Editor's note: This is a revised version of a story which first was published 30 June 2011. Corrections were made to ensure accuracy of quotes, titles and facts.
BANGKOK, Thailand—The deep, inclusive group discounts offered in online flash sales may be familiar throughout the hotel industry in North America and Europe, due in part to the spectacular rise of Groupon in the past two years. But for hotels and online travel agencies in Asia, it’s a newer sales channel. For the Thai hotel industry, which is already grappling with eroding room rates, it’s a threatening one.
• Read “Thailand: Data suggests supply/demand mismatch.”
At TravelTrends.biz’s No Vacancy Thailand 2011 meeting in Bangkok earlier this month, Bryan Lewis, CFO of Bangkok-based Agoda, one of Asia’s largest online hotel booking sites, was most adamant about the potential of the virtual discount coupon: “It could be devastating to hotels as an entity. If it continues, Agoda would offer group deals. But the guy next to you will do that. And the next will offer 50% more and then …”
“I see a huge risk for hotels (in online coupons), but I tend to think that customer might not come to the country or hotel otherwise, so maybe we’re not losing,” said Christian Lukey, COO of Sawadee, an online hotel booking site started as a content site in Thailand in the late 1990s.
HotelTravel CEO Blair Speers commented: “I think it’s inevitable these quick flash deals will be around. You can use it in a positive way … It’s not going away. I’d suggest you get your marketing teams together.”
Playing in the ‘zoo’
Brad Gurrie, Travelzoo's general manager for Australia and Southeast Asia, explained that Agoda has been a customer only of Travelzoo’s traditional media model for several months. For 13 years, Travelzoo has been publishing weekly online lists of partner-customers’ best travel offers. The viewer is then linked directly to an OTA, hotel or other merchant to close the transaction.
“Less than a year ago Travelzoo added the Groupon-style voucher coupon deals for which it earns a bigger commission and sells directly to the ultimate buyer. Most of these voucher deals that Travelzoo negotiates are with hotels,” Gurrie said. “The voucher deals are mixed among the usual linked ones on a list.”
Travelzoo claims 23 million subscribers worldwide to its weekly coupon deals. Three million live in the Asia-Pacific region. Travelzoo’s 11 websites include sites geared to Australia, Japan, Hong Kong and greater China as well as an Asia-Pacific English site.
Travelzoo’s Gurrie made the case that a coupon site can aide hotels. “It works best when a market is struggling” or for a new hotel or during the slow season.
“There’s a halo effect. You get new names for your database. These are people who wouldn’t book otherwise. And you can upsell,” said Craig Hewett, COO of travel search engine Wego.com, a Singapore-based hotel and flight search engine that also offer daily hotel deals.
“Just don’t do it all the time,” added Tai Parata, managing director of travel services for Ensogo, a Thai online discount coupon dealer. Founded two years ago, Ensogo now has sister websites and offices in Indonesia and the Philippines. Wednesday it was announced that Ensogo was bought by U.S.-based LivingSocial. (http://www.bangkokpost.com/business/telecom/244492/us-firm-livingsocial-buys-ensogo)
Parata said Ensogo can make the best case for selling to people not actively looking to travel or stay at a specific hotel because Ensogo’s customers find their deals on a Facebook stream, where they are embedded among more numerous and cheaper offers unrelated to travel. Like Groupon, most of Ensogo’s offers are intended to appeal to residents of selected cities.
Ensogo offers limited-time discounts for restaurants and specific meals, store products and specific services at dental clinics and beauty salons. Ensogo differs from Groupon, which offers a few best deals per city per day, and Travelzoo, which selects 20 deals per week for each region. Instead, Ensogo has a large number of deals available online every day.
Southeast Asia may not be the pacesetter when it comes to coupon sites. Gurrie said there are 40 coupon websites in Hong Kong, 30 in Australia, 20 in Singapore—and 4,000 in China.
A chilling downside
The downside of the larger coupon sites—the razor-thin profit—is chilling for a hotel industry like Thailand’s, which has been forced by oversupply to reduce room rates.
Even Parata seemed startled by the size of discount coupon site commissions. “A fifty-fifty split really doesn’t make sense. We’re already a hybrid,” he said.
Gurrie did not reveal what regional hotels already were employing Travelzoo to sell rooms, naming only Banyan Tree in Bangkok. Travelzoo quickly sold 1,000 US$350 vouchers for three-nights stays for the hotel, he said.
“That works out to 3,000 nights,” he said. Hotel representatives at the meeting said they hadn’t yet gone the coupon route to sell rooms but that spa or dining services in their hotels might have.
A glance at current and past deals on Travelzoo’s Asia/Pacific website indicates that plenty of Thai, Philippine and Malaysian hotels are selling via Travelzoo.