The Groupon Effect and Caribbean Hotels - The Rise of Flash Sale Sites

No doubt about it. When is comes to hotel rates we are in a buyers market. Clients can "name their own price" on Priceline and online travel agents (OTAs) like Expedia, Orbitz and Travelocity are constantly coming up with new 48 hour sales, Black Friday sales etc and they all specify a minimum of 30, 40 and 50% off on top of 20-30% commissions! The things we do to get heads in beds!

In every recessionary environment, new fads come and go and some stick around long enough to become viable business models. One of these new trends has been the rise of flash sale sites such as Jetsetter, Living Social Escapes, Tripalertz among others. These sites take discounting to a whole new level offering discounts of at least 40% off the "lowest searchable rate". So take another 40% off that 30% off special you are running on Expedia and that is the rate that you would sell your rooms at on one of these flash sale sites (before commissions that can run as high as 50% of whatever is left after all that discounting!)

Admittedly some of the deals offered on these sites are clearly at levels that are barely above the incremental cost of filling that room. Why would anyone do this? Is it worth it? Are hoteliers really that desperate to move inventory? What about the long term effects of publicly displaying such a low rate on a site like Living Social with tens of millions of subscribers. Won't that cheapen your brand in the long run?

These are all the questions we asked ourselves at Bay Gardens Resorts when we were first approached by Sniqueaway earlier this year. Sniqueaway, owned by Smarter Travel Media (Tripadvisor's parent company), is a newish entrant to the flash sale market. At the time we were looking at a very soft summer and fall (sound familiar?) and we were willing to try something new. Our flagship property Bay Gardens Beach Resort and Spa was one of the first St. Lucian properties to run a sale on Sniqueaway and we have no regrets.

The number of room nights generated from the sale were not enough to turn our summer around but it did provide a boost in occupancy at rates that were substantially above our marginal cost of filling the room, even after commissions. What was even more important to me was the dramatic increase in traffic to our website as a result of this sale. We experienced about ten times our normal volume of traffic to our site and we were able to determine that virtually all of this traffic came from Sniqueaway using Google Analytics, a tool that all hotel marketing managers should get familiar with.

The marketing value of such exposure is immense! One has to look beyond the low rates and the high commissions and think of the marketing exposure that being in front of millions of high income, well travelled potential customers can provide. Since our first experiment with Sniqueaway we have partnered with several other flash sale sites such as Jetsetter, Bloomspot, Living Social Escapes and the 800 pound gorilla and Flash Sale King, Groupon Getaways.

My own experience with this is that is has been worthwhile for us but before you jump into this you have to be clear about your goals. If your goal is to increase occupancy 20% and to sell hundreds of Groupons or Living Social Escapes then forget it. Travel to the Caribbean from our traditional source markets (US, Cananda and Europe) has become extremely expensive of late and no matter what price you sell a package at, people are going to think long and hard about booking a trip when the airfare is $700 and up. But if your goal is to get exposure and generate traffic to your website that you can turn into potential leads down the road then Flash Sale sites are a great low cost option as they take nothing upfront and only take a commission on whatever is sold.

I also think it is important to debunk some of the misconceptions about working with these flash sale sites as we have now lots of direct experience with this medium:

1. Flash sale sites charge 50% commission - Huh?!? I heard that too after working with several of these sites on 70/30 and 80/20 revenue shares. This is the same commission that is taken by OTAs. Remember travel is a new product offering for several of these sites so they are willing to negotiate.

2. The calibre of clientele that these sale sites attract is low - there was some evidence of this but it does not apply to everyone. Quite a few of these guests were high income earning professionals who can afford to pay regular prices but take pride in paying 1/2 price. For some of them its about bragging rights. Bay Gardens Beach Resort offers a Vacation Ownership program and I was pleasantly surprised when a client who booked an escape with Living Social actually bought a vacation ownership (timeshare) week valued at $15,000! Clearly they had disposable income and they will be back every year for the next 25 years!

3. Publicly displaying such deals is detrimental to your brand and your ADR long term - an interesting argument but I have not seen any evidence that persons expect these flash sale prices to continue indefinitely. I  think the market understands that this is for a limited period of time and we certainly have not seen any drop in the pace of our bookings for our peak or shoulder periods going into next year despite the fact that our rates have increased. Good properties in desirable locations will be able to attract strong ADRs in the long term and a few flash sales here and there will not permanently change that dynamic.

4. The rates that you get after commission are not worth it - I don't disagree in some cases. But at the end of the day if you feel you are better off letting a room remain empty rather than selling it at or below cost then no flash sale site can compel you to make a bad business decision. I have walked away from just as many flash sale opportunities as I have jumped on. If it it does not make good business sense even factoring in the additional exposure then don't do it!

Flash sales have become a permanent part of our marketing strategy, especially for soft periods in the summer and fall. We have received incredible exposure from these sales and in addition to the room nights generated at critical times we have received perhaps 30,000 visits to our website in a short space of time directly linked to our participation in flash sales. A conservative estimate (again derived from Google Analytics) puts our conversion rate at about 1%. So long term about 300 of these visitors may eventually make a booking with us. Maybe more. At an average booking value of $1000, that's a potential $300,000 in bookings in the long run in exchange for no more than $15,000 in commissions paid to flash sale sites to date. That's an incredibly high ROI for any marketing effort!

If you are considering signing up with one of these sites here are a few quick tips on how to make sure you get the most out of it:

1. Pick the right time to launch the sale - we are in the midst of one of the busiest travel booking periods right now (Thanksgiving) and are currently running our second Groupon sale which is performing quite well in terms of exposure and bookings. http://www.groupon.com/ch/getaways/deals/ga-m-bay-gardens-beach-resort
2. Offer more expensive room types that are tough to move - we often offer our more expensive suites that are tough to sell in low season when persons are more budget conscious. This way we don't end up tying up inventory that would otherwise be sold. It also increases the chances of coming up with a package that still generates some profit even after the 50% discount and the commissions!
3. Make use of value add-ons - we offer lots of high margin added products and services that don't cost much to throw in but offer great value to the customer. This makes it easier to discount the entire package 40-50% and still generate some profit.
4. Negotiate! - whatever their standard revenue share is, it is always negotiable. Watch for hidden costs as well such as credit card processing fees that are often added to the regular commission.

I am hoping that more and more Saint Lucian resorts participate in these sales as getting the word out about St. Lucia is an expensive endevour for our local tourist board and with each new flash sale the island will get more and more exposure and gain better top of mind awareness which will benefit all of us.

Internet Marketing Advice for Hotels: Hotel Internet Marketing Tip – Getting Started wit...

Internet Marketing Advice for Hotels: Hotel Internet Marketing Tip – Getting Started wit...: When I first got introduced to Google Analytics, I was like a kid in a candy store. Here was this free tool that allowed me to know exactly...

About Me – Not your typical internet marketer

Hi there!

Thanks for visiting my blog. I certainly don't consider myself to be a traditional online marketer. I am an accounting and finance person by profession who after 4 years of working on Bay Street (Toronto’s version of Wall Street) decided that it was time to come back home to my lovely island of St. Lucia and help take my family business Bay Gardens Resorts to the next level.

Bay Gardens Resorts is a highly successful, locally owned hotel chain consisting of 3 hotels totalling 195 rooms in Rodney Bay Village, St. Lucia’s entertainment capital. But maintaining such high year round occupancy and profitability in the face of the Great Recession is not easy and we have been just as affected by the tough economic times as anyone else. 

With my background as a Chartered Accountant (CA) and Chartered Financial Analyst (CFA) everyone on the Board and in management assumed that I would focus on internal controls, accounting, banking, balance sheet reconciliations etc (you know the stimulating stuff that I got my formal training in). And I have done a lot of that, but what nobody bargained on was the amount of my own time that would be spent on internet and social media marketing and business development.

It might seem strange that an accountant would develop such expertise but it actually makes perfect sense. I’m a business person first and foremost and my accounting and finance background means that I understand return on investment. No matter how you look at it all marketing dollars spent are meant to generate additional profit (not just revenue but incremental profit margins over and above the cost of the marketing itself). Yes, sometimes it is difficult to measure the ROI from certain types of marketing (PR, TV ads etc) but no hotelier would spend good money on any of this if they did not think it would benefit their bottom line in some way.

Internet Marketing – Great ROI for Small Hotels

That’s what I love about internet marketing. It is so much easier to measure your ROI. When you place an ad in a magazine or in a tour operator’s brochure don’t you wonder how many persons actually read and respond to these advertisements and actually make a booking? It is not impossible to measure the response to these types of ads but it is really tough. With internet marketing it is much easier to measure your return on investment. I know how many persons visit my website from a Facebook or Google Adwords campaign and furthermore I know how much revenue is generated from it. I can even tell you which city generates the most revenue from my online marketing activities and what room category persons from a particular zip code booked most often.

I think that the internet provides an excellent medium for small, independent hotels in smaller markets (such as the Caribbean) to gain amazing exposure to a variety of markets that are prohibitively expensive to break into via traditional marketing methods (TV, print, radio). Best of all I have seen it first hand from the perspective of an owner/manager who is not an internet marketing guru. And because of my financial background I can speak first hand of the financial impact that our increased focus on online marketing has had on our bottom line at Bay Gardens Resorts in terms of increased occupancy and ADR and better ROI on marketing spend.

Internet Marketing – Not just for “techies” and “gurus”!

There are a lot of so-called internet marketing experts out there and they charge anything from $100 – $200 US per hour and up to do things that you can honestly do on your own. Some of the things that I manage in house (with the assistance of my talented marketing department) include:

1. Set up and management of various social media accounts (Facebook, Twitter, Linkedin Youtube) and advertising through these media. We have perhaps the most active hotel Facebook page on island (www.facebook.com/baygardensresorts) with 4000+ fans and counting.

2. Set up and management of various pay per click campaigns including Google Adwords, Yahoo/Bing, Bookingbuddy, Travelzoo, Kayak, Expedia among others. 

3. Limited search engine optimization (SEO) – we did outsource some of the more complicated functions but the basics were done (and is still being done) in house

4. Email marketing using Constant Contact - great tool that is really easy to use and affordable.

And much, much more on top of my other functions in accounting, finance and general operational management.

My goal with this blog is to empower independent-minded owners, general managers and marketing managers with information that I have gathered through experience with a variety of internet marketing methods. I am also hoping to get ideas from you about some of your own experiences with internet marketing as well as hospitality management overall.

Happy reading!

Sanovnik Destang, CA, CFA, Google Adwords Qualified Individual

Assistant Managing Director, Bay Gardens Resorts
Board Member, St. Lucia Hotel and Tourism Association (SLHTA)

Hotel Internet Marketing Tip – Getting Started with Google Analytics

When I first got introduced to Google Analytics (thanks Keitha!), I was like a kid in a candy store. Here was this free tool that allowed me to know exactly where my website traffic was coming from, what online marketing campaigns were working and which were not, which zip codes were generating the most traffic etc. A treasure trove of information!

Getting introduced to this tool is what got me hooked on internet marketing. But let’s back up a bit. What is Google Analytics and why do I care as a hotel/business owner or general manager?

Google Analytics is a free tool offered by Google that gives you deep insight into how your website is performing. You can sign up for an account here so long as you have a Google Account (does not have to be a gmail account). http://www.google.com/analytics/.

Setting up an account is extremely easy. The only aspect of it that is a little “technical” is adding some javascript code to your website. This code is automatically generated by Google Analytics when you are setting up the account so all you have to do is copy and paste this code onto every page that you want to track immediately before the closing </head> tag. If you are like me and your HTML knowledge is limited to one chapter in one university IT course 10 years ago, then you can have your webmaster do this for you. If they charge you for this make sure they charge you for no more than 15 minutes of their time as this is about how long it takes.

If you want a step by step guide on how to set up Google Analytics on your website, this article is really helpful. http://knol.google.com/k/how-to-install-google-analytics-in-5-minutes-or-less#

That’s it! Within 24 hours or less your Google Analytics account should be activated and you will start to get extremely useful, detailed information on your website visitors including:

1. Traffic Sources – how do potential customers get to your site? Is it through search engines, referrals from other websites or through a bookmark (direct traffic). This is a great way to find out which online marketing campaigns are actually working.
2. Visitors – demographic information on your visitors, detailed down to the city. These reports also provide information on how engaged website visitors are (how much time did they spend on your site, how many pages did they visit), which web browsers they were using, even the speed of their internet connection.
3. Conversions – if you have a booking engine on your website this is absolutely critical. Where do your bookings come from? What country/region/city? Through which referral sites or search engines? Google Analytics can help you determine this in most cases. If you don’t have a booking engine on your website, Google Analytics can still help your track important site visitor activities (conversions) that you consider important such as signing up for your newsletter, filling out an inquiry form or watching a promotional video.

One article cannot possibly capture the full potential of Google Analytics and its importance to hoteliers but I hope that this helps you to get the ball rolling. Using this tool is an important first step in fine-tuning your marketing strategy both on and offline.