T A B L E_T A L K

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Mondo Weirdo
Come back soon
An ambiguous encounter in Switzerland
(05/06/98)

West Africa's capital of ghosts
By John M. Edwards
What has Parisian-style boulevards, eight-lane highways and Christendom's tallest church -- all dead-ending in jungle?
(05/05/98)

Coronation Everest
By Jan Morris
Remembering the first Everest ascent -- and a lost age of mountaineering
(05/04/98)

Mondo Weirdo
Stranded!
Readers describe adventures on a Thai isle and in the wastes of western China
(05/01/98)

Hotel Paradis-o
By Robert Strauss
An American couple discovers the perfect place to stay in Japan: Love hotels
(04/30/98)

Sick of paying so much money for last-minute business trips, he logged onto a new online travel service called Priceline, which opened its electronic doors last month. At Priceline, getting a ticket works a little differently than at other services; instead of perusing the prices of flights to a certain destination, prospective travelers tell Priceline how much they are willing to pay for a ticket, and then wait to see if the company can find a ticket for that price. "I really needed this ticket, and I didn't feel like paying through the nose; I thought it couldn't hurt to try," he says. Martinez bid $300, and an hour later discovered he was flying the same America West flight for almost $700 less than the fare he'd found through traditional methods.

It was the same flight, same time, same layover in Phoenix. Only at one-third the price. How was Priceline able to get such a cut-rate deal? It's simple: Priceline's business model is based on something all frequent fliers know -- most airlines take off with empty seats aboard. According to Priceline, there are 500,000 every day, each one representing lost revenue for the airlines. Since a cash-strapped customer is better than no customer at all, Priceline has convinced the airlines to sell it the seats that they estimate will go unsold. The tickets are then sold to the customer for a marginal profit. (Priceline made about $35 on Martinez's ticket.)

"Seats are very perishable," says John Lampl, a spokesman for British Airways. "Once the airplane takes off and the seats are empty, they'll never be recoverable. It's not like a box of cereal that sits on the shelf, or laundry detergent, which can be sold at a later date."

But to get these seats, travelers have to be extremely flexible. The only information Priceline requests on its ticket order form is the departure and return dates and destinations. Everything else -- the time, the airline, the length of the layover(s) -- is up in the air, so to speak. The flight can leave any time from 6 a.m. to 10 p.m. and stop in any city for as long as two hours.

Once the traveler's information -- including a credit card number -- is submitted, Priceline contacts the airlines to see if any of them will release a seat at that price. If one does, Priceline buys the ticket and confirms the purchase by e-mail. If they don't, there's no loss -- just the amount of time it takes to complete the process (which can be long, its server is extremely slow). Priceline says you will hear back from the company either way within an hour of submitting your request.

The ticket the airline issues is highly restricted -- no refunds, no changes, no frequent flier mile awards. And the whole process can feel like a big gamble: Roll the right price, hope Lady Luck is on your side and save big. Ron Pernick, a spokesman for Preview Travel, says that's a big drawback since most travelers "are looking to not play a game as much as plan their trip."

Priceline will not disclose how many of these bids are successful -- only that every 22 seconds, 24 hours a day, someone completes the request process. Priceline's president and co-founder, Jay Walker, says that customers have a better chance when they make a reasonable request -- not when they bid a dollar, as some people have done. Martinez based the amount of money he submitted on the price for a ticket from Seattle to Dallas with 21-day advance notice. Customers have one free shot to get it right; subsequent bids on the same itinerary cost $25.

Walker readily admits that Priceline is not for everyone, acknowledging that most people will not like the uncertainties that come along with a Priceline ticket. He says he's not for business travelers, he's for leisure travelers, people with time on their hands -- students, vacationers, people who would rather not go on a trip than pay full fare. He sees this select group of budget-conscious, last-minute, procrastinating desperadoes as his market niche. "If anything, our motto would be: Frustrated? Try us," says Walker. "Real people can't plan in advance when they want to go on a trip. What if the baby's born early or you've got to go to a funeral? Airline tickets can be expensive."

Since Walker sees this target audience as such a specialized group, he doesn't think he'll be competing against any of the existing travel agencies or cutting into the airline's own traffic. In his eyes, he'll be helping the overall industry by bringing new people into the online ticketing markets and helping airlines sell what would have been lost revenue.

But as Martinez's example suggests, business travelers may also turn to Priceline, which could lead to a situation where Priceline is competing with the two industries it says it's trying to help -- the airlines and online travel agencies. American Airlines, for one, declined to participate with Priceline because it was afraid it might compete with its own ticket sales. Why would people buy a ticket through American directly when they could bid for a ticket through Priceline and maybe get it cheaper?

"Priceline is going to turn the airline industry on its head," Martinez says. "The airlines make their money from the last-minute business travelers, but these people, like me, are going to start using Priceline. I don't think they know it yet, but you will see a lot of young professionals who have to price things out and don't always want to pay $1,500 and wait to get reimbursed start using Priceline."

Martinez says he normally would have bought his ticket through Preview, Expedia or Travelocity, but since his success with Priceline, he's going to try buying his next ticket the same way. Preview's Pernick says he doesn't foresee any competition or overlap between the two agencies, however. "We are a full-service site with everything from the booking of the ticket to helping you out when you're traveling and something goes wrong and you need to talk to your agent. I believe it's a minority of people who'd be attracted to the proposition of buying a ticket that's nonrefundable, nonchangeable, maybe on a second-tier airline, without knowing the time they're leaving. "

Pernick says there's room in cyberspace for all of them. As proof, he points to a study released last month by the Department of Commerce, which found that Internet e-commerce is growing at twice the speed of the overall economy.

Are there enough e-customers to go around? Online consumer buying patterns and preferences are still so volatile, it's impossible to predict. But with $25 million in backing and enough capacity to handle more than 100,000 hits per minute, Priceline seems ready for a long flight.
SALON | May 7, 1998

What do you think about the Priceline idea? Have you tried this service yet? Share your thoughts in Table Talk.