Expedia, Groupon And The Rush To Commoditize Your Hotel

On June 6 I published a blog post (located here) regarding the news that Groupon and Expedia have joined forces to form “Groupon Getaways with Expedia.” Now that the dust has settled, and industry analysts have had a chance to digest the information, interesting articles are appearing discussing both the pros and cons of this new service.

One such article, by Madigan Pratt (article sourced at the bottom of this post), is a fascinating look at the negatives which may reveal themselves should your hotel choose utilize this new method of distribution. The crux of Madigan’s analysis is that this new channel will turn your hotel rooms from a product which is differentiated/unique to product which resembles a commodity. Expedia/Groupon buyers are driven by price rather than the differences and supplementary services which make your business unique; as a result, hotels will be forced to compete strictly on price. 

        Madigan presents four questions which management and your sales & marketing team should critically evaluate prior to making the decision to utilize this new distribution channel. The questions Mr. Pratt proposes are:

• “Who are these Groupon buyers? What chance is there of making them loyal repeat guests – those who would visit again and pay a more reasonable rate? Or are they simply bargain hunters who will only buy at a steep discount?” 
• “How does participation in Expedia/Groupon affect your brand image? With 50 million subscribers they are bound to reach past guests and even repeat VIP guests. What will they feel about your property when they see deeper discounts being offered to strangers than they perhaps have received? Will it erode my brand?”
• “How does participating in Expedia/Groupon affect the relationship you have with other travel suppliers, like travel agents? If they are actively selling your hotel, how happy will they be when one of their clients complains they can get a room for less than they can?"
• “What happens when one of your loyal repeat guests sits by the pool next to an Expedia/Groupon buyer and they start talking about what a great value they received? Will your loyal repeat guests be pleased at how your hotel has rewarded them for their loyalty?”

These questions do a great job of presenting the negative side of a relationship with this new distribution channel. Sure, the channel will allow your property to increase your RevPar, at least in the short run, but how will this short term gain affect your business in one, two and five years?

Please check out Madigan Pratt’s full article by clicking here. He does a great job of summarizing the channel and goes into more depth than I can in a blog post.