Should independent upmarket hotels work with daily deals platforms? An empirical case study from Switzerland

Abstract

Daily deals platforms (DDPs) are perceived as an attractive means for hospitality merchants to acquire and retain new customers and generate ancillary revenues. However, these potential benefits come at the cost of steeply discounted prices and high commissions. How could hospitality merchants decide if working with DDPs is beneficial to their firm’s financial performance? This longitudinal study aims to investigate the impact of DDP on merchants’ performance by comparing DDP and non-DDP customers on key performance indicators, analyzing the benefit of product bundling, and potential cannibalization effects. The results show that DDP guests contributed lower revenues, had shorter lengths of stays, longer lead times, lower retention, and less positive reviews than their non-DDP counterparts. In deciding to work with DDPs, hoteliers must consider the opportunity cost of their choice because the expected vital benefits are more likely to be attained by non-DDP customers. Unexpectedly, DDP and non-DDP guests do not switch channels, and cannibalization is negligible. At the macro level, channel migration indicates that DDPs have contributed more bookings over the study period and become a more important channel in the channel mix.