From the site:
Typically, the amount paid above the retail market value of the item is considered tax-deductible. The retail market value of an item is considered the cost of tangible goods and services received. Winners receive a receipt containing the retail market value of their purchase that can be submitted to a tax professional for determining any tax-deductible amount. Please note that we're not tax experts and can't provide tax letters or tax advice.
If they paid $1000, but it included one night at the Ritz -- and the Ritz rate would be $500 normally, then they can only deduct the $500 above the cost of the hotel room.