For many hotel chains, dynamic pricing has become standard, but back in 2002 auctioning rooms on eBay (and its defunct competitor QXL) was pretty smart. It was nice to see Blackpool hotels getting in the on the act, found simply by searches on the appropriate eBay category.
Empty rooms are the bane of hoteliers’ lives, as the bulk of their running costs are fixed. An unfilled room may mean a little less laundry or cooking, but the mortgage, bills and staff wages still need to be paid.
Big hotel chains cope with this through special offers for times when they predict they will have space. But this requires much planning, as well as lots of advertising to promote the offers.
So how can a small accommodation owner fill empty rooms, even if at a lower price than usual? One solution is to use auction websites, the most popular being UK-based QXL.com and Ebay.co.uk, the local division of the US pioneer of online auctions.
Ebay concentrates on small traders, and has a Bed & Breakfast subcategory within its Tickets and Travel section. QXL has larger companies auctioning their wares, and the Short Breaks section of its Travel category includes a UK Hotel Breaks list. The easiest way to see what’s going on is to look at the two sites’ lists of auctions.
Relatively few hotels exploit this technique. But it can be a useful way to sell rooms at quiet times, and to get noticed. It is also fairly cheap. QXL charges no listing fee when the reserve price is the same as the auction’s starting price; Ebay charges between 15p and £1.25.
Both charge a percentage of any winning bid. QXL takes 5% of the first £50, 3% of the next £450, then 2% above that. Ebay charges 5.25% of the first £15, 2.75% of the next £585, and 1.5% above that. Both sell ways of promoting an auction, from featuring it on the site’s home page to placing it in several categories.
Roxanne and Andrew Sandiford took over the Merecliff Hotel in Blackpool last year, and were determined to take advantage of the internet. Mr Sandiford built the hotel website, merecliffhotel.co.uk, after taking a course in page design.
“I did 23 years in the Royal Navy, and the navy way of life is: if you’re going to do something, you do it properly,” he says. The site has almost replaced the need to send out printed brochures.
Mrs Sandiford began experimenting with auction sites as a buyer, when building a collection of antique postcards of Blackpool. Anyone wanting to sell on auction sites should start as a buyer, to get used to their conventions and to build a rating – the number shown next to your trading name, showing how many satisfied customers (both sellers and buyers) you have dealt with.
Mrs Sandiford first tried auctioning accommodation last December, with modest results. She hit the big time when she tried creating a package for Valentine’s Day: two nights’ accommodation for two people, plus a four-course Italian candlelit dinner. “It was a sell-out,” she recalls. Filling a nine-room hotel in February, in a town not known for its winter weather, is no mean feat.
She says she prefers Ebay to QXL or other auction sites, as she thinks accommodation sells faster there. The couple use the site to sell packages that include tickets to shows, or passes for Blackpool Pleasure Beach. They usually sell accommodation for a certain month, meaning that the winner negotiates the precise date separately from the auction itself.
Mrs Sandiford starts auctions at £1 with no reserve, to attract attention and bids. This means she could lose money on a resulting booking: “It’s a risk I take,” she says, adding that if people began winning auctions at very low prices, she would cut the number of offers rather than set a higher starting price.
Colin Fox, group marketing manager for English Lakes Hotels, has many more rooms to sell in the group’s five hotels, and at higher prices. But he still finds that QXL is a useful tool, although he prefers realistic starting prices. “I don’t think we would be keen on using £1 that often,” he says. English Lakes uses it occasionally – QXL offers free extra promotion for such low-starting auctions.
Fox has been using QXL for several years, tending to put specific dates on auctions, something that is easier with larger hotels, as selling out is less likely. He agrees that packages work best.
Hayley Watts, UK marketing manager for QXL, says packages allow hotels to promote themselves to different interest groups. “English Lakes themes things, such as a watersports package,” she says.
Watts says accommodation auctions work best when three or four days in length, and less well if the offer is for a specific date in under a week’s time. She adds that it makes sense to spread auctions over time. “Keep the inventory fresh, so there’s always something there, so people can find the hotel,” she says.
Fox says that auctions have a strong promotional element. “A lot of people see us on there, then find our website, or phone us,” he says.
Mrs Sandiford agrees: “Many people wouldn’t imagine coming to Blackpool. They come from Brighton and London, as they’ve won an auction.” And it often snags those who don’t win: “People who lose ring up and book,” she says.
There are other ways of selling empty rooms online. Lastminute.com has built its business on late bookings, and this summer is starting a web “extranet” service. Previously, lists of dates had to be sent in by fax, email or phone, making management cumbersome. “But with the extranet, we’ll be able to take on a lot more of the smallest hotels,” says hotel account manager Richard Lamb.
This kind of service is more expensive: Lastminute charges £200 for registration, plus 15% commission. However, it puts a hotel on a site concerned only with travel, and Fox says he is happy using both QXL and Lastminute.
But for a small hotel such as the Merecliff, online auctions are ideal. “It gives us a lot of publicity,” says Mrs Sandiford. “And when people win, rather than paying a deposit, they pay immediately.”
How do auction sites work?
An online auction takes days rather than minutes to complete, but otherwise it follows the rules of the saleroom. Users need to register and choose a trading name for themselves. A seller then sets the auction’s length, the starting price, the reserve price – which can be the same, or more than, the starting price – and the increment between bids. A listing fee may be charged.
The seller also chooses a category, and provides a description and sometimes a picture of the item for sale. Potential buyers can ask questions through email or by phone if the seller provides a number.
A buyer is notified by email if they fail to reach the reserve price, or if they are outbid, inviting them to rebid. Many auctions pick up speed in the last few hours or minutes, if two or more buyers are keen to win.
Both QXL and Ebay offer an optional immediate purchase option. This means the seller can set a price which a bidder can pay to win the auction immediately.
If an auction is unsuccessful, it can be reposted, although this can trigger another listing fee. After a successful auction, the seller pays a percentage of the winning bid, and contacts the buyer with contact details. In a standard auction, the website offers no guarantee that the item will be delivered, although some provide an optional insurance or guarantee service.
Rogue traders are discouraged through ratings systems. Each successful bidder and seller is asked to rate their counterparty as positive (+1), neutral (0) or negative (-1), and leave a comment, which will be publicly displayed. A successful transaction should lead to a “+1”, with “-1” ratings given only in case of non-payment, non-delivery or big problems with the transaction. The other party can leave public replies to comments.
Many buyers and sellers are unwilling to deal with anyone who has too many negative ratings. The +1s and -1s are added up to a number shown next to each participant’s trading name, and act as an online reputation – the higher the better.
guardian.co.uk © Guardian News & Media Limited 2010