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Flash Sales – Great Marketing or Cannibalisation of Existing Customers?

By Pam Carvell, Marketing Consultant, HMA.

I attended an interesting evening on 18th June 2012 organised by HOSPA, consisting of a panel discussion on the topic of ‘flash sales’. A ‘flash sale’ is essentially a short-term tactical price-led promotion, but which is promoted via email or on a website, rather then the traditional method of press ads.

Panel members were from Secret Escapes, Voyage Prive, Groupon and Travelzoo. Obviously each of these companies has a different business model, but what they have in common is a large subscriber / membership base, from Secret Escapes 1.5m to Groupon’s 33m customers. And it is that large audience that is the key to the success of any flash sales.

However, as the audience was predominantly Revenue & Finance Managers, you could sense that they consider flash sales as something of a necessary evil. Questions from the audience revolved around the commission levels charged by the companies concerned and the feeling that hotels feel held to ransom by the increasingly high commission levels charged by these 3 rd parties. Let’s face it, in days of old commission was 10% regardless of what the promotion or package and regardless of who the third part was. Now commission levels can be as high as 35%, and if this is on a heavily discounted price, hoteliers are more than likely losing money, unless they can generate sufficient incremental spend from guests during their stay.

But what occurred to me as a marketer, was that the main reason why the audience get hung up on the commission levels is because they are Revenue Managers and not marketers. So they just see the commission as reducing their achieved average net rate. Which is not the way to see it!!!! Before companies such as Travlezoo existed, the only way to promote a tactical offer to 25million people was to advertise extensively in, for example, Sunday papers, colour supplements and Readers Digest. At £50,000 per page for such publications it required a high advertising budget, with no guarantee of incremental business. You spent a fortune, then held your breath and prayed!

With most of the third parties there is relatively little or no upfront cost and commissions are only payable if you get the business. So it’s a win-win situation. And even a commission level of 35% is nothing compared with any other way of reaching such large numbers of potential customers. And let’s remember that these people have chosen to receive information about hotel deals, so they are highly targeted, which in days of old, you simply couldn’t do.

Flash sales are definitely here to stay. If hotels structure their offers correctly they shouldn’t dilute the existing business or customer base. Customers increasingly are loyal to the third-party brands, so hotels need to work with a variety of third parties. A win-win situation should always be the outcome.

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