) lords over Europe's hotel kingdom with its industry-leading
Booking.com also lords over Priceline, accounting for a
majority of the company's international bookings.
It's done well, even through the Continent's fiscal woes, as
Europeans kept going on holiday no matter what.
So it is no wonder the Norwalk, Conn.-based online travel
company describes itself as a "leader in global online hotel
What about the U.S.? After all, it is home to the company's
namesake Priceline brand, made famous by "Name Your Own Price" TV
ads featuring actor William Shatner.
America makes up only 15% of revenue. And it's been growing at
a snail's pace compared with overseas.
An analyst once called the U.S. a "countercyclical hedge" for
But after empire building in Europe and expansion in Asia
since its 2007 acquisition of Agoda.com, Priceline is turning
more of its focus to America.
It acquired U.S. online meta-search site Kayak last month. At
$1.8 billion, it was Priceline's largest acquisition by far, even
larger than its 2005 buy of Booking.com in Europe.
What's more, Priceline has been aggressively promoting
Booking.com in the U.S. Witness all those TV spots since
Until now, Booking.com has had a slim presence in America.
Aiming For A Triumph
"If they can build up a new brand in the U.S. online travel
agency market with Booking.com, that would be a pretty
significant win for Priceline," said analyst Mark Mahaney of RBC
It's a big if. Unlike the fragmented European hotel market,
which is dominated by small, independent properties, the U.S. is
much more consolidated.
Major hotel chains control two-thirds of the market. Though
they do business with online travel agencies, they also sell
directly to consumers through their own channels.
A lot of competition exists in America, not the least of it
involving leaderExpedia (
). Other players include privately held Travelocity andOrbitz (
Orbitz continues to struggle due largely to its roots and
focus on low-margin airline travel. Air travel has become a
smaller slice of Priceline's mix in recent years.
Orbitz's first-quarter gross booking in America fell 3% vs.
the prior year to $2.4 billion. Expedia's grew 7% in the U.S. to
$5.5 billion, according to research firm PhoCusWright.
Priceline is the smallest in the U.S. of the three publicly
traded online travel firms. But its domestic gross booking in the
quarter grew the fastest at 9%, to $1.4 billion.
Much of the growth came from rental-car reservations and
improved hotel bookings, CEO Jeffery Boyd said in a post-earnings
The rental car business has "attractive unit economists and
could be 5% to 10% of company profits within the next two years,"
Meanwhile, hotels continue to drive Priceline's growth.
Priceline's new focus on Booking.com in the U.S. is "absolutely"
a good idea, said PhoCusWright's Lorraine Sileo, senior vice
president of research.
"The company has always been focused on Priceline in the
U.S.," she said. "Booking.com is another option. The brand is
becoming a lot more recognized."
Mahaney says he sees no evidence that Booking.com is
But the launch of the company's first Booking.com TV ad
campaign earlier this year pressured operating margins,
management says. The operating margin in the first quarter fell
to 35.1% from 35.8% a year earlier.
Overall advertising, including substantial spending for online
search placement onGoogle (
), rose sharply in the quarter.
Per-share earnings were still healthy, rising 35% to $5.76.
Priceline's total worldwide bookings jumped 36% to $9.2 billion,
making it a close second to Expedia.
TV ads for Booking.com have continued in the second quarter,
which will again likely affect margins. But CFO Daniel Finnegan
said in the call, "We believe that investing in the growth of our
biggest brand in such an important market will yield a healthy
return over the long term."
Asia and Latin America are also becoming more important. Last
year, Priceline announced an alliance withCtrip (
), China's largest online travel agency.
But Expedia has been expanding more aggressively in China and
for a longer period, says analyst Scott Kessler of S&P
Expedia owns a stake in eLong, China's second biggest online
"There is a difference in owning a substantial stake and
establishing an alliance," Kessler said. "Asia remains an
opportunity for Priceline, but frankly they are playing
Priceline has posted strong double-digit profit gains every
quarter for years, though at a slower pace more recently. And
that's only because it's harder to grow as fast off a larger
base, analysts say.
Kessler said Priceline is "one of the largest Internet
companies on the planet" in terms of market capitalization. He
added that in America, consumers are more familiar with "Name
Your Own Price."
"There is an inherent lack of familiarity with the real kind
of success the company has had abroad for a really long time,"
While he believes Booking.com has been gaining share in the
U.S. off a low base, he thinks gains will be hard won.
"We're not anticipating it's going to have a major impact on
the company over the next couple of years," he said.
Besides competition from peers such as Expedia, Google has
enhanced its hotel search capabilities, and startups also are
focused on the U.S. online travel space, says Kessler.
How Priceline uses Kayak to its advantage other than just as a
contributor to revenue is unclear. Analysts expect Priceline to
expand Kayak into Europe and somehow leverage it to boost its
other businesses in America.
"Kayak is successful with mobile users, and it has a
U.S.-facing footprint," Kessler said.