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Cornell Study Finds Daily Deals Bring in New Customers, but Repeat Business Remains a Question

publication date: Feb 13, 2014
author/source: Cornell Center for Hospitality Research

Cornell Center for Hospitality Research Finds Hotel Industry

Split on Value of Using 'Flash' Sales

Ithaca, NY,  - Recently released research from the Center for Hospitality Research (CHR) at the Cornell School of Hotel Administration finds the hotel industry split on whether to use daily deals, also known as flash deals. An industry study shows how to structure a successful daily deal. In a separate report, the results of the latest CHR roundtable on sustainability shows considerable progress in developing "green" operations, and participants focused on removing existing obstacles. Additionally, a newly posted research brief finds some competitive advantages when hotels cluster together-even when those hotels operate in different market segments.

Cornell Study Finds Daily Deals Bring in New Customers, but Repeat Business Remains a Question

A survey of nearly 200 international hotel operators found generally favorable results for those that had offered a daily deal, also known as a flash deal, according to a study posted by the Cornell Center for Hospitality Research. The study, "Emerging Marketing Channels in Hospitality: A Global Study of Internet-enabled Flash Sales and Private Sales," is available at no charge from the CHR. In the survey, researchers Gabriele Piccoli and Chekitan Dev found that a solid 42 percent of the operators had tested a flash deal, and many of them were relatively large hotels (more than 150 rooms). At the same time, 46 percent of the hotel operators said they had no intention of offering such a deal.

"We were surprised at both the high percentage of hotels that have used flash deals, and at the equally high percentage that want nothing to do with them," said Piccoli, who is an associate professor of information systems at the University of Sassari and a visiting research fellow at the Cornell School of Hotel Administration. "Of concern is the relatively weak satisfaction levels with this type of deal. It appears that hotels need to be strategic about how they construct these offers."

"For the hotels that were highly satisfied with their daily deal, we found that they had carefully managed the details of the deal," added Dev, who is an associate professor of marketing and brand management at the School of Hotel Administration. "So, above all we believe that any company that uses a daily deal needs to look at every element of the deal, including discount levels, commissions, and limitations on how the coupons can be used."

Piccoli and Dev found that Groupon and LivingSocial were the two sites used most heavily by these respondents, and their top reasons for offering a deal were branding, customer acquisition, and boosting occupancy in shoulder periods. Ironically, the hotels that were avoiding daily deals were especially concerned about compromising brand standards. Indeed, some international chains have banned their properties from offering such a deal.

To assist operators and brand managers in crafting effective deals, Piccoli and Dev offer a checklist of daily deal guidelines. Item number one: carefully define the deal's purpose. Other suggestions include negotiating every facet of the deal and starting small.

Cornell Roundtable Examines Three Truths and Three Challenges for Sustainability

The international hospitality industry continues to move ahead with strategies for improving the sustainability of its operations, but participants in the latest Cornell Sustainability Roundtable agreed that it's time to counteract myths with truths and to address top problems. Proceedings of the third annual Sustainability Roundtable, sponsored by the Cornell Center for Hospitality Research (CHR), are now available at no charge from the CHR. The roundtable proceedings, "The Hospitality Industry Confronts the Global Challenge of Sustainability," by Eric Ricaurte, detail the discussions at the roundtable, which was held in fall 2011 at the Cornell School of Hotel Administration. The roundtable invited a balanced panel of 11 hotel industry executives, 11 academic researchers, and 7 industry consultants to focus on future directions for industry sustainability.

"Representatives of InterContinental, Marriott and Wyndham presented best practices and outlined challenges going forward. Other industry participants also shared their suggestions," said Ricaurte, a sustainability consultant who was co-chair of the roundtable. "It is critical for the industry to move past the myths that interfere with sustainability initiatives and to move ahead to address the barriers and challenges."

As presented by David Jerome, senior vice president of corporate responsibility at InterContinental Hotels Group, three critical myths are (1) that "green" is expensive, when in fact sustainable practices save money; (2) guests do not care about sustainability, when in fact many guests and group planners specifically look for "green" practices; and (3) hospitality firms can wait to implement sustainability programs, when in fact waiting is costing them both money and business.

Looking specifically at the meeting planner market, Susan Robertson, executive vice president of the American Society of Association Executives, pointed out that an increasing number of associations are seeking "zero waste" conferences and are working to offset their carbon footprint. Hotels need to show how they can assist meeting planners in those sustainability efforts.

The hospitality industry needs to overcome three major barriers to move ahead with sustainability programs. These barriers involve education and communication. The industry needs to educate and communicate its sustainability plans to external and internal audiences. Similarly, education is needed within the industry to ensure that sustainability is treated as a business issue so that it moves outside of its current "organizational silo." Finally, even as it becomes increasingly viewed as a business issue, sustainability must be viewed as a long-term brand focus rather than a reactive process.

"With a focus on cooperation between industry and academe, we can move together to overcome these barriers and advance the industry's sustainability efforts," concluded Ricaurte. "We have made great strides, and the industry is continuing to work on these issues."

Study Highlights Competitive Implications of Clustering Hotels

It's no secret that hotels are often located in clusters of various properties operating in different market segments. As detailed in a new research brief, the question addressed in a recently published study was whether and when those clusters (called agglomeration) benefit the various hotels. The CHR posts research briefs by the Cornell faculty summarizing research published in other venues. This study by Matthew Freedman and Renáta Kosová will be published in the Journal of Economic Geography. Freedman is an assistant professor at Cornell's ILR School and Kosová is an assistant professor at the School of Hotel Administration. They found that hotel operators are hesitant to build in clusters where hotels in the same segment operate, but are more likely to open new properties near existing hotels operating in different segments. Contrary to conventional wisdom, both the new hotels and the existing hotels may benefit from the diversity of hotels in a particular cluster.

About The Center for Hospitality Research
A unit of the Cornell School of Hotel Administration, The Center for Hospitality Research (CHR) sponsors research designed to improve practices in the hospitality industry. Under the lead of the center's 77 corporate affiliates, experienced scholars work closely with business executives to discover new insights into strategic, managerial and operating practices. The center also publishes the award-winning hospitality journal, the Cornell Hospitality Quarterly. To learn more about the center and its projects, visit www.chr.cornell.edu.
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Jane Henion

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