How concerned are hotels about margin and distribution cost?

priceline.com’s president and CEO Jeffery H. Boyd spoke about several pricing and distribution-related issues during the company’s fourth quarter earnings call.

Published: 19 Feb 2010

priceline.com’s president and CEO Jeffery H. Boyd spoke about several pricing and distribution-related issues during the company’s fourth quarter earnings call.

Excerpts (posted on Seeking Alpha):

About Booking.com’s fees structure and competitors’ pricing: In the last year, the hotels have gotten less focused on margin and more focused on getting travellers into the hotel. Three or four years ago, margin and distribution cost was much more of a concern for the hotels, because they had high levels of occupancy and yields were growing up, but in the current environment that really hasn’t been front burner issue. On the other hand, we have seen at least [Expedia] buying underwriting going out with an agency model that presumably could have some distribution cost efficiencies for some hotels, so that maybe an example of trying to compete on the distribution cost side.

On how travel meta search sites like Kayak are impacting OTAs: For the hotel business, which is our principal business, meta-search is a growing, but still a very, very small player in this space.

You have seen some portals like a Bing on MSN start to look at that meta-search is away to try to address specific traffic searching for hotels and airline tickets. We participate in those channels and we participate in other meta-search channels, and we’re advertisers on them; and our expectation is that those channels grow in their significance that we will continue to participate. I can’t think of a reason why we should lose share to other competitors in that kind of an environment versus the environment we’re operating in today.

Inventory concerns: Our business hasn’t performed pretty well in times of high occupancy and increasing yields and in fact, increasing yields is a tailwind for gross bookings. Having said that, there’s no question that promotional pricing helped to spur leisure travel last year, not just for us but for others in the space, and that absence of promotional pricing could have an impact on fundamental demand.

 

 

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