How hoteliers should approach flash sales advertising -

If you are one of the 115 million subscribers of Groupon's daily deals email, you expect that every morning when you awake you can grab your coffee and see what offers are available in your area.

You may have also noticed the utter saturation in the marketplace with the amount of deal Websites that have sprung up in the last 2-3 years. A recent Wall Street Journal article, "Get ‘Em While They Last: ‘Daily Deal' Sites Dying Fast" cites that 170 of 530 deal Websites have shut down or been sold so far in 2011. Even through this apparent consolidation, that means that over 360 deal Websites still remain.

Group buying or private/flash sale channels provide an opportunity to quickly move an influx of short-term inventory. Typically, a block of inventory is secured from the advertiser in the form of room nights, restaurant credits or spa services.

The inventory is then discounted 40-60%, the sale will take place for generally 48 hours and the publisher will keep a commission of 30-50% of the total gross sale. The resulting financials of the sale is net revenue to the advertiser of approximately 25-40% of the original retail cost.

With new customer acquisition costs drastically increasing for big players like Groupon, it appears that both advertisers and users alike are becoming more wary and discerning of what is really a ‘deal' in these marketplaces.

Due to the vast number of sites vying for their business, advertisers are slower to jump at these opportunities for fear that overusing these channels will erode their retail rates. The saturation of these Websites paired with higher user acquisition costs, leads one to believe that even pioneers like Groupon may be ‘over-the-hill' as it relates to their current business model.

While these channels reach a sizeable audience and there are responsible pricing tactics to limit erosion of rate, the general message is to proceed with caution. When consulting clients on this subject I will generally recommend that if they choose to use flash sale Websites, that they ensure their use complements other forms of advertising, to avoid making flash sales a core component to their marketing strategy.

Best Practices for engaging with Flash Sales:

• Flash sale sites should only be used during need periods to help build occupancy without displacing higher paying guests.
• Where possible, package in high value amenities with the rate, such as champagne, breakfast, or spa services.  This helps to maintain rate opacity and absorb the discount across rooms; by packaging in add on's, the room rate is not as greatly impacted.
• Get statistics/demographics from the site.  Take the help of the flash sale account manager and listen to their advice on creating a sale that generates the demand, when you need it, where you need it, and who you want it from. 

Flash sales may be a flash in the pan looking back on this era in a few years, however while they are around, they can be beneficial as an infrequent component to the overall media mix if pursued carefully.

Ken Barna (ken.barna@sabre.com) manages customer online media campaigns for Sabre Hospitality Solutions -  www.sabre.com  This article will also appear on www.webintravel.com.