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					E - C O M M E R C E




   FLIGHTS
   OF FANCY
    Since the launch of Priceline.com in Asia, frequent flyers have
                 been getting what they bargained for.

                                      By Tim Metcalfe




              ook yourself an air-ticket


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                                               How do you start? First, Priceline
              through Priceline,” said the     strongly encourages customers to “do
              editor. “Find out how            your research”. Establish how much you
              it works.”                       would pay elsewhere before submitting
  To anyone who has already purchased          your offer for a ticket or hotel room, rec-
  something online, this may sound like        ommended at around 20-30% below the
  the simplest of assignments. To me, and      average price.
  indeed to the vast majority of us in Asia         The second golden rule for acquir-
  who lag behind Americans and                 ing rock-bottom prices is also obvious:
  Europeans in e-commerce transactions,        fly off-peak, which for regional destina-
  it was a bold step into the unknown.         tions means avoiding the weekend rush
       Would I be able to follow the price-    hours. For the very best bargains, focus
  line.com.hk website instructions correct-    your travelling time on weekdays.
  ly? Was it wise to give out a credit card         The final key for the bargain-hunter
  number on the Internet? Would I              is flexibility. If you’re not fussy about pre-
  receive a ticket in my hands or would it     cise travel dates, choose several, and
  reside somewhere in cyberspace?              you’re maximising your chances of being
       The questions didn’t stop there.        on to a serious winner.
  What exactly does it mean to “bid” for            My schedule, however, only permit-
  your ticket, or as Priceline puts it:        ted a Thursday-Sunday long weekend,
  “Name Your Own Price” to save? And at        which in Priceline terms meant possi-
  what cost could I discount up to a third     bly greatly reducing my chance of a big
  from the “market price”? Would it            discount. A peak holiday season depar-
  require a 2am departure and 11pm             ture on August 1 did not help much
  arrival – perhaps, aboard a dangerous        either. Priceline was being put to a
  airline, inclusive of a nine-hour stopover   tough test!
  in some unwholesome airport in the                The destination was Bangkok, which
  middle of nowhere?                           coincidentally has also proved to be the
       There had to be a catch.                most popular choice for Priceline cus-
       Yet the prospect of significant sav-    tomers since the service was launched a
  ings was a welcome novelty – especially      few months ago.This may or may not be
  out of Hong Kong, where flights today        related to the abundance of fine golf
  are among the priciest in the world.         courses around the city, which was my
  Priceline’s widely advertised promise to     personal objective.
  “empower” the long-suffering public               Research was simple. My trusty trav-
  with more affordable travel seemed           el agency of many years quoted
  worth the effort of venturing into this      HK$2,943 (including HK$160 tax)
  revolutionary ticket-purchasing service.     aboard Cathay Pacific, HK$2,560 on
                                                                                                PRICELINE (4)
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  Thai Airways and HK$2,353 with Gulf
  Air (which is famously cheaper due to a
  10am departure from Bangkok, requir-
  ing an early rise).
       In the circumstances, an initial offer
  of HK$1,300 (approximately US$166)
  with Priceline was ambitious – and not
  surprisingly rejected. You can name
  your own price, but it won’t necessarily
  be accepted.
       For obvious reasons, not least frivo-
  lous time-wasters potentially increasing
  their offers by HK$1 at a time, offers
  have to be raised by a minimum sum of
  HK$150. Within a few minutes, I had
  made an offer which was accepted at a
  total of HK$1,846. But I had no idea of
  the flight times or the airline. Priceline
  reckons it usually acquires direct flights
  for regional routes, but I couldn’t be
  100% sure of that either.
       Did I wish to confirm? Yes; and with-
  in minutes I learned that my booking
  had been confirmed, with flight details
  instantly revealed. I had feared my jour-       space, as feared, and was instead prompt-
  ney might be aboard an ancient aircraft         ly delivered to my door the morning
  via a string of out-of-the-way landing          after booking. (Priceline also offers an
  strips, so in the circumstances the itiner-     option of e-ticketing, where available.)
  ary was comfortingly unremarkable. I            Although its sophisticated computer
  was booked direct both ways aboard              programme is about as safe as Fort Knox,
  Thai, departing Hong Kong at 3.30pm             concerns over making direct purchases
  (good) and returning from Bangkok               through the Priceline website can be
  three days later at 3.20pm (even better –       overcome by phoning a dedicated call
  enough time for a final round of golf in        centre to provide your details, including
  the morning).                                   credit card information.
                                                      Due to a typically late check-in for
  SATISFIED CUSTOMER                              departure from Hong Kong, aboard an
  Despite my relatively inflexible and            unusually full flight, I was upgraded to
  rather peak-time travel requirements I          business class on the trip to Bangkok –
  had saved HK$714, which was more than           which just goes to show that Priceline
  a 25% discount. It was worth about 3,700        seats are as good as any.
  baht in Bangkok and so, with newfound               So Priceline passed with flying
  confidence in the Priceline system, I pro-      colours for me, just as many others are
  ceeded to book a hotel room.                    discovering.
       I was able to specify the star rating of       In fact, my peak-season deal to
  the hotel I required (two-star) and was         Bangkok was somewhat ordinary. One
  also given the option of choosing a spe-        happy customer contacted Priceline to
  cific area within Bangkok. Again, I             report that in June she had secured two
  started ludicrously low (HK$200) and            tickets to Bangkok on Finnair for only
  again my offer was rejected (Priceline          HK$1,000 each. Not only that, she
  only partners with international-brand          stayed at a five-star hotel for just HK$480
  hotels). But at HK$350 I hit the jack-          per night.
  pot, with an upgrade to a room on the               But even high-season routes can
  top floor of a three-star boutique hotel        yield serious savings. Alfred Tsoi,Yahoo!
  that turned out to be comfortable,              Hong Kong's general manager, acquired
  friendly and conveniently located.              two return tickets aboard United Airlines
       With the saving of around HK$700           to Tokyo for the World Cup final for a
  on my air ticket, the room effectively          total of HK$4,710. His travel agency had
  cost me only HK$236 for three nights.           quoted HK$4,000 each, virtually twice
  Better still, all I had to do was make a        the price. “I couldn't believe it,” he
  printout of the booking, which I then           recalls. “I knew tickets would be hard to
  presented to hotel reception on arrival.        get and I figured I’d have to pay a high
  And they were expecting me.                     price to get them.”
       The air-ticket never drifted in cyber-         Anther satisfied customer, business-


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                                                                      30
man Leon Wu, travels frequently to           Hutchison Whampoa is shopping for            Planes and hotels have a fixed size, but
Shanghai. “I booked a hotel room             bargains in the wreckage, betting that       demand varies and there are days and
through Priceline because I was tired of     once the shakeout in those industries        even times of day when these are
hopping from one website to the next to      ends, Hutchison will be positioned to        sometimes full, and other times not.
compare prices,” he says. “The site was      reap the rewards.”                           But once the plane takes off, or the
straightforward and understandable – just        But it is Priceline’s business model,    night is over, the potential revenue is
three stages. And Priceline was very fast    not the attractive share price, which        lost forever.”
to accept an offer – just five or 10 min-    holds the most appeal for Hutchison.              The facts bear this out. Both air-
utes. Convenience was also a big extra,          “The         fundamentals      haven’t   line load factors and hotel occupancies
with Priceline staying open 24 hours a       changed,” noted Hutchison Group              generally average around 70-75%.
day, seven days a week. I like to shop       Managing Director Canning Fok. “We                The law of supply and demand
around, but that is time-consuming.          believe in this model. If other people       rationalises that these empty seats and
Priceline did all that for me.”              don't like it, so much the better for us.”   rooms could be sold at a lower price.
                                                 One of the more interesting of these     But of course such price-cutting
WINNING FORMULA                              fundamentals is that online travel today     would compromise the initial 70-75%
Such experiences are refreshingly new in                                                  of sales at the market price.“The pric-
Asia but Priceline is something of an e-                                                  ing and branding would collapse,”
institution in the US, where annual                                                       notes Gangotena.
turnover has topped HK$8 billion after                                                         So instead the industry has satisfied
just four years in business. As such, it’s           “Lower prices                        itself with “yield management” –
among top Internet brands like e-Bay,                                                     maintaining load factors and room
Amazon and Yahoo! – and is one of
                                                     introduce new                        occupancy at the highest possible rate,
the few e-businesses that are genuinely             customers who                         making the maximum possible profit
profitable.                                                                               in the inevitable circumstances.
    “They have a formidable reputa-                 would otherwise                            “But the challenge has always con-
tion,” says Hutchison-Priceline CEO,                                                      tinued – to sell those empty seats and
Alfredo Gangotena. It was against this              remain outside                        rooms,” Gangotena adds, “and the
background of proven success that                                                         dilemma was finally resolved by
Hutchison       and      Cheung      Kong             the market.”                        Priceline.”
(Holdings) together became both the                                                            Since buyers aren’t told the name
biggest shareholder in the US operation,                                                  of the airline or hotel selling surplus
with a stake now worth nearly 35%, and                                                    airline seats or hotel rooms until their
also entered into a 65-35 alliance to        accounts for 35-40% of e-business in the     offer is accepted, neither individual
extend the concept to Asia.                  United States.Another, that Priceline is a   brands nor respective pricing policies
    Priceline launched in Hong Kong in       global market leader.                        are compromised. Only the Priceline
April 2002 and in Singapore soon after           Conceived by visionary inventor and      customers ever know the airlines they
with Taiwan the next port of call. But       entrepreneur Jay Walker, and now matur-      fly aboard, the hotel where they stay, or
these are just the start.The operation has   ing into an international network,           the prices they pay.
rights to extend from Japan to New           Priceline is certainly a unique and revo-         In the meantime, airlines and
Zealand, China to India, covering a          lutionary idea.                              hotels fill empty spaces, because the
population of more than three billion            “Once you realise how it works, the      prospect of lower prices introduces a
people.                                      model is blindingly obvious,” says           new group of potential customers
    As one business magazine recently        Gangotena. “For decades the travel           who would otherwise remain outside
put it: “Hong Kong’s pre-eminent deal-       industry has been trying to solve an         the market. Research indicates that
maker is at it again. As most investors      endemic problem: what to do with             two-thirds of Priceline customers
write off e-businesses as dot-bombs…         empty airline seats and hotel rooms?         would not otherwise have travelled.




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  They are making trips purely because the
  price is right. At the market price, they
  wouldn’t go and they are willing to
  accept a few flexibilities in return for a
  bargain.                                                   SMART TIPS              FOR        BARGAIN-HUNTERS
       “This is the Priceline niche,”
  observes Gangotena.“We’re the match-
  maker. We’re not in a market that suits

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  most businessmen, who prefer precise                   E FLEXIBLE WITH YOUR TRAVEL             for fares for your specific itinerary before
  flight schedules and like to choose where              details. For airline tickets, choose    bidding. Call a travel agent or research
  they stay. So Priceline is not for everyone            multiple arrival and departure          on the Internet. When you’re ready to
  or every occasion. It’s for the flexible and   dates, or multiple arrival airports so          Name Your Own Price‘, go to www.price-
  holiday traveller to make a trip on a          Priceline® can widen its search for             line.com.hk (Hong Kong) or www.price-
  whim, not a ‘must do’ trip.”                   savings.                                        line.com.sg (Singapore) and bid a reason-
       That said, any business or individual        • Follow suit for hotels. You always         able amount 20%-30% below market
  can book specific itineraries through          choose your hotel star rating, and              rates.
  Priceline and be sure to get the best deals    Priceline seeks upgrades whenever possi-           • Be aware of Priceline’s system. For air
  available at the time.                         ble. But let Priceline expand its search for    tickets, you choose your destination, dates
                                                 your savings by choosing a variety of areas     of travel and desired price. Priceline
  READY    FOR   LIFT-OFF                        to stay in the city of your choice.             chooses a major airline and flight times.
  For “flexible” travellers, the                                                                 For hotel rooms, you specify desired
  options are as broad as a                                                                      dates, desired areas of a city, the quality of
  map of the world.                                                                              hotel desired and, of course, the price.
      Priceline’s computer                                                                       Priceline then picks the international-
  system can match-make                                                                          brand hotel.
  offers with nearly 9,000                                                                          • Be savvy about the Internet. Priceline’s
  hotels, plus 32 Asian and                                                                      encryption technology means no one else
  international airlines.                                                                        can read your credit card or personal
      Destinations cover the                                                                     details during transmission. It’s safer to
  Asia-Pacific, Europe, North                                                                    buy online than to give your details to a
  America, the Caribbean                                                                         waiter or shop assistant.
  and Mexico, with more                                                                             • Be quick to call if you need help.
  being added.                                                                                   Priceline’s Customer Service Department
      These are early days for Priceline in         • Be clever about your travel days. More     agents are available at (852) 3163-0808
  Asia, but the initial response has been        vacant airline seats and hotel rooms are        from 8am until 12 midnight. For your con-
  heartening, with sales leaping each            available on days when people generally         venience, you can also call in your credit
  month.                                         travel less. Monday through to Thursday is      card details 24 hours a day.
      Leading global Internet research           less busy, with Tuesday and Wednesday the          • Be ready for speedy service. Priceline
  group, NetValue, revealed that Priceline’s     best days.Avoid weekends if possible.           is open 24 hours a day and seven days a
  websites were the most visited in both            • Be reasonable when you Name Your           week. It will e-mail you within one hour to
  Hong Kong and Singapore in the first           Own Price. There is no charge to try            tell you if you’ve succeeded in getting your
  two months.                                    Priceline, but if you submit an unrealistic     price. Paper airline tickets will be deliv-
      “Overall, growth is healthy,” says         purchase offer, you must change some            ered within three working days.
  Gangotena. “More people are getting to         aspect of your offer before you can try            • Be ahead of the rest. Priceline’s spe-
  know about Priceline all the time – and        again. Because airline and hotel invento-       cial hot deals and promotions mean you’ll
  the more satisfied customers we have, the      ries change constantly, a delay means your      save even more on your next trip.
  more they will recommend us by word-           ticket or hotel room may be sold by the         Just register at www.priceline.com.hk or
  of-mouth. At the same time, Asia is get-       time you make another offer.                    www.priceline.com.sg to get the latest
  ting used to the idea of shopping from            • Be smart with savings. Shop around         news first.
  home. We’re open 24 hours a day, seven
  days a week, so it’s extremely convenient.”
      The convenience extends to signifi-
  cant adaptations of the US version for
  Asia. Priceline is Asia’s first multi-lan-
  guage, multi-currency B2C (Business to
  Consumer) operation, and these local
  innovations mean it can move easily into
  other regional markets.
      “I’m confident the model will prove
  extremely successful in Asia,” adds
  Gangotena. “It fits the culture, where
  bargaining and securing discount deals is
  a matter of pride – and at the same time
  it encourages more people to fly.”
    ∑ Be flexible with your travel details.

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