Weekly Online Travel Agency Notes: Priceline, Expedia, TripAdvisor, Ctrip

PCLN: Priceline Group logo
PCLN
Priceline Group

This has been quite an eventful week for the online travel agencies. Priceline (NASDAQ:PCLN) announced management restructurings which will be effective from 2015. The company is also considering changes in its business terms with hotels in Europe due to a probe by antitrust regulators. This might put Priceline’s Booking.com at a disadvantage, relative to its competitors in the European markets. Expedia (NASDAQ:EXPE) got included in the NASDAQ Q-50 index. Ctrip (NASDAQ:CTRP) is still in an investing mode. It entered into a partnership with Auckland based hotel software company, STAAH, and invested $15 million in Chinese leisure travel company, Tuniu.

Below we give a quick rundown on the most notable events in the last week related to these companies.

See Our Complete Analysis for These Companies Here

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Priceline

On December 17, Priceline (NASDAQ:PCLN) announced management changes in two of its businesses: Booking.com and rentalcars.com. Effective January 1, 2015, Gillian Tans would assume the position of President and Chief Operating Officer, and David Vismans would be the Chief Product Officer for Booking.com. Ian Brown was appointed as the CEO of rentalcars.com. Greg Wills, the current CEO and co-founder of rentalcars.com, will assume the position of Executive Chairman from beginning of 2015. (See press release here).

Priceline released a Securities and Exchange Commission filing on December 15, stating that Booking.com is considering the revision of its existing “rate parity” clauses (also referred to as “most favored nation” or “MFN” provisions) with hotels in Europe. This was in response to a probe by the antitrust regulators in France, Italy, and Sweden. The proposed revision still maintains (similar to the existing agreement) that hotels need to offer same or better rates to Booking.com and other OTAs, than those offered on the hotels’ own websites. However, under the new agreement, hotels are free to provide better rates to other OTAs, than those offered to Booking.com. This might erode the competitive advantage of Booking.com – the world’s largest hotel booking website – to some extent. By mid-afternoon December 15, Priceline Group’s stock price declined by 2.3% to $1,078.64 on Nasdaq. [1]

Our price estimate of $1108 for Priceline is slightly below the current market price. We expect the company to report revenues of approximately $9 billion and net income of $3 billion for FY 2014. Our GAAP and non-GAAP diluted EPS estimates stand at $52.70 and $54.80, respectively. Priceline’s stock experienced a decline of almost 3% over the week through Thursday.

Expedia

On December 15, Expedia (NASDAQ:EXPE) got included in the NASDAQ (NASDAQ: NDAQ) Q-50 Index, as a part of the latter’s quarterly re-rankings. This will be effective from Monday, December 22, 2014.

NASDAQ Q-50 Index is an index created on the basis of market-capitalization, to track the performance of companies that are next-eligible for inclusion into the NASDAQ-100 IndexSM. NASDAQ Q-50 consists of 50 securities ranked by market capitalization and includes companies from sectors like computer hardware and software, telecommunications, retail/wholesale trade, and biotechnology. [2] NASDAQ-100 comprises of 104 stocks issued by 100 of the largest non-financial companies listed on NASDAQ.

On a separate note, Expedia witnessed a 658% increase in bookings from Hong Kong in 2014. The findings were a result of a survey conducted by Expedia to know more about the travel aspirations of Hong Kong’s citizens in 2015.

On December 15, PR Week reported that Alison Couper left her role of Senior Director, Global Communications of Hotels.com, which is a brand of Expedia Group.

Our price estimate of $84 for Expedia is slightly below the current market price. We forecast the company to report revenues of approximately $6 billion for FY 2014. Our GAAP and non-GAAP diluted EPS estimates stand at $3.10 and $4.16, respectively. Expedia’s stocks witnessed a 4% decline over the week through Thursday.

TripAdvisor

On December 18, TripAdvisor (NASDAQ:TRIP), announced a new set of television advertisements emphasizing the website’s comprehensive travel planning, shopping, and booking features. The advertisements reflect the spirit of TripAdvisor’s “Don’t just visit” campaign and encourage travelers to “plan, compare, and book” the perfect trip. The company will expand its advertising campaign to the U.K. and Brazil, in addition to the existing markets of France, Australia, and the U.S. (Read press release here).

TripAdvisor announced winners for exceptional services in the hospitality sector, on December 17. On the basis of nominations received from its users, TripAdvisor selected 40 winners across 21 countries across the globe. (Read press release here).

Our valuation of $94 for TripAdvisor is around 24% higher than the current market price of $76. Our 2014 revenue estimate for the company stands at $1.27 billion. Our GAAP and non-GAAP diluted EPS estimates stand at $2.50 and $2.80, respectively. TripAdvisor’s stock price witnessed an almost 3% decline over the week through Thursday.

Ctrip

On December 15, Ctrip (NASDAQ:CTRP) entered into a partnership with Auckland based STAAH, a privately held hotel software company. STAAH has a client base of 300 in New Zealand and over 1300 clients across the globe. STAAH specializes in Channel Management, Booking Engines, RatesTalk, Website Development and Search Engine Optimization. The membership is symbiotic in nature. STAAH’s clientele will now have access to Ctrip’s 250 million strong member base, and in turn can increase their online visibilities. Ctrip will have an increased exposure to STAAH’s markets of operations, especially New Zealand.

On a separate note, Tuniu Corporation, a leading Chinese online leisure travel company, announced on December 15, that it had entered into a share subscription agreement to raise $148 million. Tuniu aims at issuing American Depositary Shares (each priced at $12.06), each representing three ordinary Class A shares of the company. Ctrip subscribed to $15 million of the newly issued Class A shares. [3]

Earlier on December 10, Ctrip expanded its partnership (initiated in May 2014) with Tuniu Corporation. The enhanced partnership will further allow Ctrip’s flight ticketing and car rentals to be available to Tuniu’s leisure travelers, in addition to Ctrip’s hotel inventory. [4]

Our Ctrip price estimate to $43.11 is almost in line with the current market price. For FY 2014, we forecast a revenue of approximately $1.27 billion, whereas the consensus estimate for the revenue stands at $1.19 billion. There was a 2% decline in Ctrip’s stock price, over the week through Thursday.

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Notes:
  1. Booking.com Tries to Make European Regulators Happy, Ends Up at Disadvantage, Skift, December []
  2. Quarterly Changes to the NXTQ Index, Seeking Alpha, December 2014 []
  3. Tuniu Corp (TOUR) To Raise $148 Million By Issuing Class A Ordinary Shares, Bidness Etc, December 2014 []
  4. Tuniu and Ctrip Sign Strategic Collaboration Agreement, Nasdaq, December 2014 []