As if the street-corner hotel business wasn’t already competitive enough, a new third-party intermediary undoubtedly will turn up the heat. BackBid, just 10 days old, allows hoteliers to essentially steal—for lack of a better word—guests from hotels down the street by offering a more appealing stay.

How it works: Travelers book a room and then send their confirmation number to BackBid. Hotels in the surrounding area are then able to query guests from BackBid’s database and bid, or pitch, to that traveler with value-adds and private rates. The consumer can pick his or her favorite bid and change their reservation. The new reservation is pre-paid and non-refundable.

Chris Patridge, executive VP of marketing and co-founder of BackBid, told me he hopes hotels will compete with value-adds instead of discounts. For instance, hotels can use BackBid to learn about a guest who already has booked at a competing hotel in their area and then pitch a more customized experience. If the traveler is there on business, the competing hotel could offer free Wi-Fi or free breakfast, he said.

It’s a nice thought—but I don’t think that’s how it’s going to work. If BackBid catches on the way Patridge hopes, hotels are going to be undercutting each other left and right. I don’t think a consumer would go through the trouble of canceling their reservation and changing to a non-refundable hotel down the street for a free bagel and orange juice. But to save US$50 a night …

Fortunately, the system, Patridge said, is completely opaque. So if Hotel A sees that a guest has booked Hotel B down the street, contacts the guest via email through BackBid and convinces the guest to change his reservation to Hotel A, Hotel B will never find out. At least theoretically.

Patridge says the system is set up to allow hotels to determine a competitive set that must have a certain amount of hotels. The hoteliers can create an unlimited amount of competitive sets, but there are limits on how many hotels appear in more than one comp set. So hoteliers won’t be able to gain proprietary rate information about an individual competitor or single out a particular hotel and attack it, he said. 

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There are two ways hoteliers can offer bids: A full Global Distribution System model is a little less flexible on what kind of packages the hotel can offer; or hotels can use BackBid’s extranet to get granular by looking through the database and offering specific packages tailored to individual guests. Hoteliers can set detailed parameters for their queries—such as certain days of the week or certain types of travelers—and can automate the query-and-bid process to run at specified intervals.

“We hope that in the future both hotels are going to be partnering with BackBid and accessing reservations that are coming in,” he said, “so it will be a wash losing some reservations and picking some up.”

Chris Anderson, professor at Cornell University, said during a price optimization webinar this week he is “fascinated” by BackBid. “Suppliers have been very slow to adapt; there hasn’t been a lot of desire by individual suppliers to participate in BackBid,” he said. “As a consumer, you have a lot of flexibility with the reservation. At one level, we don’t want to reinforce that more with something like BackBid.”

However, during the past 10 days, BackBid has signed on 100 hotels, and Patridge expects to add a dozen or so each week. In the meantime, the company has developed an algorithm that searches a partner online travel agency for what it considers a “better deal” and then presents those deals to the customer.

“Consumers will always get bids either from BackBid partner hotels or hotels we’ve determined are better deals,” Patridge said.

In researching and developing the product, 85% of hoteliers offer rates that are refundable with no penalty, he said. There really is no downside to a consumer posting his or her reservation on Backbid, he said.

But I wonder if there will be long-term consequences; if the trend catches on, will more hotels offer non-refundable rates?

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