You will have heard of Groupon, and its competitor, Living Social. Both are phenonoma, with the former often quoted as the fastest growing company of all time.
‘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.’
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Please feel free to add your own comments below. I’m interested to know what others in the industry think.
By Iain Martin
8 comments
Marc L says:
Sep 27, 2011
This is not a recent phenomenon. Certainly for the last 15 years there were deals to be had if you waited until the last minute to book your holiday but there are always risks in this especially if there are a few of you. Also most families want to book early in order to ensure they get the holiday they want in the resort that they want so I can’t see that this is a new threat to the industry.
I would argue the case that if used carefully the use of sites like Groupon could be massively beneficial to a small operator / chalet owner as a means of effective promotion. Typically these companies don’t have the financial clout to get national exposure through traditional marketing routes (eg print, agency, PR etc) and therefore to get your company promoted to the inbox of a large percentage of the UK population by selling 95 holidays on a low margin seems a pretty good return on investment to me. I have a pretty good working knowledge of most French ski resorts but had never heard of that particular hotel and when the email came in I clicked through and looked at the company and the product and now am aware of its existence. If I ever wanted to stay in that resort in the future then that would be the first website I would check. Traditional marketing firms have every right to be worried by the likes of Groupon but I’m not sure this is the death knell of the ski industry, that ship sailed years ago when teletext was invented, the internet has just made it easier.
Just my twopenneth’s worth
misplacedperson says:
Sep 27, 2011
What they’re not telling you: large parts of Alpe d’Huez are closed for at least part of those early and late season periods, which means you can’t ski Auris, Vaujany or Oz, making the ski area much less extensive. Can’t coment on the ‘devaluing the brand’ business but as a punter I’d be sceptical.
iain says:
Sep 27, 2011
I guess that depends on snow, but that’s always part of the gamble of going at the edge of the season. Hopefully the Southern Alps will have good snow again like last year.
iain says:
Sep 27, 2011
Good points Marc. You have to factor in the increased awareness of the company. Not many people would be prepared to commit to buying a ski holiday within 24 hours, but a number would return in the future if they thought there might be value to be had.
Paul says:
Oct 1, 2011
As a small chalet owner this was interesting to read and as marc mentions, getting the exposure that we need isnt something that happens easily. May even give this a go ourselves.
iain says:
Oct 1, 2011
If you do try that Paul, I’d be interesting to know (confidentially if you prefer), how it goes.
Paul says:
Oct 3, 2011
no problem at all – we’ve made contact just waiting to hear from them about it. We are having our own stand at freeze festival this year as well for the first time at any “show” so will be seeing how that works as a test for this year as well.
iain says:
Oct 19, 2011
Just Tweeted about a new deal… http://twitter.com/#!/skipedia/status/126578562126974976