Are hotel flash sales still worth it in 2020?
My hotel flash sale journey began at Groupon in 2011 (a couple of years after the financial crash) and ended with Travelzoo in 2017. This was a really interesting time to be in the industry – Groupon exploded with growth despite massive economic uncertainty. It namely came down to a rise in consumers tightening their belt and looking for bargains, as well as businesses dropping their margins to drive volume and increase upsells and repeat customers.
I started working on the Irish team looking after all kinds of different clients, from owl sanctuaries to restaurants. I loved dealing with hotels and quickly carved a niche out for myself in the hotel market – specifically in Donegal, Belfast and Dublin’s surrounding areas. We ran highly successful campaigns for hotels that were struggling. Often, they’d been built or refurbed with cheap financing from the boom days and needed to show creditors high occupancy rates and revenue to stay afloat.
I was then asked to help lead sales for a new, specialist, travel-only Groupon Getaways team. Across the UK and Ireland, I worked with the largest hotels, chains, and key accounts in the industry.
I worked at Travelzoo, which was in the process of developing channel management integration – an advancement that definitely could have eased operational pains for flash promotions. I worked with some of the best hotels running flash sales in the area.
Based on those years of experience, here are my top 7 tips for hoteliers trying flash sales in 2020!
Top 7 Insider Tips:
Tip 1. Have a strategy
Have a strategy: Flash sales drive volume. The volume is usually not very profitable as it’s heavily discounted and heavily commissioned by flash sale companies (more on this later). As such, it’s critical that you drive volume where you have capacity! In an ideal world, you do not want an overflow of flash sale customers cannibalising your existing full-paying clientele. AVOID this kind of conflict by limiting the time/days the vouchers are valid for to target your quiet times.
Tip 2: Seasonal or leisure
The most successful hotels we ran campaigns with were extremely seasonal or focused on leisure. These properties where either completely full or empty, so we ran campaigns that were only valid midweek or in the winter – to drive volume during quiet times. Very rarely did it make sense for a downtown hotel to run a flash sale due to the complexities of their occupancy rates.
Tip 3: Upsell
Have an upsell strategy in place, and be prepared. 🙂 Offer room upgrades, as well as upgrades from the flash offer menu to a la carte.
Tip 4: Guest data
Be sure to collect customer data. Make the Groupon customer your own customer by adding them to your database to re-market to them. Many larger hotels live and die by the strength of their customer list.
Tip 5: Negotiate
Negotiate hard – especially on commission and what’s included in the offering. I charged hotels anywhere from 15% to 38% commission. As a benchmark, you shouldn’t be paying more than 20%.
Tip 6: Fixed cost vs variable cost
Watch your margins: a hotelier must try to keep their offering primarily in the fixed cost realm, avoiding and reducing variable costs in the flash sale offer. This means avoiding food.
Tip 7: Get ready
Before you start, know how you’ll be managing the influx of reservations. Check if the flash sale company of your choice has a channel manager connection, which will make your life much easier and stop your phone from ringing off the hook.
The flash sale market was declining when I left the industry over 5 years ago, and it seems to be directly correlated with the economy. When people had more money, they didn’t have the herd mentality and sense of scarcity flash sale companies were so good at exploiting at the time. And every time a deal ran, it dropped in performance and suffered deal fatigue – likely because the customer worked out that if they’d seen it once as a limited time offer, they’d probably see it again. The urgency was gone. In my opinion, the flash sales business declined because of a lack of personalisation. They slammed their databases over and over again with the same product.
We’re now seeing the rise of smart Hotel CRM’s that allow flash sale capability with 0% commission, as well as a host of other benefits that I’ll touch on in another post.
With another recession on the horizon, we’ll see how this type of urgency-based email marketing will evolve.
If any hotels wants to contact me for impartial advice on flash sale companies or anything else related to this article, you can reach me on Linkedin: https://www.linkedin.com/in/connor-neeson-19894242/