When is it optimal to use discounting vs restricting availability?

Discounting involves lowering the rental price to attract more bookings, typically used to increase occupancy during low demand periods. This tactic appeals to price-sensitive guests and can create a sense of urgency when marketed as a limited-time offer. Conversely, restricting availability means limiting the number of nights or dates guests can book—for example, by imposing minimum stay requirements or closing off certain nights. The goal is to control how rooms are allocated to optimize revenue, often by preventing too-short stays that reduce profitability or by segmenting bookings by length of stay or booking window.

Discounting is most optimal when demand is lower than desired and occupancy needs a boost. For short-term rental managers, this means using price reductions to attract guests who might otherwise forego booking or choose alternative accommodations. Behavioral research shows many guests respond positively to discounted prices, especially when they perceive a genuine deal. It's particularly useful in midweek periods or shoulder seasons when demand softens. However, overusing discounts can erode perceived value and train guests to wait for lower prices, so timing and frequency are important.

Restricting availability is most optimal during high-demand periods, such as holidays or local events. By limiting the nights guests can book—say, requiring a minimum stay of three nights—managers can increase revenue per booking and reduce costly turnover. Restricting availability is also valuable when managing booking lead times; for example, blocking last-minute bookings to ensure premium rates for early planners. Strategic closures of certain dates can help segment demand and maintain pricing power, preventing discounting pressure during peak windows.

Guest behavior, including booking lead time and sensitivity to price, plays a crucial role in selecting between discounting and restrictions. For instance, last-minute bookers often have lower price sensitivity but shorter stays, so restrictions can encourage longer bookings while capturing higher ADR. On the other hand, price-sensitive guests looking for deals might be attracted by discounts but also require flexible booking options. Analyzing historical booking data helps revenue managers identify these behavioral patterns and tailor strategies accordingly to maximize revenue and occupancy.

Yes, combining discounting and restricting availability can be a powerful approach. For example, a manager might restrict availability on peak nights to minimum stays but offer discounts on adjacent low-demand nights to encourage longer stays or fill gaps. This complementary strategy balances occupancy and ADR, adapting to varying demand conditions. However, it requires careful monitoring to avoid cannibalizing revenue or confusing guests with complex rules. Using data analytics tools to test different scenarios helps find the optimal balance.

The main risk of discounting is price erosion—if discounts are too frequent or deep, guests may perceive the rental as lower value, making it harder to return to full price later. This "price conditioning" can reduce long-term profitability. Meanwhile, restricting availability risks turning away potential guests who require more flexible options or shorter stays, potentially lowering occupancy. Overly strict rules can also frustrate guests and reduce booking satisfaction. Both tactics need to be balanced carefully with the overall revenue strategy and guest experience in mind.

Modern revenue management systems leverage historical data, market trends, and guest behavior analytics to recommend when to discount and when to restrict availability. Machine learning models can predict demand elasticity and segment guests to tailor pricing and restrictions dynamically. This data-informed approach reduces guesswork and helps managers maximize both occupancy and revenue. Video courses and revenue strategy deep dives emphasize the importance of integrating these tools with human judgment for best results.

Start by analyzing your property's booking patterns, identifying low demand periods suitable for discounts and peak windows for restrictions. Test small, time-limited discounts to evaluate response without devaluing the brand. Use minimum stay restrictions during high-demand periods to increase booking value. Continuously monitor guest feedback and booking data to adjust strategies. Consider leveraging courses like Active RM Management and YouTube playlists on Revenue Management for foundational knowledge and advanced tactics.

Local market dynamics, including competition, seasonality, and guest demographics, strongly impact which strategy is optimal. In highly competitive markets with many alternatives, discounting might be necessary to win bookings. In markets with consistent demand spikes, restricting availability can protect higher rates. Additionally, understanding if your guest base prioritizes flexibility or price helps tailor approaches. Continuous market scanning ensures your strategy remains aligned with evolving conditions and guest expectations.