Analysis of Priceline

Priceline Inc. is an online motivate booking site that helps customers worldwide purchase airf be, hotels, lease elevator cars, and practically more. The three categories I chose to analyze atomic number 18 business role model and strategies, business finances, and expansion of the company through encyclopedisms. For Priceline to founder success, I accept the business model and how the company builds its model is extremely important. Next, it is crucial that we facial expression at the finances of the company to ensure it is profitable. The finances of the company are tied to the various acquisitions Priceline has acquired in the past hardly a(prenominal) years. By looking for at the companies Priceline has acquired, I strongly recommend investing in Priceline found off of the record boodle stick on by the company. Not completely is Priceline profitable, the corporation also has an unique business strategy to cave in m wizardy. When depute this paper, I began to use databases and Factiva to search for information about Priceline. I utilise the information found from databases and used them as research to support my report. I then researched Pricelines grocerying techniques as well as inventory prices in order to elaborate on the companys finances. Fin either(prenominal)y, I fited about the companies Priceline has acquired everywhere the years to expand its market presence. To contrive out the formatting and structure of this paper, I used other pluralitys reports as guidance.IntroductionPricelines business model includes value trace of connecting slantors and customers. It consists of a revenue model where there are transaction fees and string out earned by the company among vendor and customer price. Launched in 1998, Priceline Inc. does not directly supply pop off services, but rather they set out buyers and sellers to transmither to complete a transaction. Priceline saves consumers money by profession die flexibility of bra nds and product features for sellers lower prices. Business Model and StrategiesEver since the development of the inter dough, dot com company companies constitute been booming left and right. One of those companies founded during the dot-com boom was Priceline Inc., an online travel booking site that revolutionized the way consumers purchased air tickets, hotel rooms, rental cars, and much more. Priceline Inc. positive and innovated a new system of Name your ownprice for customers to conciliate their travels. They were able to turn excess inventory otherwise not interchange by the airlines to consumers while at the same time price single out in order to maximize shekels. In the airline industry, it is foretelld that only 65% of the seats on a plane are occupied on a daily basis.Airlines definitely were looking a way to vend the rest of the inventory. However, they could not advertise these excess seats with special ignore because in doing so, it would destroy its retail fa re structure. Priceline was the solution to this as they are able to help shield airlines branding in twain diverse ways. First, when consumers try to name your own price on Priceline, they must hire travels between deuce cities. In this case, the airlines branding and product configurations are protect as customers have no idea which airline they forget be selecting. wholly after a bid is accepted will they learn their exact flight information and itinerary. Secondly, Priceline protects those who are considered free riders. These are plenty who would receive the benefit of a discount but they are already automatic to suffer for an air ticket at a high price (Eisenmann 47-48). Name Your Price GuaranteeFigure 1.1Source (Priceline.com) Revenue Generation Priceline is able to efficaciously generate revenue one of two ways. First, it calculates a spread between the lowest prices offered by the Airline partner and the highest prices a customer is willing to pay. In this scenar io, neither party the airline partner nor the customer have the option of knowing the asking price or the bid price. A customer has no idea what unpublished rate the airline is offering. Only Priceline would have this secret information. On the other hand, the airline does not get to see how much the consumers bid on the air ticket. For example, if a customer bids $300 on a ticket from LAX to JFK and the lowest unpublished rate for any given airline is $200, then the spread would be $100, which Priceline retains as its fee. As seen from this model, profiting from the spread is highly successful given the economies of photographic plate from customers (Eisenmann 47-48). Adaptive Marketing and Cross SubsidyFurthermore, Priceline also offers consumers to bump up their bids by participating in adaptive marketing and cross-subsidy promotional programs. For instance, Priceline could attention deficit disorder $50 to an existing $100 bid to cook it more seeming that a ticket will be interchange if one signs up for a credit card. If that is the case, the credit card company may pay Priceline $75 for either referral that signs up for the card. In this case, Priceline would simply pocket the difference. If the asking price for the ticket was already under $100, then Priceline would keep all of the money coming from credit card sponsorship (Eisenmann 48).Business Finances Early Stages of Priceline At the beginning of year 2000, Priceline had a market share of 3% of all airline tickets sold in the U.S. Attracting over 3.8 million unique visitors, Priceline sold tickets for all eight domestic airlines as well as 20 international carriers. One year after its establishment in 1998, Pricelines revenue was $482 Million in 1999 and $1 Billion in 2000 (Eisenmann 48).However, the dot-com bubble would halt Pricelines success only temporarily. 1999 was a bonnet year for Priceline as it stated a $1.1 Billion loss on its financial statement. Stock prices plunged from $974 to $7 a share. According to Walker, there was a credibility issue within the organization and investors did not completely self-assertion the dot-com industry. Pricelines financials would improve slowly. In 2002, Priceline reported a net loss of $19 Million. When chief operating officer Jeff Boyd took over the company in 2002, Priceline var.s had suffered one of the worst drops in its brief history. But soon enough, Priceline was able to make a turnaround when it introduced William Shatner as the negotiator character out of the relentless to help consumers save money. Instantaneously, people remembered the advertisements put up by Priceline and associated with Shatner, a former Star-Trek stars self-parody. William ShatnerFigure 1.2Source (Thepenaltyflagblog.com) From Loss to Profit Priceline started making a profit in 2003, but it wasnt until 2004 and 2005 when Boyd bought two European hotel making sitesthe U.K.s Active Hotels and Amsterdam-based Booking.com that Priceline hit a t urning point. Pricelines earnings growth and comport market success since then have been attributable largely to those two acquisitionsBooking.com in particular. It would be tough to argue that theres been a better acquisition in Internet history, says Thomas White, an analyst at Macquarie Securities. Its why the stock has been such a home run, says White.Thomas White and Barclays DiClemente would agree that investors lack the experience that most of the revenue come from overseas. Since Europeans have many more spend days as Americans, it is not surprising that more revenue is inflowing from Europe. Jeff Boyd, the CEO of Priceline, was smart about targeting such a market in Europe. Moreover, the growth of discount airlines in Europe such as EasyJet and Ryanair have increased the popularity of city breaksthe European equivalent of a weekend getaway, states Birger. lettuce Report in 2012In 2012, Priceline proceed to post better than evaluate earnings reports. In the third make of 2012, Priceline reported third quarter revenues of $1.71 Billion, up 17.4% from a year ago in 2011. Also, Priceline beat the estimate of $1.65 Billion projected revenue determined previously by analysts. Non-GAAP acquire stood at $12.40 a share, ahead of the estimate of $11.81 a share. Gross bookings came in at $7.8 billion, elevated 25.2% from a year ago. For quarter four in 2012, Eric Savitz of Forbes magazine states Priceline projected revenues to be up 21-28% or 22%-29% in local currency revenues are expected to improve 15%-22%, with non-GAAP profits of $6.12 to $6.57 a share. Consensus has been for $6.34 a share.Continuous Growth In the mean time, CEO Jeff Boyd continues to have high hopes for Priceline. Globally our hotel business grew room nights by 36% over the same period last year, compared to 39% growth in the second quarter, he give tongue to. Our rental car business grew rental car days by 35% over last year, an acceleration from 29% in the second quarter, led by improving results at Priceline.com and continued strong growth from Rentalcars.com. While we remain concerned about economical weakness across Europe, Asia and the U.S., the company intends to focus on solidifying its position as the worlds largest and most profitable online hotel reservation service by continuing to add hotels and other accommodations and better servicing our customers through constant innovation in our mobile and desktop sites.As promised by Boyd, Priceline continued to show wicked growth. On November 1st, 2012, Priceline stock was up $12.22 in regular session handicraft and jumped another $52 a share in after-hours trading to close at $638.95 (Savitz). Since then, Priceline sustains its momentum by reporting record earnings in the preceding quarters. Today, stock price for Priceline is even higher than few years ago. It currently trades at over $1,000 a share and unendingly out competes against their rivals Expedia and Orbitz (Birger).10 Year Graph of Priceli ne (PCLN) Figure 1.3Source (Yahoo Finance) Acquisitions and Expansions Booking.com Priceline is on track to make a very good move because it is believed that the online travel reservation market still has room for expansion in Europe. Priceline typically takes 15% of every transaction done on Booking.com in return, the hotels have a much better chance to market and advertise to potential customers. After Pricelines acquisition of Booking.com in July 2005 for $135 Million, its profits skyrocketed from $10 million in 2003 to $1.1 billion in 2011. No other acquisition has proven to be that successful in the 2000s (ONeill). Agoda and TraveljigSawIn addition, Priceline is increasing its brand in Asia via its Agoda brand and it is growing its rental cars division as well, aided by a 2010 acquisition of global car-rental site TravelJigsaw. Ever since these acquisitions of smaller travel companies, Priceline is able to expand its market cap while its stock prices surged over 500% in the fol lowing five years (Birger). KayakIn 2012, Priceline Inc. continues its acquisition practice with the purchase of Kayak for $1.8 Billion. Shareholders of Kayak received $40 per share. Kayak is successful in that it raised $91 Million in the July 2012 IPO through selling of 3.5 Million shares at $26 apiece. It has affect 302 million queries across its web. Kayak and Priceline are two of the largest online-travel companies and it makes sense that these two companies would want to work together, of course, because they do have different strengths and different objectives, said Dan Marcec, an analyst at Emarketer. With the acquisition of Kayak, Jeff Boyd states that Pricelines intention is for Kayak to be operated independently under the leadership of existing management, as with our other hands, with a primary focus on building value for its customers and advertising partners (Levy).Conclusion Priceline Inc. operates as one of the biggest travel booking sites in the world. Its global p resence in Europe and Asia as well in the Americas cannot be ignored. Priceline Inc. should be a company that is to be heavily invested in because of its revenue and profit posted by the corporation. Its record breaking earnings in the billions should easily imbibe the eyes of a savvy investor. Priceline will continue to post earnings through the way it does business by matching consumers with vendors and earning the difference in prices. With its continuous acquisitions of smaller booking sites, Priceline is set on par to be the dominant and primary go to website when it comes to travel bookings. Without a doubt, its stock prices will continue to soar as it expands its presence in Asia.