Backbid hammers into auction model with hotel exchange service

TLabs Showcase on travel startups featuring Canada-based Backbid, an auction platform to allow consumers to bid on unwanted hotel reservations.

backbid2

Who and what are you (including personnel and backgrounds)?

Backbid is an online booking site that enables travelers to post their existing hotel reservation and accept bids from alternative hotel properties, in order to find the best value for their upcoming stay.

Backbid allows hotels to see which travelers are coming to their market, how much they are willing to pay and what their travel preferences are because Backbid travelers already have a hotel reservation, confirming their intention to travel.

With this insider knowledge, hotels are able to create personalized offers and deliver them directly to consumers, enticing them to book with their property and abandon their original reservation.

Backbid is based in Montreal, Canada and the founding partners have extensive experience in the hospitality, software and technology space.

What financial support did you have to launch the business?

Backbid launched with a combination of self-funding and private capital.

What problem are you trying to solve?

We are frequent travelers and we were frustrated with all the work that goes into finding the best rate for a hotel stay. Often we would cancel and rebook the same reservation several times as prices fluctuated, and in the end, we weren’t even sure if we’d booked the best deal.

From a consumer perspective, Backbid alleviates the time, effort and uncertainty of finding the best price and value for their upcoming hotel stay.

For hotels, Backbid provides visibility to guests coming into their market, enabling them to target new business from confirmed travelers.

Backbid also enables hotels to compete for business based on value, rather than just on price, by offering value-added services as part of the personalized pricing model.

As well as eliminating the need for discounting to increase business, Backbid eliminates the issues of rate parity, page placement and LRA allotment associated with traditional OTA sites.

Describe the business, core products and services?

The site allows hotels to see guests coming to their market, when they are coming, where they are staying and how much they are paying. Furthermore, hotels gain insight into the travel profile and preferences of these guests.

With this insider knowledge, hotels are able to create personalized offers and deliver them directly to consumers, enticing them to book with their property.

Who are your key customers and users at launch?

We are targeting online bookers who are savvy and motivated to explore many online channels to get the best hotel deal.

We provide these consumers with a no-risk alternative to lengthy and frustrating online searches for hotel deals because if they aren’t able to find a better price/value on their upcoming hotel stay, they are able to keep their current reservation and travel knowing that they received the best deal available.

Did you have customers validate your idea before investors?

From the beginning, we have worked closely with advisory boards comprised of independent and chain hotel representatives to ensure that our model would address many of the pain points that hoteliers were experiencing with current online channels.

What is the business AND revenue model, strategy for profitability?

There are no fees for consumers using the site. Backbid is commission-based, offering hotels a competitively priced channel that makes moving inventory simple and efficient.

SWOT analysis – strengths, weaknesses, opportunities and threats?

Strengths:

  • Because hotels have insider knowledge about guests coming to their market, Backbid offers are a function of the highest rate/value that can close the sale, not the lowest possible rate.

Weakness:

  • Potential confusion of hotels and consumers to understand the differences and competitive advantages of the site compared to other OTAs, especially since we are a new brand in a crowded marketplace.

Opportunities:

  • Savvy hoteliers have now recognized that discounting is a good way to increase bookings but that it works against the hotel in the long run as it diminishes the property’s brand and decreases RevPAR. Hoteliers are looking for a way to increase online bookings without discounting.
  • Traditional OTAs offer many problems for hoteliers, including rate parity agreements and page placement issues.

Threats:

  • Increase in non-cancellable bookings, which will require consumers to pay cancellation fees when using the Backbid site.

Who advised you your idea isn’t going to be successful and why didn’t you listen to them?

Initially, our model has been perceived as bold and disruptive by some long-time hoteliers; however, in many of these cases, the hoteliers that previously challenged the model have been asking to be kept abreast of our progression indicating they do recognize the potential we offer.

What is your success metric 12 months from now?

For us, success would mean for the site to have conversion rates that are above the current industry average.

Backbid travelers are experienced travelers and we are arming our hotel partners with essential tools to precisely target these travelers in a personalized and automated manner, increasing opportunities for online bookings and maximizing RevPAR. BACKBID represents a win/win scenario for both travelers and hotels.

tlabs logo microscope NB: TLabs Showcase is part of the wider TLabs project from Tnooz.

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Kevin May

About the Writer :: Kevin May

Kevin May was a co-founder and member of the editorial team from September 2009 to June 2017.

 

Comments

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  1. John Pope

    @Chris,

    Thanks for clarifying.

    I did try using your service yesterday for an upcoming booking but it appears you’re still in private beta mode. 🙁

    We too are entering the market soon with a business model that adds value to the consumer rather than simply discounting on price so I appreciate your objectives and strategy.

    We look forward to meeting you on the battlefield of supplier adoption and consumer participation… on guard! 😉

     
    • Chris Patridge, Chief BACKBID Hotelier

      I look forward to seeing your model up and running John.

      I really believe that adding-value will be the next phase in the burgeoning online marketplace as suppliers revolt against the discounting model.

      See you in cyberspace!

       
  2. Chris Patridge, Chief BACKBID Hotelier

    Thank you all for your comments and questions.

    I’d like to share some additional information that will help you better understand our model. As co-founder of BACKBID, I come from more than 20 years of experience on the front-lines of on-site revenue management. Although I recognize the tremendous upside that BACKBID offers to consumers, the model is largely driven by my desire to give another option to hoteliers who want to increase their online sales. An important distinguishing factor with BACKBID is that we encourage hotels to offer bids that provide value, rather than just discounting rates. For example, hotels can offer free parking or free WiFi, which can often be perceived as more valuable to a consumer than straight discounts, enabling hotels to stand out and generate additional bookings, without eroding their prices.

    We also understand the burden that managing multiple channels can present to hoteliers. The BACKBID model was designed to be automated to the level desired by each individual hotel partner. Through a flexible query process, BACKBID Hoteliers can pull data on any number of variables, as general or as specific as desired, ensuring that they can send bids to 1000s of guests just as easily as to 10 guests. Hoteliers have the option of having standardized offers sent out automatically to qualified guests, or of creating a specific offer to precisely target a subset in the database. We designed the system to ensure that, from start to finish, the process can be automated to run completely hands-free.

    To ensure that traveler information is kept private BACKBID provides data to hotels in aggregate form. From a hotel perspective, rates are kept confidential because they are not published online; offers are sent directly to guests’ email inboxes, thereby addressing most parity issues.

    Lastly, all reservations booked through BACKBID are prepaid in full and are non-cancellable thereby making it unlikely for guests to continually repost their reservations.

     
  3. John Pope

    I agree with @Valyn, it appears at first glance that the model will be difficult to scale.

    Will hotels be willing to allocate sufficient resources to manage the relationship for the ‘possibility’ of higher conversion rates and achieving marginal benefit? Time will tell I suppose.

    Also,the model encourages hoteliers to compete against each other and essentially steal business away from their local competitive set. Surely, hoteliers will realise that the same scenario (cancellations, lost business) will ultimately happen to their own bookings if they participate. Sounds a bit cut throat and inevitably lead to a race to the bottom, but I may be missing something.

    I’m going to check it out and see how it works for an upcoming booking though. Skeptically optimistic at this point but will try anything once.

    Best of luck.

     
  4. Yasmine

    Once a hotel has made a successful bid and gotten a user to cancel their previous reservation, what is to stop that user from then putting up the new reservation on auction as well? In this case, why would a hotel bother to bid on a customer’s reservation when there is still a good chance of losing their business?

     
  5. Valyn Perini

    This is an interesting twist on distribution of hotel inventory, and I have a couple of comments.

    1) It seems to me that this does in fact support rate erosion, as the service pits hotels against one another to drive down rate to lure the guest in. What am I missing?

    2) This could violate some hotels/brands’ agreements with their distribution partners, especially if the hotel/brand guarantee rate parity across all channels. This would preclude a fair number of properties in a given market from participating, meaning a user wouldn’t get much in the way of bids and wouldn’t find the service very useful.

    3) I’m going to assume Backbid provides a clear message to the user of what happens to their data when they agree to use the service. If I was a hotelier, I’d want to know not only the user name and rate paid, but also reason for travel. If I was a user, I would feel a bit queasy exposing my data to multiple properties who would then have me in their marketing databases. It would be interesting to know what data is presented to hotels as part of the bidding process, and if users can filter who gets to bid on their business (only 3+ stars, etc.), and if the user has a choice on how much of their data is actually exposed.

    4) I’d add another item under threat – this process seems burdensome to hotels, as they have to bid on a per-user basis, and I see no way to provide basic automation. If this model is successful and scales up, I would feel sorry for the revenue manager at the property who has to take the bid management process on, in addition to all their other duties. I’d like to hear a little bit more about the hotel process for managing bids.

    5) The threat of pre-paid reservations can’t be underestimated. If I’ve already paid for a non-refundable reservation (as ALL the hotel companies are pushing on brand.com), then this service is completely uninteresting to me. And pre-paid reservations are on the rise, especially to price-conscious leisure travelers, who would seem to be the target demographic for this service.

    It would be interesting to hear from Backbid what they believe their target market segment is on the user side, and what they believe their target market is on the supplier side.

     
 
 

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