What Is Troubling Priceline Right Now?
Priceline’s merchant model is causing pain to the company right now. Priceline’s domestic business is being hampered by its diminishing opaque business called ‘Name your own price’ model. In the United States, Priceline enables its customers to purchase a full range of travel services under the traditional price disclosed model (in which it earns a commission) or lets them bid for services at discounted prices under the Name Your Own Price model, where it earns the difference between the price an individual is willing to pay and the price charged by the travel service establishment (hotel, airlines, etc). One of the primary reasons for waning demand for the opaque model is that shoppers aren’t aware of the quality of the travel product purchased, until they have paid for it. This uncertainty about quality has worked against the model. Priceline’s opaque merchant model had been taking a hit in the online travel market space over the last few years.
Priceline.com’s CEO, Paul Hennessey had been heading a turnaround plan for Priceline.com and the marketing campaign had started earlier in 2016. The biggest challenge before Priceline is to revive the opaque business model or replace it with a suitable alternative. As we see, over 20% of Priceline’s revenue comes from the Merchant model. However, the declining revenues shows the segment lagging behind the rest of Priceline’s divisions. Another challenge for the company right now is that a few days back Hennessey resigned from his position. The search for a new CEO in the midst of a turnaround plan poses an additional challenge to Priceline.com.
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In April, Priceline Group’s CEO and President Darren Huston had also resigned and the company is in search for a suitable candidate in his place as well.
We believe these challenges might pose certain hindrances in the path of the company’s growth path, at least in the short run.
Have more questions on Priceline? See the links below.
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