After Expedia consumed all the air in the room in 2015 by acquiring everything in sight and given all the angst about Arbnb’s coming onslaught, the Priceline Group needs to win back the narrative in 2016.

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In this second article in a three-part series, Challenges in Travel Booking 2016, Skift examines company-specific issues confronting three major online travel players, TripAdvisor, the Priceline Group and Expedia, in the coming year. To find the stories in the series click here

Priceline didn’t make any mega acquisitions in 2015 and declined to pull the trigger on acquiring HomeAway, as Expedia did for $3.9 billion. One can wonder, with some exaggeration, what’s left to buy? Priceline’s deal-maker Glenn Fogel is undoubtedly at this moment immersed in pitch decks and interviews trying to figure that out.

Wall Street was bullish about rival Expedia’s prospects in 2015 as its stock rose 44.9 percent compared with a 14.29 percent jump at TripAdvisor and an 11.63 percent boost at the much-larger Priceline. That compared with the S&P 500 being flat for the year.

In November, tired of all the Airbnb talk and seeking to reorient the storyline, Priceline’s Booking.com revealed that it offers 21 million bookable rooms. The theme was that Booking.com’s growth, and especially its girth, compare favorably with Airbnb’s on the lodging front overall. And Booking.com can show some digital one-up-manship too because all of its 21 million rooms are instantly confirmable.

The Booking.com Group?

One of the Priceline Group’s issues is its name. As much as officials of the parent company appreciate the legacy of its namesake Priceline.com and its longtime TV point man William Shatner, they cringe whenever journalists and pundits associate the Group, which also includes Booking.com, Agoda, Kayak, OpenTable and several other brands, with the Negotiator.

Stars of the current Priceline.com advertising campaign, William Shatner and Kaley Cuoco. REUTERS/Priceline.com

As Priceline Group CEO Darren Huston told me in November: “What an asset [Priceline.com and Shatner], but on the other hand it’s a little bit of baggage for us because we’re the Priceline Group. Every time I do an interview, they show a picture of William Shatner. We’re just so much more than that. I hope people start to learn that. I love our legacy namesake business, but look, we’ve got OpenTable, Booking.com, Kayak. We’re now listed as one of the best companies to work for in the Internet segment in Fortune. That’s quite an achievement because people still don’t really know who we are.”

In fact in 2014, 94 percent of the Priceline Group’s operating income came from its international business (people located outside of the U.S. booking travel, mostly hotels), which was generated primarily by Booking.com but also included Agoda, Rentalcars.com, Kayak and OpenTable.

Although the Group’s namesake Priceline.com generated less than 6 percent of the company’s operating income in 2014, it still gets all the love in the Group’s name.

Interestingly, Group chief executive Huston still moonlights as the CEO of the Group’s profit-generator, the Netherlands-based Booking.com.

Competitive Threats

There have been a series of downgrades of Priceline’s stock in 2016, mostly tied to the company’s international currency exposure and strength of the dollar, fear of terrorism in Europe and also because of perceived competitive threats from Expedia and Airbnb.

When it comes to an acceleration narrative, Expedia is the story. In the third quarter of 2015, Expedia Inc.’s room nights, generated by Expedia.com, Hotels.com, and to a lesser extent Venere and Travelocity, accelerated 36 percent to 61.5 million room nights.

Expedia’s acquisitions, including Travelocity, Wotif, and Expedia’s Air Asia joint venture, contributed 9 percentage points of bookings growth in the third quarter. Expedia’s acquisition of Orbitz Worldwide took place September 17 so hotel bookings on Orbitz’s sites only contributed to the growth numbers for about two weeks.

The Priceline Group, including Booking.com, Agoda and Priceline.com, has a much larger lodging business, including hotels, vacation rentals and apartments, than does Expedia. The Priceline Group notched 116 million room nights (compared with 61.5 million for Expedia sites) in the third quarter and that amounted to 22 percent growth from the year- earlier period. Expedia’s growth was a lot faster at 36 percent.

Transitional Year

As we noted in the first part of this series, which focused on TripAdvisor’s challenges, 2016 will be a year of transition for TripAdvisor, Expedia and Priceline as the first two, at least, experiment with new vacation rental business models; Expedia integrates HomeAway’s vacation rentals; HomeAway begins to on-board apartments from Expedia in urban areas, and all players brace for the ongoing impact of a growing Airbnb and the sharing economy.

Midway through 2016, HomeAway plans to introduce a consumer booking fee for vacation rentals, the absence of which it often stated previously was a competitive advantage. TripAdvisor recently expanded the fees it charges travelers, and both companies’ “rake,” the fees it charges vacation rental owners and travelers, are trending toward Airbnb’s fees of around 15 percent of the booking.

Assuming that there won’t be an outright consumer rebellion against HomeAway’s and TripAdvisor’s fees, the question looms as to how Booking.com, which doesn’t charge travelers a fee on vacation rentals, will respond. While travelers’ reactions to the fees may range from disgust to acceptance of the new model, Wall Street sure loves the idea of these public companies increasing the monetization of their vacation rentals.

Booking.com booking fees

Another pivotal question for Booking.com and Expedia/HomeAway, in particular, is how the online booking sites will deal with the question of instantly confirmable bookings for vacation rentals.

A lot of people don’t understand the fact that although HomeAway is making a big push to make all of the properties it shows online-bookable, that doesn’t mean they are instantly confirmable. In fact, unlike online hotel bookings, owners or managers of online-bookable properties on HomeAway sites still have a 24-hour window to decide whether they want to accept the reservation.

As HomeAway integrates its global sites with Expedia, will HomeAway decide — or will Expedia push it — to eliminate the 24-hour wiggle room? It is a controversial question in the vacation rental industry as many individual owners of vacation homes — and this is probably the dominant sector compared with professionally managed properties — insist on being able to vet guests before confirming a reservation.

Unlike HomeAway, TripAdvisor’s vacation rentals are tilting toward instantly confirmable bookings and Booking.com shows no sign of dropping the instant confirmations’ requirement — and that’s one factor that led Priceline to pass on acquiring HomeAway.

“We’ve now been on a path and are sticking to the principle of properties being instantly bookable and verifiable, and no consumer fees,” Priceline’s Huston said in November 2015. “Now we’re so far along the path that buying something that doesn’t fit that model just didn’t fit us.”

Concessions to Hilton Worldwide and Marriott International

With merger fervor in the hotel industry, including Marriott’s acquisition of Starwood and AccorHotels’ purchase of the Fairmont, Raffles and Swissotel trio, hotel chains are putting renewed efforts in 2016 into getting direct bookings on their own websites and trying to diminish the power of Booking.com and Expedia.

Hilton Worldwide and Marriott International won concessions in negotiations from Expedia and Booking.com to offer lower rates online to loyalty program members than they give to the online travel agencies. While previously hotels could offer lower rates to loyalty program members through sporadic email promotions, now Hilton and Marriott are openly offering lower rates on an ongoing basis. Such rate parity provisions are getting even looser in Europe these days.

At the same time, most of the globe’s hotel chains, with the exception of InterContinental Hotels Group and Hilton, have signed up to participate in TripAdvisor Instant Booking. This is a move on the hotels’ part to attract incremental bookings and to bring Expedia and Booking.com down a peg.

The hotels hope they aren’t just creating a new booking monster in TripAdvisor or at least that the presence of a third major online hotel booker can serve to lower commissions across the board.

What’s Priceline’s Next Move?

Priceline Group officials like to point out that it is the third largest e-commerce player in the world — behind only Amazon and Alibaba — and yet that fact often gets overlooked when discussing the companies that have transformed online booking.

Expedia, though smaller than Booking.com, is growing faster, because of some organic growth but predominantly because of Expedia’s 2014-2015 acquisition spree.

Will the Booking.com Group — I mean, the Priceline Group — sit back in 2016, merely content to build out its hotels, vacation rentals, apartments and restaurant reservations businesses organically, as well as BookingSuite for hotels?

Part of the issue for Booking.com is what’s left to acquire? Sure, Priceline could acquire a tours and activities company like GetYourGuide and various technology startups but that wouldn’t have the girth of a HomeAway- or Orbitz Worldwide-like acquisition.

Still, it would be a shock to see Priceline just sitting back in 2016, enabling Expedia to hog the online travel conversation again.

The third and final installment in this seriesChallenges in Travel Booking 2016, will focus on Expedia.

Photo Credit: Villas.com, which is a Booking.com vacation rental site, hammers home the fact that its properties are bookable 'instantly." Vacation rental owners on HomeAway sites have 24 hours to decide whether to accept a reservation. Villas.com