A 5-star hotel at a 1-star price. Free room nights. Hotel deals too good to be true. Flash sales sites have been popping up all over the world web due to the weak economy and hoteliers desperate to get rid of unused inventory. And consumers have been profiting from these flash sales sites downloading hotel inventory at incredibly significant discounts. Sites like Living Social, Haute Look, Snique Away, Travelzoo, and JetSetter. It is true that consumers are discovering that they are saving a lot of money. But is this model sustainable for the hotel industry? Or will all these growing flash sites erode ADR and consumer trust across the board, as OTA sites have in the past?
Flash sites capitalize by appearing exclusive (email membership required), acting as auction sites, or offering flash-bang promotional offers that are only available for a very limited time. To further complicate the process, websites like Groupon and LivingSocial are bringing consumers together to further reduce hotel prices.
Currently, the model is working. Statistics show that consumers are joining these flash sites in droves. And hoteliers, for the moment, are losing inventory. Luxury hotels are finally available to the average traveler, with 4- and 5-star resorts offering great deals 40-60% off. And many consumers are discovering that not only can they now stay in nicer hotels than they could afford in the past, but they can also stay in these properties longer. Many offers include free room nights, extended consumer stays, and complimentary updates on other hotel services. So one way to look at the flash sales site phenomenon is that you are saving the traveling community money while downloading hotel rooms for the industry. A win-win, right?
The question that arises, as these hotels jump on the flash sales bandwagon, are they supporting and building a model that in a few years they will start to complain? Do these hotels lack the creativity and willingness to invest in direct sales (as flash sites are doing) on their own?
Flash sales sites are useful for the retail market that needs to unload unsold stock from their shelves as new models come out or next season’s line is released. For these types of products, the discount is a method of getting rid of inventory that could not otherwise be sold. This is not the case in the hotel industry. As we saw what happened with OTAs, deep discounts lead to value erosion and a lack of consumer trust and loyalty. Hoteliers are taking advantage of their inventory so frequently and for such a low price, it will be nearly impossible to convert rates to where they should be when the time comes. All of these short-term gains will outweigh long-term growth and sustainability. Even if demand increases with a stronger economy, there is a danger that flash sales sites will by then have set too low a bar for ADR and created an unsustainable bottom line.
It’s time for hoteliers to wake up, learn what they see on these flash sales sites, and use them on their own websites. Change the principle of compensation URLs to your own destination and booking office by inciting the same urgency, exclusivity and loyalty that flash sales sites have to yours. Once all the advantages of the flash site (both from a marketing and consumer point of view) are applied to the hotel’s website, a true win-win situation will develop. Hoteliers will be able to meet their rate expectations while satisfying consumers’ desire for the best hotel deals. However, until this happens, flash sales sites seem to be the short-term answer to an age-old question; Where can I find the best deal?