Making the Most of Priceline’s Name-Your-Own-Price Channel

Abstract

As part of their room sales strategy, many hotels make rooms available at reduced rates through such websites as Priceline.com. Priceline’s Name-Your-Own-Price application allows consumers to bid on hotel rooms with certain specifications, including that the consumer does not know what hotels have placed rooms in the Priceline system. While this approach fills rooms, it also creates challenges for the hotels regarding how much to charge, because Priceline creates a screen between the hotel and its customers. The hotelier is faced with a decision about what price to charge, because the hotel will sell the room only if it is priced sufficiently below the customer’s bid. Using the calculations shown in this report, hoteliers can use Priceline’s reports to determine what is the best price to offer through Priceline. Priceline provides reports on bids received, which allows this analysis. A field test of this method on a large convention hotel in 2010 recorded a 24-percent increase in Priceline-associated revenue. A sample of the spreadsheet calculations shows how this optimizing approach works.