Thursday, August 13, 2009

Nothing Opaque About Priceline's Take on

So what are's and Hotwire's opinions about and its model?

I was unsuccessful in reaching Hotwire Group President Clem Bason yesterday about, the start-up launched by the founders of, because Bason was said to be -- of all things -- traveling. I would still love to hear from Hotwire on this issue.

But, I asked Priceline spokesman Brian Ek how he sees the hotel landscape and whether consumers would be better served to use over Priceline.

"Regarding your questions, it’s just about impossible to draw any comparisons since we’re hearing that our major hotel chain supplier/partners aren’t supporting it []," Ek said. "They see it as non-opaque and dilutive to their ADRs (average daily rates)."

"From a hotel’s perspective, if a customer can get a discount at the exact hotel they’re looking at, why would they ever pay full price?" Ek mused. "It just hurts the hotel’s ADR at a time when hotels are doing their best to keep ADRs up."

Indeed, there apparently are a paucity of major chains using, which displays published and discounted rates on its website and asks consumers to phone its call center for additional unpublished bargains.

I checked today for Boston hotels Aug. 14-16 and found merely a dozen hotels displayed -- and just three local properties, a Radisson, a Millennium and a Wyndham, that are part of larger brands.

On Ek's point about ADR dilution, the Wyndham Boston Chelsea displayed a $200 base rate per night with a line through it and showed that room was now being offered for $160 per night.

That may be great for the consumer, but for the hotel's brand -- not so much.

Indeed, the Wyndham Boston Chelsea was transparently offering a discounted rate. Over at, that same room was being offered for a base rate of $176.25.

I searched for Chicago hotels on the same nights and found an underwhelming 15 hotels on display there.

Interestingly, may have changed its mode of prompting consumers to phone its call centers for discounts.

While in the past displayed a message to "call for special unpublished rates" within the displays of some individual properties, now I see it is showing that message at the top of pages without pointing to specific hotels for cut-rate discounts.

That change may be a way to reduce the dilutive effect of a property's discounting -- or at least a bow to hotels' sensitivities on that front.

I had another thought about the apparent lack of chains' participation in

In addition to concerns about discounting and lack of opacity, do owners Bob Diener and David Litman, who also co-founded, have to battle still-raw resentment about's distribution clout back in the day?

Methinks that may be a smoldering issue.

Meanwhile, Priceline, with its scale and flexibility, may have it all over and some other players in terms of the depths of discounts that it can offer travelers.

Comparing to Priceline, however, is apples to grapefruits. Priceline is established and is a newbie.

Also, although Priceline's opaque deals may be of better value overall for consumers, has value too because consumers know the identity of the hotel they are booking before they provide their credit card numbers.

And, that latter tack will appeal to plenty of consumers.

Still, Priceline President and CEO Jeffery Boyd wasn't talking about specifically, but he addressed the discounting issue during the company's second quarter conference call Aug. 10.

"We make business decisions as to whether to commit resources to matching those promotions and I think here domestically, our Name-Your-Own Price savings still are dramatically more favorable to the customer than one-night free if you buy four nights," Boyd said, referring to prevailing discounting trends.

Boyd added: "So we feel like we are very strongly positioned, even with that kind of promotional activity here, although there’s nothing to say that in future, we wouldn’t be able to offer that kind of a thing here in the United States and there’s nothing in the model or the Agoda model [two Priceline subsidiaries in Europe and Asia, respectively] that prevents them from offering that kind of lower pricing for multi-night stays, which is really what the principal promotional activity has been here in the United States and in Europe."

To paraphrase what Boyd seems to be saying to competitors and their discounting: "Bring it on."


getaroom, getaroom,'s Phone Rates and Manner Fall Flat

Critics to Founders: Take a Hike Founders Introduce 'Reverse Opaque Rates'


Nick Ashton said...

There is no question that getaroom is a disruptive model. They've got an impressive management team to pull it off, but as you note, the big players stand to lose a lot, as do hotels. Right now, the economic weakness is in their favor, as consumers want cheaper rates more than ever, and hotels need to get up their occupancy rates quickly. Hotels I've visited recently have been very, very quiet and empty.

RobertkCole said...

I agree with Nick - Dave Litman and Bob Diener are both very smart and experienced in introducing disruptive business processes to the hospitality industry.

And they have done it again - this time, they just made the price opacity a little bit more translucent. This obviously does not appeal to the major hotel chains - neither did Litman & Diener's Hotel Reservation Network (which became

The two know that independent hotels, lacking the distribution networks of the major brands may be more willing to provide deals - one reason is that the hotel owners are not paying the chains franchise and/or management fees. Without broad distribution, rate parity is not as big an issue.

So in their new model, Litman & Diener are finding and negotiating with a hand picked selection of hotels across a variety of quality tiers in destinations with significant tourist demand. They can tout a significant advertising budget and an intent to channel volume into their partner properties.

This is fundamentally a traditional tour operator model. It works and the participating hotels love it as long as the distributor can generate sufficient room night volume to satisfy the number of participating hotels.

This model also supports cooperative marketing efforts with the properties quite nicely, but may not be asking for marketing contribution at this point - they are probably just asking for a deeper discount on the rate.

Will it work? I believe so. It certainly did for HRN as this was exactly how they got that business started.

For non-target markets, they tie into Travelocity's partner network. However, they should be able to easily branch out into new markets armed with "here's the success we had in Boston for a property just like yours..." pitch.

There is nothing a hotelier likes to hear than a promotional opportunity that has a proven track record and targets their property. Hoteliers will understand it may require a preferential rate, but if unencumbered by corporate edicts designed to protect the brand as a whole, they will sign on.

Last time, there were some small properties that gave ALL their rooms in exchange for a guaranteed check each month. Much lower risk - perhaps with a lower reward, but right now, hoteliers are trying to mitigate risk. is different from Priceline's reverse auction model and the standard OTC supermarket with every hotel on the shelf. Each model has its advantages and disadvantages, but there is ample room for them all to compete. The biggest mistake an OTC could make would be to underestimate Litman & Diener.