As someone who has installed res systems and been involved with 100-5000 room properties and managed multi property reservation departments you are missing a big point in WHY hotels do this - the room is sitting empty and is generating no revenue, and many times in larger (and larger can be subjective) rooms if you can sell another 10 or 20 rooms at $200 rather than $400 its better than empty rooms. Of course there are expenses associated with occupied rooms but the discounted rates are still covering those PLUS some $$
I just booked a $436 room for $165 for a friend who was going to DC on priceline and yes I reported it on betterbidding, and let me tell you she stayed 4 nights rather than less nights and spent a LOT on extras in the hotel, room service, dined in THEIR restaurants etc.
So although revpar may be down, occupancy % and bottom line are generally UP. And then those guests talk to other friends about what a wonderful stay they had and recommend it to others, and since you can't guarantee which hotels you get on Priceline with "name your own price", if the persons who heard about that fantastic hotel want to stay there, they can't use Priceline unless it happens to be showing as a named hotel.
Again, people are looking for VALUE more often than price.
Oh and I have to add that with the economy I have had to do some discounts and some long stays over the last 3-4 months but over those months even though my revpar was low, my income has MORE than been covering my bills which for me is better than sitting with empty rooms and a depleting bank account ... and not one person has "reported" that they were discounted because they appreciate it and it's a 2 way street.
I didn't say that I didn't understand it, but it depends on when, how much and frankly, eventually will eat into revenue.
If a hotel is known to be on Priceline or Hotwire then people are reluctant to buy it online at full price. And frankly, it builds absolutely no loyalty to anything other than Priceline and Hotwire. Worse yet, when they start to discuss how much they paid to others, they get angry that they paid more.
The other side of this is the question of what you get. Under the law of unintended consequences you quickly see that bottom feeders are going into that market. Once you go under the 4* around here, among the hotels that show up on Hotwire and Priceline many of the hotels rank below 60th and down to below 120th. One that was so badly rated, they moved to specialty so they are 31st of specialties (they were below 120th at one time). Some hotels that I might stay at and a heck of a lot that I wouldn't put even my enemy at. And we haven't even gone to the question of location in the zone or even which room they give you. Someone has to be booked into that smelly room or we lose the revenue from it, might as well be the guy who paid the discounted rate!
As a B&B this just isn't viable. It's 25c on the dollar for people with no loyalty and a liability on the books for $1 going down to 50c (and in my case, forever, since they can never expire under our law.) And who knows if this is going to create loyalty. I am not a hotel, I don't have an infinite number of rooms that I can sell and I certainly don't want to fill my rooms at 25c on the dollar only to not make extra money. And where am I supposed to make that extra money... on hopes that they will then stay an extra day or two? Okay, so a $100 room nets me $25, two nights nets me $125, so $62.50 a night and a third brings this us to $75. But want to make a bet that Mr. and Mrs. are going to show up with two single night reservations to use a coupon each (and here, Mr. and Mrs. have different last names... because you keep your maiden name since 1981!) So, I have two nights at $25 each and they likely will block someone else who would have paid me for the room.
I have 155 room nights in March. Am I better off with 80 nights at $95.00 or 100 nights at $75.00? So 80 * $95 - 100 * $75 = $100 more in my pocket and 40 less breakfasts to expense, not to mention that much less work.
Of course, in Canada we aren't going through the same recession that you are. Except of course that our currency has gone up so much in value that it's hurting our tourism business.