SERIOUS media muscle is moving into the travel distribution chain with the imminent launch of two new group buying sites with very deep pockets and rampant ambition. First cab off the rank is LivingSocial Escapes, a travel offshoot of the very successful LivingSocial deals site. Its first deals newsletter will be sent to a 1.5 million database tomorrow supported by extensive, incentivised advertising on Fairfax and eBay. It will be followed later this month by Getaway Lounge, backed by Nine Entertainment and attendant heavy promotion through the Getaway TV show and the Ninemsn websites.
Though they differ in the finer details, model is basically the same. Source travel product, slash the price by at least 50%, take a heavy commission of up to 40% (maybe more), sell hundreds or even thousands of units (hopefully) via redeemable vouchers, and then give the supplier (inevitably hotels) the money that is left over. While there remains scepticism about this method of selling – mainly from suppliers who do not want to be seen as cheap – consumers love it to the extent that it has the long-term potential to disrupt travel buying patterns and take chunks of business away from Online Travel Agencies, some of which, such as Wotif.com, are getting in on the act.
Certainly a gaggle of entrepreneurs think there’s a future in it. Just one year ago in Australia this space (also known as ‘travel private sales) didn’t really exist, though there was a lot of attention paid to US travel sites Jetsetter and Voyage Prive, which edit and sell generally high quality accommodation at significant discounts. Also on the radar has been the original, US version of LivingSocial Escapes, which can sell up to 10,000 room nights in a single promotion. Results like these, plus outrageous valuations for general deal sites like Groupon, have created a tsunami of new like for like sites battling for deals, consumer attention and maybe, one day, dream on, extreme wealth.
So over the past year the once vacant space has become crowded with the likes of Travel Candy, Travelzoo, Lime and Tonic, Wotif, LivingSocial Escapes and Getaway Lounge, plus generalist sites such as Cudo, which has had some success with travel, all of them saying they are different from the rest and trying desperately to convince hoteliers that they should drop their pants on price to not only sell rooms but share in the reflected promotional glory of their amazing email database. And many are thinking why not? It’s not public – only members of the special club see the deal – so what the hell, let’s go for it, and maybe we can bulk up our own databases and upsell the cheap bastards (which is just about everyone these days).
It’s certain not all of these sites will survive unless they can carve a niche away from the big boys such as LivingSocial Escapes, which draws on deep US experience and has recruited a sales team of 20 staff led by Glenn Andrews. Founder and sales director of parent company, LivingSocial, James Gilbert, has no doubts his company will be able to win the trust and respect of suppliers so that they are able to put the best deals out there. “We put heads on beds,” he says. The LivingSocial strategy is to focus on “nearcation” destinations within 1-3 hours of a major city. Properties so far on board include Wyndham Resort, Mantons Creek Vineyard, Otway Estate Winery and Brewery, Rothbury Escape Guest House, Peppers Guest House Pokolbin, Oaks Seaford Resort, Castaways Resort and Spa, Paradise Palms Resort and Turtle Beach Resort.
Offers consist of packages that include a room stay and other components (tickets, spa credits, bike rentals, restaurant credits or other experiences) at a minimum of 50% discount. Deals will be sent every Wednesday to the 30 markets that LivingSocial covers in Australia and New Zealand, stay live for the week, and also be cross-promoted through the parent LivingSocial daily deal site. The initial email will be sent to the LivingSocial database of 1.5 million subscribers, 69% female, who will be given the option of opting out of the additional travel email. History shows most will stay in. Gilbert says supplier commissions will range between 20% and 40%.
It’s less clear what’s happening with Getaway Lounge, which has appointed travel industry identity Tim Hughes as its first Chief Executive Officer. Hughes, who starts his new job next Monday, is travelling at the moment and could not be reached for comments but explained in an email sent last week: “Getaway Lounge (site note live yet) is a travel only private sale site launched as an independent company funded by Nine Entertainment Co (NEC). A JV partner of international note will be signing on soon. The site is pre-launch and will be live by the end of the month. Two reasons that this is different to a travel deal a day launch. First NEC gives us access unrivalled online and offline marketing in Australia. The brand Getaway Lounge will be associated with the Getaway TV show – Australia’s number one travel TV show. Ninesmsn (one of Australia’s largest websites and a company part owned by NEC) will provide online marketing.”
So where does this leave the smaller operators? Sam Friend, a co-founder of Travel Candy, claims his site (30,000 database) biggest point of difference is giving members “access to exclusive holiday promotions at hand-picked 4 and 5 star resorts, hotels and retreats at prices they won’t find elsewhere with quality content and reviews from TravelCandy.com.au writers. The big boys may have volume but are taking a short term approach gouging large margins and not paying attention to the needs of travel suppliers. We are in this for the long term and understand the importance of serving both customers, our members and travel suppliers.”
While Friend was happy to attack other companies for large margins, the only comment he made in relation to Travel Candy commission was deliberately vague. “Margins are dependent on campaign but lie between Wotif’s and Cudo’s.” For the uneducated that is between 10% and 50% – similar to rival travel deal companies but still much more than any of the Online Travel Agents are presently charging. So you can see that the for any of these sites to survive, and get the inventory the need to do so, they better be selling a hell of a lot of rooms.
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