2. Reverse Travel Auctions’ History The 1st reverse auction websites appeared in the 1990’s They were inspired by the success of the newly-developed business model of auction websites in this “dot-com” era Companies originally used this reverse auction model to bid on and win government or private sector contracts, in this case it is a B2B model The first reverse auction website, Freemarkets, was founded in 1995 by Glen Meakem Freemarkets survived the dot-com crisis at the beginning of 2000 but soon faced an increased competition One of the most famous reverse travel auction website is Priceline, among others. It was founded in 1998 by Jay Walker and addresses the consumer market: B2C market
3. How reverse auction websites work Regular auction websites involve a seller to place an item for sale and encourage buyers to bid on it, thus increasing the item’s price. The item is indeed sold to the highest bidder Reverse auction websites on the other hand cause the sellers to compete for the selling of their item to the buyer, not the other way round, causing the price to decrease On reverse travel auction websites, the buyer names the price he is willing to pay for a certain product, then the website’s suppliers/partners compete to offer the best match to the buyer’s request Usually, the sellers’ name does not appear until the buyer purchases the product It is a good way for sellers, who are well-established companies, to get rid of their distressed inventory
4. An example of reverse travel auction website There are several reverse auction websites that specialize in holiday deals An exmple of these websites is Hotwire
5. Hotwire: partner hotels The principle is the same: buyers choose their price range on hotel/various packages and then are offered a selection of prices that they can choose to book. The particularity of this system is that the hotel names are not displayed until the booking is actually made The buyer gets to set his preferences on the product he is looking to buy, i.e. the area, the star rating, the amenities etc. which is a guarantee that he gets what he wished The type of hotels that may be found on the website is varied and depend on the star rating It ranges from lower categories hotels such as Country Inns and Suites to higher standards hotels such as Crowne Plaza, Hilton, Sheraton and Radisson hotels
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7. Customer websites on reverse auctions http://encheresinversees.eu/ is a French-written website www.managingchange.com/dynamic/auctions.htm analyses this market and gives an interesting insight about it www.exploreauctions.co.uk/ReverseAuction.html is a comprehensive analysis of reverse auctions and its advantages/disadvantages www.reverseauctions.com addresses new users of reverse auctions
8. Key points on reverse auctions Reverse auctions provoke mixed reactions: on one hand, they seem to be a great way to save money on the other hand several problems have been pointed out in studies: some websites charge a fee for being able to bid and some websites also charge fees to companies to able to offer their prices to customers Shipping fees may be high In the end, customers spend more money than expected and this system is compared to gambling I may also be damaging for well established brands (eg. hotel or airline companies) to sell their product at a discount price
9. Conclusion Is it worth it for a hotel to be on a reverse auction website? In a general way of speaking, it provides the hotel with a means to sell its distressed inventory BUT it means that it has to be part of strong competition on a website to sell this inventory = is it really worth it? It may be brand damaging: customers may think that what they considered a powerful brand has stock it did not manage to sell and they may wonder why There are more classical ways of selling excess inventory such as on lastminute.com, which are clearer websites and do not require bidding, so does not bear an image of “gambling”
