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Madigan Pratt published a story on his blog entitled “Pros and Cons of Deal Sites” that begs the question “what’s the bottom line – what’s the deal?”

Pros – Deal sites do create awareness but what is the value of a “deal customer” and is this the type of customer that a hotel can convert into a “loyal customer” or is he/she just a deal shopper?

Is a deal a “deal” for the hotel when you calculate that deal sites return $.25 to $.50 cents on a dollar on a hotel’s BAR?  Don’t sign me up!

Cons – At the end of the day when you sort through your conversions is a deal shopper a long-term customer or one who will be off shopping the next deal?  Should your hotel be more focused on providing value and not deal distribution?

I conducted a search for “deals” in my city on Groupon, Kayak, and Travelzoo and the following are my deal findings.

For the return on Groupon, I got deals for Cabo San Lucas, Las Vegas, Ontario, Canada, Toronto, Canada, Alajuela, Costa Rica, Cabarete, Dominican Republic and so on. Not what I expected and not even close to what I wanted.  In short there are no hotel deals for in my immediate area.

Kayak had four deals…two were car rentals and two were hotel deals.  One hotel deal featured an ADR that ranged from $159 to $289.  I don’t consider that to be a deal.  The other featured a two-month booking window where prices ranged from $103 to $206.  Same holds true for this as referenced above.

I conducted a similar search on Travelzoo and the return featured 14 deals of which one out of 14 were hotel deals.

Five quick thoughts for hotels;

  1. The cost of doing business with deal sites like Groupon can severely damage a brand’s image, especially if your hotel is in the Upscale Luxury category. By discounting the price your hotel becomes further susceptible to a reduction in perceived value by your customers.
  2. As Madigan pointed out in his blog, are deal shoppers here today and gone tomorrow or is there any real opportunity to convert them into a loyal customer?
  3. Most hotels that offer deals are lucky if they break even. Remember, you’re only making about 25% of what you’d normally earn if your deal discounts the original rate by 50%.
  4. While daily deal sites can generate attention to your hotel, that intense spotlight only lasts for a few days. After that, you’ll may be dealing with deal-crazed customers who may want more than what they paid for.
  5. I often hear hoteliers complain that OTAs don’t share customer information.  Don’t think for one minute that deal sites will share their buyer’s contact information or email address with you anytime soon.

Your thoughts?

Tom Costello is the CEO, Partner & Co-Founder of Groups International, a company that provides marketing, consultative services, and technology solutions to the group and leisure travel markets.  Connect with him on Twitter, LinkedIn, and Facebook or contact him by email.