We have done several of these deals and so far this what we have learned. Now this is written purely form the point of view of a B&B owner running a deal on one of these sites. Yes, we try and skew it to our advantage and this is because even after all is said and done, we are a business and as such we are in it to make money.
The discount is 50% or more. Why go more? Is there any advantage to doing a 65% off versus 50%. There are tons of these sites now and you can always do a smaller or local one to make up the lack of sales on one of the big ones if need be. Yes that takes more time but the overall point of business is to make money. Yes, you get the advertising to lots of people. This is a good thing and hard to put a price on. Yes, you get customers who then might turn into repeat customers. Again this is good but hard to price in. So lets say you give me the benefit of the doubt and don’t give too mych away upfront. Remember you also have to pay the site.
The site is going to want 50% or so of the amount you receive. We have negotiated a 70/30 split on out deals. So we get 70% and they get 30%. So if we gave a 50% discount in the first place, we get 35% of the over all deal. This number is very important. So in our case, lets say we rent a room for 160/night. We discounted it to 80/night and now we only get $56 of that. So every room we sell on the deal, we only get $56/night, and we still have to pay staff, buy soap, food etc.
So how you structure the deal is a pretty big deal. This is not ideal for the customer or for the deal site. This is structuring it for your advantage. Think about it, the ideal would be you sell a bunch and no one ever redeems them OR complains. YEs the last part is important as you most companies that run these deals see a drop in their Yelp rating. The deal seekers are net savvy and will run out to the review site that is relevant to your industry and slam you. Even if you were right etc. I will use us an example. We were brand new so we had lots of rooms and no customers. Well a B&B runs better if you have a few people on the same night. Your costs of running it our pretty fixed with some increase for volume but less then you think. So we needed full paying customers to make ends meet but adding in some discount customers in rooms that would have sat empty is a slam dunk. This is pretty obvious. Now once we were up and running, our need to just fill rooms drops off as those rooms could have been rented at full price and now we are giving them away at 65% off. We need that 65%. But we slow way down in the winter. Our cash flow drops way off and turns negative for the worst months.
So we structured some deals to suit us. We rented some rooms defined by bed size for 2 night stays in the dead of winter. This is not a big seller under normal circumstances but at a huge discount, it gives a chance for someone to experience our B&B in the off season at a special price. We made it a two night package because then we save on labor and some other stuff. Rather then get too detailed let me just say, we make more on a two night stay so that is what we wanted. We want to make money so we structured it to help us. Seems obvious but in the push to make a deal and get it out there, this idea can be lost.
The sites push for you to add stuff to the deal. A bottle of wine or a robe is the idea. But the math makes zero sense to do this. Even if you get them wholesale and you can put them in the deal at retail, you are losing money. We did a bottle of wine on our first deal. The bottle cost us $7 as we got a discount at the local winery and we were able to put them in the deal at $11. Well 35% of $11 is $3.85 so we were losing money on every bottle. Why would any business want to do that? And yet the websites push for extras to make the deal more attractive. Well if we are going to give money away then yeah it is more attractive but we would soon be out of business. You are going to be lucky if you breakeven on these deals over all so do not weight it against you. Keep it simple, discount your core business but why add in other people’s businesses? Do you need to advertise for them?
Coming to a B&B in the dead of winter with wind chills and snow is not everyone’s cup of tea. So what? I spelled it out, and you bought it. I do not agree with the idea of trying to make it unusable. That leads to complaints as mentioned above. It needs to make sense and be legit. But if you slow day is Tuesday, why not make the deal for Tuesday? This is your business. You need this bring in business and customers at a big discount on the days you have excess staff/product etc. IF I could guarantee you a 10% jump in business after doing one of these deals, you would sign up all day long and make if for whenever. You aren’t going to see a 10% jump or maybe even a 1% increase. So far the advantage to doing these has proven to be minimal. You need to the deal to breakeven at least or you are wasting your time and money. Is it worth it to you to have business on off nights? Or to rent rooms that would have gone empty? Then these deals can work for you.
To recap do not drive away your full price customers for discounted ones. Try not to make this into a public relations mess. Be straight forward and deliver what you promise. Ideally, if no one uses it, you win. So give them the bad days or crumby time of the year. They are getting a huge discount to compensate them. And most important of all, make it so you make a little on the deal.
