Oh no! More discussion about Priceline.

Old Feb 12th, 2003, 01:40 PM
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Oh no! More discussion about Priceline.

Just when you thought that the bickering about Priceline had dropped of the board, I'd appreciate your thoughts on this.

I read today <http://www.nytimes.com/2003/02/11/business/11PRIC.html> that Priceline's quarterly loss had increased to $7.41 million. "Travelers were flying less and air carriers were cutting prices, making its "name your own price" discount offerings less attractive."

"Priceline hopes to increase sales of other products, including regular airline, car, hotel and vacation package bookings through its Lowestfare.com Web site."

I briefly checked the lowestfare site. Although it's a considerably flashier than Priceline, it's pretty much the same. To me this would not seem a particularly effective method of increasing sales, selling the same product and competing against itself. What would be the advantage to Priceline?
KenCT is offline  
Old Feb 12th, 2003, 02:18 PM
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What's the advantage of Priceline using Lowestfare.com? Probably not much for the customer. Priceline has pretty good name recognition; perhaps they are considering evolving toward providing regular travel reservations ala Expedia or Travelocity?

It's a good hook from Priceline's point of view though. Someone bids for a hotel or airfare on Priceline and comes up empty (maybe because Priceline has no inventory). So Priceline passes along a page to you with conventional travel options. Perhaps the prices are as low as you'll get anywhere else, and many travelers are lazy. Why not just book it there?

I'm not surprised that Priceline's airline product isn't doing well. On BFT you can see very few successful bids relative to all the hotel bookings. I think the airlines are just charging too little nowadays to allow Priceline to compete. Who wants to book a completely non-changeable airfare when saving only a few bucks over doing it yourself?

Andrew
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Old Feb 12th, 2003, 03:01 PM
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I'm completely in agreement re/PL for airfare. I've tried bidding for air tix on three or four occasions and just don't bother anymore. Perhaps if I needed a ticket for my college aged daughter or my parents, who can fly at any time of day and don't need frequent flier miles credit... it might be worth trying. On tix in the $400 - $500 range (regular booking price) I was getting within $100 of the regular price and still getting my bids rejected - just not worth the hassle for me. Hotel bids are a different story - I consistently get great hotel deals for a variety of locations.
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Old Feb 12th, 2003, 03:17 PM
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Ken, thanks for the link. I wish I'd been able to read it to better understand what they are trying to do, but it only brought me to a site where I had to register...and didn't want to read it that badly!

I'm astounded at the size of their quarterly loss! Gulp! I've just had some experience with Expedia vacation packages, watching as our son planned his HI honeymoon. Their prices are pretty darned good and Expedia is an established name with a stellar reputation. It seems to me that not only would Priceline be competing against themselves, but going head to head with a Major Player whose foot is already well in that door.

I think too the average traveler has gotten far more sophisticated about researching price options. I know I'll check orbitz, expedia, southwest, AA etc before booking anything. Many of us have our names on airline lists to be notified of special fares. The internet has opened so many doors and we are all more proficient at making good use of the resources available.

Frankly I don't see how Priceline and BiddingForTravel work symbiotically? It seems to me that BiddingForTravel has cut Priceline's profit to the bone by divulging the lowest price a hotel will accept. How does that work to Priceline's advantage? Is BFT a part of PL's deepening problem? How can it not be? If PL makes a profit by taking the difference between what someone bids and what the hotel or airline will accept, and BFT tells you the lowest acceptable bid...how does Priceline make anything other than the $5 fee? It just seems to me that BFT is biting the hand that feeds it. What am I missing here?
 
Old Feb 12th, 2003, 03:28 PM
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I'm sure BFT is part of Priceline's problem. They're not related in this day and age--I think they were at one time. If travelers did not post their bid results, there wouldn't be a base of information on which to make bidding decisions. I just got a 4* hotel at Heathrow (it was a Sat. night,) for $55. I did make the bid through a BFT link, and posted the result there, as well. I think it's a valuable resource, and I'm going to try to use it more for lodging.
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Old Feb 12th, 2003, 03:40 PM
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I think it's a valuable resource too, but not if it sinks its own ship! LOL
 
Old Feb 12th, 2003, 08:02 PM
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OliveOyl: I disagree that BFT hurts Priceline. On the contrary, I think BFT helps Priceline greatly and Priceline knows that. How do they help Priceline? By encouraging more people to *use* Priceline. Shoot, before I discovered BFT I tried Priceline once years ago (without knowing what I was doing), bid too low, and never tried it again. After I discovered BFT, I learned how Priceline works and have been using them regularly every since.

Contrary to what has been stated, BFT does *not* tell you exactly how much to bid. Because rates change frequently and vary by date, it's not simple to duplicate someone's bid. OK, I have done it a few times (and managed to bid right on the money), but other times I have overbid considerably and Priceline has made a profit. Priceline doesn't lose money on any hotel bid I am lucky enough to make at their price - they pay the hotel what I paid them, plus Priceline collects their $5.95 fee. When I overbid they make even more money.

Had I never discovered BFT I wouldn't have been brave enough to try Priceline. I wouldn't have any clue what kinds of hotels I'd be getting. So now Priceline has another regular customer they are making some profit on as a result of BFT.

If you read BFT, you'll see a number of people still overbid regularly. So lots of people are not bidding right at Priceline's cost.

Regardless, I am guessing the majority of Priceline users do not use BFT or know about it. I've known a number of people who used Priceline (successfully) but had never heard of BFT.

Andrew
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Old Feb 12th, 2003, 08:20 PM
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The implication in the original quote is to the effect that PL's loss was most specifically related to the fact that people are flying less and doing more purchasing direct from the airlines (translation - the savings on PL airfare tix are not good enough for most people to bother trying to buy that way). I doubt that BFT has much impact on the overall profits of PL. If they believe that selling hotel rooms for too little above their cost is somehow losing them money, they can easily adjust their computers to have a higher stop price for selling. They make $5.95 service fee for every single totally automated transaction - that adds up to real profit even if they only make a few $ of margin over cost on eaqch sale. I think the airline issue and the exorbitant amount of money they spend on advertising is the biggest issue. I agree with the notion that the majority of folks bidding on hotels through PL either haven't heard of BFT or don't understand the nuances of the bidding strategies well enough to really eke out the best deals. I also don't think the hotels get hurt - check availability of rooms in a busy destination or around certain dates whena given hotel historically has high occupancy rates - there will typically be nothing available through PL or Hotwire or if there is anything there are no real savings to be had.
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Old Feb 13th, 2003, 03:54 AM
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I just gave a look at lowestfare.com (I didn't have to register though). For hotels, you choose to link to either Priceline or hoteldiscounts.com. I put in Bonita Springs for a Sunday night (where I recently won a bid for the Hyatt for $54) and chose hoteldiscounts. Well they gave me the wonderful price of $359 per night. Are they kidding? This site is not gonna help them much with most consumers.

With regard to competing against yourself, it can and does work. Think of potato chips: prefer Doritos or Tostitos? Lays or Ruffles? Doesn't really matter, you know - they're all the same company - FritoLay. I think that's the theory...but their competing product makes Priceline look great instead of providing alternate sales.
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Old Feb 13th, 2003, 07:41 AM
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Owen you are correct, hotels will not give PL availability when they anticipate being full or even close to it, however, you misunderstand how rooms are sold on PL. PL isn't setting the rate a room sells for, the hotel is, so PL can't adjust rates, as you indicated, to increase their profit. BFT attempts to shows you precisely what that rate is, cutting PL's profit to only $5.95 per transaction, (less if the BFT link is used as they must then pay them a referral) and I doubt that covers their expenses with much profit. The transaction is automated from your standpoint, but they still must deal with the hotel, setting up the reservation, making the payment transactions, plus other operating expenses.

Rates do not change frequently Andrew. If you are bidding on most any city, you can read successful bids around your date of stay, and bid precisely the same and get it 9 times out of 10. It's done over and over again. Rates certainly don't jump by the week, generally not by the month, and they don't change drastically when they do change. More likely it's a $5 increase or decrease, and most recently, it has all been increases, further ensuring that PL's profit is kept to a bare minimum, because if someone mis-bids, it will be to the low side, not the high side. Baring another 9-11, this will most likely be the trend, or hopefully, as it will mean a recovering economy. I do know exactly how it works from the hotel standpoint--our rate is 50% higher now than it was in the fall and it isn't just a function of this being our season. There was a corporate decision to increase the PL rates across the board by varying degrees, north to south, east to west, season or no. There is a corporate person whose sole job is PL pricing and it's a pretty sophisticated system.

Whatever, the fact remains that PL had a one quarter $7.41 million dollar loss, hardly a profitable company and BFT most certainly had a hand in that loss to some degree. It does not affect the hotel...we are still getting the rate we said we would accept, but it does hurt PL. PL is useful to hotel companies in selling rooms that would otherwise have sat empty, and from that standpoint I'd hate to see it go under--plus I'm planning on using them for an upcoming stay where we don't have a hotel! gt;

We were talking about the loss last night and my DH feels the relationship between BFT and PL is helpful from the standpoint of volume sales, name recognition, but they've got a hurdle to overcome...an increasing loss...and how to overcome it?
 
Old Feb 13th, 2003, 08:04 AM
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oops....despite the length of the above, I hit "reply" in error! gt; Actually, I don't have much more to say, but was wondering how they go about increasing profitability, especially, if as Joan says, lowestwebfares isn't competitive? (That rate sounds like rack rate, though it may have only been a near sold out night.) Increase charges to the consumer? Charge the hotel for the service? They already feel they are paying their share in reduced rates and won't take a further cut, at least not without increasing their rate at the same time. Bottom line is, the consumer pays.

Anyway, Andrew, your reasoning seems convoluted to me. Increasing the number of people using the service but at the same time cutting profit margin to the bone, is not going to help PL unless that $5 fee covers all expenses with enough profit to keep their heads above water, and I seriously doubt that is the case.

 
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