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Best Deal Guarantee and Parity Should Not Apply in Flash Sales in a Standard Way



By Ritesh Gupta
September 30, 2011

IN-DEPTH: The group-buying flash sale model for travel is a marketing promotion primarily towards a given market at a given time – so the price should be in relation to how big the given market is and how many potential customers are reached through the promotion and how long it lasts, says Gregory Linn, Director - Hotel & Travel Europe, Groupon.

 
Cracking the code on inspiration is being pursued by several travel intermediaries and these also include those belonging to the flash sales category. These travel sites are helping people decide where to go on vacation and also enabling them to book the trip.
 
Members of such sites like to be “inspired”, typically with no specific destination in mind. It is also being shared that average advance purchase for hotel properties is over 60 days, which is exponentially longer than other OTAs. So such offering is proving to be an effective way for partners to build a base on their books well in advance.
 
At the same time, concerns have been raised about the implications of flash sales. Be it for turning hotel rooms into a commodity like an airline seat or high cost and revenue management challenges, the industry has highlighted negative aspects.
 
Assessing the situation, Gregory Linn, Director - Hotel & Travel Europe, Groupon, says there is no better way to achieve higher RevPar and Occupancy rates for hotels if their usual sales channels have failed to achieve maximum capacity – especially with an attractive discovery package and millions of travel newsletter deals subscribers on hand – this is where the group-buying flash sale model is most relevant – massive marketing to millions at no direct cost, only the actual buyers of the package may incur some cost if the price of the package does not cover the break-even point of the hotel.
 
“This is why the partnership between the group-buying site and revenue management has to address this point to make sure the break-even point is met, or to use part of the marketing budget to cover the possible extra cost,” said Linn, who is scheduled to speak at the forthcoming EyeforTravel’s Online Marketing & Social Media Europe 2011, to be held in Amsterdam (October 10-11) this year.
 
Linn spoke to EyeforTravel’s Ritesh Gupta about the latest trends. Excerpts:
 
How has flash sales as a concept progressed this year? How is it being perceived in the travel industry as this juncture?
 
Gregory Linn:
 
Most major OTA’s, online booking platforms and even some hotel chains have embraced the concept in some way or another in or before 2011 – the general feeling seems to be not to miss out on the drive and force of this concept.
           
While a section of the industry believes that social commerce movement fills a gap in travel discovery and buying, an hotelier in one of our interviews mentioned that conceptually flash sales are extremely attractive to consumers however there needs to be a distinction between retail and travel flash sales. Unlike when making a retail purchase, a consumer does not have the opportunity to take a day trip to a hotel they discovered via a flash sale. They have to rely on the Internet and online browsing to complete their buying experience therefore they do not fill a “buying gap” they increase the buying options. What do you make of the situation?
 
Gregory Linn:
 
One of the main ideas behind group-buying sites for travel is push-marketing, where email newsletter subscribers get few deals pushed to them without them having a pre-conceived idea of where or when to go somewhere. If they like the package, the price and the destination, they will buy on impulse. This differs greatly from normal OTA’s and booking engines, even for flash sales, as they act on pull-marketing, meaning that potential customers have thought through the possible destinations already, and will check first based on the thousands of destinations available and may also have many other comparable offers under evaluation and thus act less on impulse.
 
Right now it is too easy to join flash sales. They have gone from invitation only to anyone can sign up. There needs to be a stronger barrier to entry. It is being pointed out that for flash sales to separate themselves from the average OTA (in both the eyes of the buyer/consumer and supplier/hotel) they will need to change their business model to become more of an exclusive club providing customers with a tailored list of products based on the customers preferences, one to one marketing. What’s your viewpoint regarding the same?
 
Gregory Linn:
 
Several models exist in this regard. Private sale websites are becoming more accessible, and should probably re-focus to more tailor-made and exclusive offerings. Group-buying websites on the other hand want to be accessible to as many people as possible and provide economies of scale and massive exposure to all partners involved. This also allows the latter model to include tailoring and preferences, it can be achieved thanks to the data available from the email subscribers, only adapted to a larger amount of people than for the private-sale sites.
 
For flash sales, hotels are being recommended to make sure they display the rack rate on their booking engine so that consumers understand the value they are getting from the hotel flash sales deal. What do make of this suggestion for finding the right price/ discount?
 
Gregory Linn:
 
This could definitely help the consumers realise the value they are getting out of the flash sale deal, although the “perceived” value will probably depend more on the difference between the flash deal price and the usual market price, which is usually available on various OTA´s and booking websites, even often available on the hotel website itself. Rack rates are gradually disappearing, as they rarely apply.
 
How do you think the hotel industry has responded to the challenge of dealing with the complexities of revenue managing highly discounted prices?
 
Gregory Linn:
 
The hotel industry still has to come to terms with two concepts and differentiate them – the traditional concept is to know what maximum discounted price hotels are ready to display regarding purely sales operations (where margin is key), this is handled quite well, notably by revenue management and sales departments. The new concept, which still needs to be fully grasped, as it is a combination of coordination between sales, revenue management but mainly marketing departments, is to know what maximum discounted price hotels are ready to display regarding a special discovery offer/deal that is going to be highlighted among few other offers to millions of new potential customers (with little or no margin, or at some cost in agreement with the marketing department and budget).
 
As far as the expectations of the buyer is concerned, it is being said that consumers want to know that they’re getting the very best deal before they book, and they need more flexibility. In fact, a new private sale travel site unveiled last week says it has launched with the only Best Deal Guarantee in flash-sale travel. How do you assess the clutter in the marketplace and along with it the accompanying challenges?
 
Gregory Linn:
 
Rate parity is a hot subject between hoteliers and OTA’s – this in my opinion should only apply to the traditional sales model I mentioned previously. Best deal guarantee and parity should not apply in flash sales in a standard way with the group-buying flash sale model for travel, as this is a marketing promotion primarily towards a given market at a given time – so the price should be in relation to how big the given market is and how many potential customers are reached through the promotion and how long it lasts.
 
New players are launching their operations in Europe. How do you assess the market to shape up?
 
Gregory Linn:
 
There is definitely going to be more consolidation in the market, as large number of players that have launched in the last year have either been bought by larger players or have closed down due to lack of funding and lack of reaching sufficient growth in user base. There might be room for some new niche players, otherwise 3 to 4 companies will probably shape and lead the development of the industry.

Gregory Linn, Director - Hotel & Travel Europe, Groupon is scheduled to speak at the forthcoming EyeforTravel’s Online Marketing & Social Media Europe 2011 , to be held in Amsterdam (October 10-11) this year. For more information, click here

About EyeforTravel
EyeforTravel is a leading media company specializing in business intelligence for the travel and tourism industry. EyeforTravel provides a series of senior executive travel conference on a diverse range of topics including travel distribution, online marketing, social media, mobile and revenue management.  EyeforTravel also provides some of the most in depth research into global online travel markets and trends. For more information visit www.eyefortravel.com
 
Contact:

Gina Baillie
VP, Marketing,
EyeforTravel
E: gina@eyefortravel.com
T: UK +44 (0)207 375 7197


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