Zacks Industry Outlook Highlights: Priceline, Expedia, Google, Yahoo and Facebook

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For Immediate Release

Chicago, IL - March 29, 2016 - Today, Zacks Equity Research discusses the eCommerce (Part 3), including Priceline ( PCLN ), Expedia ( EXPE ), Google ( GOOGL ), Yahoo ( YHOO ) and Facebook ( FB ).

Industry: Ecommerce, part 3


Ecommerce discussions often exclude online travel because this segment is relatively more mature, with a lot of the growth coming from international expansion and continued shift from offline to online channels. Moreover, the market is highly fragmented with just a few big players in a position to make a difference.

But the many small players mean that there is stiff competition and rapid innovation that also drives up their costs. This in turn makes it difficult for them to operate, increasingly driving them toward acquisitions in order to take their technology and expertise to scale.

The main drivers of the market are increased digitization, mobile adoption and international expansion. The stronger economy, benign oil prices and higher spending levels provide the perfect backdrop for growth, but currency will remain a headwind this year.


The U.S. Commerce Department estimates international travel to the U.S. to grow at a CAGR of 3.1% from 2015 to 2020. Visitor volume is expected to grow from 0.4% in 2015 to 2.6% this year. Inbound travel volumes from Mexico, China, Canada and the UK will be the highest during this period while China, India, Taiwan, South Korea and Australia will see the highest growth rates.

The Travel and Tourism industry remains one of the country's strongest. According to the BEA, industry spending grew 4.4% in 2015, an improvement over 3.1% growth in 2014. The fourth quarter wasn't the high point, however, growing just 1.7% (down from 4.5% growth in the previous quarter) although it compared favorably with the real GDP decline of 1.0%.

Transportation (up 1.0%) and traveler accommodations (down 4.2%) were the weakest points in the quarter. Food services & drinking places and recreation, entertainment & shopping grew nicely. Overall pricing weakened 1.5% compared to a 0.2% decline in the third quarter.

According to the TravelClick North American Hospitality Review (NAHR), stronger average daily rates (ADRs) in both leisure and business segments will drive first-quarter and full-year 2016 revenues in North America. Based on bookings and commitments up to the report date (Mar 4), the research firm sees a 2.9% increase in ADRs in the first quarter, supporting a 0.4% increase in occupancy. ADRs for the second quarter are expected to increase 2.7% with a stronger occupancy commitment of 4.0%.

For the 12-month period from Feb 2016 to Jan 2017, the research firm sees ADR growth of 2.8% and occupancy growth of 2.7% in the transient leisure business. The business side is expected to be weaker, with ADR growth of 3.4% being somewhat offset by an expected occupancy decline of 0.9%.

According to the TravelClick North American Distribution Review for the first quarter, digital channels comprising OTAs, hotel websites and GDS continue to gain in popularity. By quarter-end, the OTA channel is expected to grow 14.9% from a year ago, hotel websites 34.7% and GDS 15.8%. Direct-to-hotel and CRO are expected to increase 22.1% and 12.4%, respectively.

Based on current booking trends, overall ADRs are expected to increase 3.6%, with the direct-to-hotel channel growing 5.6%. ADRs for CRO are expected to be up 4.0%, OTA 3.3%, GDS 3.0% and hotel websites 2.3%.

eMarketer says that global digital travel sales will continue to grow through 2019 although the rate of growth will moderate. By geography, North America will remain the largest segment, although being more mature, it will see its growth rate coming down over the period to end at 28.9% of global digital travel sales.

Western Europe, another mature market, will follow along the same path to end 2019 at 24.3%. Asia/Pac will see double-digit growth in each year to end at 31.8%. Latin America will grow strong double digits off a low base to end at 7.2%. Ditto for MEA, which will end at 5.9%. Cantral and Eastern Europe will comprise less than 2% in 2019.

Mobile travel sales are expected to maintain share of total mcommerce sales this year at about 31.0%, increasing to 46.0% by 2019. Overall, desktop travel sales will see continued declines over the forecast period with mobile travel sales decelerating but continuing to grow at double-digit rates.

Vacation Rental

Another area that has gained prominence in recent years is vacation rental. Airbnb pioneered the concept and took a lot of initial share, but others like Priceline's ( PCLN ) and Expedia's ( EXPE ) HomeAway are also doing quite well. This is an emerging segment because it targets younger and thriftier travelers that might also be given to last-minute buying habits.

Airbnb mainly focuses on unmanaged properties where the owner might lend out a room or apartment, while HomeAway focuses on unshared accommodation that may be more expensive. While the market is still pretty nascent so research is limited, these companies have both spread across 190 countries and have multi-billion dollar valuations.

The top travel booking sites are,,,,,, and Since and Kayak are part of Priceline and the others part of Expedia, this narrows down the top companies in the segment to Priceline and Expedia.

Digital Advertising

eMarketer says that Display advertising will surpass Search advertising for the first time to account for 47.9% of total digital advertising spending in 2016. Search will account for 43.6%. New innovative ad formats like native and banner ads are expected to be the most popular with advertisers this year. Mobile will account for 62.6% o spending.

Total growth rates are expected to continue decelerating: 15.4% in 2016, 12.5% in 2017, 11.9% in 2018 and 11.0% in 2019. The mobile platform will remain particularly strong, growing 38.0% in 2016, 21.0% in 2017, 14.0% in 2018 and 13.0% in 2019.

Hotels may be expected to notably increase digital advertising spending this year. According to a TravelClick survey, 57.3% of hoteliers said they are increasing their marketing budgets for 2016, with an increased spend on search engine marketing (23.2%), website update/redesign (20.7%), online advertising (12.2%) and mobile (17.1%).

The underlying drivers of growth are the continued increase in the number of netizens, greater propensity of users to consume online, a growing inventory of advertisements that serve to lower advertisement prices and the need to create brand awareness online.

But the market is getting increasingly competitive and pushing players to investment and innovation. The increasing propensity to use programmatic buying techniques (automating the inventory buying process) hurts pricing at market leader Google ( GOOGL ) and rivals Yahoo ( YHOO ) and Microsoft. Facebook's ( FB ) large and growing user base and trove of personal data is driving prices on the platform. A lot of other networking companies, such as LinkedIn, Twitter, and Pintertest are also growing in the digital advertising space.

International expansion (where rates are lower) and transition to mobile (where conversion tends to be lower) result in margin pressure for these players.

Digital advertising spend continues to move beyond search to social networks and content sites like Facebook, Netflix and Pandora, so the analytics side has been racing to catch up. Most of these players are acquiring or developing their own analytics capabilities, but content providers still have a preference for third-party solutions.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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