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A Hotelier's Viewpoint on the Current Status of the Flash Sales Model

By Ritesh Gupta
February 27, 2012

IN-DEPTH: Social buying/ Group buying and flash sales sites will undergo a saturation stage in their life cycle. Many will reach the end of the road but a few strong ones will survive - albeit with some innovative add-ons to the existing business models, says Ricky Ang, vice president - Sales & Marketing, Hotel Equatorial Group.
 
There are many start-ups getting into the travel space. The pitch to the travel suppliers is that the customers want better deals, discounts, promotions etc.
 
For their part, hotels are acknowledging the challenges pertaining to impact on their brands and also how much discount or lower rates they can offer. There is a growing belief that one needs to get out of this discount mode for new travel start-ups.
 
Also, the number of sites offering flash sales continues to grow. Right now it is too easy to join flash sales.  They have gone from invitation only to anyone can sign up. 
 
Hoteliers believe there needs to be a stronger barrier to entry. 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.
 
Hotel marketers who strategically utilize flash sales based on the needs of their hotels recommend following:
  • Make sure your brand and voice are accurately represented
  • Be strategic and proactive
  • Challenge your hotels and your social commerce partners to create “win, win” situations
  • Create a mutual beneficial partnership or joint venture
Within the flash sales category, it is recognized that there are so many different types of business being categorized as flash sales.  And some of these businesses do commoditize hotel rooms by emphasizing price and destination versus the unique selling attributes of each hotel. The risk of creating a commodity out of hotel room exists in channels that feature the price of a hotel with the same weight as the images, reviews, unique selling attributes, etc.  And few are considered to be true marketing vehicles that promote suppliers with beautiful imagery, and expert-written first person reviews by real travel writers that touch upon the hotel’s saleable and unique features.
 
“In terms of perception from the travel industry - particularly hotels - such sites are not regarded too positively from an angle of brand quality as well as from the angle of yield. This however does not mean that hoteliers cannot see opportunities in participating on such sites - where the occasion is appropriate, naturally,” said Ricky Ang, vice president - Sales & Marketing, Hotel Equatorial Group, who is scheduled to speak at the forthcoming Travel Distribution Summit Asia 2012, to be held in Singapore (May 9 -10).
 
As far as the flash sales category is concerned, competition is always good for any industry, it pushes everyone to be their best, and forces companies to accelerate their implementation of innovative technology to the market. Specialists point out that like any industry there will be a point where the cream de la cream make their presence known and the “Rule of Three” will follow.
 
Ang spoke to EyeforTravel’s Ritesh Gupta about the trends in detail. Excerpts:
 
What according to you is going to be the next big thing in hotel distribution? How do you think concepts such as social buying and flash sales are progressing as of now?

Ricky Ang:
 
The next big thing in hotel distribution, I predict, will be the formation of vertical travel search sites that host/carry only links to hotel brand sites ( without any to OTAs'). Think: Wego - but with only hotel brand sites listed.

Possibly such development will be spearheaded by an alliance of hotel companies but I foresee independent entities taking similar initiatives.

Social buying / Group buying and flash sales sites will undergo a saturation stage in their life cycle. Many will reach the end of the road but a few strong ones will survive - albeit with some innovative add-ons to the existing business models.

How has social buying category as a concept progressed in 2011? How is it being perceived in the travel industry as this juncture?
 
Ricky Ang:
 
I define social buying as group buying (e.g. original Groupon concept). As a concept unfortunately, this has regressed with many flash sales sites not even using a group buying concept to activate the deal.

In terms of perception from the travel industry (particularly hotels) such sites are not regarded too positively from an angle of brand quality as well as from the angle of yield. This however does not mean that hoteliers cannot see opportunities in participating on such sites - where the occasion is appropriate , naturally.

The number of sites offering flash sales continued to emerge throughout last year. How do you see the differentiation among those who are specializing in this category?
 
Ricky Ang:
 
To be honest, I don't really see much distinctions or innovations from these various sites. In fact, if anything, most are just jumping on the bandwagon of copying the business model sans some of the more critical aspects like minimum sales target (group volume) to "activate" the deal.

Clearly there needs to be a distinction between retail and travel flash sale sites since travel is a far more complex purchase. Not only does it require more research, but it is also significantly more expensive and for most, purchased less frequently. How do you think the category on the whole established itself in the travel industry? What do you think are still the main challenges?
 
Ricky Ang:
 
In my opinion, there is a strong likelihood - if not already happening - that retail travel sites will also incorporate flash sales strategy into their business model. This will further dilute the unique qualities of flash sales / group sales sites.
 
End suppliers like hotels are typically neutral but will eventually also incorporate time based flash sales strategies in their marketing plans.

Flash sales sites inspire customers and it is also said that they engage them higher up in the purchase funnel than OTAs. How do you think the category on the whole is carving a niche for itself in distribution? How do you think it is fitting in with consumers’ behavior as of today?
 
Ricky Ang:
 
If anything, the "niche" that flash sales sites is covering in the distribution model is that it provides hotels with an avenue to manage yield/ inventory over a predicted slow period as well as providing hotels with an effective advance purchase program tool which previously could not be implemented effectively.

Consumers’ mentality is consistent with the business model being that they will put money down if the deal is attractive. The fit is certainly there.

There are so many different types of business being categorized as flash sales. Some of these businesses do commoditize hotel rooms by emphasizing price and destination versus the unique selling attributes of each hotel. What do you recommend to hotels at this juncture?
 
Ricky Ang:
 
Firstly, with the advent of flash sales sites, hoteliers should realize that for the first time in a very long while, hotel accommodation distribution/ transactions are no longer the sacrosanct business territory of the travel trade.
 
My recommendation for hotels is to use flash sales sites only on a need-to basis and ensure that such participation(s) do not erode the brand quality of the hotel product.

Where do you foresee the social buying category headed in 2012? What do you think is going to stand out and what should the travel industry watch out for?
 
Ricky Ang:
 
I foresee some flash sites going under and I foresee OTAs and Hotel Sites developing/ embracing/ incorporating some form of flash sales into their sites.

What will stand out will be travel flash sales sites that provide ample product presentation (incorporating videos, VR photography etc.) to promote the product as opposed to the more static sites evident currently.

About EyeforTravel
EyeforTravel is a leading business intelligence provider for the online travel and tourism industry. As well as providing some of the most in-depth research into global online travel markets and trends, EyeforTravel produces a series of senior executive travel conferences on a diverse range of topics including travel distribution, online marketing, social media, mobile and revenue management.  For more information visit www.eyefortravel.com.

 
Contact:

Marco Saio
EyeforTravel
marco@eyefortravel.com
London, UK: +0044 207 375 7229
US Toll Free: 1 800 814 3459


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