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Despite stalled growth in China, Brazil and Russia, a wave of newly middle-class travelers from the BRICs and beyond will start visiting international destinations in the coming decades — dwarfing the numbers we’ve seen thus far.
What does Priceline’s $1.8 billion acquisition of metasearcher Kayak mean as the first-year anniversary approaches? If you are a big-time online travel agency, you gotta have one. Just ask Expedia, which got its hands on Trivago soon after Priceline made its move on Kayak.
In the first quarter of 2014, Kayak contributed disproportionately to Priceline’s profits because Kayak’s click-based advertising revenue is less subject to an otherwise seasonally slower first quarter for Priceline’s other brands, and the Priceline Group also slowed its TV campaigns following the polar vortex in North America and flooding in the UK, officials said.
Priceline Group CFO Dan Finnegan said Kayak was “nicely profitable” in the first quarter, notched $59 million in revenue (excluding very substantial revenue generated from other Priceline brands such as Booking.com and Agoda), and contributed about 7 percentage points of inorganic growth.
Setting the financial contributions aside, Kayak not only gives Priceline.com, Booking.com, Agoda, and Rentalcars.com an in-house advertising and marketing arm, metasearch is becoming increasingly important to the Priceline Group, and Kayak enables Priceline to view metasearch from “both sides,” Priceline CEO Darren Huston said.
Huston said Kayak participates in meetings where the Priceline Group’s various brands share best practices about issues such as social media and mobile.
“They have settled in with the group,” Huston said, referring to Kayak personnel, adding that the Kayakers get energized by sharing knowledge with other strong-performing companies.
“Kayak has been a tremendous addition,” he said.
Kayak is in the midst of transforming itself from a primarily U.S. brand into a global one, and has been making targeted gains in Europe, Huston said.
Advertising on metasearch sites, including Kayak, Trivago, TripAdvisor, and Google, is still a relatively small portion of Priceline’s advertising mix, but its importance is growing, and Kayak helps Priceline’s other brands get a better understanding of the space, Huston said.
$1.8 billion worth of understanding.