Digital Marketing Resolution - Case#8 By Max Starkov & Mariana Mechoso Safer

8. I will NOT resort to desperate measures and use social buying and flash sales sites in 2012.

Situation:
Social buying and flash sales sites emerged as a result of the recession. Social buying and flash sales sites in travel and hospitality, such as Groupon Getaways with Expedia, LivingSocial.com, and SniqueAway.com are an integral part of the economy and the supply-demand market equilibrium. For social buying and flash sales sites to exist, there must be market equilibrium (price-quantity) between the demand side (quantity of members/engaged social buyers) and the supply side (quantity of fresh, intriguing deals).

In 2012, all signs are indicating that the hospitality industry is in recovery mode. STR projects that all three of the key performance measurements (occupancy rate, ADR and RevPAR) will realize steady increases for the year as a whole.

As travel demand improves, hoteliers have become reluctant to participate in social buying/flash sales sites because of their "open discount" business model need for steep 50%-60% discounts. Online travel consumers, disappointed by the lack of fresh hotel deals on the social buying sites, are reverting back to traditional booking channels: hotel direct, OTAs, GDS and voice.

Action Plan:
Some hoteliers participate in social buying and flash sales sites merely because their competition is doing so. Our advice? Don't succumb to the devil. Stick to the fundamentals in hotel distribution and make sure you are covering all the bases in the Direct Online Channel.

Hoteliers should realize the existence of "The Law of Unintended Channel Share Loss" which stipulates the following: Any booking via the most discounted channel (i.e. Flash Sales Sites such as Groupon, LivingLocal.com or SniqueAway.com or an OTA) is one fewer booking for the same hotel via the hotel website, call center and GDS (in that order).

This is why we recommend that hoteliers focus on the direct online channel (the hotel branded website), which is by far the cheapest distribution channel. A booking via the property website of an independent hotel costs $10-$11, including all marketing and advertising expenses.