Gilt Groupe's Jetsetter takes off

September 30, 2009: 8:00 AM ET

Online sample-sale company tries to bring its model to luxury travel

Ready to jetset? This may be the site for you. Image: Jetsetter

Ready to jetset? This may be the site for you. Image: Jetsetter

At the Cotton House, one of only two hotels on the tiny Isle of Mustique, warm breezes drift in from the Caribbean, which is always in view. As you nibble on caviar and sip champagne at dusk, the only sounds are those of the waves gently breaking and a jazz singer crooning in the distance.

Daydreaming at work? Or maybe you just logged in to Jetsetter, a website launching later today that brings exclusive luxury travel within closer reach.

Jetsetter tells Fortune Brainstorm Tech exclusively that it aims to bring high-end travel online by adopting the model of its parent company, Gilt Groupe, a members-only shopping site featuring daily deals, or "flash-sales," on limited quantities of designer goods.

Gilt has been unloading excess luxury goods online since late 2007, but really began buzzing a year ago when Susan Lyne, the former chief of Martha Stewart Living Omnimedia (MSLO), signed on as CEO.

Soon people were talking about the site's meteoric growth. Then in August, Gilt raised another $43 million from General Atlantic and Matrix Partners, leading to speculation about where and how the company would grow. Tech and online retailing circles have long speculated that Gilt's next move would be into travel.

Travel business veteran Patterson runs Jetsetter. Photo: Jetsetter

Travel business veteran Patterson runs Jetsetter. Photo: Jetsetter

The buzz proved to be true. To captain the new site, Lyne hired Drew Patterson. Patterson was a  VP of marketing at  discount travel site Kayak and alum of Starwood Hotels.

"Not like buying Christian Louboutin shoes"

Jetsetter mirrors Gilt in several ways. Deals are available only to members, who receive a weekly email previewing upcoming sales (you can join by putting your name on the wait list or receiving an invite from a member). Inventory is limited and sales last only 48 hours (compared to Gilt's 36-hour sales).

But some tweaks to the model were also in order since, as Jetsetter CEO Patterson tells us: "You can't buy a vacation the same way you buy a pair of Christian Louboutin shoes."

Translation: Planning travel involves more logistics and usually more money than an impulse apparel purchase, so customers can hold a trip for another 72 hours with a deposit, which can then be used toward that getaway or another later in the year.

Another difference between designer duds and travel: Gilt advertises discounts up to 70% off, Jetsetter promises at least 30% off the best available rates.

Gilt members will recognize the sleek graphics and crisp layout at Jetsetter, but they get even more eye candy here. Sale listings include several shiny images to drool over and first-hand accounts from Jetsetter's correspondents whose job (if you can even call it that) it is to visit these destinations and give them the stamp of approval. So Jetsetter feels much more like a highly polished travel blog, where you can buy the experiences you read about.

Bringing luxury to discount travel

While online travel may be a crowded category, Jetsetter is a sharp departure from the likes of Orbitz (OWW), Expedia (EXPE), Priceline (PCLN) and Sabre Holdings' Travelocity. Whereas these nearly identical sites compete around prices for a destination you already know about, Jetsetter claims it is more focused on discovery and experience. "They all start with a search form, there's nothing inspirational or seductive," Patterson says of the existing, transaction-focused sites. "We're trying to do something different."

Jetsetter focuses on high-end destinations, cruises and tours, dispatching those lucky field contributors to ensure they merit the "Verified" seal. "It has to be more than 'we've got a bunch of rooms we want to unload,'" explains Patterson.

Partners that have made the list so far and have deals launching this week include: the Standard Hotels, the Wynn in Las Vegas, the Bauer Hotel in Venice, and the Yachts of Seabourn. (The first sales go live at 12 pm EST today).

Although luxury travel vendors are typically averse to discounting their inventory, the current economy has made many reconsider. Occupancy for luxury hotels in the U.S. is down 12.6% as of August compared to last year, with revenue per available room trailing by 27%, according to Smith Travel Research.

Expanding the customer base for high-end travel?

"There's an openness to new ideas today that wouldn't have been the case three years ago," Patterson observes. "They need to move beyond luxury travelers and their historic customer base."

Still, these premium brands aren't ready to farm their excess capacity out to just any discount travel site. "They're very protective of their experience and position in the marketplace. You wouldn't see them in a place like Priceline," says Patterson.

Witnessing Gilt's success with high-end fashion has helped ease their reservations, Patterson claims, and they're impressed with the glossy editorial treatment. "We put it in a very compelling story. When partners see the site, they feel this is truly a luxury experience, not a discounter," he maintains.

Henry Harteveldt, travel industry analyst at Forrester Research, sees potential in what Jetsetter offers the struggling industry. "There's an oversupply of capacity, especially at resorts and high-end cruises. This could be a way for premium travel suppliers to offer value to a focused group of customers without getting into in all-out price war."

While that VIP treatment may help get buy-in from travel vendors, it also presents a challenge for Jetsetter to scale up as scouting new partners and creating individual profiles can be time intensive. Patterson recognizes that maintaining this level of customization will be tough. But, he says, "If you start sounding like a lot of the marketing materials, consumers see through that quickly."

Jetsetter also faces the mixed blessing of marketing to Gilt's 1.5 million members from day one. "Most business have a couple of years to think about that kind of scale," Patterson says. "I just started working on this in April." Still he says Jetsetter has an edge over Gilt in that there's no physical inventory to manage.

While Jetsetter doesn't currently utilize any proprietary technology, Patterson foresees a day when the site will present consumers with relevant recommendations akin to what Netflix (NFLX) offers. "Ultimately that's where this business goes," he says.

In the meantime, Gilt members will be left to follow their own wanderlust as they peruse the profiles of the Peninsula Hotel in New York or a ranch in Uruguay. Patterson claims to be encouraged by the response rate in beta tests. "The Gilt audience is hungry for the offers. It shows up in the bookings." Just in case you don't believe him, get yourself a Gilt membership and see if there's still an open room for you on the Isle of Mustique.

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