance.

But back to "smart couponing": The great thing is that in a Big Data environment everything is measurable. For one of our clients, for example, we could generate more than 60,000 bookings. This is the fun part of intelligent data management!

So rise to the challenge and embrace the change! Stephen Hawking once said, "Intelligence is the ability to adapt to change". So, don't wait any longer and use the opportunity!

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Munich, 80333
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Michael Toedt

Operating at the intersection of business and technology, Dr. Michael Toedt helps hoteliers with the software dailypoint™ to use the tremendous increase of data in order to become data-centric. Dr. Michael Toedt has over 25 years of experience in operations, technology and marketing. He is the author of several books – among others the German version “Big Data – Herausforderung und Chance für die Hotellerie (ISBN: 978-3-8751-5305-7) and “Data Revolution – How Big Data Will Change the Way of Doing Business” (ISBN:978-3–7375-1688-4) and his articles are published by journals on a regular basis. Dr. Toedt holds a doctoral degree in management science. He is lecturer at several universities and assistant lecturer at the University of Applied Sciences of Munich for the subject “Customer Relationship Management in Tourism”. Apart from this he speaks at various hospitality events and fairs such as ITB, HITEC, Internorga, Austrian Hotel Society ÖHV or Cornell Hotel Society.

Michael Toedt

Managing Partner, CEO