Over the last 10 years, eBay spread the online bidding model to all business areas. You can now bid to buy any hospitality goods or servicesÊ including a car rental, a flight or a hotel room. Bidding systems are everywhere today and hoteliers get often proposals for different solutions whose common objective is always the same: to sell your hotel rooms!
Hotels are using bidding for different purposes, like:
- Selling their last-minute rooms to increase their occupancy rate (eg ÒName Your Own PriceÓ),
- Make early bookings via auction systems (eg ÒBidtotrip.comÓ) or
- Increase direct bookings with the new model emerging on the market called direct bidding, where guests bid their price to book a room directly on the hotel website (eg privatedeal.com).
Model 1– Bidding for last-minute sales: guests select a hotel type and individually bid their price.
Model 2– Bidding for early bookings via an auction system: guests book a room by offering progressively higher prices and bid against one another.
Model 3– Bidding to book in direct: guests individually bid their price on the hotel website and buy their room online.
What all bidding systems have in common is that GUESTS DECIDE THEIR PRICE.Ê
This statement is so shocking at first sight that some hoteliers would not even consider working with such a systemÉ. Well, let’s talk about it!
How can I monitor my revenues with a bidding system if I do not control my prices?
If you are in the US market and need to sell in last-minute, you may accept to work with lower margins on some rooms that you would not sell otherwise (Model 1). For early bookings (Model 2), taking a traditional bidding system helps you to secure sales in advance and you accept to pay a high fee for it. In Model 3, you let guests bid their price on your website after having set the limits in which the system will allow online negotiation. So in the 3 situations, you are always in control of your prices.
I don’t want to do bidding as it is too costly for my hotel
Well, it all depends on the purpose. Why do hotels need bidding systems? Is it to manage distressed inventory? If so, any additional sale is a gift and your benefit is to measure against marginal costs (Model 1). If you need to fill-in rooms in advance, then you can accept a lower margin with Model 2, in much the same way you would sell a portion of your rooms to a Tour Operator at lower prices. If you choose a bidding system to generate direct sales on your website (Model 3), then the cost of such a system is close to the one of a booking engine, so cost is not even an issue, unlike OTA costs (Models 1 and 2).
I don’t want to do bidding as I am contractually bound by Rate Parity
Said in short, a Rate Parity clause implies that hotels are not allowed to present on their own website a lower price than the OTA price. If you choose a direct bidding system on your website, this clause is not applicable anymore as guests propose their own price to the hotelier and not the opposite way. Deals are closed directly one-to-one, so no one else other than the guest and the hotel know the final price of the deal. Thus some bidding systems allow you to bypass rate parity easily.
I am ready to do bidding on an OTA, but because of my corporate clients, no bidding on my website
Why? Having corporate clients means that some companies benefit from negotiated rates – so what if your maximum discount allowed for all bidding clients is capped by the corporate discount you are making? Simply make sure to set your limits above the discount rate you give to corporates.
Accepting guests bidding on my website will lead me to bargain the rooms
Let’s come back to the daily business of a hotel: a guest calls to get availabilities and rates. They may or may not negotiate the price, and finally the reception desk closes the deal. Direct bidding engines (Model 3) do nothing else than replicate this service 24/7, by closing direct deals with your guests via an online negotiation algorithm. Guests with budgets matching the BAR will book directly on your booking engine. Guests with budgets a bit lower will go on the bidding engine to find out if they can get a room at their own price.
Doing bidding on my website will not generate new sales but hijack all my existing clients
Using a bidding engine on the hotel website (Model 3) in addition to an existing booking engine is a way to capture the 52% guests who come on your website because they saw you on an OTA, but go back on the OTA or elsewhere. Without a bidding engine on your website, you are not able to capture these clients, to know them, their expectations in terms of pricing, nor get them to book, as they are convinced that they will have the best price on an OTA. A bidding engine on a hotel website gives good reason for guests to stay and book on your website as you allow them to bid their own price.
These are common questions I have collected from my discussions and emails with many hoteliers. There may be a number of other questions raised by bidding systems and I would be more than happy to get your feed-back and answer your questions,
About the author
Isabelle Jan is co-founder and manager ofÊPrivateDeal SA, a Swiss company specialized in night & day-use bidding solutions for hospitality businesses. After several years of experience in hotel management and an entrepreneurship background, she is now focused on helping hotels to find new ways of attracting their Millennial guests while improving their direct bookings and simplifying yield management.