How low can you go? This budget hotel lets guests pay what they want

A newly opening budget hotel has decided to boost its visibility and patronage by offering an unusual promotion for the hospitality industry: It is allowing guests to offer to pay what they want for a room.

At the 538-room Ibis Singapore on Bencoolen, part of the French Ibis chain, rooms usually cost about $92, but for a short period each day, the hotel allows customers to go to its website and enter the price they feel like paying. A little countdown clock on the main page lets them know when the next opportunity window will open.

The idea is a temporary promotion (in fact, bidding comes with a random-draw giveaway of a stay) that ends March 15, and is not a permanent pricing system. Hotels don't want to risk sustaining themselves over the long term by sticking to this pricing system. Anyone who has ever seen their low bid rejected by Priceline, which has a major name-your-own-price component, knows that there are limits to how low hotels are willing to go.

But when you think about it, this idea isn't quite a high-wire act of good faith. There isn't a whole lot of overhead to a single budget hotel room. Restaurants have to buy ingredients, but a hotel room is already built and few raw materials are being spent. You're mainly paying for time, and I think we'd all be shocked to learn just how few dollars would be required, per-room, to pay the staff at a large budget hotel when it's full. In the Ibis' case, if you buy breakfast (Ibis being French, serves magnificent baguettes) or any other meal, the hotel will recoup some of its expenses.That ancillary income is a big reason why Disney's grand plan to give away free admission on your birthday in 2009 isn't the risk it may appear to be at first.

But don't make the mistake of thinking that name-your-own-price product experiments result in disaster. Two years ago, the band Radiohead decided to introduce its album In Rainbows as a price-optional download. On the name-your-price promotion alone, the band made more money than it had on any previous album, and once the album was finally released as a physical CD, it sold another 1.75 million at a retail price. And to everyone's surprise, the album distributed some 3 million copies altogether, which was a real coup, promotionally speaking, for a band that normally sold in the hundreds of thousands.

Granted, that was before the economy started wheezing so badly. Given the option of paying nothing or entering what they think is a fair price, I wonder how many more people would go for broke.
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