June 2018, London
Priceline vs Booking - what’s in a name?
As Booking.com racks up 5 million listings on its site to take over a million bookings a day, is there any wonder that Priceline decided to rebrand?
Words do hurt – despite the old adage. Priceline Group Inc. obviously thinks so, and has dumped that name to re-christen itself as Booking Holdings Inc. – taking the identity of the site, which is the main driver for its business revenues, and the one that is best known internationally. Major efforts to promote the change are going into place.
While there are all sorts of marketing rationale for such a radical move, the main factor is that the shares have been trailing the electronic retailing sector on the US stock market NASDAQ for some time. Investors are not happy and want to see action. They are also anxious about the likely impact of the fast rising new players, such as Airbnb and even Google, which has been debuting its own online travel services.
The group says that the change to Booking Holdings is intended to emphasise the growth of Booking.com and the idea that all of the company’s business units involve some sort of online booking component. “If you don’t innovate and keep up with changes, you will not survive,” Fogel told a press conference. He gave Booking Holdings’ targeting of China as one example, (the company has a partnership with Ctrip and with food reviews and delivery giant Meituan-Dianping).
If you don’t innovate and keep up with changes, you will not survive
Glenn Fogel, CEO, Booking Holdings
The industry believes the moves designed by CEO Glenn Fogel are part of a change of business model. Industry players see him migrating Bookings Holdings towards being a full-service online travel agency, nearer to the models of Expedia and Ctrip. This makes sense to the marketing people.
“Priceline has so many different brands. If you consolidate around one brand, then you become more likely to be the brand people go to,” was the comment to Bloomberg from Aaron Shapiro of US digital marketers Huge. Over the past two decades Priceline had expanded from a one-brand US company to a group with six brands, operating globally from more than 220 countries and in 40 languages.
For companies that have lots of signage, trucks and other logo-showcasing equipment, a rebrand might be a pricy endeavour. But for Booking Holdings, this won’t be much of an issue. “Priceline is e-commerce so the actual cost of the rebrand will be significantly lower,” Adam Caplan at Kantar Consulting told Bloomberg.
Within Priceline Group Inc (as was) were Kayak, a travel site for airline tickets and other services, the Priceline travel brand, which offers services similar to Kayak, and Booking.com, which focuses on online accommodation reservations. In its announcement, Booking Holdings said that a “significant majority” of its gross bookings and operating profit come from Booking.com, which has more than a million bookings each day. While the group will not break down the financial numbers, it says that out of the group total of 22,000 employees, 17,000 work in Booking.com.
International business, said its press release, in the last full year reported “represented approximately 88% of our consolidated gross profit.” It added: “A significant majority of our gross profit is earned in connection with facilitating accommodation reservations.”
Booking Holdings generates revenue from three primary streams – agency revenue, merchant revenue, and advertising & other. The company has witnessed increased gross bookings over the past couple of years, primarily due to bookings on Booking.com. That added over 460,000 properties in 2017 to take its overall count to 1.6 million hotel properties and there was 53% jump in alternative accommodations offered, with 1.2 million the new figure. This year there has been another quantum leap with Booking.com now saying that five million reported listings are available on the site, covering everything from homes, apartments to other unusual places to stay.
Despite a slight decline in average daily rate, significant growth across night rooms booked led to increased revenue. With a take rate of around 14.5%, similar to the figure for the past few years, US broker Zacks estimates that agency revenue should grow by 19% annually going forward.
In addition to sections on tours and activities in 40 cities, flights+hotel, car rentals, air taxis to augment the core hotels offering, Booking.com is testing out a restaurant tab (powered in-house by OpenTable) and has its own chatbot to help service clients. Yet, Fogel has indicated that, while he is looking at creating a full-service travel agency, there is no rush.
What he is describing is a step-by-step process - gradually going in the direction of a full-service online agency, spending more money than in the past in marketing the brands. Last year ad-spend rose by over 32% to $392 million. The aim, according to Fogel, is to build a tighter direct relationship with customers so that they go straight to the Booking Holdings’ sites.
“This continued spend, as we build campaigns in additional geographies and increased media support in markets where we are already advertising, will put pressure on margins,” said Fogel in his presentation to analysts. “However, we believe this spend represents an important long-term investment in the franchise and is the right thing to do at this time.”
Todd Henrich, SVP Corporate Development, Booking Holdings will expanding on the firms growth strategy in a fireside chat at the upcoming EyeforTravel Europe (June 4-6)