NB: This is a guest article by Matt Zito, an online travel business consultant.
What is the Micro-Tripper? It's the short-term, purely spontaneous travel enabled by the flash sale, group buying, and private-travel sale start-ups.
And now, after a period where a newsiteappears to have launched every month and despite the scepticism of manyin the industry, it appears that for time being the flash sale model the real deal and is starting to create market share.
The new social e-commerce travel companies are not intruding upon an online travel agency’s (OTA) business but are, in essence, capturing an undiscovered new segment of the travel market that I call the "spontaneous micro-tripper".
The spontaneous micro-tripper, created via the convergence of social networking and sharing, new ecommerce technology, an extended recession, our insatiable desire to buy deals, and email marketing, is the primary delivery path of the new "travel deal" product.
The woman in the family leads the spontaneous micro-tripper. Micro-trippers take between three and five trips per year, on one- or two-night stays. Micro-trippers are staying at lodging properties and destinations that 75% of the trippers are unfamiliar with, and/or have never visited before, and did not plan on traveling to.
The trips purchased were never consciously planned or pre-planned and an overwhelming number of the purchases by micro-trippers occurred within twenty-four hours of hearing about the trip from their friends and family, or through the email marketing that comes into their email box.
The spontaneous micro-tripper is not an OTA buyer (the pre-planned travel market). The micro-tripper market is unlike any mature travel market. I believe this new market is being driven not by the 50%-off deal, like most people think, but by the power of the spontaneous purchase and the opportunity it creates for the lodging industry as a new online distribution channel.
The key difference between an OTA buyer and the Micro-Tripper buyer is the pre-planned purchase versus the spontaneous purchase.
The OTA website booking model or sales process supports a traveler’s pre-conditioned itinerary through a trip-quote booking engine, where the traveler, in effect, tells the website where and when he or she wants to go by selecting a destination and arrival and departure dates. This is the main function of the OTA booking model.
At every OTA website the traveler voluntarily chooses to visit the website, so in my view travelers are highly pre-conditioned to know where and when they want to travel.
Whereas the flash-travel sale, group-buying and private-sale booking model or sales process supports minimal if any pre-planning, and starts out by sending an email to the prospect telling them about a travel deal, travel experience or travel destination that they may have never thought of or heard of before.
I have relationships with over 100 directors of sales and revenue managers at many of the major hotels and resorts in North America. A few have told me that their OTA business is slightly decreasing, while their new "flash-sale, private-sale, group-buying" distribution category is increasing.
Therefore the recent Groupon and Expedia joint venture is not about Expedia seeing this as a threat so much as an opportunity to enter into this new market, one that their current business model does not support.
So what are people at the coalface saying? Heather Salter, innkeeper of Bishop Farm Bed & Breakfast and Cottages, says:
"I was ecstatic about the response I got from the Spring travel sale with Buy With Me out of Boston. We sold 300 vouchers in less than 48 hours.
"A lot of people told us it was risky to sell our rooms at 50% off, but we thought this was a great way to get our name out to travelers in Boston. This is Gorilla marketing! We knew we weren’t going to make a ton of money. We received over 5,000 visits to our website, and a check for $18,000 before anyone even came to the B&B, and we garnered many new TripAdvisor reviews from our guests.
"Overall, we feel this was an amazing opportunity for 600 guests from Boston to stay at our B&B and then go back to the city to tell their friends what a wonderful time they had had. You just can’t put a price tag on the amount of marketing we got out of this promotion."
Patrick Matheson, the director of revenue optimization for the 300+ room Stowe Mountain Lodge in Vermont, says:
"The social ecommerce travel companies have become a part of our daily life now. We are pre-scheduling sales and we are reviewing in weekly and monthly reports".
"This is a new distribution channel - we have completely separated the social ecommerce companies from the OTAs and, in some months, social ecommerce sales have out-performed OTA sales on both room nights and ADR. Our internal data shows that 91% of the bookings are new, first-time clients to Stowe Mountain Lodge."
My final point focuses upon the lodging industry’s distribution needs being relevant to the market it is distributing into.
If you’re in agreement that your OTA distribution channel is to reach travelers that know they want to visit your hotel or the destination your property is in, and you agree that the spontaneous micro-tripper market is a new market segment, you’ll have to view the flash-sale, private-sale and group-buying companies as a new online distribution channel.
You need to think about how you value an OTA booking versus a Micro-Tripper booking.
A successful flash-sale, private-sale or group buying sales offer is 50% off to the Micro-Tripper, with the lodging property paying a 20%–40% commission. The 50%-off offer is the bait that attracts Micro-Trippers from inside their computer.
A 50%-off offer with a 30% commission is an effective 65% off your best available rate.
If you’re distributing to the OTA channel, you’re offering between 20%-35% off your best available rate, 35%+ to the opaque OTA channels. The purchaser in both channels is a pre-conditioned buyer, or has pre-planned their travel, and is highly likely looking to directly book your hotel and/or visit your destination or area.
For whatever reason, this buyer is going through the OTA instead of going through your property website direct. My point here is that an OTA travel purchaser is most likely coming to your hotel or destination no matter what.
So how do you value a micro-tripper who is unfamiliar with your lodging property and possibly your destination, was never pre-conditioned or never planned on visiting your lodging property, and who, once introduced to your property through a branded and highly discounted lodging offer or package, decides to book a micro-trip of one or two nights?
I believe the answer to this question ultimately varies with each individual hotel and lodging property. As a side note, I owned a bed and breakfast, fly-fishing lodge in my earlier twenties, so I’ve had experience managing and putting "heads in beds". Yes, on a small scale, but I’ve been there.
The new distribution channel makes sense, purely as a new client acquisition strategy, if I convert but 15%–25% of the Micro-Trippers who visit my property on 50%-off deals as repeat customers over my client lifecycle.
There are then also some secondary benefits; heads in beds, increased occupancy, in-house ancillary income generated, and the marketing exposure your brand will get from being displayed in 1,000,000+ email boxes.
The spontaneous Micro-Tripper is a new leisure travel market segment that your hotel or lodging property will want to distribute into - this new market opens up huge opportunities for destination-based hotels, lodging properties less than a three-hour drive from major cities and seasonal properties.
NB: This is a guest article by Matt Zito, an online travel business consultant in the social e-commerce travel industry, helping both online travel companies and lodging properties build and grow their businesses. Subscribe to the Travel Business Profits eLetter and on September 19-20, attend the Travel Distribution Summit North America, where Zito will moderate.