06 Feb Flash Sales on Hotels: The Good and the Bad
A 5 star hotel at a 1 star price. Free room nights. Too-good-to-be true hotel deals. Flash sales sites have been popping up all over the worldwide web due to the weak economy and hoteliers desperate to shed unused inventory. And consumers have been cashing in on these flash sales sites that unload hotel inventory at incredibly deep discounts. Sites such as Living Social, Haute Look, Snique Away, Travelzoo and JetSetter. True, consumers are finding that they are saving big money. But is this model sustainable for the hotelier industry? Or will all of these growing flash sites eventually erode ADR and consumer confidence across the board much like the OTA sites have done in the past?
Flash sites capitalize by appearing as exclusive (email membership required), acting as auction sites or by offering flash-bang promotional deals that are only available for a very limited time. To further complicate the process, websites like Groupon and LivingSocial are teaming up consumers to further drive down hotel prices.
At present, the model is working. Statistics show consumers are joining these flash sites in droves. And hoteliers, for the moment, are shedding inventory. Luxury hotels are finally becoming available to the average traveler as 4 and 5 star resorts are offering steep deals at 40-60% off. And many consumers are finding that they are now not only able to stay at nicer hotels than they could afford in the past, but they are able to stay at these properties longer. Many deals include free room nights, extending consumer’s stays and complimentary upgrades on other hotel amenities. So one way to view the flash sales sites phenomenon, is that it is saving the traveling community money while unloading hotel rooms for the industry. A win-win, right?
The question arises, as these hotels jump on board the flash sales train, are they supporting and building a model which in a few years they will start complaining about? Do these hotels lack the creativity and willingness to invest in direct sales (like the flash sites are doing) on their own?
Flash sales sites are useful for the retail market which needs to offload unsold stock from its shelves as new models come out or the next season line is launched. For these types of products, discounting is a method to get rid of otherwise unsellable inventory. This is not the case in the hotelier industry. As we saw what happened with the OTA’s, heavy discounting leads to the erosion of value and lack of consumer loyalty and confidence. Hoteliers are pimping out their inventory so often and for so discounted a price, it will be nearly impossible to convert rates back to where they should be when the time comes. All of these short term gains will offset long term growth and sustainability. Even if demand rises with a stronger economy, the danger exists that flash sales sites will have by then set too low a bar for ADR and a created an unsustainable bottom line.
It’s time for hoteliers to wake up, learn what they see from these flash sales sites and use them on their own websites. Shift the principle from the offsetting URL’s to their own destination and reservation office by prompting the same urgency, exclusivity and loyalty that the flash sales sites have, to their own. Once all of the advantages of the flash site (both from a marketing and a consumer standpoint) applies to the hotel’s own website, a true win-win situation will develop. Hoteliers will be able to meet their rate expectation while satisfying the consumers’ desire for the best hotel deals. Until this happens, however, flash sales sites seem to be the short term answer to age-old question; where can I find the best deal?