And then this same week, I met up with Nazar Musa, the new man in charge of growing the travel vertical at Living Social, based out of Singapore who assured me daily deals was still very much alive, well and kicking.
A few months into the job as general manager, Escapes Asia, Nazar says he’s seeing growth rates that he’s never seen before in his entire career in travel and he’s had a long and varied one.
“It’s awesome in Asia,” he said over local coffee at Old Town White Coffee. “It’s why I moved here. Our industry hasn’t seen anything new in the last 10 years and to be part of that is too tempting, plus to be part of that in Asia. It’s why I gave up my boat in the Palm Island for a tiny flat in Tanjong Pagar,” laughed the man, born in Sudan and raised and educated in Britain.
Nazar was with Holiday Autos, then lastminute.com, in the UK and for the last seven years, he’s been in Dubai where he and a team built up GoNabit, a daily deals site in the Middle East, which was acquired by Living Social.
In South-east Asia, where Living Social bought the Ensogo group of sites, it’s rebranded DealKeren to Living Social Indonesia andeveryday.com.my has also been rebranded, while sites in Thailand and the Philippines remain under the Ensogo name for the moment.
It is in Korea, where Living Social bought Ticket Monster (Tmon) in August 2011, that Nazar says the growth has been spectacular. Staff strength is now at 900 from the 600 (at time of acquisition) and travel now forms 20% of the business in Korea. “All the things there point to a successful online business,” said Naz.
A recent PhoCusWright report on South Korea supports that observation. With one of the fastest broadband services worldwide (with speeds up to 100 megabytes per second), over 90% of Korea’s Internet users connected wirelessly in 2Q11, indicating heavy mobile usage. Korea also has high credit card penetration: Though the population is less than 50 million, the country has over 117 million credit cards, with transactions worth nearly $475 billion in 2010.
Across Asia, travel accounts for 20-30% of Living Social’s business with daily deals the biggest category. In Korea, products is tops while in Indonesia and the Philippines, travel is neck-and-neck with daily deals. The gender split of customers is 50:50 men and women.
And while most people are predicting the demise of daily deals sites – indeed many have crumbled from Australia to China to Singapore – Nazar says Living Social’s gone from strength to strength. In the US, it crossed more than one million room nights in March this year – “the first 500,000 took eight months to reach; the last 500,000 took four months.”
While the barrier to entry is low, it takes scale to make the model work, hence the big two global players remain Groupon and Living Social. In Singapore, Groupon’s opened a physical store, its first worldwide, primarily to enable customer to collect orders personally while Living Social is testing a store in Thailand. “We have a travel corner and a café. We use an Amadeus platform so you can also buy a flight ticket.”
And that could be the next nut to crack for daily deals sites, says Nazar. He sees a tomorrow when deals will go global and personal.
“We have a network of people who talk to hotels around the world, doing deals on the assumption that consumers will buy deals nearest to them – 20% of bookings are regional or international. What’s to stop me from asking the customer, where do you want to go and here are the deals for the rest of the year?
“The next question for the day after tomorrow is, how do I get them there? There has to be answer for that and today’s speed to market is phenomenal.”
In Korea, the company is testing personalized offers – such as, you have purchased that before, would you like this? Or you live in this city and it’d be useless to send you air deals from other cities.
For now, realities persist and there is still misunderstanding about the daily deals model, hence hostility from certain merchants. “There are questions such as are we distribution or marketing or what’s the difference between an OTA and our model?”
To Nazar, the model is clearly marketing. “If you have a hotel in Singapore and you give an OTA 100 rooms for free, they’d put those rooms on their site and a consumer would go to it and get those online. But if you give me those rooms, I’d email them to millions of people, people would receive that email and see an offer (which they have subscribed to).”
To overcome the problem of rate parity, Living Social takes a rate and package that with a hotel’s other inventory and offers a combined value of 50-60% off, depending on the deal. “Eighty percent of properties make money from the deal. We do all the promotions. If we sell zero, it costs them zero.”
The biggest resistance probably comes from hotel chains where there is corporate pressure on properties not to do deals at the local level.
Nazar recalls when he was with Holiday Autos and the company launched car rental services in Malaga, Spain. “We tried to work with the bigger companies but they all said no, so we had to work with a local company Helle Hollis, which is now the biggest player at the airport. Every single time, when the franchise owner of Hertz Malaga, passed by and saw no queues at his counter, he’d write to Hertz head office to complain. Three or four years, Hertz now has a long standing relationship with Holiday Autos.”
He said the daily deals space was still new and people still had to understand it better. Eventually, it will become a standard part of the marketing mix.
