The conventional wisdom has been that flash sales can't be a profitable model during economic good times. The apparent success of Secret Escapes puts the lie to that notion.
Flash sales for travel are out of fashion in the United States. A common explanation is that the model only works during recessions when hoteliers are eager to offer discounts to put heads in beds — and when consumers are willing to be more flexible than usual about their travel plans to snare deals.
But the apparent steady growth in Europe of Secret Escapes, the London-based vacation deals marketplace, suggests that smart execution can still win the day during economic good times.
Slevomat.cz will produce net sales minus tax of close to $119 million, or 100 million euro, this year, the companies said. It will retain its brand.
Earlier this year, Secret Escapes was named one of the 1,000 fastest-growing businesses in Europe by the Financial Times. It says that its portfolio of brands will sell more than 6 million room nights across the world this year. In 2015, the company notched sales without value-added-tax of about $225 million, or 175 million pounds, it tells Skift.
In 2015, Secret Escapes raised a $60 million funding round that included venture capital firms Google Ventures, Index Ventures, and Octopus Investments as investors.
All of that context suggests that there is life in the members-only flash-sale concept — an idea that had a heyday in the United States during the financial crisis.
Secret Escapes plans to use “dynamic packaging,” or letting shoppers pick the exact flight or hotel they want from a menu rather than a pre-set bundle, to increase demand. The offering is only available on a smattering of its UK-based deals today, but executives say they hope three-quarters of all its packages will be dynamically created within two years.
Its chief executive and founder Alex Saint says he hopes to list the company on the public markets by 2021.
Secret Escapes has grown via acquisition. In 2013, it took over JustBook, a Berlin-based flash-sales rival that it turned into its German version of its Secret Escapes brand. In 2014, it bought Travelist, a flash-deals brand it has maintained in Poland and expanded to Hungary. In 2015, it purchased Germany’s Travista and folded it into its German brand. Today, its main revenue comes from its German and UK brands, though after the acquisition it will operate in 21 countries.
Leading Player Globally?
Secret Escapes claims to be the largest flash sales travel company in the world, overtaking TripAdvisor-owned Jetsetter.
The term “largest” depends on how you define the category.
Voyage Privé, based in Aix en Provence, France, says it has an annual gross turnover of 530 million euro ($630 million), which probably makes us it the largest travel private deals site in Europe. (Correction: This article originally said the company was part of the Gilt Groupe and didn’t disclose its revenues. Sorry.)
Travelbird, an Amsterdam-based startup, says it is the largest deals publisher in Europe. But it has diversified toward being more of an online travel agency, with about 100 of its 446 employees being “travel advisors” who can help with booking itineraries to customers in 11 European countries.
TravelBird doesn’t disclose revenue but it says it books transactions that result in 15,000 travelers being on its trips every day on average.
Booking.com claims to have 841,000 “members-only deals,” many only available on short notice and accessible if you sign in.
In the U.S., Groupon continues to sell travel via its Getaways product and says it sold $700 million in travel in 2016. Many of those deals are of the flash-sale variety. Last autumn it acquired LivingSocial, a brand that continues to offer flash-sales for travel and other products.
Relatedly, you could argue that many of the deals for sale at the last-minute by Hotel Tonight are also flash sales that are only available to people who create membership accounts, broadly speaking. It had $500 million in sales last year and is turning a profit. Revenue would be about $60 million to $65 million for 2016.
Yet it is undeniable that Secret Deals is building a business on a pure, members-only flash-deals. Its fate is far different from its U.S. counterpart Jetsetter, which was once expected to become a significantly sized travel company.
In 2015, Jetsetter decided to outsource its flash-sale business, which had once been its flagship product, to Secret Escapes on a white-labeled basis, and now uses a mix of metasearch and some selective, one-off deals with online travel agency partners like Agoda. TripAdvisor rarely talks about Jetsetter today. Flash-in-the-pan was more like it.
While Secret Escapes (and to a lesser extent Travel Bird) are still riding high on recent venture capital raises, the companies seem to also be showing that execution can make the flash-sales model work.
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Photo Credit: Founded in 2011, Secret Escapes claims to offer deals of up to 70 percent off luxury hotel stays. It has sold more than 6 million room nights. Secret Escapes
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