How to use Flash Sales to Turn Around a Distressed or Under-Performing Hotel?
When discussing Flash Sales there appears to be a lot of dislike in the hotel industry. The consensus could be summarized as that commissions of such email subscription promotional websites are way too high and discounts required are way too steep. Moreover you will be undercutting your own direct price positioning.
If your hotel runs at 95%+ occupancy each year, I of course might have to agree with you. However if your hotel is distressed or under-performing, you should look for opportunities to generate growth. From a revenue management perspective that is. Because in the end the cost of extra revenue is not extra cost!
I understand the fear that these types of channels will eat away at the existing revenues of your hotel, and hence increase cost and lower average room rate. But this does not have to be the case if managed well.
At Xotels we have used such promotional websites to help turn around the financial results of distressed and under-performing hotels. In some of our city destinations where occupancy is traditionally low during winter or summer (due to the heat), we have implemented flash sales campaigns, in a surgical method, to gain extra occupancy points only in periods of need.
We understand it is important not to do an aggressive discount on room only or bed and breakfast prices, as you will risk to merely displace existing demand. So the offers were smartly configured, incorporating extras into a package that had a high face value but low cost, to offset the discount given. This way the impact on the ADR was controlled, and consumers still got a sense of a deal with a lot of added value.
As a result we have been able to add as much as 10% to 30% occupancy in the low demand periods in various hotels. Through these flash sales email campaigns we have been able to reach consumers we were not reaching before though our existing distribution channels.
This helped us turn around the hotels performance quickly in the first one or two years. Now the task lay upon us to leverage this new (and relatively expensive) business into a less costly or higher yield one. The extra revenue streams allowed for more investment in guest service, maintenance and as well internet marketing. Subsequently the popularity of these hotel properties grew and we started seeing more demand coming from our ‘traditional’ distribution channels.
After about 2 years, the flash sales has scaled back to a minimum, and reservations are coming in via the hotels own websites and OTA.
Annual ocupancies of some of these hotels have grown by 5% to 15%, Revpar went up 15% to 25% (in 2 years time), and one hotel went from number 14 to number 2 in their competitive set.
I think we can say, mission accomplished with the help of some flash sales (where needed)!
Don’t just see it as something costly and evil. Use it smartly to your advantage. It can be a short term investment serving a larger long term goal.