Key Take-Aways From Priceline’s Q4 2016 Earnings Call

by Trefis Team
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Priceline released its Q4 2016 earnings on February 27th. The company ended the year on a strong note and the trend seems to be continuing in the first quarter of 2017 as well. Priceline’s – globally, the most popular online accommodation booking platform – added over 289,000 accommodation properties to its platform in 2016, reflecting a 33% growth, and ended the year with around 1.15 million properties. Priceline’s vacation rental properties grew by 49% to 591,000 properties in 2016. The management believes that not charging a booking fee like other competitors such as AirBnb and Expedia’s HomeAway, might have helped this growth. One of the highlights of its earnings call was that most of the Priceline Group’s growth was organic. The teams behind each of its brands built the supply inventories in their respective platforms, instead of growing through acquiring other brands. In 2016, Priceline’s gross travel bookings amounted to around $68 billion, reflecting a 23% y-o-y growth. Its gross profit rose by 20% y-o-y to ~$10 billion and its international operations contributed around 90% to this. The management expects the strong growth to continue in Q1 2017 as well, with around 20% to 25% growth in room nights and a 17% to 22% growth in gross bookings.

The Pursuit Of Organic Growth Gives Priceline Significant Competitive Advantage 

One of the highlights from the earnings call was how the company was focused on organic growth unlike growth with the help of acquisitions as pursued by some of its close rivals (most notably, Expedia). Priceline Group’s newly appointed CEO, Glenn Fogel, stated that the company considers the addition of the inventory supply on its platform as a part of its growth strategy and pursuing it organically does give it a significant competitive advantage. The result of this growth pursuit strategy has met with huge success. In Q4 2016, the company’s room nights grew by 31% y-o-y which had been the highest growth rate since Q1 2014. The company’s Q4 2016 revenue stood at $2.3 billion reflecting around 17% y-o-y rise while its net income rose by 34% to $674 million during the same period.

Priceline is so selective about acquisitions, that in the last year it didn’t undertake any significant ones. While the company recently completed a deal to takeover the Momondo Group, it was mostly to help its metasearch engine Kayak with its expansion in markets where it lagged behind.

Expedia, on the other hand, follows a strategy of growth through acquisition. Expedia’s 2015 was eventful with several big takeovers such as Orbitz, HomeAway, Travelocity, and Wotif. After acquiring the world’s largest vacation rental platform, HomeAway, Expedia currently has the largest number of accommodations on its platform. On the flipside, Expedia’s growth remained slow throughout 2016, on account of technical glitches it faced while trying to integrate entities such as Orbitz into its platform.

Most Brands Under The Priceline Group Grew Successfully in 2016

  • The company’s brand made significant progress with its revamp initiatives that was going on through 2016 including the improvement of technology and customer experience on the desktop and mobile platforms. Last year this brand also announced Brett Keller as its new CEO.
  • Kayak, Priceline’s metasearch arm, entered Asia Pacific and Latin America last year. This year, Priceline announced the decision to acquire The Momondo Group, the parent company of Momondo and  Cheapflights, for a cash sum of $550 million. This marked the biggest acquisition for Priceline since its OpenTable acquisition for $2.6 billion in 2014. The main goal behind this acquisition is being touted as entry into markets where Kayak doesn’t enjoy a strong presence, including the UK and the Nordics, where The Momondo Group’s brands are popular. Another reason for the acquisition might be to pose a stiff competition to flight metasearch engines such as Skyscanner (which was recently acquired by Ctrip). Ctrip is currently the second largest OTA in terms of market value with a 10% market share in the online flight booking market. With Ctrip’s backing, the Edinburgh-based Skyscanner can grow even stronger. Hence, Priceline’s acquisition in the same region might help it to compete with Ctrip’s Skyscanner.

  • Priceline’s travel fare aggregator and metasearch engine, Singapore-based Agoda, also performed well overcoming challenges in the markets where it operates.
  • Its, the world’s largest car rental company, grew well despite challenges including the impact of Brexit. increased mobile bookings, enhanced user experience, and grew its supplier base.

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1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Priceline

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