Online Travel Booking and Bidding Agencies - Overbid on priceline, who profits?

This is something I've wondered about for a while...

Let's say a hotel has a Priceline rate of $42 a night. I bid $60 on Priceline and the hotel accepts. If my understanding is correct, Priceline still pays the hotel only $42 and gets to keep the difference between my bid and the PCLN rate, which in this case would be $18 per night on top of whatever the transaction fee is. Is this accurate or not?

Also, what if you book a multiple-night Priceline reservation but no-show? I've heard that Priceline often only has to pay the hotel for the first night and then they just pocket the rest. Any idea?

Just trying to better understand how the Priceline business model works.

Hotels can have lots and lots of priceline rates.

Priceline books the highest applicable rate.

So if there's a $42 rate and you bid $60, the hotel may well have a $60 rate in which case it gets $60. But if the closest rate to your bid is $58, then Priceline pays the hotel $58 and keeps the $2 difference.

Actually, as I understand it, Priceline derives revenue from 3 sources
* Booking fee (used to be a fixed amount, now sliding and reported to you along with taxes in a single figure)
* A commission paid by the hotel on the accepted rate
* Overbids

But my point about overbids is that since a hotel can have 50+ rates, the amount Priceline keeps on an overbid is likely to be small.

You may claim your multi-night prepaid reservation at any time. But if you are going to be at all late (after 6 PM first night) you should call the hotel to prevent a royal hassle in asserting this.

The consensus is a hotel can have up to 3 (not 50) PL rates. It is not clear if the hotel is allowed to keep more than one night in the case of a no-show. With multiple hotels in most zones and up to 3 rates per hotel I wouldn't think Pl would get much money from overbids. I guess someone who used PL posted rates on the bid screen and then just took 20% off the rate might overpay by enough for PL to get some extra money.

A few (old) PL agreements/contracts with the hotels were posted on the web. It's not clear if the policies have changed since.

The consensus is a hotel can have up to 3 (not 50) PL rates.
Whose consensus exactly?

I don't know the limit (or if there is one)... but it's definately more than three.

I believe that the Priceline gets to keep the money for all no shows.

As a General Manager for a London hotel I will give a quick way it works.

A hotel gives a net price to Priceline this price is at least 30% below rack rate--- in my experience we reduce price to Priceline by 50%. If someone bids for a £X.00 for a hotel , four star, downtown, etc Priceline will allocate a hotel that meets the criteria and they still manage to get a margin themselves which would be at least 10% (standard travel agency commission in NA). If more than one hotel meets that criteria the hotels with the similar rates, location etc will rotate on who the reservation will be allocated to. Hotels give an allocation of rooms for each day to Priceline so even though a hotel may be full on their website Priceline MAY still have their allocation remaining. Once a booking is made with the hotel the hotel immediately charges a Priceline credit card and regardless if the guest shows or not the hotel gets their money.

A hotel may lower thier rate at anytime to Priceline-- they also may increase their allotment. Therefore last minute bookings could result in a better hotel and a lower than anticaipated price.

thanks yyzlhr. I too have wondered how it works.

thanks yyzlhr. I too have wondered how it works.

No Problem.

I have just read some other bidding threads and there seems to be some misconceptions about how us "hotels" partner with expedia, hotels.com, PL etc etc-- there are more and more each day, and I have now limited the number of companies that we will use at my hotel.

As a General Manager for a London hotel I will give a quick way it works.

A hotel gives a net price to Priceline this price is at least 30% below rack rate--- in my experience we reduce price to Priceline by 50%. If someone bids for a £X.00 for a hotel , four star, downtown, etc Priceline will allocate a hotel that meets the criteria and they still manage to get a margin themselves which would be at least 10% (standard travel agency commission in NA). If more than one hotel meets that criteria the hotels with the similar rates, location etc will rotate on who the reservation will be allocated to. Hotels give an allocation of rooms for each day to Priceline so even though a hotel may be full on their website Priceline MAY still have their allocation remaining. Once a booking is made with the hotel the hotel immediately charges a Priceline credit card and regardless if the guest shows or not the hotel gets their money.

A hotel may lower thier rate at anytime to Priceline-- they also may increase their allotment. Therefore last minute bookings could result in a better hotel and a lower than anticaipated price.

Thanks, that is very helpful. I knew that sometimes sold-out hotels can still give out Priceline rooms, and that helps explain it.

Do you know if the 10% margin can include the service fee that is bundled in with the taxes? I, and other posters, have sometimes seen Priceline's rate charged to the hotel (or what looks like it) and often there isn't a 10% margin based on our bid and the taxes alone.

Is the 30% below rack rate a hard and fast minimum discount requirement?

Do you only provide Priceline one single rate, or do you have multiple rates?

Please don't feel obligated to answer. I can understand if you feel that it would give too much away to say.

Thanks, that is very helpful. I knew that sometimes sold-out hotels can still give out Priceline rooms, and that helps explain it.

Do you know if the 10% margin can include the service fee that is bundled in with the taxes? I, and other posters, have sometimes seen Priceline's rate charged to the hotel (or what looks like it) and often there isn't a 10% margin based on our bid and the taxes alone.

Is the 30% below rack rate a hard and fast minimum discount requirement?

Do you only provide Priceline one single rate, or do you have multiple rates?

Please don't feel obligated to answer. I can understand if you feel that it would give too much away to say.


I do not know if the min10 % margin includes their fee but would bet no. When a hotel signs up to PL or even expedia or hotels.com-- they contract a maximum rate and min allocation of rooms. It is at the hotels discretion to reduce the rate, hence being able to secure $50 rates at a 4 star marriott that would be £220-- , As far as room type only one room type is given which is usally a twin room (2 beds) and I beleive on the request page of PL you can "request" bedding type. One post said hotels give 50 rates if they want-- unless some hotels have special privledges that is not true. There maybe be 50 different PL rates for any given date only because the rate had been reduced by the hotel to PL again and again etc etc.

I can guarantee you that PL always makes a margin-- they are never stuck with no show charges that they do not have revenue for as they have release dates usually 1 day before and then the hotel gets those rooms back-- This is another story on why hotels have to overbook--

Maybe things have changed since this article was written (August 2002), or maybe different hotels have different agreements with Priceline.

http://www.utellportal.com/Marketing/priceline/

This link tells hotels they should load at least three different Priceline rates, suggesting they have the option to load more.

Maybe things have changed since this article was written (August 2002), or maybe different hotels have different agreements with Priceline.

http://www.utellportal.com/Marketing/priceline/

This link tells hotels they should load at least three different Priceline rates, suggesting they have the option to load more.


Interesting.... My hotel is with Utell for our GDS provider and I now will be calling in my Reservation Manager to find out if it is different if you go via Utell or direct to PL.

Even so, the tiers could be what I wrote before but highest "tier" is a min discount of X%.

thanks for the link!!

As a General Manager for a London hotel I will give a quick way it works.

A hotel gives a net price to Priceline this price is at least 30% below rack rate--- in my experience we reduce price to Priceline by 50%. If someone bids for a £X.00 for a hotel , four star, downtown, etc Priceline will allocate a hotel that meets the criteria and they still manage to get a margin themselves which would be at least 10% (standard travel agency commission in NA). If more than one hotel meets that criteria the hotels with the similar rates, location etc will rotate on who the reservation will be allocated to. Hotels give an allocation of rooms for each day to Priceline so even though a hotel may be full on their website Priceline MAY still have their allocation remaining. Once a booking is made with the hotel the hotel immediately charges a Priceline credit card and regardless if the guest shows or not the hotel gets their money.

A hotel may lower thier rate at anytime to Priceline-- they also may increase their allotment. Therefore last minute bookings could result in a better hotel and a lower than anticaipated price.
Very interesting thread. yyzlhr, you comments are a "goldmine" .. thanks.
You say there are rotating hotels in the same area with the same rate, say $60. So they allocated hotel A, then B, then C, then A again .. Lets assume I want hotel D with a rate of $80, and bid $80. Would Priceline allocate the $80 Hotel D or a $60 hotel (A, B or C) and take the difference. I know my example is a little theoretical. Actually, all I want to know is, do I get a better hotel, when I bit with a higher price (in the same area, same stars)?

Priceline books the highest applicable rate.

Priceline books the highest applicable rate.

This is true! They match the hotel to highest rate after thier margin/commission etc. The rotating of hotels is more seen in outskirts areas of town where you would have a EG: Holiday inn, Ramada, Courtyard etc where rates are more similar. When getting into city centres there is more of a fluctuation of rates discounted out to PL.