Hotel & Motel Management - March 17, 2008 - (Page 14) 14 Cornell Insights IN THE details Priceline guides rates Web site benefits managers Detailed reports available RMs could rework strategy H&MM March 17, 2008 | HotelMotel.com www.HotelMotel.com/digital_edition Shedding light on revenue management elling hotel rooms on Priceline.com and others like it presents a true dilemma to hotel managers. The site’s opaque nature means that would-be guests have only your price as their decision factor. This can put revenue managers into the awkward position of leaving money on the table in two different ways. Price your S By Glenn Withiam H&MM Columnist rooms too high, and the bidding guest will decline your offer, so that your room may go unsold. On the other hand, price your room low and your offer will be accepted, but you may have priced too low and left money on the table. This dilemma encourages many hotels to offer only their distressed inventory to Priceline. If that’s your view of Priceline, Cornell professor Chris Anderson would like you to take another look. As Anderson explains in a new report from Cornell’s Center for Hospitality Research, revenue managers can use the daily reports from Priceline to determine what level of discount has the greatest probability of being accepted. The report, “Opti- mizing Expected Hotel Revenue on Priceline,” is available at no charge at chr.cornell.edu. Anderson acknowledges that most hotels would prefer to maintain as much control of their distribution as possible, particularly by encouraging guests to book through the chain’s own Web site. However, the availability of numerous online travel agencies (Travelocity and Expedia), has encouraged prospective guests to shop around. Even as hotel chains work to standardize pricing on various channels, an appreciable number of customers are willing to use Priceline and accept the risk of bidding on an unknown hotel in hopes of getting a deep discount. To the extent that hotels need to shed inventory at distress prices, the industry may have encouraged that practice. By analyzing the daily sales report that Priceline provides to its hotel clients, a revenue manager can calculate the best discount to offer according to each expected day of arrival. The report allows you to sort bids by check-in date, and you can see the number of bids and how far ahead of expected check-in the bids are being made. Most important, the report tells you what rate the bidder offered and whether another hotel accepted that offer. Thus, you can calculate the frequency of a particular price and, more to the point, of a particular discount percentage. At this point, the arithmetic becomes too complex to explain here. The good news is that Anderson both explains the equations needed to calculate your best discount (showing his work) and provides a spreadsheet tool with the math already installed. This tool allows you to plug in your data to see the optimum discounts according to the number of days before arrival and the number of rooms that should be offered to Priceline. hmm@questex.com Glenn Withiam directs publications at The Center for Hospitality Research at the Cornell University School of Hotel Administration. He can be reached at grw4@cornell.edu. CIRCLE NO. 160 http://HotelMotel.com http://www.HotelMotel.com/digital_edition http://Priceline.com http://chr.cornell.edu http://www.telematrixusa.com http://www.telematrixusa.com http://www.telematrixeurope.com
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