As part of their room sales strategy, many hotels make rooms available at reduced rates through such web sites as Priceline.com. While this approach fills rooms, it also creates challenges regarding how the price point will affect hotel revenue, explains Chris Anderson, an assistant professor at the Cornell School of Hotel Administration. In a new report from the Cornell Center for Hospitality Research (CHR)…
As part of their room sales strategy, many hotels make rooms available at reduced rates through such web sites as Priceline.com. While this approach fills rooms, it also creates challenges regarding how the price point will affect hotel revenue, explains Chris Anderson, an assistant professor at the Cornell School of Hotel Administration. In a new report from the Cornell Center for Hospitality Research (CHR), Anderson and coauthor Radium Yan, who is with InterContinental Hotels Group, America, show that judicious use of Priceline’s reports to set optimum rates can be an effective hotel revenue management strategy.
"Although Priceline creates a screen between the hotel and its customers, the hoteliers can use Priceline’s reports to determine what is the best price to offer through Priceline," said Anderson. "The math is complicated, but we show how it works. We field tested this method on a large convention hotel earlier this year, and we saw a 24-percent increase in revenue from Priceline."
Priceline‘s name your own price application allows consumers to bid on hotel rooms with certain specifications. But the consumer does not know what hotels have placed rooms in the Priceline system. The hotel revenue manager 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. Priceline provides reports on bids received, which allows the analysis developed by Anderson and Yan. The report includes a sample of the spreadsheet calculations to optimize revenue through Priceline.
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