NB: This is a guest article by Joel Brandon Bravo, managing director of Travelzoo UK.
The Expedia-Groupon announcement has added more fuel to the alreadyhot topic of flash sales and deal sites.
But I'm often asked: how does Travelzoo feel about these relatively new entrants to the market?
In short, we believe that a rising tide lifts all boats and we will continue with what we have been doing and focus on value, honesty and quality.
The Expedia-Groupon partnership does bring a deal-hungry audience together with an understanding and access of the travel supply industry. The success of it will be in the implementation, and the devil, no doubt, in the detail.
A risk is perhaps that deal sites make most sense when the business is incremental not just channel-shifting at a lower price.
The keys to survival in the increasingly crowded market are to offer something different to the competition, provide content that subscribers really want, and focus on quality.
Consumers only have an appetite for receiving a certain number of deal emails per day, and if they have a poor experience or receive emails that they don’t feel are relevant to them, they are very likely to unsubscribe.
Having clear USPs is also key as it’s very easy for consumers to throw all daily deal sites into the same "bucket", especially with so many aggressive ad campaigns around.
At Travelzoo we maintain that the best deals are not mass produced, so all our deals are made by us and every deal takes hours to put together. We have found that mass produced deals do not work - AOL Wow is a perfect example of how the concept can go wrong, even when there is a huge brand behind it.
The main reasons the concept of daily deals took off so quickly are threefold:
1. Timing
The modern consumer does not want to compromise the quality of their lifestyle despite current economic conditions, and receiving deals on a plate in their inbox every morning has allowed them to continue to enjoy some of life’s luxuries without breaking the bank.
2. Use of social media
At a time when the Facebook and Twitter phenomena are at their peak, using a minimum purchase level and encouraging consumers to "tell their friends" about deals was truly inspired.
3. Investment
A business model that in theory offers "no risk advertising" was seen as an advertising breakthrough and led to huge investment in some of the big players. This allowed these businesses to spend big on marketing and led to huge growth of subscriber bases at the same time.
Now the industry is facing more and more challenges, and the public is beginning to lose confidence. With business commentators casting doubt over the long-term sustainability of the model, and both consumers and businesses who have run deals having bad experiences which have been heavily publicised, the public is becoming more wary.
This is where quality becomes so important. Consumers want deals at quality establishments. Businesses want to work with quality partners whom they trust to run mutually beneficial deals.
The quantity of deals is increasing with more and more new players jumping on the bandwagon, but with so much competition for deals, quality is being increasingly compromised. This is why it appears that the players that retain the most integrity will be those who survive in the long run, rather than simply those with the deepest pockets.
We have been in the travel deal publishing business for 13 years and launched Local Deals in the US in August 2010 (in the UK in December). We have found that hotels which had successfully filled room nights with our audience also needed to attract a more regular quality local customer to their spa or restaurant.
Knowing where our subscribers lived and having their trust in sourcing quality products and deals was a natural extension of that. We also found we could deliver more volume and a higher spending audience than the newer players in the market. I’d invite any business owner who has run with multiple channels to post here and we’ll take the Pepsi challenge!
We've found that 40-60% of purchases were for the higher standard room with accommodation offers and spas have confirmed that around 50% of customers pay for an additional full price treatment.
Of course hoteliers need to look at it in the mix with the rest of their channels. Charge your higher rates when demand is strong and when there isn’t enough demand, be prepared to offer great deals to fill rooms and then engage with those customers so they become your repeat business when you market to them, at lower cost, directly.
That’s a benefit of the customer coming directly to the hotel rather than via a TPI/OTA.
Our feeling is that ultimately only relationships that work for both sides, hotels and publishers will flourish in the long run. Both sides have to feel like they benefitted commercially and more importantly left the customer with a good experience or it’s all for nought.
I interviewed an ex-employee of a flash sales site this week who wanted to join us because, they said, while it had been relatively easy to get clients to sign up initially, it had been increasingly difficult to get them to rerun or sign up new partners.
We published our millionth deal this spring, so I can’t say we have got it 100% right, 100% of the time, but in the same way we test our deals, we ourselves have been tested by suppliers and subscribers who come back.
NB: This is a guest article by Joel Brandon Bravo, managing director of Travelzoo UK.