Leading US-based online travel agency (OTA) Priceline (NASDAQ:PCLN) recently announced the extension of “Express Deals” as a mobile booking application available for the iPhone, Android and Mobile Web. Launched in July this year, Express Deals is an opaque booking system offered by Priceline, apart from the “name your own price” model.
Offering thousands of great deals on hotels, Express Deals allows users to view price, amenities, star level of the hotel, locality and user ratings, but not the name of the hotel, which is only revealed post a non-refundable payment by the customer. Offering discounts of up to 45%, Express Deals is covered by Priceline’s Big Deal guarantee, which promises to pay the user an amount of $25 and match any lower price that the user finds for the same hotel on competing websites. (Read: Priceline Leverages Growth In Hotel Bookings With Express Deals)
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Last month, Priceline also expanded its “Tonight Only Deals,” a mobile application feature that offers lucrative discounts for hotel booking made for the same night, to over 150 destinations.
We estimate hotel booking to contribute over 86% to Priceline’s valuation. Not only does this division contribute over 95% to the company’s revenue; but, with over 20% revenue margins, it is also the most profitable. With the rapid increase in the adoption of mobile devices globally, we believe that expanding Express Deals as a mobile application could turn out to be a good long-term move for the company.
Expanding Mobile Travel Space
The emergence of alternate platforms – such as smartphones and tablets – have registered significant growth in recent years, and this growth is expected to continue in the years ahead. In a recent study conducted by competing travel agency, Expedia (NASDAQ:EXPE), to gauge the mobile device habits of travelers in the U.S., revealed that close to 61% of online adults in the U.S. own and use a smartphone, e-reader or tablet device.
If online travel agencies fail to keep up with innovation in the rapidly growing mobile space, they face the risk of losing out a growing user base of online travel bookings via mobile devices. Thus, we believe that enhancing the Priceline Negotiator application for mobile devices is a good move to stay in-line with changing consumer trends.
Our price estimate of $568 for Priceline is below the current market price.