Feb272008

Priceline Bidding for Travel

Is there a Priceline Master in the House?

I am not a real doctor (PhD). I only have a Master of Science. That is why I work for consumers instead of pocketing the lucrative research paycheck from the hotel industry.

The doctor, Chris K. Anderson, Ph.D., at the Cornell Center for Hospitality Research has come out with a report advising hoteliers how to squeeze more pennies out of our consumer pockets. This time the research is aimed to maximize hotel profits from Priceline.

http://www.hotelschool.cornell.edu/research/chr/pubs/reports/abstract-14705.html

The report is available for free download upon registration with the center.

Loyalty Traveler has a few comments on the report.

Cornell Report Statistic:
60% of online hotel rooms are booked through hotel-branded websites (I assume this is what is meant by “supplier-managed” websites).

Loyalty Traveler view: Hotels have provided incentive for customer reservations through hotel-managed channels by offering exclusive loyalty program benefits. In other words, Hotel points and frequent guest member perks are only guaranteed when booking through hotel-managed websites. The hotel websites generally offer a better rate , although special offer rates are often hidden from view to the casual online reservationist of a hotel room.

Report Statistic: 40% of online hotel bookings are made through online travel agencies like Expedia, Travelocity, Orbitz, and Priceline.

Loyalty Traveler View: Expedia and Travelocity and Orbitz are convenient. Priceline and other opaque sites like Hotwire.com generally offer the best discounts on room rates. A traveler has to weigh the factor of cost with the uncertainty of hotel location and brand. A frequent guest member does not earn hotel points and the reservation is likely to be booked in lowest category hotel room on property.

Priceline Bidding data:
A graph shows the number of bids in the two weeks prior to the date of arrival for the sample hotel. Data shows about 50% of all Priceline bids occurred in the 2 days before arrival.

The minimum acceptable Priceline bid for the hotel, within a one week period, ranged from mostly $55/night to $65 per night with one outlier night at $235/night.

An interesting chart is Exhibit 8, which if I have interpreted correctly, indicates that about 1 in 25 Priceline winning bids represented a 90% discount on commonly published rates for the hotel. And about 5% only got a 20% discount on the going room rate.

The vast majority of bid winners receive less than a 50% discount on the regular room rates. About 60% of winning Priceline bids received a 28%-36% discount on the room rate. Technically, the Priceline slogan “Save Up to Half Off” appropriately represents the Priceline reality. The Cornell graph shows about 10% of bidders received between 67% and 90% off the regular room rate.

The last time I used Priceline was for a night in Washington D.C., June 2007. I ended up with the Marriott Key Bridge, Arlington, VA for about $100 and the lowest available room rate through the Marriott site was $329 for that night.

Marriott Key Bridge Arlington Virginia

My initial analysis of the Priceline tool provided for hotel managers seems to indicate some trends for consumers.

Consumers may find the most favorable room rates booking Priceline the day before or day of arrival. Booking at 10 to 14 days in advance of arrival may also provide the best opportunity for higher discounts. The Cornell Priceline tool appears to encourage hotels to not discount Priceline inventory rooms as deeply between 2 and 10days before arrival as a means to maximize profits.

An interesting analysis would be to compare the Cornell Priceline data with consumer bidding data from www.biddingfortravel.com to see if there is useful consumer information to be gleamed from the comparison.

Anyone planning to make a hotel bid through Priceline.com or Hotwire.com should check out www.biddingfortravel.com to see what successful bids are pricing out and then try and use that data with the knowledge that 10-14 days before arrival may provide the best opportunity for deep discounts on Priceline. And if you are desperate and lucky, the day before and day of arrival Priceline bids may save you enough cash to buy gas and pay for hotel parking.

The PointsWizard blog on BoardingArea.com had a link to this article detailing strategies for successful Priceline bidding.

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About Ric Garrido

Ric Garrido of Monterey, California started Loyalty Traveler in 2006 for traveler education on hotel and air travel, primarily using frequent flyer and frequent guest loyalty programs for bargain travel. Loyalty Traveler joined BoardingArea.com in 2008.

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