April 11 -- It used to be easy: for pretty much any domestic or transatlantic flight, Priceline (www.priceline.com) would have the lowest fares. The opaque fare service, where you have to guess what price an airline is selling its tickets for, was the airlines' sales channel of last resort -- the way they sold off tickets they didn't feel they could get rid of by any other means.
But capacity cuts and the generally dire condition of the airline industry have reduced the number of empty seats available to Priceline and its competitor Hotwire (www.hotwire.com). Trying to fill empty seats and to face down competition from low-fare airlines such as Southwest, the major airlines have been undercutting Priceline and Hotwire with their own sales. When I shopped for a ticket from New York to Amsterdam last month, I found both services unable to come close to a $316 sale fare being offered by Northwest.
"We just have fewer seats...and the spread between retail prices and opaque prices isn't as great as it used to be," says Tim Gordon, Priceline's senior vice president in charge of their airline products.
Sheryl Mexic, who runs the Biddingfortravel.com (www.biddingfortravel.com) bulletin board that tracks Priceline deals, seems to agree: in a public posting on her board last week, she warned Priceliners not to expect the kinds of savings they'd seen in the past.
"There are still deals to be had with Priceline, primarily on routes that are always expensive and most of all for last minute bids, but I foresee that these deals will become fewer and farther between as long as the current travel climate and airline capacity remain at their current levels," Mexic said in an announcement on her bulletin board.
There's a silver lining for bargain-hunters, though. Priceline and Hotwire say -- and Biddingfortravel.com's listings support -- that they're still a great way to go for hotels. Priceline's hotel product has always been less fraught with doubt than their airline tickets, as you can choose the quality level and neighborhood your hotel is in.
There's a simple reason Priceline's hotel business is booming, says Chris Soder, Priceline's exective vice president in charge of hotels. "You can't take hotels and go park them in the desert," like you can with airplanes. Hoteliers have been loathe to shut down properties and haven't engaged in the vicious price wars that have been seen in the airline industry, so Priceline and Hotwire still have room to play.
"Our savings on hotels are greater than any other product. We save up to 75 percent off published rates...With air, we save up to 45 percent over published rates," says Hotwire's Amy Bohutinsky.
Biddingfortravel.com users have been reporting spectacular savings using Priceline for hotels in expensive cities, such as $47 rooms at the Grand Hyatt in San Francisco and $75 rooms at various four-star hotels around Manhattan. A few weeks ago, I found success in a smaller city as well: looking for a place to crash in New Haven, CT, I bagged a $99 room at the local Fairfield Inn for $50 on Priceline. (During the school year, this college town is much more expensive than you'd think.)
Priceline's revenues have been shifting away from airline tickets and towards hotels, spokesman Brian Ek says. The company's hotel sales jumped 47% from 2001 to 2002, while the traditional opaque airline ticket part of the business fell from more than half of Priceline's total sales to a mere 37%. (The company also offers rental cars, vacation packages, and regular-price airline tickets.) Thanks to its success with hotels, Priceline's not in danger of going out of business any time soon. The company only saw its revenue slide a little bit between 2001 and 2002.
Similar changes have happened with Hotwire. Between the first quarter of 2002 and the first quarter of 2003, airline bookings dropped from 60 to 40 percent of Hotwire's business, and hotels jumped from 30 to 50 percent, according to Bohutinsky.
The lessons for travelers are clear. Keep Priceline and Hotwire in your travel arsenal (especially for hotels and last-minute air trips), but be extra-careful to check airline sale fares and other discount channels before committing yourself to an opaque ticket. As always, you can look for help at Biddingfortravel.com.