how opaque pricing works
the opaque pricing strategy is popular in the travel industry websites like hotwire and priceline use it to sell unsold hotel rooms airline tickets and car rentals customers who wish to take advantage of an opaque pricing structure visit a website which offers hidden rates choose their location dates and for hotels star rating after paying the website will reveal the name of the hotel but doesn t allow for refunds changes or cancellations opaque pricing benefits hotels because they can sell otherwise empty rooms without damaging brand integrity in addition once reserved the hotel has guaranteed revenue for that room as the reservation can t be modified the big benefit of opaque pricing used by hotels is that it allows them to sell otherwise empty rooms without damaging brand integrity benefits of opaque pricingwhile a seller would ideally like to charge the maximum price a buyer is willing to pay the seller doesn t actually know what that maximum is and the buyer has no incentive to tell as anyone who has haggled with a car salesman well knows this is why sellers create segmented offerings as a way to get at least some customers to pay more for example airlines offer first class seats at a dramatically higher price per unit of space consumed the buyer gets more space and the prestige of flying in first class and the airline gets an order of magnitude higher revenue per customer for the same flight often 10x more types of opaque pricingother techniques of opaque pricing include charging a high starting price and then lowering price through age based discounts movie tickets for kids and older citizens channel based discounts online versus offline volume discounts frequent flyer programs and geography based pricing differences enterprise software special considerationsthe market clearing price for products usually still leaves a seller with excess inventory open seats on a flight for example however the marginal cost of that inventory is often so low that it is usually possible to sell it for a profit but doing so means that people who would have bought the product at a higher price will now pay less and aggregate revenue will decrease by selling a hotel room through a bundled vacation package a seller dramatically decreases the likelihood of cannibalizing their own revenue 