Analysis of Priceline

Priceline Inc. is an online travel booking site that helps nodes worldwide obtain airf atomic number 18, hotels, lease cars, and oft much. The three categories I chose to analyze ar stage business model and strategies, business finances, and expansion of the scorety through acquisitions. For Priceline to have success, I believe the business model and how the company builds its model is extremely important. Next, it is important that we look at the finances of the company to ensure it is put on open. The finances of the company argon tied to the various acquisitions Priceline has acquired in the past few years. By looking at the companies Priceline has acquired, I strongly recommend investing in Priceline based off of the embark earnings transported by the company. non unless is Priceline profit fitted, the corporation also has an incomparable business strategy to reach m wizardy. When assigned this paper, I began to use databases and Factiva to search for information ab bug out Priceline. I used the information found from databases and used them as research to admit my report. I then researched Pricelines foodstuffing techniques as well as timeworn sets in order to elaborate on the companys finances. Finally, I learned round the companies Priceline has acquired over the years to expand its food market forepart. To figure out the formatting and structure of this paper, I used some other(a) peoples reports as guidance.IntroductionPricelines business model includes nurture pro coiffure of connecting vendors and nodes. It consists of a tax revenue model where on that point are motion fees and imbue earned by the company between vendor and guest monetary value. Launched in 1998, Priceline Inc. does non directly supply travel services, but earlier they bring buyers and sellers together to complete a transaction. Priceline saves consumers money by trade travel flexibility of specks and product features for sellers lower prices. Bus iness Model and StrategiesEver since the maturement of the internet, dot-com companies have been gold rushing left and right. One of those companies founded during the dot-com boom was Priceline Inc., an online travel booking site that revolutionized the style consumers purchased air tickets, hotel rooms, rental cars, and much to a greater extent. Priceline Inc. developed and innovated a new system of Name your ownprice for customers to finalize their travels. They were able to turn excess inventory otherwise not sold by the airlines to consumers while at the same time price discriminate in order to maximize profits. In the airline industry, it is estimated that only 65% of the seats on a plane are work 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 particular discount because in doing so, it would destroy its retail fare structure. Priceline was the solution to this as they ar e able to help shield airlines branding in 2 diametrical ways. First, when consumers try to name your own price on Priceline, they mustiness choose travels between two cities. In this case, the airlines branding and product configurations are protected as customers have no idea which airline they entrust be selecting. Only after a put up is accepted will they learn their exact flight information and itinerary. Secondly, Priceline protects those who are considered free riders. These are people who would receive the benefit of a discount but they are already willing to pay for an air ticket at a higher(prenominal) price (Eisenmann 47-48). Name Your Price GuaranteeFigure 1.1Source (Priceline.com) Revenue Generation Priceline is able to effectively generate revenue one of two ways. First, it calculates a stagger between the final prices offered by the Airline partner and the highest prices a customer is willing to pay. In this scenario, neither party the airline partner nor the c ustomer 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 disposed airline is $200, then the spread would be $100, which Priceline retains as its earnings. As seen from this model, profiting from the spread is highly successful given the economies of scale from customers (Eisenmann 47-48). Adaptive Marketing and Cross SubsidyFurthermore, Priceline also offers consumers to come apart up their bids by participating in adaptive marketing and cross-subsidy promotional programs. For instance, Priceline could add $50 to an existing $100 bid to make it more likely that a ticket will be sold if one signs up for a credit card. If that is the case, the credit ca rd company may pay Priceline $75 for every referral that signs up for the card. In this case, Priceline would simply scoopful the contrast. If the asking price for the ticket was already under $100, then Priceline would bring through all of the money coming from credit card sponsorship (Eisenmann 48).Business Finances archaean Stages of Priceline At the beginning of year 2000, Priceline had a market character of 3% of all airline tickets sold in the U.S. Attracting over 3.8 trillion 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 trillion in 1999 and $1 Billion in 2000 (Eisenmann 48).However, the dot-com bubble would halt Pricelines success only temporarily. 1999 was a tough year for Priceline as it stated a $1.1 Billion spill 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 exclusively trust the dot-com industry. Pricelines financials would improve slowly. In 2002, Priceline reported a net loss of $19 Million. When CEO Jeff Boyd took over the company in 2002, Priceline nervous strains 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 blue 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 qualification a profit in 2003, but it wasnt until 2004 and 2005 when Boyd bought two European hotel military reserve sitesthe U.K.s Active Hotels and Amsterdam-based Booking.com that Priceline hit a turning point. Pricelines earnings step-up and stock market succe ss since then have been attributable more often than not to those two acquisitionsBooking.com in particular. It would be tough to argue that theres been a ruin acquisition in Internet history, says Thomas White, an analyst at Macquarie Securities. Its wherefore the stock has been such a home run, says White.Thomas White and Barclays DiClemente would agree that investors drop the knowledge that most of the revenue come from overseas. Since Europeans have many more vacation 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 harvest-feast of discount airlines in Europe such as EasyJet and Ryanair have increased the popularity of city breaksthe European equivalent of a spend getaway, states Birger. Earnings Report in 2012In 2012, Priceline continued to post break up than expected earnings reports. In the triplet quarter of 2012, Priceline reported th ird quarter revenues of $1.71 Billion, up 17.4% from a year ago in 2011. Also, Priceline remonstrate the estimate of $1.65 Billion projected revenue determined previously by analysts. Non-GAAP profits stood at $12.40 a share, ahead of the estimate of $11.81 a share. clear bookings came in at $7.8 billion, elevated 25.2% from a year ago. For quarter foursome 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 soaked 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 said. Our rental car business grew rental car days by 35% over last year, an speedup 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 economic 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 act to add hotels and other accommodations and better servicing our customers through constant mental hospital in our mobile and desktop sites.As promised by Boyd, Priceline continued to furnish tremendous growth. On November 1st, 2012, Priceline stock was up $12.22 in regular academic session trading 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 constantly out competes against their rivals Expedia and Orbitz (Birger).10 Year Graph of Priceline (PCLN) Figure 1.3So urce (Yahoo Finance) Acquisitions and Expansions Booking.com Priceline is on route 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. later 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 prove 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 following five years (Birger). boatIn 2012, Priceline Inc. continues its acquisition practice with the purchase of boat for $1.8 Billion. Shareholders of Kayak accepted $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 processed 302 million queries across its web. Kayak and Priceline are two of the largest online-travel companies and it makes sand 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 publicizing partners (Levy).Conclusion Priceline Inc. operates as one of the biggest travel booking sites in the world. Its global presence in Eur ope 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 intimately attract 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.