Solutions by Industry

Hotel Promotions: A Case Study

A global hotel company struggled to determine the incremental revenue and subsequent ROI of a national discount promotion.

  • Using APT analytical software, the company was able to accurately quantify the incremental revenue generated by the promotion and its resulting ROI.
  • The marketing group used APT’s analytic software to identify and target the markets that would experience the highest revenue gains, thereby increasing the value of subsequent promotions by over $2MM.
  • The hotel company now works with APT to project increased revenue from a variety of promotions and to target specific promotions to the highest yield markets.
The Company:

An international hotel franchisor and operator of thousands of hotels across multiple brands

The Challenge:

A global hotel company launched a limited time promotion offering a 10% discount to guests staying two or more nights. The company sought to better understand the effectiveness of this promotion by measuring the overall incremental profitability in light of three types of guest stays that would qualify for the reward:

  • Incremental Stays:  Guests who would not have otherwise booked a stay during this period, but were called to action by the promotion. These guests offered the highest incremental gains.
  • Upsells:  Guests who stayed an extra night at the hotel in order to qualify for the promotion. These guests offered moderate incremental gains.
  • Accidental Qualifiers:  Guests who did not reserve or extend their stay because of the promotion, but benefited from the discount anyway. These guests represented a loss for the company because they received a discount that was not tied to any incremental profit.
The Solution:

Working with APT’s Test & Learn™ software, the marketing group was able to measure the promotion’s lift in revenue by using a carefully selected set of control hotels to account for many complex external factors and thus isolate the bottom-line returns generated by the promotion. By comparing each hotel that offered the promotion to a group of comparable hotels that did not, APT was able to accurately quantify the incremental stays – and thus revenue – resulting from the promotion. Equipped with a reliable analysis of the promotion’s value, management was able to determine that the revenue generated by the promotion did, in fact, exceed its costs. 

As expected, the promotion drove an increase in revenue from 2+ night stays, indicating that stays from incremental stays and upsells off-set the losses to accidental qualifiers. The increase in 2+ night stays was partially offset by a decline in 1 night stays as some guests booked longer stays than they would have otherwise.

In addition, management identified the attributes of those hotels that had the largest revenue lift from upsells and incremental stays, and, consequently, the highest returns from the promotion.

The Results:

Management changed the Two Plus Night promotion by offering it only at hotels that would, in fact, achieve the target lift and ROI from the promotion - a move that ultimately increased the program’s NPV by $2M upon rollout.