Hoteliers have a love/hate relationship with deal sites but they’re not a new phenomenon.
Bucket Shops, their predecessors from the ‘80’s for example, were essentially high street travel agents offering heavily discounted, below-cost travel product: product that operators were unable to shift at neither published nor promotional prices .
So if you were travelling on holiday, you wanted a last minute discounted break and you weren’t pushed about where you would end up, you would go to a bucket shop. Customers were ‘happy’ as they got a deal and hotels were ‘happy-ish’ in that they would shift otherwise ‘un-shift-able’ availability.
Distribution is now infinitely more complex for hotels as it is transparent for consumers. With multiple channels to manage, yield management has taken on almost mathematical proportions while customers can shop in a ‘virtual high street’ – comprising multiple sites for multiple hotels – instantaneously.
Deal sites however are that bit stickier than say your average OTA as the latest ‘below-cost’ hotel deals available are delivered straight to a subscriber’s desk-top and mobile with a limited window to book a designated allocation of product: the deal site has done both the research and the negotiation for the consumer hence part of the reason for their traction in the hotel market-place.
The challenge for hoteliers has been to find a place for deal sites – temporary or otherwise – within their distribution matrix. As if it wasn’t difficult enough managing OTAs and GDS alongside your own hotel site, deal sites have sizeable databases and pulling power with the ability to accelerate revenue and brand reach for what are typically independent hotels. So they’re difficult to ignore.
And all this with little or no marketing cost other than an above average commission … Of course it’s at this point the relationship turns from love to hate.
Think about it. Not only is the hotel paying a higher than average commission, but the package price is usually at between a 40 – 50% discount on the best available rate for the period the deal is valid for.
So not only does your average room rate and RevPar take a major hit, your rate parity goes out the window. Which won’t endear you to your OTA partners and furthermore undermines your own site’s likely ‘best rate guarantee’ (BRG) claim.
And to add insult to injury, when a deal site launches, not only is your reservations phone line jammed by callers for between 24 – 72 hours, possibly displacing ‘normal’ business, the online impact can be nothing short of disastrous.
Why? Well when an offer goes live, it’s emailed to hundreds of thousands of potential buyers. All at once. The likelihood is that recipients if interested do a certain amount of research and compare the offer to the hotel’s own site before booking which can cause massive peaks and skews in traffic. It’s also the case that potential buyers click on paid-for listings since these are typically the first to hand, further throwing search stats out and wasting precious PPC budget.
It may also be that the hotel inflated its BAR so as to provide a higher base price to the deal site in an effort to improve the nett contribution. This however puts the hotel out of kilter with its comp set and also potentially turns off non-deal site demand simply because the BRG is no longer in place and the hotel is now simply more expensive.
Certainly there may be the potential for additional on-site spend and also repeat business. However based on experience it’s best to take this with a large pinch of salt as this type of demand tends to be budget-driven, transient and non-brand loyal.
So if you want to avoid undermining your direct revenues and escalating your marketing cost, approach the deal site channel with a health warning: at the very least, suspend your PPC, offer the same deal to your own database before it’s released to the general public, provide a dedicated number for phone reservations and monitor your allocations closely.
In summary, use only as prescribed.