Expedia: What Groupon Getaways with Expedia means for hotels
Note: This is a guest article by Jennifer Mellet, senior director of new channel sales at Expedia.
The news itself touches on some of the hottest topics in the travel industry today, including the role of daily deals in travel marketing, the power of social media in brand building, and the value of the online travel agency channel in distribution.
So what does this new channel really mean for travel suppliers?
It is first and foremost a low cost, low risk customer acquisition and brand introduction channel.
At launch, Expedia and Groupon will market Groupon Getaways with Expedia to our huge combined audience of more than 50 million subscribers in the U.S. It is a young and affluent audience, with over half earning more than $70,000 a year.
These consumers will turn to Groupon Getaways with Expedia to discover new travel opportunities — in their own backyards and across the country — that in most cases would not have otherwise been on their radar.
Here’s an illustration to show how it can work:
Deal: 50% off $200 room at Amazing Hotel
Value of offer: $200
Cost to consumer: $100
Revenue to hotel: $50
Operating cost to hotel: $40
Hotel margin/room: $10
Total margin generated if 1000 vouchers are sold: $10,000
If you’re a hotel revenue manager, you might be thinking “You want me to give away a $200 room for $50?”
Though a room is in play for each Groupon sold, we’ve found that the model is best understood as a marketing vehicle. In the example above, those are 1,000 largely incremental room nights that would have otherwise gone unsold.
Your operating costs are covered, and you’ve attracted a set of affluent, avid travelers to your property, with the opportunity to generate even more revenue from on-site purchases, such as additional nights, room upgrades, dining and in-room entertainment.
In fact, Groupon customers have been shown to spend as much as 60 to 80 percent on top of the value of the Groupon.
Cross-sell revenue per room (70% on top of $100 voucher at 70% margin to hotel): $49
Total margin generated if 1,000 vouchers are sold: $59,000
Another question you may have: “How do I know if Groupon Getaways with Expedia isn’t just cannibalizing bookings I could have gotten at full price?”
The average hotel reaches maximum occupancy very few nights of the year. Many hotels run at max occupancy on less than 2 percent of nights. Even highly seasonal outliers that do fill all their rooms for a two- or three-month stretch will commonly have four or five months at less than 30 percent occupancy. These types of properties could utilize a Groupon Getaways with Expedia offer to attract off-season business.
Next, we know that a certain percentage of travel bookings are spontaneous and incremental, and Groupon Getaways with Expedia directly addresses this market.
The 36 million visitors to Expedia sites every month are either shopping for a trip to a specific destination, shopping for a trip to an undetermined destination, or not necessarily planning a trip at all, but still in the market for travel.
Then there is a fourth type of consumer, who may not actually be shopping for travel in any given month, but is open to having travel offers pushed to them regardless. There is at least some element of spontaneity to the booking decisions made by three out of these four types of consumers. And bookings by two of the four types are fully incremental to the travel supplier that presents the right offer.
One of the things that makes Groupon Getaways with Expedia an opportunity worth considering is that we are not trying to be all things to all travel suppliers. The sales team is working closely with participating hotels to design offers that meet the needs of the hotel while at the same time delivering a compelling deal to potential guests.
Groupon and Expedia bring a combined expertise in daily deals and travel, and an understanding of what it takes to make these offers work.
Groupon Getaways with Expedia is good for travel suppliers who want to:
- Win new guests and awareness for your property.
- Reach millions of people in one day with a direct offer that comes from you, exclusively. No comparison shopping, no website cruising. They buy your offer, or nothing.
- Be on the leading edge of the e-marketing revolution and enjoy the buzz and exposure that comes with it.
- Spend your marketing dollars on real customers rather than on other efforts that are hard to measure, and may or may not work.
Note: This is a guest article by Jennifer Mellet, senior director of new channel sales at Expedia. Mellet oversees the Expedia sales team for Groupon Getaways with Expedia.
Special Nodes is the byline under which Tnooz publishes articles by guest authors from around the industry.