Many companies are just opening up to flash sales; for hotels, it’s about filling rooms and reaching out to new guests. Some are pulling away from them due to profit loss and lack of returning visitors. I reached out to my mentor Larry Mogelonsky and asked his opinion on the use of daily deals companies in the hospitality industry.
In his typical cut-to-the-chase style, Mr. Mogelonsky had this to say, “Flash sales are heroin.” Despite the initial gratification of filling beds, it is not worth the loss of profit. Many people have discussed “training the guest” and I believe this falls into the same category. Why would consumers return to paying full price (or better put, full value) for a room they know they can have 85% off if they only wait a few weeks? They’ve been trained to wait for the sale.
Aside from undercutting the value proposition of the property, he explained that the displacement of regular patrons has become a secondary concern. So, imagine you have a favorite local spot for lunch or coffee, and they run a flash deal for a predetermined period of time. While they may see a huge increase in the number of new patrons during that time, the previous loyal visitors no longer enjoy the space due to overcrowding. A few weeks later, the deal seekers have moved on to greener pastures and the regular guests have found a new favorite spot. The initial increase in business does nothing for long term profits.
Most daily deals companies operate the same way; hotels lose revenue first by discounting the rooms, and second by paying a commission to the flash sales company. Mr. Mogelonsky tells me that the only time he could see turning to flash sales is in an event such as a massive cancellation – when a huge block of rooms need to be filled very quickly, but never as a day-to-day program. Even then, consideration must be taken for the repercussions and every effort must be made to turn these flash-sale guests into loyal ones.
Have you had experience with flash sales? What is your advice for fellow hoteliers?