Priceline names its own challenges as discounting and mobile competition heat up
Priceline has stated for months that its growth rates would inevitably decline given the size of its business, and Expedia is apparently making some gains, too — at least domestically.
A couple of years ago travel companies were talking about growing, but still-minimal, booking volumes generated through mobile devices, but today the game is on.
In Priceline’s second quarter earnings announcement August 7, CEO Jeffery Boyd said the company’s Name Your Own Price bidding service was impacted by stingy supply from airlines and rental car companies, increased competition from discounters [such as Hotwire], and “a more challenging user experience from mobile devices often used for last-minute bookings.”
Less complicated Express Deals
It’s now becoming clear why Priceline recently launched Express Deals, a hotel-booking service which provides discounted prices up-front, but the guest learns the name of the property only after completing the booking.
It’s a bow to Hotwire, which pioneered the model and has apparently been taking some share.
And, since there is no bidding involved with Priceline’s Express Deals, it may be more suited to mobile platforms than Name Your Own Price.
“And Express Deals is one way where they can get the kind of savings that they are used to with the bidding process without having to go through that, especially if you’re dealing with a small screen and potentially a last-minute transaction,” Boyd said.
The savings with Express Deals are substantial, but generally not as steep as when bidding through Name Your Own Price.
Growing, but at a slowing rate
Priceline, hit by sluggish demand and average daily rate declines in southern Europe and the UK in the second quarter, saw its global room nights grow 39% in the second quarter, but that’s down from the 47% growth pace in the first quarter.
Analyst Herman Leung of Susquehanna International Group wrote in a note to investors that Priceline faced competition domestically from Hotwire-Expedia cross-promotions in the second quarter, and Hotels.com margin squeezing.
“Overall, room night growth of 39% came in lower than expectations and the spread between Expedia [and Priceline] has come the closest we have seen in recent years,” Leung wrote.
Hey eLong, take this
Meanwhile, Ctrip in China has partnered with Priceline’s Booking.com as a means of competing with Expedia’s eLong.
Ctrip agreed to add Booking.com’s global portfolio of 235,000 hotels to is current roster of 50,000, giving Ctrip users more robust options when traveling outside of China.
“We believe that this will give Booking.com a new way to serve travelers from the Asia Pacific region,” Boyd said during the earnings announcement.
However, the Booking.com-Ctrip partnership will not be material to Priceline’s financial results.