The Priceline Group boosted its gross bookings during the first quarter to $12.3 billion, a 34% year-over-year rise.
The US-based travel comparison conglomerate boosted its spending on marketing offline and online in its effort to fend off rivals including Google, Expedia, and Skyscanner.
The company said its earnings before interest, tax, depreciation and amortisation for the quarter was $513 million, an increase of 39% over a year ago.
Two yellow flags:
Worry #1: Priceline has seen a deceleration in its rate of room-night growth for seven quarters now.
It had a jump in room-night growth in the first quarter of 2014 to 83 million room nights. That was a 32% rise, year-over-year, which seems good at first.
But in the first quarter of 2012, it had a much higher growth rate of 47%, year-over-year.
So the rate is decelerating. It's partly because of market saturation in the brands' domestic regions. International gross bookings group-wide increased 37% in the first quarter of 2014.
Worry #2: Its marketing return-on-investment metric has also been pressured downward for seven quarters.
RE: TripAdvisor
On the earnings call today, chief executive Darren Huston made comments on user-generated review site TripAdvisor's recently launched assisted book feature, Instant Booking.
The tool allows travelers to easily complete their hotel reservations while remaining on the TripAdvisor mobile app and mobile website.
Priceline decided not to participate "at this time", he said, qualifying his comments by saying that their overall relationship with TripAdvisor is "symbiotic" and has high "strategic value."
As explanation, Huston cited potential confusion in the consumer's mind over whom he or she may be booking with when using TripAdvisor's assisted booking feature.
When booking on TripAdvisor you, as the customer, are told you are told which agency you're booking through, but Huston's comments suggest he is concerned that the feature may dilute brand-building.
Huston referred to it as a "tough decision" but questioned the feature's "strategic value" to Priceline.
In his next breath, he noted that spending on Google pay-per-click advertisements has an enormous "strategic value" for Priceline, and thus is very deserving of investment as a source of demand.
In a question later in the call, Brian Fitzgerald, analyst from Jefferies & Co, said he estimated that user reviews on Booking.com are up 44% in the past year. He asked the executives about their user-review game plan.
Huston said he plans to continue to drive user review growth on his company's own sites, which are from verified guests and that are no older than 14 months old on a rolling basis. He says engagement is increasing.
"Other sites have reviews but their criteria is much more open-ended."
RE: Kayak
Metasearch site Kayakacquisition on May 21, 2013, has been a net gain. But the executives didn't offer comparable metrics of net margin to the group's other brands or break out what they meant by saying it is "nicely profitable."
Increased advertising placements by Priceline brands on Kayak since the site's acquisition helped boost growth, they said.
Kayak has helped the group improve its number of air transaction numbers in particular, executives said.
The inclusion of Kayak in results added about 7% of growth for the quarterly results -- a share boost that it said was disproportionately high for the first quarter relative to its expectations for Kayak's contribution later in the year.
Huston said that metasearch is an important channel for the company -- growing as a source of demand. But meta is not "dramatically" increasing as a proportion of the sources of demand for the group.
Huston says it sees that meta is becoming a more important channel for all the OTA groups.
Kayak earns more of its revenue from click-based advertising rather than from transactions booked. It spends less on advertising than Priceline's other businesses, improving the group's overall marketing efficiency.
RE: Offline marketing
Priceline Inc. will continue to push down on the pedal for Booking.com's expansion in offline marketing internationally, said Huston.
Across brands, Priceline expects to spend at least $220 million in offline advertising this year.
Residents in the US, UK, and Canada may see an uptick in TV ad spend this spring. This past winter had especially bad weather in those markets, and the company didn't spend as much in offline advertising as it had budgeted.
But it plans to ramp up offline marketing in the second quarter.
RE: Booking.com
Booking.com says it has 40,000 properties in the US, including nearly all of the chain properties. But it still hasn't gotten into long-tail accommodations, such as independents in cities like Miami, San Diego, and Portland, Maine.
Switching to the topic of vacation rentals, the company says Booking.com now has more than 140,000 vacation rentals (including self-catered products, like holiday homes).
To grow inventory, it started by reaching out to property managers. Now its building out extranets and other products to work with individual vacation homeowners.
Direct marketing by hotels
Are hotels becoming more sophisticated in engaging directly online? Darren says:
"A few years ago we'd have to teach people how to use a PC. That obviously isn't the case any more. I was just in Bucharest this week, and they have fibre optics lines there. Who would have thought?"
Hotels are becoming more confused about all of the low cost options for generating demand, he adds.
"Even to advertise on TripAdvisor, you now have to pay just to play...
A lot of hotels rely on us for demand at scale from every corner of the world, even as much as technology.
Many hotels have channel managers so they can plug in to Booking.com, Agoda, and Kayak, but most hotels have a hard time finding the ROI by doing it on their own.
The real secret to success in this new world is to run a great product that's very differentiated and let us drive traffic.
RE: Social media
In April, Huston implied in comments that social media has limited ROI. He commented today:
We do spend money on Facebook and Twitter and many other platforms, and they work closely with us to make this work. But it's a small fraction of our spend.
We're direct-response advertising, not brand advertising like, say, Coca-Cola. Social media doesn't work the same for companies like us. There's a large audience on social media we haven't figured out how to translate into conversions.
Facebook is making a lot of progress, and we'd love to find business and high ROI in their pool. If anything, I'd characterize this as gentle encouragement for them to break the back of this issue and solve direct-response advertising.
Mobile web engagement
Regarding the adoption of mobile devices by consumers, Priceline's Huston is sanguine about mobile engagement for his brands.
Huston says he thinks of mobile customers as best reached via the mobile Web, thinking that mobile downloads are more for the most loyal customers.
High download numbers are like high Facebook likes -- nice to have, but not driving enough transactions....
But I don't mean to say we've done everything we can in mobile booking. We're looking to innovate.We're building out our own tooling.
Huston says multi-screen attribution remains a challenge, but his teams are learning more about how many screens users are touching on the route to ultimately completing their journey -- and how to better interact with those users.
He says he likes how Booking.com's hotel booking confirmation now includes walking directions for getting to the hotel. He sees that as a model of how all of the brands can increase value at all stages in the travel process, helping with air and hotel check-in.
"We want to be more than just being a great place to do transactions."
At another point in the call, Huston mentioned:
"In the area of mobile, Kayak has been tremendous in helping us share best practices across the group. We have sessions around the group around mobile, for the companies to help energize each other."