Priceline question -- from the hotel's perspective

[Commish of TX]

I have always wondered about the following. Say three hotels at the same star level and in the same bidding zone agree to work with Priceline. One hotel says the minimum they will accept for given dates is $50, another says $70 for the same dates, and the third says their minimum is $90 for those dates. If a customer bids $95, which hotel does he get?

[Colfax]

Priceline doesn't have an official rulebook describing the protocols they use for assigning hotels, so we don't know for sure how Priceline decides. The "common wisdom" though is that in your example the $95 bid would go to the $90 hotel.

Bids of $50 to $69 to the $50 hotel.

Bids of $70 to $89 to the $70 hotel.

Bids $90+ to the $90 hotel.

The problem with bidding $95 to win the $90 hotel is that you don't know if the $90 hotel is on Priceline for your dates. If it's not you'll get the $50 or $70 hotel on an overbid.

[nexofa]

I've been wondering the same thing... I wonder if PL (trying to maximize profits) has a formula for this type of situation, in which the bid award decision is made not simply with the bid price, but also factoring in an "incentive", expressed as a percentage of the overbid that the hotel is willing to give up to PL.

So in the example with the three hotels, if the two "cheaper" hotels are not willing to provide any "overbid bonus", and the other one is, then the $95 bid will go to the $90 hotel. But if one of the other hotels offers any overbid bonus, it's likely to be the one chosen.

I guess they could also include other "tie-breaker" variables - like a percentage of the bid itself that the hotel is willing to give back to PL to break a tie.

Then again, PL might sometimes want to sacrifice some short-term revenue for a greater number of satisfied customers (building their recurring revenue) by awarding bids to the hotel whose minimum acceptable bid (a proxy, useful or not, for quality and customer satisfaction) is closest to an actual customer bid. So the $95 bid would get the $90 hotel.

Probably just depends on if they need extra cash to pay Shatner's contract...

[Colfax]

A related matter I've wondered about and don't know the answer to is whether hotels can pay to improve their results, like on Google.

Take a zone like Ontario, California where a large number of hotels come up at the same price, like $35 or $36. When six hotels feed Priceline the same $36 rate do the hotels get assigned wins in rotation, each hotel getting one in six? Or can a hotel pay Priceline a premium to get a better yield...like half the wins.