Partnering with Daily Deal Websites

By Brandon Dennis VP of Marketing, | August 16, 2015

Current data is hard to come by. In the first 6 months of 2014, consumers spent $1.6 billion with Groupon alone, according to The Motley Fool. This places the industry right on track to realizing BIA/Kelsey's predictions. Clearly, consumers are still using daily deals. The question is: How profitable are daily deals for hotel businesses?

How Profitable are Daily Deals for Hotels?

In June of 2012, Rice University published the results of a 1-year study tracking activity with daily deal websites. They found that between 54.9% and 61.5% of businesses make a profit. Profitability varies by industry, with health and beauty businesses coming out on top. Travel and tourism still did well, with 68% of participating businesses turning a profit using daily deals. At the bottom were restaurants and bars. Only 44.2% of them reported success.

The Goal of Daily Deals

Many criticize daily deals for bringing properties an influx of low-quality business that cashes in on the daily deal, and then never visits the business again. This is particularly pronounced with restaurants, bars, and cafes. However, data is more promising for other businesses like hotels.

80% is the number to remember--it pops up everywhere. About 80% of business generated by daily deals is from new customers. Business owners have been concerned that only their repeat customers would use the daily deals, thereby eating away at revenue they would have made anyway. The data shows this not so. Additionally, 80% of customers who used a daily deal ended up spending more money at the business than the value of the deal. This can include hospitality upgrades, additional night stays, restaurant purchases, and more.

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The hotel industry has undertaken a long-term effort to build more responsible and socially conscious businesses. What began with small efforts to reduce waste - such as paperless checkouts and refillable soap dispensers - has evolved into an international movement toward implementing sustainable development practices. In addition to establishing themselves as good corporate citizens, adopting eco-friendly practices is sound business for hotels. According to a recent report from Deloitte, 95% of business travelers believe the hotel industry should be undertaking “green” initiatives, and Millennials are twice as likely to support brands with strong management of environmental and social issues. Given these conclusions, hotels are continuing to innovate in the areas of environmental sustainability. For example, one leading hotel chain has designed special elevators that collect kinetic energy from the moving lift and in the process, they have reduced their energy consumption by 50%  over conventional elevators. Also, they installed an advanced air conditioning system which employs a magnetic mechanical system that makes them more energy efficient. Other hotels are installing Intelligent Building Systems which monitor and control temperatures in rooms, common areas and swimming pools, as well as ventilation and cold water systems. Some hotels are installing Electric Vehicle charging stations, planting rooftop gardens, implementing stringent recycling programs, and insisting on the use of biodegradable materials. Another trend is the creation of Green Teams within a hotel's operation that are tasked to implement earth-friendly practices and manage budgets for green projects. Some hotels have even gone so far as to curtail or eliminate room service, believing that keeping the kitchen open 24/7 isn't terribly sustainable. The May issue of the Hotel Business Review will document what some hotels are doing to integrate sustainable practices into their operations and how they are benefiting from them.