Which sectors of the hospitality industry are dabbling the most in travel flash sales? Independent hotels and then alternative property types such as inns and B&Bs -- that's who.
A new analysis from PhoCusWright, Travel's Daily Deal: Distribution Disruption or Flash in the Pan?, written by Maggie Rauch and Douglas Quinby, analyzed 100 random flash sales deals (which included accommodations) from Groupon Getaways, LivingSocial Escapes and Travelzoo Local Deals and found that independent hotels (42%) were the most active participants.
The rest of the breakdown was:
- Branded chain hotels (12%),
- Vacation rentals and timeshares (9%), and
For better or worse -- you decide -- independent hotels (42%) obviously see flash sales sites as an adept way to increase their reach, and perhaps reduce the tremendous advantages of the large chains.
Responding to a question about the independents, Quinby says: "I wouldn’t say they level the playing field, but flash sales do give independents another marketing lever to pull to drive demand. Flagged properties, in addition to the very brand affiliation itself, have a larger arsenal of marketing channels to manage distribution and pull in business. Independents are naturally more reliant on intermediaries, and flash sales do present a means to get their properties in front of many more prospective travelers."
And, even 12% participation by chain hotels in travel flash sales might be considered curious. The PhoCuswright study notes:
But the 12% raises some key questions, such as whether these individual branded properties are pursuing unsanctioned sales and marketing practices, and whether the chains are turning a blind eye at the corporate level to give local owners or sales managers some flexibility. Some of these deals may also be in violation of chains' price parity agreements, which cover multiple distribution partners.
The PhoCusWright study, using Yipit data, found that total travel gross billings for daily deals in North America from Groupon Getaways, LivingSocial Escapes and Travelzoo Local Deals stood at $71.5 million in the fourth quarter of 2011. And that was about 8.5% of the $836 million these vendors billed for all of their deals in that quarter.
Of the three flash sales vendors, Groupon had the highest share of travel gross billings, 57%, (versus 36% for LivingSocial and 6% for Travelzoo) even though LivingSocial offered the highest share of deals at 53% (compared with 39% for Groupon and 8% for Travelzoo).
Interestingly, Travelzoo emphasizes that it differentiates itself from Groupon and other competitors by offering deals with real value as opposed to offers for things like teeth-whitening services.
Yet the PhoCusWright study concluded that Travelzoo's deals offered the lowest price point of the three vendors. The study says:
Travelzoo has the lowest price point, which helped it bank 321 vouchers per deal, close to one and a half times the ratio for LivingSocial. But Travelzoo still trails well behind Groupon in sales per offer, perhaps due to lower consumer awareness of its travel offers in its local deals business. Also, a consumer looking at Travelzoo's Local Deals has the ability to discover a huge number of alternative travel deals without leaving the Travelzoo site.
The study found that for some 10% of the deals examined, the purported published value of the deal was different from the actual going rate on the hotel website, although sometimes the flash sales included add-ons.
The study doesn't answer one burning question -- do flash sales provide incremental revenue or cannibalize existing sales?
But, the study does argue that travel flash sales have the potential to become a potent force -- especially as the flash sales sites begin to mine more data and enhance their personalization and yield management efforts.
"But as Groupon's recent purchase of Uptake, the travel semantic search and social data aggregator, suggests, the daily deal providers plan to get a lot cozier with travelers," the study says.