Reverse auctions gained popularity in the late 1990s
as a result of the emergence of Internet-based
online auction tools.
FreeMarkets was the first company, launched in
1995 by former McKinsey to use the reverse auctions
At the beginning of the new millennium, eBay created
an online auction model where buyers compete to
each other for their highest price for a particular item.
In 2005, the reverse auction concept arrived in
The reverse auctions process
An online auctions is a process where Internet
buyers can set a purchase price as the basis
for finding a vendor willing to sell at that price.
Reverse auctions can effectively be used for
procurement of a variety of goods and
services, as well as financial products.
Unlike a typical auction, prices in a reverse
auction decrease as the bidding process
The objective of reverse auctions process is to
stimulate the demand.
The target of reverse auctions is price
Reduce of the product’s cost, saving
Save time by using online reverse
It is quick (competitors normally have
only minutes to do their bidding)
It encourages competitors to focus on
each other’s pricing
in the travel industry
Case study : Priceline.com
Business description: Priceline.com
Priceline is an OTA that uses the reverse auctions
process as their main strategy.
Priceline.com enables customers to name their price.
“Name your own price”.
In 2002, Priceline licensed its “Name Your Own Price”
travel system to eBay.
The offer of Priceline is airline tickets, hotel rooms, car
rentals, and Vacation Packages.
Priceline is the parent company of the European
Hotels’ profile on priceline.com
Priceline hotel participants are major national
brands: what are their characteristics?
Well known brand that customers can easily
They have quality standards, that most
customers are familiar with.
They negotiate Net price/non commissionable
They have perishable inventory, because of
their huge capacity (room inventory)
It is easy for customers to have information
about hotel chains.
Sites giving customers advice on
using reverse auctions
This site gives information about the benefits of
using a reverse auctions process whether its is for a
company or for a buyer. It really gives details on
how to use a reverse auctions process.
www.reverseauctions.com: this website describes
the history, the issues and opportunities about
www.oltiby.com : it is like Ebay, a website which
sales products and services with a reserve auctions
model. In this website the process of purchasing a
product is well described and easy for the
customers to understand.
The keys points of using the reverse
• The buyer posts an order with the amount of it price
• Multiple sellers offer the desired product at competitive
• The seller who posts the lowest bid is the winner of an
• The Buyer receives a contact information from
• Buyer-to-seller funds transfer
• Buyer receives the product
Conclusion :How can a hotel best
participate in a reverse auction site?
Hotels most particulary chain hotels can participate
in reverse auction by adding their hotel to a well
known OTA which uses the reverse auctions
The hotel must choose the OTA regarding its
reputation, its fee policy, its rate of
customers’satisfaction and its cancellation policy.
It will allow the hotel to sell its inventory and gain