DON"T bid higher for a specific hotel

[dahammer]

I don't know if anyone has addressed this, but I read (somewhere!) that PL will sell at cost, and sometimes below

Priceline is basically a broker, they don't buy and then resell hotel rooms. Priceline acts like an auction house matching hotel offers with customer bids. Priceline can't sell anything below cost, but a hotel can decide to reduce its offer price in an attempt to increase its occupancy levels and revenue.

[kohalasunset]

Dahammer, thanks! I realize PL matches offers between hotels and bidders. Wish I could reference the article I read now, and it's not worth searching out, but that was pretty much what it said. The point I guess being below the cost of doing business, and any profit coming from fees, or the chance to make money from things like rental cars. Could be older information, too.

Still, I think there is a chance to get a great deal on a new property with a low bid. That would be one argument for bidding low, in case there IS a new property. I'm sure you're right about hotels lowering the costs for other reasons, too. I meant this to add another reason NOT to overbid! Do you know for sure PL will not sell/broker below what a hotel is asking and absorb the loss for some reason? Happens all the time in retail.

[dahammer]

Do you know for sure PL will not sell/broker below what a hotel is asking and absorb the loss for some reason? Happens all the time in retail.

I really can't say for sure but I can't think of any time where Priceline's remittance to the hotel for room and tax was greater than my bid including taxes and fees. While selling below cost may be a common practice in retail, the role of Priceline is to help me sift through all of the low room rate "offers" made by hotels trying to unload excess inventory at or below cost. This, in exchange for not knowing in advance the name of the property until my bid is accepted. Additionally, making room inventory available through an opaque bidding process like Priceline also helps the hotel "save face" with its corporate clients.

But what does an empty room cost a hotel? Without getting into fixed costs and variable costs which are better explained by my old Accounting II Prof....fixed costs will be the same if the room is empty or full. Variable costs such as labor, electric, linen supply, etc. need to be covered.

A great example is the Marriott in Somerset, NJ. Rack rates during the week are around $195. But during the weekend, the same room can be had for $32; is this below cost?

[kohalasunset]

About what an empty room costs a hotel--that's a good question. And I think that depends on a lot of things, especially in the pricey Hawaiian market right now. With so much renovation going on, and factoring in the variable costs as you mentioned, it seems hotels have determined it is more cost effective/profitable not to offer rooms to PL at times. Some renovations can be accomplished one room at a time with minimal loss of revenue.

About the hotel you mentioned--interesting range. It would effect the average daily rate, that's for sure, so could it generate that much additional revenue? Maybe. But I think other things come into play. Do you think 32 is above cost?

I don't know that any of this has really added much to the topic, but I can't think of one good reason to start bidding too high, and lots of reasons to start low. If I wanted to avoid a certain property, I would book a hotel by some other means.

[menelaus7]

Hello All:

I know this topic has ended a while ago - but I had a question sort-of on the same point. I am going to Hawaii in a few months and wanted to book a resort on Maui. The problem that I faced when looking at the resorts was the differentiation on the actual prices on said resorts. In one area, Wailea, there were three resorts offered -- one at $329 and the other 2 at approximately $500. In the other area, there was an even bigger discrepancy with one at $269, one at $500 and one at $620 a night. Those were the only "resorts" listed. I wrote to PL and asked them what would prevent the lower priced resort from accepting a higher bid - and they basically told me that there is nothing that would prevent them from doing that - although they did not actually "respond" directly to the question. So, if I wanted to get one of the more moderate resorts, am I sort of stuck by paying their actual price, rather than submitting a bid? In some of the other messages, the prices weren't that signficiant of a difference, but in this case, the difference can be $350/night. Any suggestions? Thanks.

[thereuare]

To use the opaque suppliers you need to be willing to accept any hotel at the minimum star level you bid in the zone.

If you want to avoid a particular property, you can also consider HOTWIRE which you can often identify the hotle beforehand, or at least identify what it isn't.

If you'd like to continue this discussion for your particular needs please start a NEW TOPIC in the Hawaii section of the board.

[jewela]

I'm new to this.....please bear with me. How can you identify what hotel "it isn't "when using Hotwire?

[thereuare]

If the amenities don't match the hotel you're trying to avoid :)

If you have a specific trip in mind, feel free to ask for help by posting in the appropriate state category.

[surve]

Sorry if this has been mentioned already, if it has, let me reiterate. Priceline pays the hotel a flat fee with their Priceline credit card, the same as Hotwire. I spoke to one hotel GM (Extended Stay Deluxe) and he told me that Hotwire paid him $40 per room. On Hotwire I always got that hotel for $39 plus tax/fees which on the average is about $8-10. On Priceline, I was usually able to get it for $25 plus tax/fees. So obviously Priceline pays him less.

In some cases, some GMs have told me that Hotwire/Priceline's flat rate for a room from them was more than what the hotel was offered for online, so how does that work? Do they take a loss in some cases to make more in the long run?

p.s. in regards to bidding higher in hopes for a better hotel in the same zone, I have done it a few times and have been successful, but....another important thing is to always check the hotel list for whats available and at what price.

[thereuare]

So obviously Priceline pays him less.

Not necessarily... PRICELINE may accept a bid at their cost while HOTWIRE marks-up the room rate. So it's possible (and likely) that the hotel is getting paid the same amount by both PRICELINE and HOTWIRE.

[Will]

In case people are interested in a bit more detailed run down on how PL works, you can look at their patent on the technology here About bidding higher for a specific hotel this seems most relavent:

If, however, it is determined during step 1648 that the CPO was accepted by

more than one airline, then a tie breaker algorithm is preferably executed

during step 1652 to determine which airline acceptance to utilize. For

example, the tie breaker algorithm can select an airline offering an

itinerary which maximizes the convenience to the customer 110, maximizes

the profit to the CPO management system 100 or optimizes the inventory

available for sale by the CPO management system 100. It is noted that in

the alternate embodiment, where the evaluation process 1700 is performed

for each airlines in a predefined sequence until one airline accepts the

CPO, a tie breaker algorithm will not be required. In a further alternate

embodiment, the customer 110 may select for himself which airline

acceptance to utilize. Thereafter, program control proceeds to step 1672

(FIG. 16c) to book the ticket.

I doubt anything is done for the convience of the customer, more likely the tie breaking is done for maximizing profit. This is for airlines but the patent also states it can be used for hotels of course and similar rules would apply.

The other intersting thing I read in the patent is hotels ( or airlines) may have complex rules about accepting a bid, e.g. must stay over a Saturday, must be a stay of greater than N days or less than etc. The rate your willing to pay is only one factor in acceptance, hotels may have a lot of specialized business rules as to when to accept and what price.

[WillTravel]

That is very cool. Thanks for posting the patent link.

[jniff]

So after reading this very interesting thread, I'm wondering this -- if you see a recent bid posted on the board for a hotel you want, does it make sense to start your bidding with that winning bid? You're still risking over bidding, but seems like this might work unless hotels are changing their prices constantly ...

[BEAV]

Hotels do change their rates constantly, including their PRICELINE rates. As an example, one hotel I looked at yesterday (for check-in today) changed their rack rate from $63 to $55 within the same day. It's possible they also adjusted their Priceline rate accordingly. Answering your question specifically, if someone posted a rate very recently for the same travel date I'm looking at, I might emulate their bid price. But if my travel date was different than the previouis posted win, there are other factors to consider. If you're in a business market, typically a hotel will be less on Friday & Saturday nights vs Sunday through Thursday. Or just the opposite if you're looking in a leisure market. Hope that helps a little!

[cj1959]

Has anyone every just tried calling the hotel directly and explained for example" I stayed here 6 months ago by using priceline for xx$ and would you give me the same rate now?" Just curious, as I have wondered about trying this myself.

[AaronJB]

They would almost certainly tell you no.

[hansen]

Sorry for going off-topic in this very interesting thread, but I wonder, how can it be, that it is still not known to the outside world, how Priceline is working?

They started their business 10 (?) years ago and I would assume, that a lot of frustrated developers and other insiders have left the company ever since and none of them has ever revealed, how it works?

[thereuare]

Just like at other companies, not everyone (in fact only a select few) are privy to the 'secret sauce', and it is standard practice within the technology industry that workers are tied into confidentiality agreements.

If you've made any purchases yourself over the last year it would be appreciated if you shared them with the board.