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Cornell study on flash sale, private sale distribution in hospitality

February 13, 2012 | Hotel Marketing

Study respondents’ general assessment of the deals’ success was moderate. They agreed that their deals brought in new customers, but repeat business was more tenuous. Yet, respondents saw little evidence of cannibalization of existing business, particularly when they packaged their deal carefully.

The potential uses of flash deals or daily deals have caught the attention of many restaurant and hotel firms, as well as third-party distributors, such as Expedia.

A survey of nearly 200 international hospitality practitioners found that a remarkable 42 percent had tested a flash deal promotion, and some of those firms had offered numerous flash deals. At the same time, 46 percent of the responding hospitality firms had no intention of offering a flash deal, with some citing concerns about the potential damage of group discounts to brand integrity.

Individual hotels that had offered flash deals tended to be on the large side, averaging more than 150 rooms.

Discounts offered in the deals ranged widely, from 15 to over 75 percent off rack rates. Likewise, commissions paid to deal vendors saw a wide range, as the most typical commission was 15 to 20 percent, but some hotels paid as much as a 40-percent commission.

Most of the deals reported in this survey had been offered through Groupon or LivingSocial, but Jetsetter unexpectedly appeared as the number-three flash-deal channel for these respondents.

Deal structures also varied widely, although many deals were offered for mid- week. Although most offers involve a non-refundable purchase, deal vendors are increasingly offering their customers opportunities to obtain refunds in certain circumstances.

Respondents’ general assessment of the deals’ success was moderate. They agreed that their deals brought in new customers, but repeat business was more tenuous. One favorable outcome was that the respondents saw little evidence of cannibalization of existing business, particularly when they packaged their deal carefully.

On balance, hoteliers who were most pleased with the outcome of their deals were also the ones who managed the cost of the deal most assertively.

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