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Are Flash Sales Good For Business?

Flash Sales took off very quickly and while the speed has slowed down, their distribution list size only continues to grow – with Groupon subscribers now reaching over 55 million.  So how do you decide if it makes since for your hotel or attraction to participate?

Flash Sale is the term that companies like Groupon and Living Social have generated because, like a flash flood, you need to be prepared when your “Deal of the Day” drops.  In our experience, there has been no other initiative to generate more traffic to a site, or more online bookings in one day, than some of these campaigns – so not only do you need to make sure that the deals make sense financially, but also that you market and prepare as much as possible to get the most out of it.

Deciding If It Makes Sense
The idea of running these types of sales can draw some scowls and negative quips from many revenue managers, and indeed this type of promotion isn’t right for all properties. One of the best arguments we have for why to participate in these sales, is the massive amount of exposure to new customers.  Sure, some of the participants will only want to come back at the bargain price, but what other initiative out there gets that many new faces through the door?  The audience overlap is 14% and 7% for Groupon and Living Social, respectively, so all the rest are people who may have never heard about you!   When deciding whether or not this type of sale makes sense for your property, pay special attention to the following factors.

What is your annual occupancy?  This is important.  If you are currently running a very high annual occupancy this type of promotion may not be right for you for several reasons.  The first reason is that you may not need to run a sale this aggressive to sell rooms.  Running a promotion of this sort when you already have a high occupancy will likely result in a sizeable drop in ADR (Average Daily Rate) and therefore REVPAR (Revenue Per Available Room).  When auditing your occupancy draw a sharp distinction between an actual high annual occupancy and relative high annual occupancy.  Relative high annual occupancy would be defined as occupancy that is high based on competitive set or the market as a whole.  Based on the audience overlap statistics above these promotions might be a good fit for properties with relative high annual occupancy status.

Is there enough current demand to achieve the desired results without running a flash sale?  This factor is closely tied in with your occupancy, but if there is a possibility of selling these rooms on a more cost effective channel those options should be explored before running a flash sale.  The easiest way to determine this is to look at your occupancy among your competitors and in the market as a whole.  If you are underperforming based on either or both and your competitors or the market as a whole have actual high annual occupancy there may be other options you haven’t considered yet.
So what is it going to cost you?  While there are no up-front fees, the companies of course take a negotiated commission, so you have to be smart about what you offer.

How It Works
Once you have agreed upon the terms, both Groupon and Living Social will decide the promotion date, and give you prior notice. They will write the copy that will appear on their site and eNewsletter campaigns, which is one less thing you have to do, but unfortunately this means you don’t always see what they say about your product.   Vouchers have a time frame, so make sure you set limitations that make sense for you, and never oversell.
You also may have the opportunity to select the region for your deals to be distribution, so definitely ask.  In that case not only can you select the markets that perform well for you, and reach new ones, but you can coordinate to have the same deal drop multiple times to new people.

Maximizing Deal Performance
To maximize the effectiveness of your flash sale one of the keys is to be prepared.  The call volume, in addition to website traffic, can be enormous and likely overwhelming especially for smaller properties that operate with a limited front desk or reservations staff.  Make sure you are staffed correctly.  Find out from Groupon or Living Social what time the bulk of the emails will go out to their subscribers so that you can have the right level, and the right quality, of staffing. Make sure the entire team knows the details and restrictions of the deal, but also have additional upsell information ready.  Treat these customers as you would any of your others, making sure they get the full service level despite the busy day.

Another opportunity to maximize the effectiveness of the sale is to have a plan in place to upsell guests.  This could include upgrading to a higher end room type upon booking or check-in, booking additional room nights, adding an amenity like champagne or chocolate covered strawberries, spa gift certificates, or almost anything that you would offer all of your guests.  Frequently these consumers are prone to spend more money once at a property than typical guests because they spent significantly less on the room itself.

The surge online to your website will also be huge and there is no worse first impression than landing on a site that’s down. Make sure you have notified your web host and given them an idea of the timeframe and distribution size to expect.  Also consider setting up a landing page specifically for the flash sale.   This customized content and faster load time will not only help with more bookings, but can also prevent website server overload issues.

Ear mark these customers information so you know your Flash Sale customers when they come in.  They love discounts, so educate them about additional promotions while they are there (if appropriate), and always give them some sort of return incentive to encourage their repeat visit.