Deal or no deal

IT seemed like a perfect liaison at first. New hotels need the publicity and large hotel chains have empty rooms to fill in low season. Groupon-style collective buying websites have a wide-ranging online reach. So the two buddy up to dangle discounts on hotel room stays to travel-loving Singaporeans. But like with any new marriage, the strains are starting to show. Travellers have complained that the deals - typically transacted in the form of vouchers - often entail hidden additional costs not mentioned by the websites. There have also emerged grouses about hotels selling more vouchers than their capacity can handle, resulting in would-be travellers unable to book a stay despite having bought vouchers.

Absent, too, from such websites are luxury and boutique hotel offerings for the more upmarket globetrotter. It is this segment that has caught the attention of ImpulseFlyer, a week-old new entrant to the online travel deals business. The Singapore company positions itself as a members-only website that will offer discounts on luxury and boutique hotels in the Asia-Pacific region exclusively for the affluent traveller (see sidebar).

High-end hotels have so far shied away from the contentious trend as they are fearful of sullying their image of prestige and exclusivity by being associated with the mass market-targeted group buying sites, notes ImpulseFlyer's founder Steven Gong.

'Existing sites don't work for luxury and boutique hotels, nor do they cater to the affluent in Asia-Pacific, who values convenience over price,' says Mr Gong.

Agreeing, Federico Asaro adds: 'Mass market websites target deal seekers without any loyalty. They are a bit similar to budget airlines, they open up new market possibilities and are good for a certain segment of individuals who are only looking for cheap deals and who could not travel in the past because of costs, but there is nothing advantageous for us in the long run.'

The managing director and owner of Malaysian resort and restaurant chain, the Samadhi Group, which will be opening its first Singapore boutique hotel in Labrador Park next June, adds: 'Any short term gains we get from them may in fact have long term negative effects for our brand.'

It is afterall, stringent brand management that sets apart a luxury brand. 'As such websites operate based on price alone, brand dilution will happen as the perceived value of a product or service is tied to the price,' adds Angie Ho, vice-president of online marketing for the Pan Pacific Hotel Group. 'In today's competitive landscape, it has become more crucial than ever for hotels to have strong brands that resonate with customers.'

Already, Ms Ho notes, customers are growing increasingly particular over consistencies in hotel branding and hotels' ability to deliver on their promise. 'Do offerings on a deals site address these problems? No, in fact they may actually perpetuate them,' she adds.

Hannah Gold, managing director of public relations agency Grebstad Hicks Communications, which works with upscale hotel and resorts chains globally, feels that until the relatively new phenomenon of group buying sites have matured 'and tangible results can be seen as to which demographic is looking for online deals and which isn't, marketers are reluctant to jeopardise their brand's existing profile.'

Sometimes, there may not even be any results to justify the risks. Luxury resort Paresa Phuket tested the waters with Groupon-style sites during its low season earlier this year by offering a 50 per cent discount on its room and services on New Zealand group buying site Slicedwiki,only to find that the discount barely boosted sales.

The resort's general manager Scot Toon believes this is because the lowest price that the resort could offer was still beyond the average budget of the mass market, a view reflected by many other high-end hotels.

A limited time deal, while preserving exclusivity, is not enough time to leave a lasting impression on website followers, adds Mae Noor, marketing manager for the Unlisted Collection hotel chain, which includes the New Majestic and 1929 hotels in Singapore. They partnered high-end private sales site Reebonz in March this year to help generate for publicity for their newest venture, the Wanderlust hotel.

But one hotel that has bucked the trend is the five-star Royal Plaza on Scotts. The five-star hotel got more than $100,000 in revenue and an additional four million on their website after tying up with Groupon for two separate deals in March and April. 'We have ensured that we have enough inventory so that new customers will not displace regular ones and that our existing business will not be cannibalised by the promotion as we are targeting new markets which have not been tapped,' says its marketing manager Samantha Wong.

Mass market label

Existing group buying sites meanwhile, feel that it is unfair to tar them with the mass market label. 'Marketers often use the word 'niche' and 'targeted communication' while losing focus of the fact that a mass market constitutes several niches,' says Deal.com.sg's co-founder Patrick Linden. Chief executive Karl Chong of Groupon Singapore, agrees, adding: 'With over one million opt-in subscribers, or 20 per cent of Singapore's population, a large portion of our subscribers are of high disposable income and well matched to luxury hotels.'

Groupon Singapore initially started with tie-ups with boutique hotels in Bali, Batam and Bintain, but has since roped in bigger players such as the five-star Park Royal on Scotts in Singapore and Hilton China. Currently, 20 per cent of Groupon Singapore's deals are travel-related, with hotel discounts ranging from 40 to 90 per cent.

'Discounts don't mean that they are cheap. Customers look for value rather than price and even the very rich look for deals too,' says Voucherwow's managing director Ozlem Savas Dayioglu. The key, she believes, is in working with hoteliers to tailor-make deals to their needs: 'If they are a small boutique hotel, we advise them to put a limit on the number of vouchers they sell, or hold sales in smaller batches over separate months so it's easier operation-wise.'

Almost all hotels interviewed expect that the bigger group buying outfits will ultimately buy over newer set-ups, but hope they will launch offshoots targeted at more specific market segments.

Adds Royal Plaza on Scotts' Ms Wong: 'Consumers now have a different mindset. They want luxury experiences at the best values. In the past they look for deals, now these deals come to them.'