Do flash sales level playing field for independent hotels?

Which sectors of the hospitality industry are dabbling the most in travel flash sales? Independent hotels and then alternative property types such as inns and B&Bs — that’s who.

A new analysis from PhoCusWright, Travel’s Daily Deal: Distribution Disruption or Flash in the Pan?, written by Maggie Rauch and Douglas Quinby, analyzed 100 random flash sales deals (which included accommodations) from Groupon Getaways, LivingSocial Escapes and Travelzoo Local Deals and found that independent hotels (42%) were the most active participants.

The rest of the breakdown was:

  • Inns and B&Bs (32%),
  • Branded chain hotels (12%),
  • Vacation rentals and timeshares (9%), and
  • Tour operators (5%).

For better or worse — you decide — independent hotels (42%) obviously see flash sales sites as an adept way to increase their reach, and perhaps reduce the tremendous advantages of the large chains.

Responding to a question about the independents, Quinby says: “I wouldn’t say they level the playing field, but flash sales do give independents another marketing lever to pull to drive demand. Flagged properties, in addition to the very brand affiliation itself, have a larger arsenal of marketing channels to manage distribution and pull in business. Independents are naturally more reliant on intermediaries, and flash sales do present a means to get their properties in front of many more prospective travelers.”

And, even 12% participation by chain hotels in travel flash sales might be considered curious. The PhoCuswright study notes:

But the 12% raises some key questions, such as whether these individual branded properties are pursuing unsanctioned sales and marketing practices, and whether the chains are turning a blind eye at the corporate level to give local owners or sales managers some flexibility. Some of these deals may also be in violation of chains’ price parity agreements, which cover multiple distribution partners.

The PhoCusWright study, using Yipit data, found that total travel gross billings for daily deals in North America from Groupon Getaways, LivingSocial Escapes and Travelzoo Local Deals stood at $71.5 million in the fourth quarter of 2011. And that was about 8.5% of the $836 million these vendors billed for all of their deals in that quarter.

Of the three flash sales vendors, Groupon had the highest share of travel gross billings, 57%, (versus 36% for LivingSocial and 6% for Travelzoo) even though LivingSocial offered the highest share of deals at 53% (compared with 39% for Groupon and 8% for Travelzoo).

Interestingly, Travelzoo emphasizes that it differentiates itself from Groupon  and other competitors by offering deals with real value as opposed to offers for things like teeth-whitening services.

Yet the PhoCusWright study concluded that Travelzoo’s deals offered the lowest price point of the three vendors. The study says:

Travelzoo has the lowest price point, which helped it bank 321 vouchers per deal, close to one and a half times the ratio for LivingSocial. But Travelzoo still trails well behind Groupon in sales per offer, perhaps due to lower consumer awareness of its travel offers in its local deals business. Also, a consumer looking at Travelzoo’s Local Deals has the ability to discover a huge number of alternative travel deals without leaving the Travelzoo site.

The study found that for some 10% of the deals examined, the purported published value of the deal was different from the actual going rate on the hotel website, although sometimes the flash sales included add-ons.

The study doesn’t answer one burning question — do flash sales provide incremental revenue or cannibalize existing sales?

But, the study does argue that travel flash sales have the potential to become a potent force — especially as the flash sales sites begin to mine more data and enhance their personalization and yield management efforts.

“But as Groupon’s recent purchase of Uptake, the travel semantic search and social data aggregator, suggests, the daily deal providers plan to get a lot cozier with travelers,” the study says.

 

 

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Dennis Schaal

About the Writer :: Dennis Schaal

Dennis Schaal was North American editor for Tnooz.

 

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  1. Vendite Flash ed Hotel Indipendenti – D’amore e d’accordo? | Promozione Albergo

    […] Articolo: Tnooz 1 minuto ago by admin in Hotel Marketing | You can follow any responses to this entry through […]

     
  2. Flash sales-travel | Pearltrees

    […] Which sectors of the hospitality industry are dabbling the most in travel flash sales? Independent hotels and then alternative property types such as inns and B&Bs — that’s who. A new analysis from PhoCusWright, Travel’s Daily Deal: Distribution Disruption or Flash in the Pan? , written by Maggie Rauch and Douglas Quinby, analyzed 100 random flash sales deals (which included accommodations) from Groupon Getaways , LivingSocial Escapes and Travelzoo Local Deals and found that independent hotels (42%) were the most active participants. Do flash sales level playing field for independent hotels? | Tnooz […]

     
  3. Denis

    So the message I think is that alternatives like http://www.EveryDayOffers.co.uk/ are far fairer and more attractive to independent hotels many countries: https://www.tnooz.com/2012/04/09/tlabs/everydayoffers-wants-to-cut-out-the-fat-cat-middle-men-of-flash-sales-sector/

     
  4. Robert Gilmour

    I did mean UK based travel and hotel brands by the way, i can’t speak for overseas brands

     
  5. Robert Gilmour

    Brands don’t participate in flash selling in the main because individual brand hotels are prohibited by brand rules from doing so. Why? – its called brand erosion, and i don’t blame the brands for protecting their brand integrity

     
  6. Robert Gilmour

    I think independents need eyes on the back of their heads, doing things major brands won’t do, requires serious due diligence

     
  7. Robert Gilmour

    Brands will never support flash selling sites, that’s the bottom;line

    Are they wrong?

     
  8. Matt Zito

    I helped launch BuyWithMe Destinations, a flash travel channel/brand for BuyWithMe, a group buying company that was acquired by Gilt City Group (Jetsetter) this Fall. At BuyWithMe Destinations we focused on selling travel package offers that included lodging at small independents, boutique hotels, Inns, B&B’s small resorts. Our internal research and surveys showed that the members were interested in buying getaways that included a meal and or an activity.

    The hotel brands and chains could not provide us with the packaged product we wanted to offer. It was less about the price or discount we could get and more about the independent able to support the type of travel offer we wanted to sell which was a package including 1 night lodging, a dinner for 2 and an activity.

    Small independent Inn’s or B&B’s are the best type of property to fulfill the flash sale product in my opinion for a few reasons.

    1. 100-300 reservations is a massive number of reservations in 7-days for independents. We found that small independents were not only much more open to discounting but the real influencer was the opportunity to receive 100-300 reservations within 7-days. The economics just added up for properties with 5-25 rooms, whereas hotels and larger chains with hundreds of rooms to sell each day were less inclined to get excited.
    2. Less resources/no revenue managers. The realty is that the big chains have directors of revenue, price yield technology and tools and more resources to analyze room inventory and price. Small independents have 1 person doing all the room inventory management and that is the owner.
    3. Understand how to package. The owners of small independents really understand the components of the flash sale which is to package and they go out of their way to either create it themselves in house or they partner with local businesses to make it happen. The big brands just want to sell rooms. I found that the big hotels don’t have the entrepreneurial spirit of the independent’s to want to get off their butts and do a little work which is required to participate in a packaged flash sale.

    Overall I agree with the new analysis from PhoCusWright that the travel daily deal distribution is not a flash in the pan but here to stay. I hope I’ve added a little contribution and insight for this article.

    Matt Zito works with companies in the travel daily deals space. Learn more about Matt’s work here. http://goo.gl/1aW3F

     
    • Ming

      Matt,

      Great comments. I am a strong supporter and believe in brand value, from prev experience in Advertising. And I am surprise by the 12% of usage by branded chains. Here in Australia, there is low to no participation from chains. I see that will change once the more savvy businesses can see that flash sales or deals type channel offers an additional tool in yield management too.

      Travel/ accomodation type deals makes up about 24% of total revenue from all flash sales/ deals sites. It is a market dominated by local or JVs, less so Internationals. Likely a reflection of the poor participation from chains.

      Ming

       
  9. Robert Gilmour

    It drags the low value/basement bucket stuff away from the brands, they’ll be highly delighted about this. it also drags the cheap end of the market away from the luxury segment, which they’ll also be delighted about.

    There is no commercial win for the independent hotel on any opportunity cost analysis. Looked at as an absolute in isolation (rather than as an alternative to other marketing and sales initiatives) – we;ll you can usually justify anything!

     
    • Kayla Luken

      Offers like these allow the market of people who buy travel products/services to grow.

      People who could not afford to take vacation, are now going , and/or people who could only afford one vacation – are now taking multiple.

      The savings are so great that it creates a powerful incentive for people to take a weekend vacation, who wouldn’t ordinarily take one.

       
 
 

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