Should flash sales be part of your hotel revenue management strategy? The pros and cons
Consumers love them, hoteliers are generally wary of them and the promotional websites that push them out are completely and utterly devoted to them.
We’re talking about flash sales.
There’s no mystery as to why consumers and promotional websites love flash sales of course. Consumers get what they think is a great bargain and, in exchange for access to their extensive databases of potential customers, websites get a very healthy serving (sometimes as eye-wateringly high as 50%) of commission on all sales.
So what’s in it for hotel revenue managers? Despite an obvious reluctance to hand over higher commissions on what are already discounted rates, why are so many hoteliers willing to participate? And should you consider making flash sales part of your revenue management strategy?
Flash sales: the downside for revenue managers
For flash sales to be fully effective, customers need to feel like they have the chance of grabbing a real bargain. Consumers are used to seeing massive discounts on what they would normally expect to pay, so it is often the case that revenue managers will need to drastically undercut their own direct price position.
Add to this the commissions that flash sale sites claim for the privilege of sharing your reduced rates, and it can seem like there is very little chance of turning anything like a profit for your hotel.
Another major downside of participating in flash sales too frequently can be the devaluing of your business in the eyes of your target audience. Higher-end clientele could be put off staying with you if they start to see your hotel as more bargain basement than chic boutique.
And who is really going to be willing to pay full price for a hotel stay that they know they’ll get for a fraction of the price if they wait a couple of weeks for your next flash sale?
So do flash sales offer any value as a revenue management strategy?
You might think with all these negatives, any revenue manager worth his or her salt wouldn’t consider participating in a flash sale. But when handled with care and caution, flash sales can actually prove to be a very useful revenue management tool.
Employed judiciously, they can buoy up periods that see a dip in occupancy, or can act as a shot in the arm for under-performing hotels.
They can also help to boost your visibility. Customers drawn in by a promotional rate will of course be so impressed when they stay at your hotel, they may want to return.
There are a number of techniques revenue managers can use to ensure they reap the benefits of flash sales as much as their guests do.
Firstly, make sure you’re using the right flash sale partner for your guest demographic. Will they offer flexibility with blackout dates? Are they able to segment their subscribers to match your target audience? There is an abundance of flash sale sites out there these days, so do your research and pick the channel that caters most to your needs.
Secondly, try to avoid offering room-only or bed-and-breakfast rooms in flash sales. Make the deals you offer more of a package, incorporating value-added extras with high face value but low cost. Using your flash sale as a tool to push suite upgrades, spa treatments or restaurant deals may offset the discount you’re offering, while giving your guests the sense that they’re getting a lot of added value. Everyone’s a winner.
Thirdly, make sure you set limits to the number of rooms available at the flash sale price and the redemption period. The last thing you want is to lose out by giving away rooms you could have potentially sold full price at reduced rates.
When managed carefully, flash sales can be an effective tool for your revenue management strategy.
Octopus Revenue’s revenue management specialists have the knowledge and experience to help to drive performance. Get in touch today to find out how we can help your business.
