There are so many different types of business that are being categorized as flash sales.
And yes, some of these businesses do commoditize hotel rooms by emphasizing price and destination versus the unique selling attributes of each hotel.
Hotel marketers have given a mixed response till date. At times they don’t see much distinction or innovation from these sites. In fact, they say, if anything, most are just jumping on the bandwagon of copying the business model.
But a specialist like LivingSocial believes hotels need to understand what they want to achieve and need to work with the social buying platform to create deals that offer guests the best of the property, fulfill the hotels goals from running the promotion, and recognizing the costs and revenue requirements of the social buying company.
“Businesses like LivingSocial work closely with hotels and groups of hotels to develop plans that have achieved all of these goals,” said Nazar Musa, GM of Travel Asia Pacific, LivingSocial.
Musa agrees that the number of sites have increased dramatically in the Asia Pacific region over the past year or two, however, the strength of the top few sites is without doubt their understanding of who their subscribers are and what product they should offer them on a daily or weekly basis.
“When you combine significant growth in the number of users that receive offers on a daily basis and an understanding of what these people want to be enticed with each day, then merchants have clarity on the marketing and sales opportunity on offer,” Musa told EyeforTravel.com’s Ritesh Gupta, “We at Livingsocial understand who we are speaking to and work with partners to ensure that all three parties benefit from each promotion, the consumer, the merchant, and ourselves. Companies that are not able to offer this level of sophistication will gradually disappear from the market, and there will undoubtedly be consolidation.”
Musa, who is scheduled to speak at the forthcoming Travel Distribution Summit Asia 2012, to be held in Singapore (May 9 -10) this year, spoke about the social buying category, its significance in hotel distribution and other issues. Excerpts:
How has social buying as a concept progressed in 2011? How is it being perceived in the travel industry as this juncture?
Social buying has grown from almost nothing to be a significant channel in online marketing and promotion for hotels and travel products by the end of 2011. I truly believe that the industry is still trying to understand and plan how best to interact with social buying companies. A significant number of hotels and travel providers have already tried promotions and are evaluating their success and who best to work with in the future.
How do you think flash sales sites have lend a new dimension to hotel distribution?
Hotels can and sometimes do use social buying as a distribution channel and those that manage the contribution by combining the package to include some fixed inventory within the property do it extremely successfully. However, I feel this medium is currently best utilized as a marketing channel giving the opportunity for new clients to come and try a property and its services and then use again or recommend again at a later date. There are constant discussions about attracting the wrong clients by heavily discounting, however, research has proved this not to be the case. The cost of social buying is truly variable. If the promotion does not attract buyers then the hotel does not have any cost – all design and distribution costs are paid by ourselves – and so any income can help get a real figure for the cost of acquisition for new clients.
Would it be right to say that the “niche” that flash sales sites is covering in the distribution model is that it provides hotels with an avenue to manage yield/inventory over a predicted slow period, as well as providing hotels with an effective advance purchase program tool which previously could not be implemented effectively?
Absolutely. We work closely with hotels to understand when they want extra people into their hotel (e.g., weekends for business hotels and in shoulder seasons), and we tailor promotions that help achieve these extra guests whilst still offering an unbelievable package to the consumer.
It is being pointed out that social buying/group buying and flash sales sites will undergo a saturation stage in their lifecycle. Many will reach the end of the road but a few strong ones will survive – albeit with some innovative add-ons to the existing business models. What’s your viewpoint about the category?
I agree. The businesses with the strongest business models and future strategy will survive and work with the industry to become an even bigger cut of their marketing and distribution plans each year. Technology will evolve, which will allow even more innovation, and this will offer even more options to merchants. Eventually there will be a handful of major players in the space, and these will command market share.
Flash sales sites inspire customers and it is also said that they engage them higher up in the purchase funnel than OTAs. How do you think the category on the whole is carving a niche for itself in distribution? What do you think are still the main challenges?
The inspirational aspect of LivingSocial is a fundamental in the strategy of our travel business. Whereas a traditional OTA can distribute great offers and allow clients who are interested in those destinations discover them on their sites, we actively promote the deals with emails throughout the week. It’s vital that we offer our clients something that they perhaps weren’t even considering and drive the idea of a weekend getaway or long-haul holiday into their minds, and this is our niche. Clients are time poor and an offering that takes care of 50 percent or 60 percent of their needs for a quick escape fits nicely. One of our main challenges is to work with the industry to help them understand how we can be of benefit to them, and we are constantly doing this throughout our worldwide network.
What according to you is going to be the next big thing in hotel distribution? Also, where do you foresee the social buying category headed in 2012?
Social buying is without the doubt the next big thing in hotel distribution and promotion. I think 2012 will see a growth in awareness of our category, and we will work closely with hotels and other travel providers to become an important part of their marketing plans for this and future years.