Flash Sales: What Revenue Managers Need to Know

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What Hotel Revenue Managers Can Do to Manage the Impact of Flash Sales. By Bonnie Spalding

Bonnie Spalding, Vice President Business Consulting with The Rainmaker Group

Ensure that you are viewing flash sales as a tool available to you, not as a supplement to your existing demand.

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.

o    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?
o    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.

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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