Effect of hotels’ price discounts on performance recovery after a crisis

Abstract

Hotels often must manage unexpected external shocks, such as crises, which can threaten the sustained profitability and viability of the firms. While the literature suggests that hotels’ crisis management capabilities can be improved by evaluating the efficacy of crisis-coping strategies used for a past crisis, a limited number of empirical studies have focused on such assessment. Anchored from crisis management perspectives, this study examines the effect of a hotels’ common crisis-coping strategy—room rate discounts—on alleviating cumulative performance loss and on accelerating the speed of performance recovery. By applying a fixed effects spatial panel to the property-level performance data in a U.S. lodging market, we find 1) that discounting room rates may alleviate cumulative occupancy loss precipitated by a crisis but do not reduce cumulative RevPAR loss, and 2) that discounting may delay both occupancy and RevPAR recovery times. Managerial implications and suggestions for future studies are discussed with the study’s findings.