Opaque bookings on the wane: Priceline, Hotwire, and a changing landscape
Priceline built its business in 1998 on opaque bookings, or buyer-driven pricing.
But the supply of opaque deals appears to be shrinking for it and all players in the industry, according to Tnooz interviews. But a survey of bids shows the steepest discounts are still available on Priceline.
Increasingly difficult market
There’s no authoritative market research on the total market for opaque or semi-opaque bookings, let alone anyone tracking a relative decline.
Alek Vernitsky, the CEO who pulled his startup GetGoing out of opaque sales earlier this year, gives the most plausible estimate Tnooz has heard, namely, that opaque accounts for 2% to 4% of total US online sales.
Higher in the off-season, lower in the high season, of course.
Vernitsky says that the issue is supply rather than demand.
In general, it is more difficult to get opaque inventory, as most airlines are running very high load factors.
Hotels also have more revenue optimization tools and distribution channels, like last-minute mobile-only offers, than they did a decade ago. Opaque is less necessary for them now.
Meanwhile car rental chains have consolidated in the US to such an extent that fleets have been downsized and they are increasingly sold out in many US markets.
US-based Guestmob attempted a couple of years ago to launch an opaque hotel booking service using big data. It failed.
Expedia’s effort to integrate its sub-brand Hotwire’s distressed inventory into its main site with so-called “Expedia Unpublished Rates” hasn’t caught fire either.
A visit to Expedia’s Hotels homepage (US) shows no link to the unpublished rates.
And in the past year, since Expedia began powering Travelocity’s results, Travelocity’s equivalent product, Top Secret Deals, has also vanished.
Some startups not deterred
One company that says it remains sanguine about semi-opaque bookings is GetARoom.
For five years, the premise of this Texas startup has been that users can make a call to get access to rates discounted up to 15% off of what’s available retail on the Internet on thousands of hotels.
The OTA, which turned five this month, has seen its call center — the main source of semi-opaque bookings — “remain an important revenue source”, according to David Litman, CEO of GetARoom and former CEO of Hotels.com.
That said, in the past year the company has come to rely on affiliate relationships instead of the call center.
Another company that’s not deterred is Stayful. The New York City-startup Stayful launched last year with a product that lies in-between Priceline’s name-your-own-price opaque bidding model and the standard retail model.
Its algorithm suggests a rate the hotel is likely to accept. Like Priceline’s Express Deals, this type of semi-opaque product might be popular, though it’s still early days.
The Priceline versus Hotwire battle
Of course the lion’s share of opaque and semi-opaque is still held by Priceline and Hotwire. They’re also being shaken.
In Priceline’s pioneering version of opaque booking, a shopper doesn’t know the details of the travel product until after he or she has bought it.
As a customer, you say what you’re willing to pay for plane tickets, a hotel room or a rental car, and then find out if your offer is accepted.
Rival brand Hotwire broached a half-way approach to opaque sales, in which the price is listed along with amenities, such as if the hotel has a swimming pool or the rental car has an automatic transmission, but not full reveal.
At first, Hotwire’s product seemed like an also-ran. But soon its sales picked up.
Two years ago, Priceline, in turn, imitated Hotwire’s model by showing prices up front (eliminating the bidding aspect) with its new Express Deals product.
That new product, with such a minor twist on the original product, has boomed. Priceline says that is currently seeing a decline in revenue from its original Name Your Own Price services.
A Priceline spokesperson told Tnooz:
We have commented (generally speaking) about how some of the direct Name Your Own Price decline was a shift into our other semi-opaque product Express Deals.
So all in, we still see a healthy appetite for these products… it’s just that our share is shifting internally as we widen our product offering.
Price über alles
Demand remains at about the same level, say experts. Last year Hotwire trotted out a survey of European travelers to support the idea that a particular niche set of consumers continues to like opaque deals.
But these travelers will only accept the uncertainty involved in opaque bookings if they feel there’s a real bargain to be had relative to retail prices.
Which begs the question, are there bargains still there?
Owner Randy Greencorn, based in British Columbia, says:
I looked at over 8,000 crowd-sourced winning bids from over 1,000 hotels on Hotwire and Priceline. This data only included hotels where I had at least two reported wins per hotel on each site.
Users report on the hotel they received, the price they paid, the bidding zone, and hotel attributes (amenities, hotel rating).
Comparison 1 looks at which website has a cheaper average price per hotel. Of the 1,000+ hotels, Hotwire had a lower average rate in 12% of the hotels.
Priceline had a lower average price 88% of the time. On average, Priceline’s average price per hotel was 20% cheaper than Hotwire’s based on HotelDealsRevealed’s data.
Comparison 2 takes a slightly different approach.
If the average Hotwire and Priceline price for a hotel is within +/- 10%, they’re considered roughly the “same” (within spitting distance). 21% of hotels had average prices that were roughly the same on both sites.
Priceline had a significantly lower avg price (at 10% ) in 74% of the hotels we looked at. Hotwire only had a significantly lower average price in 5% of the hotels.
The data was submitted by users from September 2012 to May 2014. However, these are the submission dates to HDR and not necessarily the travel dates or booking dates.
In short, there are still deals out there, especially with Priceline’s Name-Your-Own product.
Opaque not going away
Despite apparently waning inventory, Priceline and Hotwire haven’t indicated any plans to diminish their opaque products, though semi-opaque is certainly overtaking true opaque.
The essential difference between Hotwire’s and Priceline’s products also hasn’t changed, says Greencorn.
Hotwire seems to better suited for those who are more risk averse — those that need to know what amenities they’re getting and don’t mind paying a little extra.
I’m a perfect example: When I travel with my kids, I need to book a hotel with a swimming pool so I choose Hotwire over Priceline even thought I may pay a little extra for my hotel room.
NB: Image courtesy Flickr/jdhancock/Creative Commons
Sean O’Neill had roles as a reporter and editor-in-chief at Tnooz between July 2012 and January 2017.