Chris Woodyard writes today about business travelers using priceline.
If the economy refuses to expand, and business travel budgets remain tight, this is going to become an increasing trend. It has the potential to subvert the whole hotel industry pricing structure.
Old-line companies with traditional travel departments don’t like travelers using priceline, because those companies negotiate corporate discounts and kickbacks which are undercut by their employees saving money with Priceline. The travel departments are generally measured based on their contract negotiation, so they want all travel booked through their own more traditional venues. And companies like to centrally book so that they can keep better track of their employees.
But the Priceline model offers enough savings that its use and acceptance is growing. Or at least the media thinks that it’s growing. I have an appointment this afternoon to be interviewed by a reporting doing a similar story for a major paper.
I hesitate to predict the long-run effects of priceline and other discount travel models. They could ultimately fall flat. The economy could improve and travel budgets could loosen. Then, since travelers tend to have different incentives from the companies paying for travel, costs could skyrocket again and the old model of high priced business travel could survive.
But if companies start adopting tactics like use of Priceline for hotels, use of online discounters for airfare, and other tactics generally employed only by leisure travelers, the entire travel industry pricing structure will have to change. Instead of high priced (and high margin) travel for the business customer and deep discounts for the leisure traveler — viewing the lesiure traveler as merely an income supplement, and charging them based on marginal cost — we may see a shift to an average cost pricing model where business and leisure travelers alike face similar costs.
That could mean the end of the widely available $38 four-star accomodation and the $200 upgradeable transcon airfare. But it would also mean the end of the $2400 coast to coast flight in coach. United Airlines is currently running $1200 first class fares from the East Coast to Hawaii — roughly a 50% premium over coach but about half the usual fare. Maybe then they’d sell the seats instead of giving them away.