Priceline CEO to Hotels: We Can Offer Discounted Rates, Too

Priceline Group Interim CEO Jeffery Boyd wanted to appear reasonable and measured so in discussing the hotels chains’ efforts to push direct bookings on their own websites, he declined to get into a tit for tat discussion.

“I wouldn’t express it as if they do this then we’ll do that,” Boyd said during the company’s second quarter earnings call August 4. “This is a partnership.” He characterized the chains’ activities as an “evolution” of goals they’ve had for a long time.

Still, Boyd said, “it’s a reasonable ask” for “the largest player in the space” to expect to get the chains’ most-competitive rates because that’s what Priceline’s customers’ expect. Priceline now offers more than 1 million properties, a 30 percent increase over the second quarter of 2015, and this includes some 493,000 vacation rentals and apartments, he said.

Boyd said the Group will continue to “press” the chains for their lowest rates and noted that Priceline is equipped to advertise substantial discounts, too.

“It might not be a good idea” for the chains to push those discounted rates, Boyd said.

In other words, if the hotel chains continue to offer discounted rates to their loyalty program members when booking directly on the chains’ own websites, then Priceline can do some discounting of its own as a counter-measure.

“We think it is a good idea regardless of the market cycle” or occupancy rates for the chains to participate in Priceline Group sites such as Booking.com and Priceline.com with their most-competitive rates if they want to maintain average daily rates and revenue per available room numbers, he said.

When occupancy drops or when the hotel chains are trying to put heads in beds in far-flung geographies and in diverse languages then Priceline Group sites are effective marketers for them, Boyd pointed out.

Expedia Claimed Direct-Booking Has Improved Margins

None of the analysts during the Priceline Group’s second quarter earnings call asked what impact the hotel chains’ direct-booking campaigns have had on the company’s business.

But during Expedia’s earnings announcement last week, CEO Dara Khosrowshahi argued it hasn’t had an adverse impact. In fact, Khosrowshahi said hotels chains have lost market share on Expedia and have been replaced in some cases by independent properties.

Since smaller, independent hotels generally pay Expedia higher commissions than the chains do, the overall impact has been positive for margins, Khosrowshahi said.

If the Expedia CEO is trying to characterize the chains’ efforts in the most positive way that he can, then it still doesn’t seem to be an attractive and sustainable development for Expedia’s customers if they lose the option of booking chains that are household names, particularly in the U.S.

An Earnings Beat

In contrast to Expedia and TripAdvisor, which saw their share prices drop after releasing second quarter earnings and missing analysts’ expectations over the last week, Priceline’s shares were up 5.5 percent in after-hours trading August 4 after beating consensus estimates on earnings per share ($13.93 versus $12.67) and just missing on revenue ($2.56 billion versus $2.59 billion).

Although there has been abundant concern over the past couple of weeks from airlines, hotels and corporations reporting earnings about the prospect for dampening corporate travel demand in Europe, Priceline officials said they saw reduced demand in countries such as France, Belgium and Turkey but overall in Europe they are not seeing “a major pullback.”

Take That Airbnb and HomeAway

With its accommodations’ numbers now eclipsing 1 million properties, including 493,000 vacation rentals and apartments, Booking.com in particular is now one of the largest platforms for alternative accommodations, particularly for those that are bookable online, Boyd said.

Booking.com has a variety of filters for customers to use in searching for accommodations and the priority is to show them the kind of property they are looking for, he said.

Boyd said HomeAway’s customers and vacation rental owners “are chafing a little bit” about the introduction of booking fees for travelers — a move that the Booking.com doesn’t intend to parrot.

Boyd said “we like” our vacation rental model, adding Booking.com customers are used to the no-fee structure. Just as hotel customers learned over the years to comparison shop, he feels vacation rental customers will eventually do likewise.

“It’s probably the case that they will be shopping around for vacation rentals and I’m hoping we will be able to provide the best value,” Boyd said.

But don’t expect the Priceline Group to push the envelope on alternative accommodations in markets where regulators clamp down, he said.

Boyd added: “We are a law-abiding company and we are not trying to disrupt the legal system.”

CEO Search Continues

The Priceline Group search for a permanent CEO continues following the ouster of Darren Huston from the slot in late April. Boyd said a board committee and a recruiting firm are working on finding a replacement “and they are right in the middle of it.”