Entrepreneurship

I want to Brainstorm the idea of Reverse Bidding for Hotels

Munish Suri Entrepreneur, Leader, Expansionist, Technologist

June 25th, 2017

On a very High Level: Customer provides the dates, city, preference for the hotels, and the money they are willing to spend. Hotels in that city bid for the customer business while offering rooms within the customer defined budget. Few sites are doing this but not in very effective or transparent way!! Can someone brainstorm this idea with me? Hospitality industry has a lot of potential plus there is also a huge gap between demand and supply. And as a customer it is also a pain to go through various online booking sites to search for a great deal. Why not give customer an ability to get the price within their budget plus giving Hotels additional method to bid and generate revenue.

Seetharama Durbha

June 25th, 2017

In a way, isn't this what is happening already under the hood in any hotels web-site (like hotels.com)? I put in my search criteria (price, breakfast, free parking, etc.) and then the results are filtered per those criteria. What would be different?

Paul Garcia President at TABLE

June 25th, 2017

There are two main challenges with this business model and hoteliers. 1) it requires someone at the hotel to monitor bidding opportunities, 2) there are already established easy ways to book excess room inventory. Hoteliers are already complaining that the trend is towards last-minute bookings, and if you listen to their conversations, it's unlikely they would support a lowest-bid model. Hoteliers also don't want you to judge them based on price. Yes, we know we all want a deal just like finding an inexpensive airline ticket, but the hotel rarely loses money after a certain percentage of rooms is booked. The incentives exist to have 100% booking for front desk staff, but there's limited authority to respond as an official hotel representative.


The Priceline model behind the scenes releases a certain number of rooms based on percentage booking, at a pre-determined rate within the Priceline live monitoring system, a certain number of days in advance. These are careful corporate calculations on purchase behavior, not actual negotiations. All those bids are automatically accepted or rejected. There's no magic to it at all. To receive ANY bookings from sites like Priceline/Hotwire, the hotelier has to guarantee them a certain amount of inventory. And the hotel typically assigns them the least popular rooms.


Before you build a reverse bidding system, you will need to understand how bookings occur and what long-term planning the hotel's general manager does to attribute room inventory to certain categories in advance. They are NOT looking at the rooms left today, even on Hotel Tonight, it's all automated, and prices are chosen well in advance based on a formula for the cost of commission, cost to turn the room, and the average rate paid by other guests for the same dates.


The supply/demand gap varies quite a lot depending on the location and date. It's not as desperate a situation as you imply.


Hoteliers have a basket of other approaches to increasing bookings that are much more profitable long-term. Whose problem are you trying to solve? It sounds like you want to be customer oriented, but in this industry, you need to incentivize the hoteliers, not the customers, because without hoteliers being willing to give you inventory, you have nothing to sell.

Paul Garcia President at TABLE

June 26th, 2017

Thanks for the additional description of your idea. It unfortunately makes me think the idea is further down the wrong path though. You make the incorrect assumption that a hotelier cares about an individual customer. They don't, as much as they'd like you to believe they are hospitable, they are only once you are a customer. Hotels do not want to deal with customers one at a time. There will never be someone there to negotiate with. If you want to negotiate price, walk up to the counter. It's more effective than using a booking tool. Even hotels own booking systems are for the majority handled by a central booking system that processes transactions with no thought to an individual relationship with a prospective customer. You assume the consumer has the upper hand with their money to spend, but hoteliers don't see it that way. And potential customers do walk up to the counter and try to negotiate price every day. The desk staff knows the inventory and whether the customer is a bargain hunter or not. They're taught to grade customers before considering any negotiation. But the only time you're getting this 1:1 decision is at the hotel desk. No one is going to do this online because they can't evaluate the prospect fairly.


Bargain hunting customers are low-grade customers. Hoteliers are interested in guests who pay full price, who aren't looking for deals, and who are more likely to spend additional money on other hotel services (food, spa, etc.) or stay more nights. They don't want to attract bargain hunters except as a last resort.


Hoteliers will shut entire floors of the hotel when bookings are low rather than sell them at discounted rates. This is normal. it's planned for and drops in occupancy are budgeted for. It's an error to assume that hoteliers have a strong incentive to get 100% bookings and that they're willing to take a lower price to fill those rooms. In fact, when bookings are high, the rate goes up, not down, to fill those last rooms, because it means demand is high.


I suggest that if you're serious, you go work in a hotel for a while.


As for Priceline masking the hotel name, there are two reasons. 1) there is no incentive to complete the transaction if you see the hotel identity before you pay, it's like any other price shopping. If you don't like the choice, you move on and never commit. 2) the other as someone pointed out is that it tips the hand of Priceline to reveal whom they have deals with beforehand, and then competitors can go say "you deal with priceline, so give us discount inventory too or you won't be listed."

Theodore Caravellas

June 25th, 2017

That kind of reverse bidding will prevail in my opinion. Competition is hard and businesses struggle to get new customers. It won't be long until the customer realizes his power (with the help of a few startups of course).


I think your idea is valid. I've also made a market research on it for a local market. The only thing to solve there (as in any similar "marketplace") is the validity of the request (RFQ). You don't want to spam hotels with requests who are just "phishing".


Connect with me on linkedin (/in/manemoi) if you wanna talk more about it


Sedef Onder Managing Partner + Strategist, Clear Inc.

June 25th, 2017

Isn't this the original form for bidding on priceline.com, when it launched? Unless I'm misunderstanding you. I've not used it in a while, so perhaps it's changed since then.

Sean Rakidzich Media Press Promotions

June 25th, 2017

aside from being a media consultant (with a software focus) i am also an airbnb host with 10 active properties. This is something i would be interested to discuss.

Munish Suri Entrepreneur, Leader, Expansionist, Technologist

June 25th, 2017

I welcome all participants views and perspective. The problem i want to solve is that there are dime a dozen travel sites offering hotel bookings, they all get the data from Sabre GDS system to check the availability, price and hotels booking. As a customer, you are neither dealing directly with the hotels nor you have any method of negotiating the price. On top of it, all different sites offer different results and pricing on the basis of their commissions structure and mark-ups.


Suppose a customer is ready to book a hotel with a credit card in his hands, this generates a genuine lead, that someone, somewhere is ready to spend money for a hotel stay. The customer knows the average price a hotel charges per night on the basis of its star-ratings/reviews. The customer can then define his price point range he is willing to spend, which will be a realistic price calculated by the software before sending a real time notification to the Hotels within the destination city.


This will open up an opportunity for Hotels, as now they are dealing with a genuine customer, who want to spend his money!! Hotels can either reject his offer, or accept the offer or bid another price/amenities. if one hotel rejects the offer, the system will either send the notification to the next hotel matching user criteria automatically or can bump up the price user is willing to pay by certain percentage. This will continue until a price point has reached where user and hotel are both willing to make a deal.


I feel this will be a win-win situation for customers and hotels too! Hotels will know for sure that the customer has already made up his mind to travel to the destination city, he is a strong authentic lead. And for a customer saving as much as 10% or higher on the regular listed price will be an incentive!


I welcome everyone's input and perspective on this idea therefore please continue to share your views. Connect with me on LinkedIn to further brainstorm the idea and its execution.


Thanks


Sean Rakidzich Media Press Promotions

June 25th, 2017

The closest product on the market I can think of is priceline's "name your price" feature. Question number 1 is 'is there good reason to mask the provider prior to booking?' Especially when hotels are showing their hand by being willing to drop price. I can see why Priceline keeps it anonymous before booking. Can this be improved upon?.

Munish Suri Entrepreneur, Leader, Expansionist, Technologist

June 26th, 2017

@Paul: I value your opinion and perspective. Let me share little bit more about the idea. Customer and Hotel deals through a middle man i.e. the booking sites. Hotels pay commissions to the booking sites which can be as high as 10 to 30% plus hotels face huge competition as the booking sites only display results of their favorable high commission paying hotels. On the other hand Customer gets fewer selection of hotels and the listed hotels offer inflated price.


Now lets say, you are a customer who wants a great price option for all the hotels in a destination city as per your choice and you want a transparent booking system to display all hotels of similar stature. Hotels on the other side, want a model of reduced commissions where they do not want to deal with middle man eating their profits. Instead of paying 10-30% commissions, they can offer half of it to the customer to win the sales.


Anyways, I do not want to discuss the implementation process on the open forum therefore please message me if you want to discuss the details. On a very high level, i am considering a Smart Contract between a Customer and the Hotel which will remove any dependency of human interaction. The whole process will be 100% automatic.

Bill Lennan Red Rope Social - everyone is an influencer.

June 26th, 2017

Who's pain point are you helping?

What is the pain point you are solving?

Do you know anyone who will pay to have this problem solved?