Friday, December 12, 2008

Crazy Or Genius?

antiguaIt is starting to become big news now, but a prestigious resort company, Elite Island Resorts, is running a promotion right now that allows customers to pay for their accommodations with stocks. Not only that, but they are allowing customers to use the stock based on the value back on July 1st of this year. In case you’ve been in a cave somewhere the stock market has fallen off a cliff since then, so this potentially offers a tremendous value for customers. Is this move craziness, or pure marketing genius?

Before you come to judgment you should know that there are certain restrictions. For one only about 100 stocks are accepted as part of the promotion, so they retain control over the stock that is accepted. They aren’t going to take Lehman stock, or stock from Freddie Mac and Fannie Mae. They have selected around a hundred solid companies, although some, like American Express have seen their stock halved since July. In addition they have capped the program at $10 million in total, and $5,000 per individual stay. In order to qualify, reservations must be made by the end of this year and travel dates must be before the end of 2009. The CEO for Elite Island Resorts, Steve Heydt, was also quoted MSNBC as saying, "The vacation business has gotten hammered probably as much as the stock market."

The last quote is quite revealing: Business is down considerably and vacant rooms are worthless to a resort. They could have simply discounted the room rates like most firms do in this situation, but instead choose a much wiser path. They still discounted the rooms, but did it in a way that created a ton of free publicity. The publicity alone that they have received is probably worth the $10 million set aside for the program. In my mind Heydt is a marketing genius. When the recession ends, his company will be positioned to benefit from newfound clients that could return year after year, and there is always the chance the stocks could rebound and make this slump incredibly profitable for Elite Islands in the long-term.

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