The Priceline Group will consider various strategies to further its priority of increasing its lodging supply. The reason? The more choice, the better the conversion rates of lookers into bookers. When people tell you Airbnb won't ever get into selling hotel rooms, then consider the lessons Priceline has learned about adding rooms.
This was interesting talk from a company, the Priceline Group, which announced a few weeks ago that it will acquire the Momondo Group for $550 million.
Speaking Monday during the company’s fourth quarter earnings call, his first as Priceline Group CEO, Glenn Fogel said the company sees adding supply as an ongoing key part of its growth strategy and that doing it organically, without the distraction of acquisitions, is particularly advantageous.
“We look at a lot of potential deals and we are careful about it,” Fogel said, referring to mergers and acquisitions. He said the company will be prudent about pulling the trigger on large deals going forward.
One issue in doing big acquisitions to increase lodging supply is the difficulties in tying in all those properties of various types into the Groups assorted brands and this can be yeoman’s work.
The Momondo acquisition isn’t a large deal for the Priceline Group with its $80 billion market cap, and it technically does not involve adding bookable lodging inventory in the sense that Fogel was talking about. Instead, it involves adding supply that is searchable.
Regarding “distractions,” Fogel didn’t mention Expedia but it was clearly at least one of the companies that he was referring to. Expedia acquired Travelocity, Wotif, Orbitz Worldwide and HomeAway in 2015, and saw its growth slow in 2016 as Expedia stumbled in integrating Orbitz Worldwide and its brands onto Expedia supply and technology platforms.
The Priceline Group didn’t make any major acquisitions in 2016 although it did have to take a write-down of its 2014 acquisition of dining-reservations platform OpenTable. So maybe the difficulties of the acquisition dynamic were very fresh in Fogel’s mind.
In the fourth quarter of 2016, Priceline’s room nights climbed 31 percent year over year — the highest growth spurt since the first quarter of 2014. Net income in the fourth quarter grew 34 percent to $674 million on $2.3 billion in revenue, a 17.4 percent increase.
All of this took place without buying a big company to add to the lodging stockpile.
Instead, in 2016 the Priceline Group added supply largely organically through the efforts of its sale organization. Its mainstay Booking.com brand added more than 289,000 properties last year, a 33 percent leap. Booking.com now counts 1.15 million hotels, apartments, vacation rentals and other lodging types.
The company wants to highlight that it features 591,000 instantly bookable vacation rentals, a mark that grew 49 percent in 2016, although Airbnb probably has double that quantity. Fogel said Priceline may begin marketing the fact that its vacation rental are available to consumers without them having to pay the booking fees that companies such as Airbnb charge.
On the looming Momondo Group acquisition, which Priceline officials expect to close in 2017 after securing regulatory approvals, Priceline Group CFO Daniel Finnegan said it would be “modestly” accretive to non-GAAP earnings per share in 2018.
The Momondo will join the Kayak brand portfolio and it is expected to help Kayak in Europe in competition with Skyscanner and others.
Asked about the future of metasearch brands such as Kayak, Fogel said it’s clear that consumer increasingly like to use such comparison-shopping sites. He said it can become a much bigger business for the Group, which does not intend to force consumers to book their travel in a prescribed way.
Said Fogel: “This will be determined by what the consumer wants, not what we want.”
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Photo credit: Priceline Group's Glenn Fogel speaking at a conference in November 2016, a month before being appointed Group CEO. BTO / Flickr