Priceline (NASDAQ:PCLN) has announced a partnership with
) wherein members of Delta's SkyMiles Frequent Flyer Program can
earn SkyMiles whenever they book hotels through Agoda.com,
Priceline's very popular hotel booking site in Asia. SkyMiles
members will earn two miles for every dollar spent on hotel
bookings over Agoda.com, in addition to Agoda Reward Points worth
4% of the price of the stay. This follows a string of
partnerships between airlines and online travel agents (OTA's).
) recently entered a JV with AirAsia (see
Expedia Partners with AirAsia
) and South African Airways.
Priceline with a $506 Trefis price estimate
of its stock, in line with its current market price.
What does the partnership mean for Priceline?
Delta Airlines flew over 160 million passengers last year making
it the world's largest air carrier. With more than 140 worldwide
partners and over 81 million members, Delta's SkyMiles is among the
longest and most successful loyalty programs in the travel
industry. Hence being a SkyMiles partner provides access to a
massive audience, which could help Priceline sell significantly
more hotel bookings.
What does the partnership mean for Delta
The list of Delta's SkyMiles hotel partners already includes the
big and established hotel chains such as Marriott, Starwood, Accor
and Hyatt. However, partnering with Agoda.com helps Delta Airlines
offer travelers SkyMiles on even stay in small, low budget and
independent hotel properties, which dominate the Asian hotel and
How much could be the impact?
Partnering with Delta's SkyMiles Program could potentially
increase Priceline's market share of hotel stays leading to upside
to our current
$506 Trefis price estimate of Priceline's stock
Here's how we think of the potential impact:
More hotel stays for Priceline through the SkyMiles
SkyMiles membership stood at 81 million in June 2010.
Frequent flyers travel more often and are believed to take on an
average 3 or more round trips in a year, making a total of 243
million SkyMiles member-trips (81 million Sky Miles members x 3
trips per year)
Assuming even if 1 in every 10 SkyMiles member booked tickets at
Agoda.com for even one-third of the trips in a year, this
translates into 8.1 million (81 million SkyMiles members x 1/ 10 of
the SkyMiles members x 3 average trips per year x 1/3 of the trips
every year) more hotel stays.
More hotel nights booked through Priceline
We estimate that on average there will be 2 persons per hotel
room and 2 nights per stay leading to 8.1 million hotel room night
bookings at Priceline per year (8.1 million visitors / 2 visitors
per room X 2 nights per stay).
However not all 8.1 million hotel bookings are incremental.
Assuming even a one-third cannibalization leaves 5.4 million
additional hotel bookings on account of Agoda.com'a partnership
with Delta's SkyMiles Program. The resulting 0.12% incremental
market share could lead to a 4% potential upside to our current
$506 Trefis price estimate of Priceline's stock.