REVERSE AUCTION WEBSITES ANALYSIS

THE HISTORY OF REVERSE AUCTION WEBSITES

The first reverse auctions websites appeared in the 1990’s.

The pioneer in the market was Freemarkets.com, founded in 1995.

Eventhough Freemarkets resisted the slowing down of the Internet boom, they had to face new competitors.

Recently, reverse auctions websites have evolved. Originally they were targetting Businesses but now, we can find websites where customers can bid for travel, rooms…

THE WAY OF WORKING OF THESE SITES

In ordinary auctions, The seller put an item on sale and a customer can bid on it. Other customers have to make higher bids if they want to « win » the auction.

In reverse auctions, the opposite happens. Customers are telling at which price they are ready to buy a product or article and the seller can agree or not to sell his product at this price.

Thanks to this kind of auctions, hoteliers can get rid of their distressed inventory and be sure to increase their revenue.

EXAMPLE OF REVERSE TRAVEL AUCTIONS WEBSITE : PRICELINE

Customers can choose the city where they want to go, the category of hotel and the area

EXAMPLE OF REVERSE TRAVEL AUCTIONS WEBSITE : PRICELINE

The partners hotel on this website are very varied since they cover all ranges of hotels from 1-star to 4-star hotels.

Customers can also choose between big chains hotels such as Best Western, Marriott and Renaissance and small hotels like Gabriel..

EXAMPLE OF REVERSE TRAVEL AUCTIONS WEBSITE : PRICELINE

KEY POINTS

Reverse auctions are representing both an issue and an opportunity for customers.

The first issue is that the customer should know that reverse auctions are not synonymous of savings. Indeed, the fees charged by the website can be very high.

The second thing is that since the customers are the ones to fix the price, some hoteliers might have proposed lower prices without the customer knowing it.

CONCLUSION

Reverse auctions represent an opportunity for the hoteliers (since they can get rid of their distressed inventory) as well as for the customers (since they can pay the price they think it right for their trip).

It is a way for hoteliers to know at which price people are ready to buy their stay in the same category of hotel and maybe adapt their pricing policy.