Beware the down side if doing daily deals

Deal of the day offers have exploded over the past couple of years as an ever more bargain-hungry consumer seeks out all the value they can squeeze from suppliers.

And for hospitality, they can be a great way to expose your brand to a wider audience in the hope that new customers will use your services more regularly, preferably at full price.

Websites such as Groupon can offer the kind of exposure you can only dream of. But it comes at a price. And from anecdotal evidence, that is usually a significant discount which is dented further by the website's terms, which can be as much as 50% of the offer.

At last week's Marketing in Hospitality conference, Tourism Business managing director Martin Evans told the audience that daily deal sites can entice new guests and increase your advertising coverage. But he warned that there are pitfalls, including the erosion of rates and cheapening your business. This is borne out by comment on our forum, Table Talk, where operators complain of having to honour vouchers at a loss, being forced to turn away customers prepared to pay full price and striking deals that weren't as clear as they first thought.

Groupon is now under investigation by the Office of Fair Trading and has been censured by the Advertising Standards Authority for breaking advertising regulations 48 times in 11 months. That's not to say it has done anything wrong in its dealings with hospitality and it's too early to say if it's broken the law at all. But regardless of the deal's terms, operators would be wise to recognise that volume doesn't necessarily deliver results.

The old management adage that turnover is vanity and profit is sanity applies just as well to new media as it does to old. There is no doubt that daily deals can attract significant levels of custom, but any operator must go into any arrangement with their eyes open or they're unlikely to see any return.

By James Stagg

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If you have something to say on this story or anything else join the debate at Table Talk - Caterer's new networking forum. Go to www.catererandhotelkeeper.com/tabletalk

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