Dear Audience, two people check in to the Park Hyatt in Chicago; one pays USD 480, and the other a third of that amount. If guest number one finds out, they’re unlikely to be very pleased, and it’s also a bad deal from a luxury hotel’s point of view – but in this industry, knockdown rates are a necessary evil when occupancy is low. Bargain-basement offers can also damage the reputation of a five-star business, so they need to be kept quiet. Regular customers paying rack rate detest seeing people walking in from the street and getting better deals. This catch-22 is one of the main reasons for the success of Priceline, the Connecticut company that auctions hotel rooms, flights, and car rentals online. Sales have been climbing steeply for years, growing from USD 35 million in 1998 to USD 4.4 billion in2011. The only way of achieving growth like this is to offer a unique product.
Priceline | Strategic Management
Priceline’s Name Your Own Price system has been a big success. It breaks with the traditional rule of retailing whereby the seller sets the price and the buyer decides whether to pay it, turning the relationship on its head by charging a commission for acting as an agent for the seller – say a hotel operator. Instead of paying a fixed price, the customer makes an offer for the room, which the hotel is free to accept or reject …
