International Markets Can Drive Gains in Priceline’s Hotel Bookings Market Share

Priceline’s (NASDAQ:PCLN) market share of global hotel room bookings has been on the rise – from an estimated 0.6% in 2007 to 1.9% in 2010 – driven by growth in international hotel bookings. Priceline’s market share is calculated as the number of hotel nights sold through Priceline.com and its subsidiary websites and is expressed as a percentage of total hotel room bookings worldwide. We expect Priceline’s market share in the hotel bookings business to continue its upward climb, although at a slower pace, led by international markets like Asia. Priceline’s direct competitors include Expedia (NASDAQ:EXPE), Travelocity and Orbitz (NYSE:OWW).

While we anticipate that Priceline’s hotel bookings share will touch 3% by the end of our forecast period, Trefis members predict a slightly higher level of about 4%, implying potential stock upside of close to 20%. Priceline’s stock is very sensitive to its hotel bookings share as this business segment constitutes over 90% of our price estimate for PCLN stock.

We maintain a price estimate of $452 for Priceline’s stock, in line with market price.

Large and Underdeveloped International Markets

While the market for travel services is large, the percentage of online sales is relatively lower in international markets than in the United States. This is because Internet adoption rates for commercial use in these regions have been lower, particularly in emerging markets. However, Internet penetration in international markets has been growing at a substantially greater pace than in the United States and offers Priceline a larger addressable market to increase its hotel bookings.

Strong Footing in International Markets with Existing Brands

Priceline made three key acquisitions, among others, in the past five years. It acquired Booking.com in 2004, Booking.com BV in 2005 and Agoda in 2007. Booking.com has driven most of Priceline’s hotel bookings growth since its acquisition and provides the company with a foothold in the European hotel market. The acquisition of Agoda will help Priceline tap into Asian markets and will be a substantial driver of Priceline’s expected hotel bookings market share increases in the years ahead.

See our full analysis and $452 price estimate for Priceline

Trefis Community Forecast

Trefis community members expect Priceline’s market share of occupied hotel rooms to increase from about 2% in 2010 to nearly 4% by the end of our forecast period, compared to the baseline Trefis estimate of an increase to 3% during the same period. The member estimates imply an upside of almost 20% to our $452 price estimate for Priceline stock.