"It is not worthy to do it," exclaimed John, the Director of Food & Beverage at the YYZ Hotel, a luxury hotel at downtown Toronto.

"What do you mean?" asked May, the Director of Sales & Marketing of YYZ.

John, May, Tom, the YYZ's Financial Controller, and Sue, the YYZ's Resident Manager, were holding their weekly revenue management meeting. They were discussing a proposal from May that Le Fouquet's, which was the hotel's upscale dining room, participate in the City of Toronto's Summerlicious Foodie Event. "Essentially, explained May, the City of Toronto and the media partners would not charge participating restaurants or hotels for their ads. The participating businesses were simply required to offer a "lunch or dinner" at a promotional price.

According to May, the idea was a no-brainer and a real winner. The Summerlicious would bring new customers to the hotel. These customers would love the food and, on subsequent visits and without the promotion, would pay the full price. The customers would also tell all their friends. The "word of mouth" advertising would be invaluable for additional food and beverage sales as well as enhanced room sales to local residents for special events.

John was not convinced.

"What I mean is that it is unrealistic for you to assume that guests who use these promotions will come back and pay full price. These kinds of people only buy when they can get a deal. From my experience, they will tip the staff based on the reduced meal price too!" said John

"But the program is free," said Tom. "Free advertising is worth something all by itself."

"Not to me it isn't, replied John. "The only time we'll see these customers again is when there is another promotion."

"Well, the program also supports the City of Toronto as well as our Mayor, who is a good friend of the Chairperson of our Board of Directors," said May, "and that's important, too!"

"If you want to support the City, then give them money from your budget, don't take it from mine," replied John.

Question:

What suggestions would you give to YYZ Hotel? Provide support to your answers and make reasonable assumptions if necessary.