‘Discounting tarnishes the ski industry as a brand’
It’s recognised that one of the key challenges the industry faces is persuading consumers to book in advance, rather than wait for discounted holidays.
Roy Barker of Spike Marketing recently told ABTOF that ‘discounting tarnishes the ski industry as a brand’.
Discounts have become so pervasive in recent years that consumers have learned that, outside of high-season weeks, it can be worth waiting until nearer the time to book.
Growth in passengers based on the paper-thin margins left after discounting will not help our industry – we need to re-educate the consumer that there is value in booking in advance.
Discounts are prevalent elsewhere
The challenge is that discounting is now so prevalent in the mind of the consumer that few people expect to pay the full price for anything. If it’s not Groupon, a quick search will give you a ‘2 for 1’ voucher at any chain restaurant. Retail sales no longer have seasons (‘Spring Sale’ – how quaint does that sound?), but last all year. It’s going to be hard to turn this mentality around.
So can selling ski holidays via Groupon help, or will it just reinforce the belief that everything is available at a discount, including ski holidays? Surely a planned approach to marketing and branding would be more effective.
Ski holidays are already being sold on Groupon
One operator has already tried it out. I noticed this campaign on Groupon on 15 September 2011:
The message here is clear. Book now and save 50%. Evidently there were 95 sales, and I can think of many tour operators who would be happy to sell that in a week in mid-September, let alone the 24-hour selling window that typically applies to Groupon.
Is this good business?
But is this good business? How can you give a 50% discount in September and make a profit over the season.
I had a look at their website. It turned out the same deal was available on their website (minus ‘a hamper of wine, cheese and bread on arrival’), albeit only for the four weeks at the very start and end of the season:
Can you make money out of Groupon discounting?
I wondered what sort of discount this represented. Could they really be selling holidays at a 50% discount already?
Typically Groupon charge in the region of 50% for their cut of any sale. This would suggest net revenues of £248 (2 person share), £198 (4 person share) and £149 (6 person share).
[The Groupon deal also included three days’ equipment hire, a day trip to Les 2 Alpes and the aforementioned hamper. That probably adds £100 or so of value, but might only cost the operator say £10, as the equipment is their own stock and the bus will be running to L2A anyway.]
The Groupon dates are highlighted in red in the price panel below. This suggests a typical net discount of £100 (going up to £150) from these prices. NB – the week commencing 25 March is fully booked and the prices are not shown either online or in their brochure. The the net discount for this week is likely to be much higher. We asked the operator if they could advise the original prices, but we have not heard back from them.
The Fine Print
Incidentally, if you’re wondering how a 50% discount can be claimed, take a look at the Groupon ‘Fine Print’, shown below. Note the highlighted section: ‘Original prices based on hotel rack rates’ i.e. not our brochure prices.
Is Groupon a beneficial new form of distribution?
So has this operator spotted a new form of distribution that the rest of the market is missing?
I can’t answer that. I don’t know how much Groupon’s share of each sale was and what sort of margins this operator works on. However, it’s hard to believe that any holidays sold on this deal for shoulder season weeks will be profitable.
Set against that, the company has 95 guaranteed customers, who have paid their entire holiday in advance. They may be able to improve the margin with in-resort sales and many of those customers may come back. Every customer has an acquisition cost and this could be considered an alternative to advertising.
In my view however, to paraphrase Roy Barker, quoted in my opening statement above: ‘Selling on Groupon devalues the ski industry as a brand.’
Please feel free to add your own comments below. I’m interested to know what others in the industry think.
By Iain Martin