June 23, 2011 - The past few weeks
have been very hot for flash sale sites in travel, with three new sites
that
launched the first week in June alone (Groupon Getaways, Getaway
Lounge, Wego’s
Fast Deals). Clearly the biggest headline is the partnership
between Groupon
and Expedia. The daily deal/coupon distribution niche is
entrenching
itself deeper with consumers. However with new players in the
space
popping up at a record pace, what should hotels be doing to manage this
trend? There are many ways that flash sales will be impacting the
hotel
industry. I am going to focus on deciding how to participate and
understanding how these sites could affect revenue
management
teams.
No one is forcing you
on this bandwagon
- Participating
in flash sales is entirely optional, regardless of what they may tell
you. The industry has gone through peaks and valleys, and has
come out of
recessions before the existence of Jetsetter or LivingSocial
Escapes.
Yes, they will generate awareness, but not necessarily to the markets
you care
about and not necessarily more effectively than your current OTA
participation. Yes, they will likely fill distressed dates, but
how well
compared to opaque options and at what costs remains to be seen.
- Groupon
suppliers’ reports of satisfaction have been mixed at best, and
Expedia’s
reputation in the industry could inspire an “it gets better”
campaign.
Unless your brand or property is looking for broad exposure – and has
exhausted
more creative means of getting it – the value proposition for supplying
inventory to these sites is difficult to estimate and still relatively
unproven.
Commoditization 2.0
- While
“curated” sites like Jetsetter helped maintain the image of
exclusivity, the
latest entrants are decidedly mass market. If price integrity is
a
priority for your brand or property, playing anywhere in this space
(even with
the “exclusive” first movers) could lump you in as a discount product
from the
consumer’s perspective.
- Do
not confuse these (lightly) fenced sites with opaque sites.
This is a tool – not
a channel
- Ensure
that you are viewing flash sales as a tool available to you, not as a
supplement to your existing demand. These sales – if used
at all –
should be used as a targeted promotional tool to generate incremental
demand. There is word that Groupon Getaways will not have
blackout dates
– this will likely cause displacement of higher-rated business and
provide
little to no incremental benefit to travel suppliers.
Suppliers (that’s
YOU) hold the power
- With
the ever-expanding legion of potential partners in this space, managing
relationships and offers may only become more confusing. Partners
with
whom you participate should be carefully vetted. Do they cater to
the demographics of your transient
guests? How much flexibility are you afforded with blackout
dates? Can
you target a particular region or segment of their subscribers?
Is their
booking or voucher redemption process disruptive to your business
processes?
- Thoroughly
research past sale results for comparable properties. Don’t be
afraid to
reach out to peers that have run such promotions.
- As
more entrants to this market come online, the power to be selective is
shifting
towards suppliers. This will likely contract as less successful
players
exit the market, but currently hoteliers should recognize that they can
(and
should) be the ones determining who will still be in this space in 2013.
Even if you don't bet
- you're in the game
- Flash
sales could result in enough bookings at a property to shift market
share to
your competitors in an uncharacteristic way. Sales with limited
dates of
availability will be the primary offenders here, potentially causing
market
share indices after a flash sale to be skewed. A competitor who
participates in a flash sale could have higher-than-expected occupancy
and
lower-than-expected transient ADR.
Use your systems to
their potential
- If
you do participate in a flash sale, ensure demand is tracked separately
through
your revenue management system for two reasons.
- First,
ensure that you can perform an appropriate post-mortem analysis on the
success
of the sale. Did it result in incremental demand or
displacement?
Would you want to participate again, under what conditions?
- Second,
ensure the integrity of your forecast. During the sale, you may
have
guests redeeming vouchers well after the purchase decision has been
made. Be
particularly mindful of your booking curves during this period.
Once the
sale is over and your property is back to “status quo,” automated
solutions
will need user input to understand that any resulting spikes in demand
or
uncharacteristic booking patterns are unlikely to be replicated.
Your competitive set
is changing
- For
properties that rely heavily on transient business, some consumers may
be just
as likely to book their trip to Miami as they would to Los Angeles
depending on
where they can find the better deal. When assessing your
competitive set,
you need to be mindful that flash sales are inherently steering some
customers
towards not just properties, but destinations as well.
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Bonnie
Spalding is Vice President Business Consulting with The
Rainmaker Group, an industry-leading provider of revenue management
and
profit optimization solutions to owners/operators in the gaming
hospitality
and serviced apartment/multifamily housing
industries. Ms. Spalding lives in
Singapore.
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