Unleash the Power of Sharing Notes

Jonathan at My Money Blog wrote a very good post about shopping for hotel rooms a while ago:

5-Step Guide to Finding The Lowest Rate For Hotel Rooms

Basically if you use an “opaque agency” like Priceline or Hotwire, you are able to save substantially on a hotel room. Although I’ve had a problem with Priceline, I still use them because on average I still get a better room for the money.

When hotels sell the same room for less on Priceline or Hotwire than they do on their own web site, they are practicing price discrimination. Customers who are willing to jump through a few hoops get a lower price. [Note 1]

The “catch” with Priceline and Hotwire is that you don’t know exactly what you will get before you commit to buy. In the case of Priceline, you also don’t know how low you should go. [Note 2]

Consumers counter it with web sites like BetterBidding and BiddingForTravel, where they post what prices were accepted or rejected and to which hotels they got assigned. When consumers share notes with each other, it’s no longer as opaque.

Businesses share notes about consumers all the time. They have access to a consumer’s credit reports, ChexSystems report, C.L.U.E. reports, MIB file, and God knows what other reports. It’s time for consumers to get together and share notes about businesses.

Right now the consumers are very disorganized. There are various review sites (Yelp for restaurants, for example), forums, blogs, Facebook, Twitter, but the “notes” are scattered all over the place. Google helps people find them, but relative to the number of consumers conducting transactions with businesses, the number of reviews is still very very small.

A smart government can play a good role here, as you see in how they help consumers save money on auto and homeowners insurance. If there is an official place where consumers can look up the score card of any business, they are so much better off than being in the dark.

If the government says every business must provide a score card and disclose their scores before entering into a contract with a consumer, good honest businesses will welcome that. This has worked very well on eBay.

If the consumers who fill out the score card with a review are entered into a lottery, there will be an incentive for consumers to do so. Some countries use this lottery mechanism to reduce tax evasion. In the end, everybody benefits. The consumers are more informed. Good businesses earn more business.

Whenever possible, I do my fair share of notes sharing. The reach is still very limited though. Sadly my post about BBG Communications has become a popular one because so many other consumers are also victimized by BBG.

Notes:

1. There’s an econ paper about this whole opaque model. To be honest the propositions and proofs make my head spin. I will leave them to your enjoyment.

Shapiro, Dmitry A. and Shi, Xianwen, Market Segmentation: The Role of Opaque Travel Agencies (February 2008).

2. If you use Priceline, make sure you are familiar with this “free rebid zones” strategy:

Consumer’s Checkbook: Priceline Can Deliver Incredibly Low Rates on Hotel Rooms — If You Use It Wisely

See All Your Accounts In One Place

Track your net worth, asset allocation, and portfolio performance with free financial tools from Personal Capital.

FREE E-mail Newsletter

Join over 3,000 readers and get new articles by e-mail:

No spam. Unsubscribe any time.

Comments

  1. the weakonomist says

    Notes sharing will always be imperfect without a reward system. If there is no incentive to share knowledge then most of the knowledge will not get shared. On the other side if you create an incentive system you may entice people to not do a proper review or share notes in a helpful manner. It’s the social consumerism pickle.

  2. Wai Yip Tung says

    Priceline works really well in “expensive” cities. I’ve gotten deals well below the published price in DC, New York, Vancouver, LA, etc. It works so well that I don’t know how other low to mid-range small hotel or B&B can compete. For example I was searching for a 4* hotel. It goes for something like $180. Too much for me for leisure travel. Then there is those dingy little family run hotel that goes for $100. It is clearly a lower cost alternative. I actually prefer this kind of places because it has more personality that a business hotel. But when I use priceline, I got the same 4* place for $90, beating even the low end hotel.

    The thing is small hotels often have a simple website that posted their rate that seems fairly rigid. I’m not thick skin enough to bargain with them. Their price become uncompetitive compares with corporate hotel with a system to unload their inventory.

  3. AM says

    if you introduce incentives for people (such as a lottery entry) to fill out the score cards, it is possible that many people will not be very thorough/diligent with it, lowering the value of such reviews. You could, of course, audit them, but that may be quite expensive (in addition to the lottery expense, which isn’t free either, obviously).

    Completely voluntary review sites such as Yelp or TripAdvisor are of limited value to me because many people don’t pay attention to things that are actually important to me (to take the simplest example, I’ve seen too many Amazon reviews where people complain about delivery or store packaging, etc, instead of the actual product), so I fear that the value of reviews where people have a monetary incentive to complete them would be even lower.

  4. Harry Sit says

    OK, so maybe creating an incentive for filling out a score card isn’t a good idea. Any suggestions for how to make people share more often? eBay feedback rating system seems to work well. Nobody is required to do it but it looks to me the majority of the transactions generate a feedback. When I sell on eBay I get a feedback more than 90% of the time. It’s just in the culture. Amazon also has a feedback system. When I sell on Amazon, I get a feedback less than 50% of the time.

Leave a Reply

Your email address will not be published. Required fields are marked *