How Big Will Flash Sales and Daily Deals Be for Travel?

Daily deals sellers may be relatively recent entrants into travel distribution, but the flash sales model has captured an enormous amount of industry attention. What impact will travel daily deals have on online travel distribution overall, and will the channel remain attractive to travel suppliers in the long run?

According to Travel's Daily Deal: Distribution Disruption or Flash in the Pan? (a Global Edition publication), travel daily deals sales comprise just a sliver of the total U.S. online travel market. Yet the deals model has amassed considerable momentum, and the two leading brands – Groupon Getaways and LivingSocial Escapes – would rank among the top 1% of travel retailers in the U.S. if their 4Q11 gross billings were representative of their travel sales on an annualized basis.

"Daily deals have stirred more than their fair share of controversy within the travel industry, but the enormous consumer reach of the category cannot be dismissed," says Douglas Quinby, Phocuswright's senior director, research. "Suppliers must take a tactical – indeed a surgical – approach to evaluating each outlet, and measure the potential risks against the opportunities."

Phocuswright partnered with Yipit, a leading daily deal aggregator and data analytics firm, to size and analyze the travel segment of the North American daily deals marketplace for 4Q11. The study sizes the segment by North American gross billings and transactions for Groupon Getaways, LivingSocial Escapes and Travelzoo Local Deals. The analysis focuses on a random sample of deals to assess how a variety of factors – including price, discount rate, destination, and deal structure – may affect how well a deal sells.

Travel's Daily Deal: Distribution Disruption or Flash in the Pan? provides a comprehensive analysis of daily deals in travel, including market size, participating travel suppliers, types of deals offered, pricing and discount rates, and what drives sales. In the process, the article addresses some of the key questions surrounding the daily deals model: Does it attract new customers, what makes deals successful and how can suppliers turn a profit on such steep discounts?

For those who want a better understanding of this small but increasingly influential segment of the online travel space, Travel's Daily Deal (US$595) is a great resource.