The boss of Priceline, Jeffrey Boyd, has described Asia Pacific as a “very very competitive market” for online travel agents. He told analysts that “the absolute economics in terms of the pricing of hotels and the competition makes it potentially more expensive” than other key global markets. But the pay off is that Asia Pacific markets are growing fast, more than compensating for the high costs borne by its two major regional brands – Agoda and Booking.com.
“Agoda delivered good room night growth in the March quarter, and is building a leadership position in many of its Asia Pacific markets, particularly for Asia Pacific bookers. With Agoda and Booking.com whose APAC business does particularly well within international bookers, we believe the group has build a valuable franchise in this part of the world with attractive prospects as the region grows.”
He said: “The Priceline Group reported consolidated gross bookings for the first quarter of approximately $9.2 billion, up 36% year-over-year. Non-GAAP net income was $297 million or $5.76 per share, up 35% versus prior year. First quarter results surpassed FactSet consensus estimates of $5.27 per share and our guidance for the quarter.
“Worldwide hotel room night reservations were $63.2 million for the quarter, up 38% year-over-year.
“Our international business recorded 43% gross bookings growth on a local currency basis consistent with Q4’s growth rate. Hotel room night growth rates in the latter part of the quarter were better than expected as our forecast for deceleration proved conservative.”
Mr Boyd also acknowledged that margins have been squeezed at Priceline – increased search marketing costs a major factor – but said the company will not increase hotel commissions to compensate.
“We are not looking to try to drive higher margin through increasing cost to hoteliers. That is not part of our strategy at this time. I think it is true that some other players in the space charge hotels more. When that’s the case, we’d like to take advantage of that disparity so we can compete more aggressively for availability and rooms at times of high occupancy.
“If we have significant market share and I think with that comes a responsibility to be good partners with our hotels and I don’t think it would be consistent with that to think that it would be a good idea for us to do some sort of across the board price increase just because we were worried about our margins coming down a 100 basis points.”