Operators in the lodging industry often grapple with excess inventories due to the seasonal nature of their consumption trends. Not only is the lodging business affected by the seasonality of consumption, it is also affected by economic dynamics and market slowdowns. These moderating factors, triggered by the advent of internet and ecommerce have spawned a new business model known as “Flash Sales.” This is an ecommerce trend in which a website may offer a sale on a single product for the duration between 24 and 36 hours (Max & Ritesh, 2011). Potential customers then register as members to receive daily updates of the products in sale through social media or email. Websites partner with suppliers to give great discounts to the customers according to optimal economies of scale. Companies' offering great discounts on all products from home goods to luxury fashion to local services and travel experiences; this represents a rapidly growing section in the online retail business. The limits on sales have generated a new market trend known as online impulse travel deals purchase. What this new trend means for the travel segment is that empty hotel rooms that would otherwise be hard to sell due to the aforementioned constraints would be filled with ease.
Flash sales have offered travellers a chance to discover a new property or hotel experience that they would not have been afforded. The high discounts offered by flash sites are enough to attract customers; travelers are usually motivated by deals. Research indicates that 20% of travelers may buy some sort of travel service because of a flash sale or time sensitive offer delivered via email from providers such as airlines or hoteliers. This shows that the cost may not be the only trigger behind purchase; the right price must follow an attractive deal (Dana & Anupreeta, 2012).
Some of the examples of flash sites are Groupon, and Living Social. When Groupon launched Getaways with Expedia in July 2009, they were able to receive 9% of their $147 million in sales in North America from Getaways by October. Groupons closest competitor LivingSocial, after debuting its Escapes segment in November 2012 has been able to book over 600,000 rooms in hotels exceeding 800. Considering the numbers, one may wonder why this business will survive in the market (Dane, 2012).
How? Why? When?
Groupon had benefitted from the couponing comeback of the mid 2000s, which was fueled by recession, rising food prices, and the advent of digital marketing and social media. Although online coupons accounted for only 1 percent of all coupons distributed, they accounted for about 10 percent of all coupons redeemed (Coupon Facts Report, 2010). Currently, Groupon is the most renowned and the largest flash site. The site is able to feature a daily deal for every city in which it operates, offering great discounts for products. For instance a sushi special that would normally cost $40 is featured for $20 or $59 for a spa that is...