Skift Take

The move outwardly appears to make sense for LivingSocial: If you are attracting a lot of traffic among users who aren't interested in your flash sales, why not diversify and get them to reserve a different hotel. Just how the economics plays out in the end remains to be seen.

Going where others haven’t feared to tread, LivingSocial┬áhas quietly added hotels from Priceline to the flash-sales site’s travel section, Escapes.

Site visitors now will be able to choose whether they want to book an flash sale, such as four nights at the Old Bahama Bay Resort, West End, Bahamas, for $599 plus a bunch of taxes and fees, or instead opt for the Priceline-provided Wyndham Nassau Resort for about $100 per night.

LivingSocial as a whole fired about 10% of its staff late last year, posted $44 million in operating losses in the first quarter of 2013, and last week revealed that the accounts of up to 50 million of its users may have been compromised because of a cyberattack.

Is adding hotels at standard retail rates from Priceline a last-minute attempt to monetize some of the traffic it gets as flash sales lose their buzz, and will it dilute the Escapes business as bargain-hungry shoppers book the Priceline hotels instead?

Not so, says Dave Madden, general manager of LivingSocial Escapes, who tells Skift that LivingSocial Escapes was not impacted by the layoffs last year, processed more than 1 million room nights in 2012, and has hired three to four people since the beginning of 2013.

Adding — actually curating — hotels from Priceline, Madden says, is a way to take advantage of demand for hotels that Escapes doesn’t necessarily handle.

Several other sites online travel sellers that specialized in opaque hotel deals or flash sales have gone a similar route in adding retail hotels in the past without killing off their core businesses.

In 2010, flash-sales site Jetsetter added retail hotels, which now accounts for about half its business. But, unlike what LivingSocial is doing, Jetsetter, which was recently acquired by TripAdvisor, contracted directly with hotels instead of procuring them from an online travel agency.

And, years earlier, both Priceline and Hotwire successfully added retail hotels to their opaque hotel offerings.

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Tags: flash sales, livingsocial

Photo credit: LivingSocial Escapes is adding hotels from Priceline to supplement its flash-sales Escapes.

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