Rentalcars.com won't bring in the mega wealth that Booking.com has done because of the disparate nature of the car and hotel businesses. But, there is a whole wide world out there, and Rentalcars.com, with Priceline's resources and experience at its disposal, has the potential to be a huge player on the global stage.
Priceline released its second quarter earnings today, and the fastest growing metric was rental car days, which leaped 46.3% year-over-year in the quarter to 12.5 million days. In addition to rentals through Manchester, U.K.-based Rentalcars.com, the growth in rental car days also includes rentals through Priceline.com.
By comparison, hotel room nights in the quarter grew 38.2%, and airline tickets edged upwards just 1.8%.
Priceline CEO Jeffery Boyd said during the earnings call that Rentalcars.com is geared to build a global platform in a manner similar to the way Booking.com conquered the world (our words, not Boyd’s).
Simple Formula, but Execution is Another Matter
The formula is fairly rudimentary, although actually doing it isn’t.
As Boyd describes it, you build simple websites with one product — i.e. cars — and you don’t mix in soup-to-nuts other products such as airline tickets, hotels, and vacation packages. Then you focus on conversion, efficiently turning lookers into bookers, and you pour in online advertising dollars.
Priceline and Booking.com know a thing about online conversion. Asked if TripAdvisor’s launch of hotel metasearch and Google Hotel Finder’s similar product represented a risk to Priceline, which advertises in both, Boyd said changes like these will happen constantly in the future, and they represent a risk and an opportunity.
But, about conversion, Boyd said: “We tend to do well once we get a visitor to the website.”
Something New: Cross-Promotion
Priceline lets its brands, including Priceline.com, Booking.com, Agoda, Rentalcars.com and Kayak, operate independently, and historically there hasn’t been a lot of cross-promotion between them.
But, Boyd indicated that both Booking.com and Priceline.com are now cross-selling Rentalcars.com, offering travelers the option of tacking on a car rental after a hotel or airline-ticket booking, respectively.
Rentalcars.com may not have the potential to generate the profit margins that Booking.com does, but it, too, can be a huge business.
Priceline acquired a controlling stake in Rentalcars.com, then known as Traveljigsaw, for $108.5 million in 2010. The managers of Rentalcars.com still hold a minority interest, and ironically Booking.com executives owns a 3% piece of Rentalcars.com, as well.
In other news, Priceline reported that Booking.com’s lodging inventory climbed 40% year-over-year in the second quarter to 330,000 hotels and apartments, and room nights soared 38%, far outpacing Expedia’s room-night growth.
Priceline indicated it is epecially pleased at Priceline.com’s domestic growth as gross bookings in the U.S. climbed 11.7% in the quarter, fueled in part by Booking.com’s U.S. advertising campaign, as well as an advertising blitz supporting Priceline’s Express Deals (you know the hotel rate, but not the hotel identity, up-front with no bidding required.)
In a bit of unsolicited advice that was likely directed at Expedia’s Hotwire unit, which has taken a big hit from Priceline’s Express Deals, Boyd said one competitor was periodically altering its levels of TV advertising, which doesn’t work in building brand recognition among consumers.
“That doesn’t seem to me to serve a brand well,” Boyd said.
In the second quarter, Priceline’s net income increased 24.1% to $437 million on nearly $1.7 billion in revenue, a 24.6% increase, all supported by U.S. advertising campaigns on behalf of Priceline, Booking.com and Kayak.
Still Early Days for Mobile
On the all-important mobile front, Boyd said it’s still too early to know the real value of an app download.
It’s unclear, he said, whether a company would need to advertise again to travelers who have downloaded its apps, whether competitors that poured lots of advertising dollars into mobile will keep up the spend, and how mobile adoption impacts customer-acquisition costs.
“I still think it’s too early to map that out,” Boyd said, adding “I really can’t tell over the long haul whether it (mobile) will make customer-acquisition costs go up or down.”
Photo credit: Rentalcars.com offers customers virtually all major brands, including Hertz and its Mustangs for rent. Like the hue of the Hertz rental in the photo, Rentalcars.com is seeing green. Brent Payne / flickr.com