Imagine if you bid unsuccessfully on a piece of business, then found out that your own revenue management system had encouraged a competitor to undercut your price.
It sounds crazy, and it probably is. But that’s pretty much what’s happening with a new website called backbid.com.
“BackBid is a hotel booking website that revolutionizes how travelers book hotel rooms,” according to the company’s website. “BackBid empowers you, the traveler, to find the best possible hotel room, for the best price, with no elaborate or time-consuming searches necessary.”
Here’s how it works. After booking a room and receiving a confirmation number, the guest posts the details on BackBid. The site distributes the information to competing hotels and invites them to come back with counter-bids. Participating properties are encouraged to offer services and concessions, like free breakfast or wi-fi, rather than price reductions. But they’re free to use the system as they see fit and, in any case, a higher-end facility that matches a published rate may already be discounting. If the customer accepts the new bid, the reservation is prepaid and non-refundable.
BackBid says the system is opaque to individual properties: if a customer puts a reservation out to competition, then cancels the original booking, the first hotel in line never knows why. But the system still puts hotels in the position of cannibalizing each other’s rates, and they’ll all see the impact in the aggregate.
If the system works, it will be because some properties have nothing to lose: if a small, independent hotel is trying to stretch a limited marketing budget, a deeply discounted rate or upgraded package may still be better than an empty room.
Currently the site only caters to individual travel. But if this system became a factor in the group market, hotels would take a double hit. Sales managers would negotiate volume discounts with planners, but participants who initially booked inside the block could easily stray after “backbidding” their reservations.
One scenario is that the lost revenue will force hotels into a downward competitive cycle of cutting rates and service. Another possibility is that properties will refuse to play, offer their best rates the first time, and do their best not to cannibalize (or be cannibalized). But if the trend really catches on, we could be in for an era of permanent fire sales, in which no rate is the absolute lowest and few properties can count on the revenue they need to put their best product forward.
What will hoteliers do to counteract this push towards commoditization? Weigh in and tell us what you think!