This commentary by Doug Miller, senior vice president, New Initiatives for LivingSocial, is in response to a blog by Max Starkov posted to hotelsmag.com.
In the annals of erroneous headlines, last week’s column by Max Starkov on the social travel industry may rank up there with “Dewey Defeats Truman.”
Starkov’s piece was led by the self-congratulatory header of “I told you so: How the flash sale bubble popped.” Unfortunately, as anyone working in the travel distribution industry today knows, the exact opposite of what he predicted is happening, as social travel is skyrocketing in growth and popularity.
While the social commerce industry is still in its infancy, and it’s too early to predict what it will look like in the future, it is quickly solidifying its role as a powerful distribution channel with unique advantages for hoteliers and travelers alike.
Rather than discussing the industry in abstract terms, however, let’s look at the specific claims made in Starkov’s piece, all of which are demonstrably false.
Myth #1: The social travel industry is a recessionary phenomenon whose growth has peaked and will fall as the economy improves and hotels decline to use it.
On this, the facts speak for themselves. LivingSocial only launched its Escapes service in November 2010. Since then, our members have booked more than 750,000 room nights with more than 800 different hotel partners. Other companies with similar offerings have also seen hockey-stick growth over recent months.
The pace of adoption by users and hotels, from a base of zero, is spectacular, and it continues to accelerate with an increasing number of new hotels looking to partner every week. In short, far from peaking, this industry has just left the runway and started its ascent as hotels learn how to use it as a valuable marketing channel and users become accustomed to finding great new travel ideas through it.
Myth #2: The social commerce travel buying model hurts hotels by reducing their margins on rooms they would have otherwise sold at full price.
This claim betrays a basic ignorance of the social travel model. Most existing distribution channels involve the “pull” mechanism of a traveler searching for a room in a particular destination, on a particular date, to meet an existing travel need. In other words, a user who knows they are visiting a particular city may compare prices for their stay across OTAs, search engines, and hotel web sites.
The social travel model, however, is based on the inverted “push” model: we send our members new ideas for great destinations that they had not intended to visit until they got our e-mail. In other words, social travel offerings are designed to create demand by inspiring consumers to travel and enjoy unique experiences, and thus, almost all subsequent room bookings are additive to those the hotel would have received through other channels.
In fact, 70% of LivingSocial Escapes purchasers weren’t actively looking to book travel when our email arrived in their inbox.
Myth #3: Working with third-party sites hinders the property’s ability to build relationships with their customers.
Please don’t confuse social buying sites with OTAs, as the model does not have any interest in monopolizing the customer relationship. The goal is to make the introduction between property and customer, and once that initial introduction is made, the relationship belongs to the hotel.
For example, every LivingSocial Escapes promotion includes direct links to the hotel website, and we encourage users to visit the hotel’s page, learn more about the property and build a direct relationship with the hotel. Once our members have “discovered” a hotel through one of our packages, we hope they will return time and again, and we help the hotel build a relationship to ensure they do.
Myth #4: Social travel drives a race to the bottom on prices, in part because the “open discounts” offered are visible to travelers.
Once again, this claim highlights a misunderstanding of the social buying site sale model. Unique packages are meant to inspire travel and often include premium room types, meals, spa treatments, local activities, upgrades, and other perks. These packages are not about price, they’re about value.
Each package is offered as a bundle and does not break out the room cost or other prices within that bundle. The goal is to offer the best experience for the traveler, not the cheapest price for a room, and we work to protect our brand and that of our hotel partners in doing so.
Thus, in many ways, social buying sites are more akin to a brick-and-mortar travel agent or a glossy travel magazine, not a discount travel site.
Myth #5: The multi-channel marketing approach hurts hotels.
What decade is Starkov living in? Travelers now have hundreds of different sources to tune into. They’re discovering destinations and properties through friends and the recommendations of like-minded contacts in their social graph. The socially connected and empowered consumer is here to stay, and it means marketing channels are proliferating. Trying to turn back the clock will only be turning away business that a hotel needs to succeed.
Within our new socially connected world, different channels work best for different needs. For hotels that are trying to fill unused inventory with visitors who wouldn’t have come otherwise, and as part of a premium package that creates a positive and lasting traveler experience, we believe that the social travel channel can offer an excellent solution.
Despite what Max Starkov may think, there’s a big difference between social buying sites like LivingSocial Escapes and traditional flash sale sites. Unfortunately, we’re often lumped into the same category as these flash sale sites – a last resort at the end of the supply chain and a way to fill unoccupied rooms. But, with the rise of the social commerce industry, we’ve separated ourselves from that pack and flipped everything you think you know about us on its head.