Deal publishers get a boost with increase in discounting By Dennis Schaal / February 03, 2009 Share 1 -- The Art of the (Travel) DealSusan Black, who held top-level marketing positions at CheapCaribbean.com and Liberty Travel and is now managing partner of Susan Black Associates, offers five tactics for suppliers, agents and wholesalers seeking to convert more online-travel-deal ad lookers into bookers: • Make the deal authentic to get higher click-throughs, and explain why the offer is a "deal" (50% cheaper than last year or fourth night free, etc.). Although a deal can be merchandised through value-ads, it's the discounted offer that gets the majority of bookings. Always show prices. • Advertise everywhere on a performance basis, and use deal-distributors that can help you measure activity. With deal publishers offering a variety of distribution models, test them all -- and may the best merchandiser win. • Appoint a "deal czar" on your staff to ensure your deals stand out and are innovative. Hire or outsource an experienced copywriter who knows how to write effective text-ad headlines and 40-character copy that convert to bookings. • Understand that context is key, so ensure that text ads are served up within the appropriate destination or special-interest content. • Partner with deal distributors that vet their network affiliates and their audience, because you want your ad to be seen by active bookers.Reid Burkett, the director of revenue at Hotel Solamar San Diego, likens his job these days to a chess match: In this moribund economy, he tries to execute creative moves to fill rooms and must do so in a way that puts the competition on the defensive. Increasingly, Burkett says, the property is using deal publishers, including Travelzoo, on a tactical basis to boost reservations in periods of slack demand. Hotel Solamar, a four-star Kimpton property three blocks from the San Diego Convention Center, has advertised in Travelzoo's Top 20 deals newsletter, chopping $100 off peak-season rates; offers often sell out within a day or two. The Travelzoo Top 20, which features deals from paying advertisers, gets emailed to 10.6 million subscribers in North America every Wednesday. Revenue managers like Burkett have to dabble in all of the distribution channels, including corporate, travel agency and direct-to-consumer. But while hoteliers need the huge marketing clout of Expedia and Travelocity "every day" in the online-leisure arena, a quick hit in a so-called deal newsletter often produces a greater return on investment than a sale through an online travel agency, and it makes it tougher for competitors to react, Burkett said. The deal newsletters, Burkett said, "have always have been there." "Now advertisers are relying on them to a greater extent," he said. In fact, with discounting so pervasive these days, and suppliers, wholesalers and intermediaries scurrying to convert sometimes-reluctant consumers into active travelers, 2009 is shaping up as the Year of the Travel Deal. As the economic crisis and travel slowdown trigger comparisons to the Great Depression and 9/11, respectively, scores of travel deal publishers and thousands of their advertising clients are transforming this channel into an essential element in any distribution strategy. Advertisers from all sectorsThe "deals" filling email inboxes are coming from all over, from airlines, hotels, resorts, car rental companies, cruise lines, tour operators and travel agencies. Here's a sampling: Smarter Travel's Jan. 22 Deal Alert Newsletter featured an advertisement from CheapCaribbean.com for a $200 rebate on Grand Bahama and Nassau/Paradise Island vacation packages for travel through July 31. Travelzoo's Jan. 21 Top 20 email carried an advertisement from Northwest WorldVacations for one-child-flies-free (100 such flights in all) as part of seven-night Hawaii vacation packages for travel March 11 to April 22. Sherman's Top 25 e-letter, from Sherman's Travel, included a Jan. 21 Carnival promotion for "cruises from $279." Cruise lines and hotels are strong advertisers in Travelzoo's publishing outlets, which include the weekly Top 20, a Newsflash email and a network of nearly 150 affiliate websites, said Shirley Tafoya, Travelzoo's president, North America. But it's not just about suppliers. "Intermediaries and wholesalers spend more money, hands-down, than suppliers through these deal networks and emails," said Susan Black, managing partner of Susan Black Associates, a consultancy for online and traditional travel brands. What's the deal?The deal industry is as diverse as travel; it includes virtually anywhere you can place a "virtual" advertisement of a deal. It includes email marketers and website publishers like Travelzoo, Sherman's Travel, SmarterTravel's BookingBuddy and Kayak. It also includes the big online travel agencies like Expedia, Travelocity and Cheap Tickets; auction sites like Hotwire and Priceline; travel-review sites like TripAdvisor and IgoUgo; search engines like Google and Yahoo; and metasearch sites like Kayak, FareChase and Mobissimo. Suppliers also post deals on their websites and through their customer-loyalty programs. In short, the travel deal permeates U.S. online-travel advertising, which JupiterResearch forecasts will grow from $1.3 billion in 2007 to $3.4 billion in 2012, a 158% increase. One of the key benefits that advertisers see in the deal newsletters is that many of their subscribers are actively engaged in the travel-planning process, ready to make a reservation when a great deal comes along. That proposition, in targeting consumers while they are in the travel-planning process, parallels trends cited in the Jupiter study, "U.S. Online Category Advertising Forecast, 2007 to 2012," which estimates that the compound annual growth rate in online-travel advertising through 2012 will be 21%, outpacing the 15% growth rate for the overall online ad market. "Regarding travel, advertisers will boost online spending as consumers both research and purchase more travel online," the Jupiter forecast stated. "Also, behavioral targeting offers travel advertisers improved ability to target consumers during critical portions of the purchase cycle." In one measure of the size of the travel deal phenomenon, a new Forrester Research online-travel forecast, using data from the fourth quarter of 2008, found that 18% of U.S. leisure travelers who plan trips online use deal websites like Travelzoo.com as part of the process, said Henry Harteveldt, Forrester Research vice president and principal analyst, airline and travel research. While 18% is clearly a minority, it represents more than 18 million people. "In marketing, 18% is significant," Harteveldt said. "It means that travel companies have a way to reach out to almost one in five travel researchers. At a time when travel advertisers are trying to communicate their value, this is a way for them to reach out, and these kinds of tools will become increasingly popular." In another signal of the deal arena's dimensions, Travelzoo, a public company, recorded $61.5 million in revenue through the first nine months of 2008, the latest figures available at press time. Travelzoo's revenue comes from advertising in its deal newsletters, website affiliate network and SuperSearch travel-search engine. What's undisputed these days is that deal promotions are vital to the travel business. A private study conducted last summer for a new-entrant deals syndicator, Travelscream, based in Edwards, Colo., took the pulse of 13 travel-distribution managers and executives, primarily from the hotel industry. In one set of answers to the online survey, three of the executives responded that deals and promotions were "critically important" to their businesses, nine indicated these offers were "somewhat important" and one responded that deals and promotions were "somewhat unimportant." Travelzoo, the big three online travel agencies and Hotwire were the top three choices when these executives were asked to name their favorite vehicles for advertising discounts or promotions during low-demand periods or for distressed inventory. The lay of the landCompanies that specialize in deal publishing do so through a variety of email newsletters, which is the core of the business, and through their websites. An upward trend is networking with partner websites. The business models that they use are varied and evolving. Sometimes companies pay a lump sum to appear in a deals newsletter. For newsletters or websites, they might also pay on a cost-per-click or cost-per-1,000-impressions basis for text and banner ads, respectively. Some deals combine elements of different payment models. Both the cost structures and models are under pressure because there is increased competition and a tug from suppliers who increasingly seek performance-based, largely cost-per-click campaigns, which they can readily measure and evaluate. Tafoya of Travelzoo said, "It is not a secret that we are a little more expensive than others" because the company produces both a good return on investment and volume. When consumers click on a paid text ad in the Travelzoo Top 20 newsletter, they navigate to a Travelzoo.com page, where they can read a bylined article from a Travelzoo producer explaining the deal's details and what aspects differentiate it. The producer, who also handles the advertising account, then explains how to book the deal. There might be a link to the advertiser's website or a phone number to call. The formula apparently works. For example, in a seven-day booking window within the last few months, a four-diamond Las Vegas hotel sold 10,000 room nights and produced $850,000 in revenue from a Travelzoo promotion, said Michael Stitt, Travelzoo's general manager of production. The hotel originally promoted a $59 rate, but the net average daily rate booked through the advertisement increased 44%, to $85, as consumers opted for upgrades. However, despite the results that the company apparently delivers for advertisers, Travelzoo said that it was unable to raise advertising rates Jan. 1, 2008, as it historically has done at the start of each year, "due to intense price competition in our industry." Travelzoo, which publishes newsletters in North America, Europe and Asia/Pacific, was a pioneer in the field and is the leader in the deal-newsletter business, with 14 million subscribers, including about 11 million in North America, according to Tafoya. The company's fourth-quarter and full-year 2008 results are slated to be released Feb. 3, but in the third quarter Travelzoo posted a net loss of $1.8 million, which CEO Holger Bartel attributed to "a weak economy and the continuation of our aggressive expansion in Asia/Pacific and Europe." The company has one advertiser that provided 10% of Travelzoo's total revenue in the first nine months of 2008, but most of its contracts are much smaller, typically costing the client $2,000 or less per month, Travelzoo said, and "listing fees are based on placement, number of listings, number of impressions or number of click-throughs." Travelzoo founder and Chairman Ralph Bartel was living in Germany in 1998 when he got the idea for a deals newsletter; he discovered that advertised travel deals often were unavailable when he tried to book them online. Bartel and his brother Holger Bartel launched the Top 20 newsletter a year later from Silicon Valley, and they named the company Travelzoo, which was supposed to conjure images of something fun and different. Still following that heritage, Travelzoo states that its newsletters take an "editorial" focus, which means that a team of producers/account managers vets the advertising deals to ensure that the deals really have merit, and staff in a production center in Chicago test the offers to make sure they can be booked. "If the deal doesn't pass muster, we'll refuse the ad dollars," Tafoya said. Burkett of Hotel Solamar doesn't think this boast is bluster. "Travelzoo is only as good as its last success," Burkett said. "If they market these things and they bomb, other hotels will hear that. They have a lot at stake." Other major playersSherman's Travel, which publishes Sherman's Top 25 and a print magazine about luxury travel, and Smarter Travel/BookingBuddy are two other leading deal-newsletter publishers, with subscriber bases of 4 million and 3 million, respectively. A recent initiative taken by Smarter Travel Media, which is part of the Expedia-owned Trip-Advisor Media Network, reflects one of the directions in which the deal-publishing business is headed. In November, Smarter Travel launched the BookingBuddy Deals Network, which means that the text ads of its advertisers now can be seen by 23 million visitors on BookingBuddy.com, SmarterTravel.com, TripAdvisor.com and sister websites CruiseCritic.com and VirtualTourist.com. Previously, BookingBuddy's cost-per-click deal advertising for things like a three-night vacation package in Boston or an all-inclusive resort in Montego Bay, Jamaica, appeared on the BookingBuddy.com site only and/or in the BookingBuddy.com Top Travel Deals newsletter. David Krauter, senior director of product for Smarter Travel Media, said the company would continue to invest in the email side of the deals business, which will remain "a big part of our business." "On the network side, we will build out the number of placements to grow traffic and targeted advertising," Krauter said. "We definitely feel the network side has a lot of upside over the years and the potential to grow." Smarter Travel plans to expand the network beyond Expedia-owned sites and will introduce a new advertising package, geared toward small to midsize companies, in the next few weeks. Krauter said he felt that the newsletter and website-network components of the deal-publishing business had different strengths. The newsletters reach "a highly engaged audience of subscribers who ask to receive deals and promotions on a weekly basis," Krauter said. However, advertisers can better target their audience on the website network, as BookingBuddy can serve up a relevant ad to consumers who visit a Boston or a St. Thomas destination page, for instance, Krauter said. "With the emails, you don't always know which deals subscribers will be interested in next week," Krauter said. Advertisers aim for targetingThat kind of targeting was high on advertisers' wish lists in a private study that Chimney Rock Partners conducted in May for destination-information publisher Fodors.com. The survey, which elicited the views of "10 leading digital media buyers and supervisors, representing more than 30 prominent travel brands," found that travel companies want their online advertisements to appear as close as possible to the booking process, and they want publishers to offer compelling content along with performance-based, cost-per-click advertising models. "Deal sites like Sherman's Travel and Travelzoo perform well because it is easier for advertisers to track online-booking conversions," the survey found. "Trip-Advisor was overwhelmingly the buyers' top media buy because readers of reviews often are close to the point of purchase. TripAdvisor was universally praised for its high ratio of conversions and for its reasonable pricing structure." What clearly emerged from the Fodor's study is that travel advertisers are looking to initiate multifaceted campaigns and are willing to pay more to reach qualified audiences, like those sometimes-one-foot-out-the-door deal-newsletter readers and travel-review-site visitors ripe for bookings. Thus, one media buyer told Chimney Rock interviewers that she would pay a premium if the travel publisher "could tell me that someone is a head of household, for example." Travelzoo, for one, has an extensive customer database and shares data with advertisers about what works and what doesn't. "Now, more than ever, it's all about the quality of the audience," the study for Fodors.com found. "All of the participants expressed that they would pay more for targeting demographic and psychographic groups."