Management and Implications of Daily Deal Promotions in the Hospitality Industry: Toward Their Holistic Understanding

Management and Implications of Daily Deal Promotions in the Hospitality Industry: Toward Their Holistic Understanding

Katarzyna Barbara Minor (Cardiff Metropolitan University, UK) and Miha Bratec (University of Ljubljana, Slovenia)
DOI: 10.4018/978-1-5225-9783-4.ch008

Abstract

Discounting, a common practice in the hotel industry, used in order to mitigate seasonal demand fluctuation, was especially prominent at the time of the most recent recession. This coupled with consumer saving trends gave rise to the phenomenon of daily deal or flash sale websites. These are often also referred to as social shopping or group buying marketplaces and combine attractive discount for customers who propagate their offer using their social media channels. Though daily deal websites represent an interesting and multi-faceted e-commerce phenomenon, their nature within hospitality inventory distribution landscape remains largely unknown, even more so, their implications, particularly for the hotel industry. This chapter sets to fill this gap by collecting and structuring the available knowledge about daily deal websites according to the following themes: motivators for their use, profitability-related issues, marketing implications, operational issues, impacts upon branding.
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The Nature Of Hospitality Businesses

The hospitality industry is highly seasonal with businesses often experiencing changes in demand depending upon the time of the year (winter-summer), week (weekday-weekend), or day (lunch- dinner). Fluctuations in demand due to seasonality typically have more severe effects on businesses located in rural or coastal, far-off locations, as city locations have the potential to draw visitors with a number of different attractions. Hospitality product by its nature is perishable, thus, the operators need to find ways to adjust supply and demand in the goal of sustaining revenue during the low season, and safeguard against profit foregone.

Equally, the price that hospitality products and services command vary greatly, with businesses often operating dynamic and variable pricing strategies. This means that the product and service can be offered at a different price point to customers from different target markets. Differential pricing strategy is often advised as a tactic to secure the highest possible yield (Mattila & Choi, 2006).

Hospitality products and services are highly perishable, experimental, intangible and high risk, i.e. these are goods and services where the quality is hard to evaluate before the purchase and can only be judged through consumption, such as hotel stays and restaurant meals. Therefore, the customers may have difficulty assessing what they are paying for in advance of the purchase. Service companies sell promises of service delivery where the service is unverifiable to the customers’ prior consumption, thus, the customer must believe and trust that the company will fulfil the promise (Gan & Zhao, 2012; Lee & Lee, 2010; Nelson, 1974; Setó-Pamies, 2012).

Key Terms in this Chapter

Commission: The amount of money liable for a provision of service; can be fixed or based on a percentage of sale price.

Price Promotions: Temporary lowering of a price of goods or service, designed to stimulate sales.

Distribution Channels: Third party intermediaries and own outlets serving as paths by which the hotel reaches its customers; they together form a part of a distribution mix of hotel services.

Profitability: The degree to which a business generates financial gains, once all financial obligations are met.

Daily Deals: For-profit website platforms that connect businesses wishing to feature discounted offers of their goods and services, with customers who are looking for these type of sales; they propagate their offer via the social media and email marketing.

Discount: The amount off by which the price is reduced; can be expressed in a form of a percentage or nominal value.

Brand Reputation: A concept related to trust or distrust in a company, formulated on subjective perceptions of the company by a customer.

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