How Should I Treat Discount Codes In My Revenue Strategy?

Discount codes allow for "price discrimination," which is the ability to charge different prices to different customers for the same service. While your public-facing rate on Airbnb or your website might be the "standard" market rate, a promo code allows you to capture price-sensitive travelers who wouldn't book otherwise—without lowering the price for everyone else.

This strategic layering ensures that your "Average Daily Rate" (ADR) remains high for the general public, while you still fill rooms using targeted discounts. In a data-informed strategy, these codes are monitored for their "conversion lift," helping you understand exactly how much of a discount is required to move the needle for different traveler segments.

The most powerful use of a discount code is as a "switching incentive." When a guest finds your property on an OTA, they are often looking for the best price. By offering a code like "BOOKDIRECT" that provides a 10% discount on your own website, you are essentially sharing the commission savings with the guest.

This strategy turns the OTA into a lead-generation tool. You pay the commission once to "find" the guest, but you use the promo code strategy to ensure their future stays (and the stays of their friends) happen on your own platform. This shift significantly improves your net margins over the long term.

Behavioral economics tells us that scarcity and urgency drive action. A "Flash Sale" code that is only valid for 48 hours can trigger bookings for a slow shoulder season that standard pricing changes might miss. This is particularly effective for your email database of past guests.

Instead of lowering your base rate for the next three months—which might lead to "wait-and-see" behavior—an urgent promo code forces the guest to make a decision now. This helps you "build the base" of your calendar early, giving you the confidence to hold higher rates as the check-in dates approach.

Orphan nights are the 1-2 night gaps between longer bookings that are notoriously difficult to fill. Lowering your overall nightly rate for these dates can be risky, as it might attract the wrong type of guest or look desperate to the algorithm.

A better approach is to create a "Gap Filler" promo code. You can send this code to local businesses, past guests, or specific social media groups. This allows you to fill the gap at a lower price point while keeping your "public" rate high, preserving the perceived value of your property for those looking at longer, more profitable stays.

Influencer marketing in the STR space is often hit-or-miss. The best way to measure its effectiveness is through unique promo codes. By giving an influencer a code like "INFLUENCER15," you can track exactly how many bookings—and how much total revenue—that specific partnership generated.

This data allows you to move away from "vanity metrics" like likes or followers and focus on actual "Revenue Per Available Room" (RevPAR). If an influencer’s code isn't being used, you know that their audience isn't your target demographic, and you can reallocate those marketing "dollars" elsewhere.

One of the biggest risks in a discount strategy is "stacking," where a guest uses a promo code on top of an already discounted last-minute rate. To prevent this, your revenue management software or booking engine must have clear rules that prevent multiple discounts from being applied to a single reservation.

Additionally, every code should have "Blackout Dates." You do not want a guest using a "Loyalty10" code during the Super Bowl or a major holiday when demand is already at its peak. Professionals use Wheelhouse to coordinate their base pricing with these promo layers, ensuring that even with a discount, the stay remains highly profitable.

Mid-week travel is often driven by business travelers or people visiting local institutions like hospitals or universities. These travelers are often looking for consistency and a fair price. By creating a permanent promo code for a local company (e.g., "LOCALBIZ"), you can capture this "steady" demand.

This is a "set-it-and-forget-it" strategy that helps stabilize your mid-week occupancy. Because these codes aren't advertised to the general public, they don't impact your weekend "leisure" rates, allowing you to run two distinct pricing strategies simultaneously.

While it depends on your market, the "sweet spot" for a promo code is typically between 10% and 15%. A 5% discount is often too small to change a guest's behavior, while a discount of 25% or more can signal that the property is "cheap" or that the original price was inflated.

Data suggests that a 10% discount, when framed correctly as a "Loyalty Reward" or a "Direct Booking Bonus," feels significant to the traveler but still keeps the booking's margin well above what you would net from an OTA booking. Always calculate your "Net RevPAR" (Revenue per available room after all commissions and discounts) to ensure the code is actually helping your bottom line.

Rate cannibalization occurs when a guest who would have paid full price uses a discount code instead. To minimize this, avoid placing promo codes in prominent places on your website, like a header bar. Instead, treat them as "earned" rewards.

Send codes to people who have signed up for your newsletter, or include a "referral code" in your digital guest guidebook. By keeping the codes "hidden" from the average browser, you ensure that you are only discounting for people who are actually part of your "inner circle" or who need the extra nudge to hit the "book" button.