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Daily deals and flash sales for hotels, right or wrong

Aug

2011

Flash sales for hotel: Are they good, bad or evil? If you want to start a discussion with revenue managers and hotel take up the subject of daily deals and flash sales. Groupon, Jetsetter, TravelZoo, Voyage-Privee and so on. It’s such a heated subject that people are either totally for it or totally against it.But what’s the real deal? In this article we try to show the plus and minus and give you some suggestions.

What’s bad about Flash Sales for Hotels

Well there’s a high “cost” of doing flash sales for hotels. First of all one needs to slash prices for the sale to work, giving the usual best available rate isn’t going to cut it, most flash sale sites wont even accept such a rate. And then there’s the additional cost of the sale, some sites take a 50% commission on the already massively discounted price and others take a fee which isn’t small. Overall it affects profitability on the rooms sold and some argue that it could affect the ADR on the long-term by depreciating the value of the hotel.

What’s good about Flash Sales for Hotels

Those are valid points, but what about the plus side? Well there’s the obvious advantage that hotel’s will sell lots of rooms for the period given. But what’s much more interesting with flash sales is the visibility that the hotel is going to get during the flash sale period. Per the stats that we’ve gathered with our clients doing flash sales the month where the flash sales are on, the hotels received more than double the average visits and almost doubled their direct revenue on their website at regular rates. The visit counts remained at 25% increase for two month following and so did the direct revenues on the website. This graph shows the total number of visits for the quarter before the sale and the quarter after. An obvious increase in traffic.

For an independent hotel, flash sales represent a high advertising value for their property without a high payment fee (except for TravelZoo who takes a flat fee).

In summary, good visibility comes at a cost. A hotel can take advantage of it, if you’ve got a good product and want to make it known fast, you’re willing to play the game and risk some profit to gain name recognition, this could be good for you. If you’re already hugely popular hotel that doesn’t need any more advertising then this is not for you.

Here are some tips on how to do it right, if you’re going to do it.

Flash sales results, quarterly visits before flash sale and quarterly visits after flash sale.

Flash sales results, quarterly visits before flash sale and quarterly visits after flash sale.

How to use flash sales and daily deals

Limit the number of rooms you’re willing to sell. The biggest danger in flash sales is not setting a limit to how many rooms you are willing to sell through that channel per day. Put too many rooms and you’ll miss all the “billboard effect” since people trying to book through your website will find no availability. Putting too few rooms will cut the effect you want to create since you’ll be sold out all the time. Find out what is comfortable for your property and probably add a few rooms to your comfort zone.

Give a very good price. While you should not to lose money on the sales don’t try to make much of a profit either, set it up to break-even and make it mildly profitable for you and profitable for the flash sales site.

Deal a shut-off clause. It’s possible sales will go way over what you’ve expected, make sure you’ve for a clause set up that allows you to shut off the flash sale so you don’t end up over-booking and getting the reverse effect.

Be #1 in all search engine result pages. Bump up your paid search budget and make sure you’ve got the #1 place on organic and paid search for your name in all languages and in all countries. For the flash sale period and a bit longer, you can’t afford to lose any visitor.

Have a high-conversion site. Your site needs to be super smooth on the conversion side, get a user-experience professional to check the site and rework it so you don’t lose any sales, have all the key elements visible on the home page and make sure the page loads fast. Key elements are: Location, Comfort and Value.

If you do it right and follow these guides, flash sales can be a great promotion for your hotel. Doing a flash sale shortly after you’ve opened the hotel is a great way to give your hotel a second boost after the first media interest is over.

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Martin Soler

VP Marketing and Sales

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