The Priceline Group’s new president & CEO said that the company would look to continue growing supply organically, rather than through acquisition.
Glenn Fogel drew attention to the increase in shared accommodation on the group’s platforms, with Booking.com described as having the largest choice of instantly bookable, no fee product on the market.
Chairman Jeff Boyd described Fogel as “a primary driver in key acquisitions including Active Hotels, Booking.com and agoda.com”.
Fogel told analysts: “I’ve been in the company now 17 years and started out in corporate development, M&A, either on strategy title sometime later. And I worked with all the CEOs very closely on our strategy. My title has changed and the role has changed, but the company strategy has absolutely not changed.
“In terms of M&A specifically, I think we’ve done a very good job of that in the past. We look at a lot of, lot of potential deals but we’re careful about it. We understand the risk and we try to be prudent.”
The comments were made as the group issued Q1 guidance forecasting room nights to grow by 20% to 25% and total gross bookings to grow by 17% to 22%. For the full year 2016, The Priceline Group saw room night growth of 29% accelerated by 380 bps compared to 2015, which, Fogel said: “represents a year in which we believe we grew our market share in US and internationally through outstanding organic execution by our brands”.
Q1 adjusted Ebitda is expected to range between USD550m and USD580m which at the midpoint is up about 7% versus prior year. The CEO said that he expected the shift of Easter from Q1 last year to Q2 this year would negatively impact Q1 gross profit.
The company’s core Booking.com brand reported a 33% increase in properties over the last year, taking it to 1.15 million hotels, apartments, homes and other places to stay. The platform includes approximately 591,000 instantly bookable vacation rental properties, 49% year-on-year growth.
Fogel said: “We continue to expand aggressively into the alternative accommodations market, and we believe we offer more choices on an instantly bookable, no fee basis than anyone else.
“You see the property growth on our website and that’s been driven more by vacation rentals. So you can assume that the vacation rentals are contributing nicely to our room night growth. We don’t split up the growth rate separately but that’s been a nice tailwind to our growth rate for several years now. And it’s certainly something that we expect to continue going forward.”
His comments came as Dara Khosrowshahi, president & CEO, Expedia, Inc – which owns sharing platform HomeAway – told delegates at this year’s IHIF in Berlin that the sharing economy was “a threat and an opportunity. Every time you introduce new supply it’s a threat to pricing, but it will introduce new travellers. It could be the start of a new wave of travel growth and there will be an opportunity for brands. The brands are important to any marketplace – the consumer likes brands, they will expect a certain quality of [bed] sheet – Sébastien [Bazin, AccorHotels’ CEO] understands that. If you look at eBay 10 years ago it was entrepreneurs and now it is professionals. The sharing economy will be professionalised.”
While Fogel would not be drawn on geographic areas of focus in order to avoid giving competitors “a roadmap”, he confirmed that China would be “continue to be one of the largest opportunities for travel growth”.
The CEO said: “We have a partnership with Ctrip but we also have Booking.com is there and we have Agoda in there. Chinese people want to try outside and we have a great advantage because of the breadth of our properties. We’ve got a great inbound business because we have been an incredible customer base. We have people who want to go and visit China and then there’s the domestic business, which is not as big for us but we’re growing nicely.”
He added that, with the group not yet the leading OTA in the US, it was also looking to “try harder and make more share”.
HA Perspective [by Katherine Doggrell]: This year’s IHIF in Berlin marked the ongoing thawing of the relationship between the OTAs and the hotel sector, with the “frenemies” happy to talk about the need to work together, rather than grating against each other.
Khosrowshahi was even handing out tips, telling the operators that, while the airlines were debundling into basic economy fares and the internet was “tearing apart bundling into its components” the hotel industry was sadly lagging. He said: “Over a long period of time franchise pricing is going to have to get debundled to realise the value of the different parts the chain”.
Cost-cutting tips aside, the frenemies are likely to find much conflict in the OTA’s growing realisation that they need to meet the consumers’ appetite for the sharing economy. The OTAs have appreciated what, as Khosrowshahi noted, AccorHotels has also noted – that the consumer thinks not ‘which hotel shall I stay in?’ but ‘where shall I stay?’ when they travel. Listing hotel rooms alongside sharing product underlines this point and, as the OTAs help to move that shift into professionalism, hotels need to think about where they can insert the security and guarantees of the brand into that mix.
Image: Dara Khosrowshahi, president & CEO, Expedia, Inc