A press release caught my eye last week. It was from one of the “flash sale” companies. (For those of you not familiar with the terminology, flash sales are web-based programs that offer a very deep discount for a limited time period.) I can’t remember which one, not because of my age, but because they all appear to be the same insofar as their attitude and consumer positioning. The press release extolled the fact that an AAA 5-Diamond rated resort had utilized their services, and in doing so, they were claiming to the world some form of bona fide for their efficacy as a luxury marketer.
Interesting, I thought! Has it come to this, with luxury properties needing a quick dose of occupancy, like some sort of drug-induced high? I understand the strategic rationale of a trial strategy. My old bosses at Procter & Gamble, a marketing-oriented, packaged-goods firm of pretty good standing, taught me that trial strategies are often necessary in driving new customers to your product. Indeed, thinking of a flash sale as a trial generator might be a logical rationale for the exercise. But the costs incurred through any trial strategy are high, and the margin lost needs to be rationalized through the conversion of these trial candidates to regular, loyal customers.
Simply put, the use of any flash sale program might fool your CFO (and owners) by temporarily bumping your GOR for the period. But if you think for a moment that this is a sound business strategy, you’re fooling yourself! It is a short-term high. Like a drug addiction, it is one that will only be satiated by another “hit” of flash-induced occupancy. And like any addiction, the longer you’re hooked, the harder it is to break away.
Getting back to the strategic value of trial, the goal for any trial program has to be based upon the conversion of these triers into loyal customers. Think of any trial program you undertake as being only the first step of a multi-level program designed to convince these customers to become repeat guests. These strategies should be honed to include effective use of databases and electronic marketing programs, as offered by most reservations systems. Again, the secret here is capturing all of the trial data on your system, not on some third-party flash sale supplier.
Revenue managers often love flash sales, as they serve to fill gaps in the occupancy schedule, say a soft point between two groups scheduled in house. They will argue that the filler is justified on this basis. I can often see their point. But think for a second, would you ever try a drug at a party, just because everyone else is? Hardly, and you would probably find the practice appalling. So why cave in to the pressure on the business? If you have a soft spot, why not reward past guests with excellent pricing or complimentary value added extras that make your property irresistible. Offering a short-term promotion program to a past customer is called a reward for loyalty. Giving it to a total stranger is called foolhardy.
(Article by Larry Mogelonsky, published on hotelsmag on March 2, 2012)