Win-win. That’s how a new crop of travel bidding sites want you to think of their businesses.
The airline wins by selling a seat that would otherwise go unused; the hotel wins by giving you a surplus room. And you win because you get to “name your own price.”
Win-lose is more like it. The suppliers win; the sites win. But for you, the traveler, the outcome is much less of a sure thing. Although Web sites that let you bid on travel products can be a good deal, they also can prey on customers who are uninformed or in a rush to buy a ticket. The online bidding sites effectively profit from your ignorance.
“I wouldn’t go so far as to call these bidding sites a gimmick or a scam,” says Lorraine Sileo, an analyst at PhoCusWright in Sherman, Conn. “Not yet.”
The economics of the bid sites is indisputable: the company either takes a fee from the transaction or makes money from the spread – the difference between the price you pay and the price the supplier charges – or both. The greater the spread, the greater the loot.
The most well-known travel bidding site, Stamford, Conn.-based Priceline.com, warns users to do their homework before bidding for a ticket.
“We strongly recommend that if you really want to get tickets, you name a price no lower than the lowest published or special discount fare,” the site cautions. “If you’re not sure what the lowest published fare is for your dates, we suggest you raise your price to the highest amount in your personal range that you are willing to pay.”
Finding the lowest published fare can be a real hassle since airlines are under no obligation to give you that information, so most users either overbid or underbid. (Even if you do know it, Priceline.com admits it accepts less than half of its users’ “reasonable” bids – those “within 30 percent of the listed advance purchase price.”)
Why not just post the lowest published fares on the site? “Our contract with the airlines forbids it,” says spokesman Mike Darcy. How convenient.
Not to pick on Priceline. It is, after all, one of the clearest and most credible of all travel bid sites. Others, such as Travelfacts Auction, can be even more confusing – and costly.
Travelfacts users make an offer for a cruise or other vacation package, the actual value of which is extremely difficult to determine.
Krista Pappas, senior analyst at Gomez Advisors in Concord, Mass., says travel bid buyers need to beware. In the worst case, travelers can unwittingly pay way too much for their trips. At best, “when you see the final result, it’s not much different from visiting a travel agent.”
No kidding. When I had to buy a last-minute ticket from Los Angeles to Baltimore recently, I checked out a variety of online bidding sites. The fine print scared me away. It stipulated that I had to wait until my bid was accepted or rejected – meaning I couldn’t shop elsewhere – plus I was forced to buy the airline ticket if my bid was successful.
On some sites, I would also have to accept any routing with the possibility of a long layover, and I didn’t much care to spend a whole day traveling. I went straight to United Airlines and got a seat on the red-eye for a fairly reasonable price.
Hal Segal, president of TravelBids.com, a Boulder, Colo., “reverse auction” site, says online bidding sites have their weaknesses, but he says they’re working to improve the way they sell their products. For example, TravelBids offers several purchase options, by which users can control the length and terms of their bids.
Nonetheless, Segal echoes the Priceline advice: “Before you place a bid, be sure to shop around and look at all of your alternatives. Look at all the other online sites, and then come to us.”
If only Internet users would do a little browsing before they bid, maybe companies like Priceline.com wouldn’t have stock-market valuations of more than $20 billion – about the same as the market worth of American Airlines, United Airlines and Delta Air Lines combined.
I believe the investors who have sent these stocks into the stratosphere aren’t putting their money on the newfangled sites as much as they’re banking on our collective stupidity.
I, for one, intend to disappoint them.