Distribution Strategies

As its international business continues to drive growth for the US-based online travel company priceline, the presence of booking.com in the group’s portfolio continues to gain prominence.

Published: 06 Sep 2010

As its international business continues to drive growth for the US-based online travel company priceline, the presence of booking.com in the group’s portfolio continues to gain prominence.

Amsterdam-based Booking.com has now established direct connections to 100,000 hotels in 89 countries.

Kees Koolen, CEO of Booking.com, says the company is currently working with 100,000 directly contracted hotels worldwide that are ready to be booked on www.booking.com.

“With 30 offices around the world, it is our goal to keep up our current growth rate in signing new hotels. Our customers will benefit from our wide selection of various types of hotels at great prices that cater to the needs of every budget and can be viewed in 37 languages,” said Koolen.

Performance

The company launched its business in the US in 1998 under the priceline.com brand and has since expanded its operations to include, among others, the international brands Booking.com, Agoda and TravelJigsaw. The company says its principal goal is to be the leading worldwide online hotel reservation service.

Its business is driven primarily by international results. During the year ended December 31, 2009, the international business — the significant majority of which is currently generated by Booking.com — represented approximately 61% of its gross bookings and approximately 75% of its consolidated operating income.

Given that the business of its international operations is primarily comprised of hotel reservation services, priceline says commissions earned in connection with the reservation of hotel room nights represents a substantial majority of its gross profit. Agency revenues are derived from travel related transactions where we are not the merchant of record and where the prices of the travel services are determined by third parties. Agency revenues include travel commissions, customer processing fees and GDS reservation booking fees related to certain of the services listed above and are reported at the net amounts received, without any associated cost of revenue. Principally all of the revenue for Booking.com is comprised of travel commissions.

Gross bookings increased by 43.3% and 47.5% for the three and six months ended June 30, 2010, respectively, compared to the same periods in 2009, principally due to 48.2% and 52.0% growth in hotel room night reservations, respectively. The 59.5% increase in international gross bookings was attributable to growth in international hotel room night reservations for Booking.com and Agoda (growth on a local currency basis was approximately 67.1%).

Impact on operating expenses

In its previous quarterly results, the company stated, “As our international operations have become significant contributors to our results and international hotel bookings have become of increased importance to our earnings, we have seen, and expect to continue to see, changes in certain of our operating expenses and other financial metrics.”

For example, because Booking.com and Agoda utilise online search and affiliate marketing as the principal means of generating traffic to their websites, the overall online advertising expense has increased significantly over recent years, a trend the company expects to continue throughout the remainder of 2010.