BackBid promises a better hotel deal, but at what price? By Christopher Elliott | March 18, 2012 FacebookTwitterGoogle+Pinterest A few days before Eric Kimmel flew from Montreal to San Francisco for a recent conference, he checked to see if he could find a better deal on a hotel. There’s a new site for that. It’s called BackBid, and within hours of his telling it about his confirmed reservation at the St. Regis, where a standard room starts at $579 a night, seven competing hotels had contacted him with lower prices. One of them, the Omni San Francisco, offered a $120 savings and was closer to his meeting. “It was right where I needed to be,” says Kimmel, who owns a health food company in Montreal and had heard about BackBid from a friend. “I called the St. Regis to cancel my original reservation, which was refundable.” Almost since the beginning of the commercial Internet — at least as far back as 1998, when Priceline.com launched — consumers have been bidding on travel. That model frequently benefitted the travel industry, because customers didn’t know how much to pay and often overbid for their rooms, rental cars and tickets. But now, BackBid, a Canadian start-up, is flipping that idea on its head by asking hotels to bid for your business. The implications could be significant for travelers — perhaps even revolutionary. “It’s empowering the consumer to say, ‘This is what I’m looking for,’ and the hotel to say, ‘This is what we can offer,’ ” says Chris Patridge, BackBid’s executive vice president of marketing and the company’s co-founder. “It turns the tables on the traditional way of booking a hotel room.” BackBid takes advantage of the hotel industry’s generous refund policies, which often allow travelers to cancel rooms without a penalty as long as they give enough advance notice. Guests register with BackBid, adding their reservation and lodging preferences. That information is sent to BackBid’s hotel network. Hotels may then submit bids to encourage travelers to “abandon” their current reservation — that’s the company’s word, not mine — and book with their property instead. The new reservation is nonrefundable and can’t be changed, and your card is charged immediately. As you might expect, the BackBid concept has its share of both cheerleaders and critics. Arthur Frommer called it “a remarkable new website” on his blog, praising it as a “nothing-to-lose proposition.” But the lodging industry isn’t so sure. Starwood Hotels and Resorts Worldwide, which owns the St. Regis, would not comment on losing a customer, despite repeated requests. Jason Freed, the news editor for the industry Web site HotelNewsNow.com, called BackBid’s strategy “a bit scandalous.” “What if every time you bought an item from the grocery store, an article of clothing or a piece of furniture, once you got home you had competing stores offering to sell you the same item for a cheaper price?” he asked. Hotels are concerned that BackBid will ratchet up competition to an unsustainable level. “If Backbid succeeds, this sense of competition will only heighten, and hotels will be undercutting each other left and right,” Freed said. “It’s not good for the hotel industry because everyone involved — owners, managers, brands — lose revenue. And while on the surface, cheaper prices may sound good to the consumer, it really means that hoteliers have fewer resources to put toward making your stay better.” Patridge believes that those worries are unfounded. As a former hotel manager responsible for revenue management — the folks who make sure that every room is full and that the hotel is getting top dollar for them — he says that BackBid is just another way of selling rooms. “The name of the game is heads in beds,” he says. And far from harming consumers, he says, he’s seen hotels bid on business by offering more amenities, such as free wireless Internet, a higher star rating than the original property and better prices (often $20 a night lower, or more). A site such as BackBid could also have a cleansing effect on the hotel industry, from a customer-service point of view. I receive regular complaints from readers about mandatory “resort fees” and other nuisance surcharges arbitrarily added to the bill. But if you’re paying for the room up front and in full, then a resort can no longer surprise you with a mandatory fee for using its gym or having an in-room safe or access to a concierge. The hotel has to roll it into the BackBid rate. As for the suggestion that BackBid could turn the hotel industry hypercompetitive, I have only one thing to say to that: Now hotels know how it must have felt when Priceline burst onto the scene and consumers had to guess the winning rate when they made a “name your own price” bid. Many guests complained to me afterwards, believing that they had overpaid. Hotels didn’t care. Now they’re getting their comeuppance, some might argue. Although Patridge won’t reveal any booking numbers, he claims that the site is growing “exponentially” and adding new cities and hotel partners, though he declined to name any of the participating hotels. But they’re out there. Dennis Schaal, who writes for the travel industry Web site Tnooz.com, recently used BackBid on a hotel stay in Chicago. He was surprised to discover that one of the hotels bidding on his business was the one at which he already had a reservation. It offered him a $39 per night discount on his room. Schaal, a longtime observer of online travel start-ups, likes what BackBid does and believes that travelers will benefit. “Can they make a business out of it?” he asks. “I hope so.” FacebookTwitterGoogle+Pinterest Christopher ElliottChristopher Elliott is an author, journalist and consumer advocate. You can read more about him on his personal website or contact him at firstname.lastname@example.org. Got a question or comment? You can post it on our help forum.More Posts - Website - Twitter - Facebook - LinkedIn - Google Plus Crissy I voted no, not because I don’t like a good deal and to pay the lowest price. But, I’m concerned that it will force hotels to find new ways to make money (like the airlines), will the poorly advertised resort fee be higher? Will I be paying for towels? How low can the hotels go to keep making money? Julie Sturgeon As a travel agent, I can tell you that people will shop for better prices on hotel rooms regardless of this tool. One of the reasons I do a lot of conference business is because attendees register their conference hotel and price with me, and I contact them if anything in the area is cheaper. Sometimes I even get the conference hotel cheaper for them through consolidators. I’ve rebooked stays as many as 5 times in a week for vacationers who are always looking to save even a dollar more. Since my commission goes down as the work goes up, I can say it’s not a great business move. But it’s happening more and more and more. backprop So you purchase a refundable reservation at a premium and swap it for a nonrefundable reservation to save a few dollars? I can’t wait for the headline on Chris’s site in a few months: “Traveler’s Uncle Dies Before Trip, Wants Refund from BlackBid” Fly, Icarus, Fly Sounds like an interesting concept. If your own hotel that you have reservations with can also bid, then why not? Question for anyone who’s used it — do the bidders get to see who / what was bid or only the consumer? ClareClare “‘What if every time you bought an item from the grocery store, an article of clothing or a piece of furniture, once you got home you had competing stores offering to sell you the same item for a cheaper price?’ he asked.” Well, if it’s a big-ticket item (akin to a $579/night hotel room), and someone else offers it to me for $120 less, I’ll gladly exchange it! And if it’s a smaller item, like a quart of milk, and someone else offers me five cents off, I won’t bother! Any other questions? MeanMeosh Sounds like a great idea. What I would fear, though, is the proliferation of “service fees” for cancellations, deposits charged to your credit card at the time of booking, or longer penalty periods. A lot of hotels already do this in super high demand areas like National Parks in the summer, where it’s common to see a deposit immediately charged equal to one night of your stay or more, plus a $25 fee for all changes, plus the room becomes completely nonrefundable 30 days or more in advance of your stay. It wouldn’t surprise me if you rather quickly started seeing hotels in cities where BackBid has a presence start instituting 7 or 10 day advance cancellation policies. I’m guessing most BackBid hotels are getting rid of distressed inventory, which they’re less likely to do further out. Joe Julio Exactly. Mr. Freer must not spend too much time away from his desk. Lots of stores offer “price match” offers good for 30 days after your purchase. So yes, Mr. Freer, many retailers do offer you a better deal if you can find it somewhere else even weeks after you purchase it. Meebo “…on the surface, cheaper prices may sound good to the consumer, it really means that hoteliers have fewer resources to put toward making your stay better.” I almost wet myself laughing at that absurdity. How dare you consumers encourage and engage competition! We will punish you now!!! Meebo You think they’re hurting? really. Carver Clark Farrow II Mr. Freer is singing an old song with a different name. Every industry spokesman has a reason why higher prices and less competition is actually better for the consumers. That is of course total B.S. In my own field, attorneys in a certain state actually tried to get do it yourself legal guides outlawed. The argument was the a DIY guide was practicing law without a license. Preposterous. Of course the real reason was that it reduced attorney’s incomes from lucrative fields such as residential evictions and no-contest, no asset divorces. It doesn’t matter whether it’s attorneys and DIY legal guides, travel agents and the internet, or hotel owners and Backbid.com, anything that reduces revenue streams will be attacked by those who wish to protect their money. It’s human nature. MarkKelling I doubt hotels will list every room in their inventory on BackBid or sites like that. No one is forcing them to even participate in the program if they choose not to. They will only offer the rooms they feel they will not be able to sell through normal reservation channels. And they won’t offer them at a price that will cause them to lose money either. But if they are able to provide rooms at a significant discount over their normally advertised rates or the rates of equivalent hotels nearby, then what’s wrong with that? Does it really cost $579 a night for the hotel mentioned to have you stay there? I doubt it cost them half or even a quarter of that amount. Of course a hotel has fixed costs like housekeeping and utilities that have to be covered by a minimum number of guests staying there. But you pay a lot for the perceived value of the brand, location, and amenity mix and some people think that is worth a rate that high. MarkKelling Me too. That statement to me read as “hotels won’t be able to make as much profit off of suckers.” MarkKelling I find it amusing that every time someone wants to do something to help the consumer get a better price or better service a company involved in that business starts screaming about how it will hurt the consumer. An interesting airline competition situation is developing in Houston TX. Southwest Airlines has petitioned the city of Houston to allow them to add an International terminal to Hobby airport (HOU) so they can start offering service to the Caribbean and Mexico. United has strongly objected stating it would “dilute” the efficiency of the international services offered at Houston Bush airport (IAH). No, the only thing it would do is offer the traveling public an option other than United and break United’s stranglehold on international service out of Houston. And it might cause a few people to choose a more affordable option than what is offered today. Carver Clark Farrow II The scary thing is that some people actually believe the spin doctors ExplorationTravMag I can’t help but feel if the hotels are against it, there must be something to this. I think you said it best, Chris, when you pointed out the hotels have been sticking it to travelers for years with no concern whatsoever for the customer. Now the customer has the opportunity to get what they want at a price they can agree with and the hotels don’t like it? Wow… y_p_w Wasn’t Southwest originally only allowed to use Love Field for flights directly between states neighboring Texas or within Texas? y_p_w I’ve returned items when I found a better price somewhere else. I’ve never actually used a price match guarantee after the fact. I’ve used price matching where I brought in an ad. Once I even got a better deal where I got several items where a matcher had a better item (different manufacturer but technically the same item with the same UPC code). TonyA_says Mr. Freed is full of sh*t. If a hotel does not want or cannot afford your business, it simply should not bid for it. Nothing is forcing a hotel to lower its price except perhaps “competition”. Competition is good for everyone. dave3029 I thought Chris covered that when he wrote ” I receive regular complaints from readers about mandatory “resort fees” and other nuisance surcharges arbitrarily added to the bill. But if you’re paying for the room up front and in full, then a resort can no longer surprise you with a mandatory fee for using its gym or having an in-room safe or access to a concierge. The hotel has to roll it into the BackBid rate.” DavidYoung2 I’m with you, but for a different reason. I think that it is possible that the hotel for which you hold a confirmed reservation may decide to just cancel it themselves, or flag you as a potential flake. Hey, you’ve posted your intention to cancel the reservation, so why should the hotel be bound to hold it? So if the hotel finds itself overbooked, you’re reservation is canceled by the hotel 60 seconds before your reservation is ‘locked in.’ Hey, if you can do it, so can they! Also, I’m a bit uncomfortable telling the world where I’ll be on certain dates. Hey, come rob me — I’ll be in Houston from this date until this date. MarkKelling The restriction applied only to flights to and from Love field in Dallas and was an attempt to put Southwest out of business in its early days by American Airlines. Southwest has always been free to fly from any other Texas airport including HOU & IAH to any destination it chose. MarkKelling Including the Houston mayor and the director of Houston airports. andrelot Well, that would be a likely outcome in your scenario. But I don’t think it is necessarily bad. In fact, I think hotels and car rentals have exceedingly generous cancelling policy, which are somehow met with excessive inventory and higher-ish prices. jm71 I can easily see the outcome here — hotels will offer rooms for $59 on backbid to undercut…with a $100 “resort fee”, “fuel surcharge”, “housekeeping fee”, “tax processing fee”, etc tacked on at the desk. This is what happens with Priceline and Hotwire reservations today. This only works if the contract is for a final, set price, all taxes and fees included. JT What part of this did you not understand? “But if you’re paying for the room up front and in full, then a resort can no longer surprise you with a mandatory fee for using its gym or having an in-room safe or access to a concierge. The hotel has to roll it into the BackBid rate.” TonyA_says Here’s Elliott’s 2006 article in NYT telling how resort fees are charged at check in for prepaid hotel rates. http://travel.nytimes.com/2006/03/12/travel/12prac.html Chris Partridge himself seems to suggest that adding fees (at or after check in) can make the hotel’s rate MORE OPAQUE. http://www.tnooz.com/2011/11/01/news/when-it-comes-to-online-travel-agencies-hotel-size-does-matter/ The take away here is the Partridge cares more about hotels (his clients) than you, the consumer. Valyn Perini My thoughts on this, as a former hotelier, is that it forces hotels into a race to the bottom for rates, which is ultimately unsustainable from a margin standpoint. Hotels must make up for the lower fees somewhere (higher charges for in-room amenities, higher fees for room service or food outlets, higher spa fees, etc.), so while the guest might be getting a lower rate, they’ll pay for it somewhere else. Of course a hotel doesn’t have to participate, but if every other hotel in their comp set does, the pressure to play is almost irresistible. Lindabator But it is NOT an international airport – so NO they did NOT fly internationally, just domestically. jm71 I read it and understood it, I just don’t believe it. There’s nothing about paying up front for the room that prevents adding “mandatory” charges afterward — as I understand it, that’s exactly what can happen with Priceline/Hotwire. Even if not “mandatory”, they can simply unbundle parking, internet, fitness center, etc, and charge exorbitant rates for them (“you don’t want to pay the $35 resort fee? Okay, internet is $20 and parking is $30”) Now, if the Backbid site requires the hotels to list all of these “optional” charges out in the bid, that’ll help. MikeInCtown This makes absolutely no sense whatsoever because it was the property itself that contacted you looking for your business at their offered price point. Also, when you accept their offer, you are now billed and your night is nonrefundable. You are guaranteed a room and they are guaranteed their room being sold at a rate they offered. MikeInCtown I’m with Joe in that I also noticed this. People do this every day with every other retailer out there. For it to be a shock with the hotel industry is simply amazing and speaks volumes about the industry in general. Does he not think that people shop places like Amazon, Best Buy, WalMart, etc to get the best price, and if an item goes on sale, the people will return looking for the refund on the difference. MikeInCtown I thought our constitution allowed people to represent themselves. Go figure. maybe some lawyers should go back to school. lol IGoEverywhere Good example of where hotels will get their $$$ XYZ hotel at the Pittsburgh airport has a $95.00 park and Fly rate. If you buy the hotel at $50.00 through priceline, there is no free internet, no free parking and $10.00 shuttle service to the airport. Did the internet geek save any money? The hotels will get back what they lose on the backend. dsliesse I voted no. I can see that it’s a help in the short term, but in the long run I believe it’s going to lessen the product (look at the US airline industry, which in many instances isn’t even up to Greyhound standards anymore). At least it’s a bit different in its setup, and the traveler doesn’t seem to be committed to anything before learning the specifics of the offer. On the other hand, how can anyone justify ANY hotel room for $579? Sounds to me like somebody should have done some looking around in the first place. CAEmigirant Who owns my negotiating data. Will Backbid tell me the last transactions’ prices or bids from similar hotels or “coach” me to accept a certain price…In any case, giving unknown new customers a better price than loyal customers defeats all the years of loyalty program marketing because it will be found out, such as when hotels bid on customers with existing reservations. I think airline passengers on each flight should pass around a clipboard and record ticket prices to be published on line. With an automated version like a blog where we can also publish hotel bids. GlobalTravelAgencyDeals I don’t get it why so many fees for this, for that. These people are out there just to rip us off, by attracting us with nice cheap so called deals which in the end prove to be just lies. That’s Marketing! GlobalTravelAgencyDeals malysz2 There’s a similar site based in Europe called bidroom.com, which has also attracted a lot of press attention recently. Only difference is that you don;t need to have a current reservation to use it.