From a historical standpoint, Priceline.com’s Name Your Own
Price tool for flights has long been viewed as a revolutionary program that
fueled interest in travel e-commerce in the earliest days of the internet. But
the historical is now history.
Changes in the travel industry, including record airline
load factors and carefully controlled capacity, have meant that less and less
inventory has been available for the program, and analysts said that likely
sounded its death knell.
Priceline.com recently announced the end of the opaque
pricing program for flights, which began when the site launched in the
late-1990s. The OTA said in a statement that the end was a result of “a
dramatic evolution in both technology and consumer behavior when it comes to
booking travel.”
In the same statement, Priceline urged consumers to use its
semi-opaque Express Deals for flights. Name Your Own Price is still supported
for hotels and car rentals.
Looking back over several years of Priceline Group’s (No. 2
on Travel Weekly’s 2016 Power List) financial reports, the writing was on the
wall for its demise. Former CEO Darren Huston and current CFO Daniel Finnegan
both addressed Name Your Own Price’s decreasing performance over the past few
years.
For example, Huston said in February 2015, that “2014 was a
tale of two cities for Priceline.com, with solid growth in its retail
businesses offset by declines in its opaque businesses. We believe that
pressure in opaque is reflective of a historically healthy overall travel
environment in the United States, which is beneficial to the balance of our
groupwide business.”
Finnegan said on multiple calls that Name Your Own Price’s
performance was down for air, hotel and car services on a year-over-year basis.
Last May, he said the services “continue to be challenged by a lack of discount
rates.”
Lorraine Sileo, senior vice president of research for
Phocuswright, said last week that while Name Your Own Price “was certainly a
signature product for Priceline … it has not been as popular over the past few
years.”
Henry Harteveldt, an analyst with Atmosphere Research,
agreed that the product was “revolutionary” when it was introduced.
“It was pioneering, and it had a huge impact in terms of
changing how consumers planned and booked travel and, for that matter, how
airlines used third-party distribution to sell their product,” he said.
Harteveldt also suggested that the product may have been
“instrumental” in getting leisure travelers flying again post-9/11.
“But the industry dynamics have changed, and airlines just
don’t need Name Your Own Price like they once did,” he said.
Sileo said that Name Your Own Price business has been
declining for several years while other parts of Priceline’s business, most
notably Booking.com, have continued to grow. She called Name Your Own Price’s
elimination on the flight side “a matter of priorities.”
Today, airlines closely control their capacity and pricing,
leaving fewer tickets to unload than in the past, she said.
Carriers, Sileo said, “have been able to fill their airplanes
without having to use the opaque model, so therefore it just wasn’t a huge
business anymore for Priceline.”
Harteveldt said that since Name Your Own Price launched,
consolidation in the airline industry has changed business models
significantly.
“With the various mergers and megamergers, we had reducing
capacity,” he said. “And with the remaining airlines themselves being very
aggressive in controlling the capacity that they offer, and as a result, with
airlines operating at record load factors, there’s less excess inventory
available to offer to a travel agency, to the Name Your Own Price product from
Priceline.”
The Name Your Own Price tool still exists for rental cars
and hotels, though Sileo said she would not be surprised if Priceline eventually
moved to eliminate the tool for those two sectors, as well. Consumers might be
more attracted to using Express Deals, especially for hotels, she said, since
Express Deals offers a little more information about the hotel at which the
consumer is staying.
Booking.com’s growing inventory could also be a draw for
consumers with its deals, Sileo said, leading them away from Name Your Own
Price. Additionally, if hotels aren’t practicing heavy discounting when a
consumer enters a Name Your Own Price bid and they don’t get a match, that
leads to an unsatisfactory experience.
“If people are bidding too low and suppliers aren’t willing
to discount anymore, especially as the economy improves, and they’re not
getting a match or they’re not able to find a deal that way, then it’s again
not a great customer experience,” she said. “So you want to move on to a
different business model, which is what they’re doing.”
On the other hand, Harteveldt said that the dynamics of
booking flights, hotels and rental cars differ, and there likely isn’t a need
to drop the pricing tool in those two sectors. With hotels and car rentals,
“there’s generally more availability of supply than demand,” he said.
Name Your Own Price, Harteveldt said, “is a tool that they
can put in their distribution and revenue management arsenals and use it as
they feel they need to.”