Ask many observers about reverse auctions in the travel industry and there is a collective shrug of the shoulders – it doesn’t work, too complicated, often risky.
But tucked away in New Zealand appears to be a shining light as to how it might be done.
Air New Zealand launched GrabASeat over three years ago. It is primarily a deals portals to throw fares from distressed flights on various ANZ routes.
Users can see which fares are available at certain prices and snap up offers before the offer runs out.
However, since the launch of GrabASeat the airline has also run four reverse auctions for domestic and international tickets.
The execution of these has been varied with starting prices tending to be for long term lead-in fares. says ANZ.
“The rationale behind it is customer/market led pricing giving the customers the power to decide what price they want to purchase at.
“But, obviously it is scarce inventory, so they can’t wait too long or they will miss out.”
So popular have the reverse auctions been in New Zealand that ANZ is currently in the middle a series of events once a week throughout March 2010.
Word-of-mouth appears to be quite a strong factor in the take-up of the auctions. ANZ says it has done zero traditional marketing for GrabASeat, yet traffic during the auctions soars ahead of what is already a well-visited site, scoring 380,000 visits in its first week and reaching highs of 3.4 million on some occasions.
“It creates talk in the market and we have anecdotally heard stories of highly engaged customers sitting on the website watching the auctions as they happen.”
So the question is why reverse auctions are not so prevalent elsewhere in the industry?
Some suggest it is a combination of implementing online technology to facilitate the bidding process with the risks associated with being unable to manage pricing and yield on tickets.
What about other sectors?
- Can the reverse auction process works for hotels as well as airlines?
- Car hire, cruise?
- Or even OTAs?
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wow only tens years after southwest….very innovation.
@david – did they stick with it though?
FYI – This format is really a Multiple Unit English Auction with a Reserve Price. With a true Reverse Auction there is only one buyer and many sellers and no reserve price.
@thomas – thanks for the clarification. not sure how that would work for one seller in ANZ.
Budget Rent a Car tried a true reverse auction around 1999/2000 called BidBudget. The twist was that there were not multiple suppliers. The impact was a significant dilution of revenue.
While the product may have induced some traffic from new customers, existing customers simply tried to get lower pricing using the tool, undermining the retail pricing integrity of the brand.
In perhaps the most comprehensive sense, it was a really bad idea…
Interestingly, Priceline purchased the intellectual property from Budget – the conventional wisdom at the time was that the Priceline method patent on reverse auctions had not anticipated single sellers and they wanted to ensure the full protection of their reverse auction model.
One comment on david’s definition – a reverse auction does have a reserve price, but it is a blind reserve price for the bidder.
I like this idea.
I found a site that does something very similar. reverse auctions a becoming more and more popular, and on this site when you register for free, you get a $500 travel voucher that you can use at thousands of resorts worldwide. For US customers they give you a $25 restaurant voucher as well. I think in the future more people will start buying on these kinds of sites to save.
Hi, Do you have the name of the website you are talking about?? Thanks.