3 Jul 2015

DEFINITION of ‘Opaque Pricing’
Opaque pricing is a way that companies can sell their merchandise at hidden, lower prices. Opaque pricing is a type of price discrimination – the target customer is one who will purchase a product or service primarily based on price (price-conscious customer) and not based on the company’s amenities, reputation, etc.

This pricing strategy is popular in the travel industry. Websites like Hotwire (EXPE) and Priceline (PCLN) 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.

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