In the past year, Priceline Inc has regained its status as the star of the travel industry within the financial investment community. Today's earnings call underlined the point.
Priceline total revenue for the second quarter was $1.68 billion (vs. Factset consensus estimates of $1.66 billion). Average daily rate (ADR), adjusted to local currency, was up roughly 1% for the quarter across its range of brands. Gross travel bookings year-over-year spiked between 27% to 34%.
Its absolute margins are higher than its nearest competitor's, Expedia Inc.'s.
The Priceline brand grew 12% in the US, with TV marketing essential to growth, said CEO Jeffery H. Boyd. Express Deals has become a larger share of its overall mix.
International results were up in up 44% on a local currency basis, creating an increase of 39% in gross profit on a local basis.
Booking.com now has 330,000 hotels and lodging available, up by nearly half in a year's time. Agoda continues to grow faster than the group's brands in North America.
In Europe, the nightly room rate stayed stable despite weakness in the local economies. Boyd claimed he's been seeing a challenging environment in Europe but that the market there has been more stable relatively to where it was six months ago and a year ago and that the company has better adapted to the situation.
The "name your own price" business continues to decline globally.
Strong results at RentalCars.com were frequently mentioned by Boyd.
Kayak got a shout-out: Its operating margins, while down, came in within the range of its forecast, and its advertising efficiency has been "variable". But Boyd said he was confident in the company's development.
Here are Boyd's comments to some investor questions. (For a full transcript, see SeekingAlpha, an investing site, tomorrow.)
Does Google Hotel Finder and TripAdvisor's hotel metasearch matter?
We have risk when interfaces change. The fundamental asset we have is a direct channel that converts consumers well, whether we receive the customers via pop ups or via metasearch.
What about Kayak?
Traditionally Priceline group brands were under-represented in Kayak. We weren't pulling our weight, in a way that was relative to our market share. Now that we're one company we want a reasonable representation for our brands in Kayak's results.
The degree our brands are better represented on Kayak, it can absolutely can help the brands grow. Referrals in the US markets definitely matter, and hopefully the company will be a big business globally, too, which will also help Priceline Group brands.
How's the Booking.com TV branding campaign going?
We think the TV campaign is contributing to the bookings growth the brand is seeing in the US. We're happy with the results so far.
It's still an experiment. As early as the end of this year, the company will have to decide if it wants to continue the campaign.
What about Rentalcars.com?
RentalCars.com tries to copy Booking.com's approach: one product, one website, focused on conversion with a significant investment in online marketing to build the customer basis. The unit economics for the rental car business may not be as attractive as hotels but are certainly attractive in international markets to support that expenditure.
Pricing is firmer this year in the US and internationally than in previous years.
RentalCars.com is an option post-transaction for Booking.com customers, and some Priceline.com customers. That cross-selling will be added to Kayak. Yet the cross-sell from hotel to rental car is not as material from an airline ticket to rental car. But we'll pursue the opportunity as we can.
What's the effect of mobile?
The group is tracking nicely in terms of mobile market share relative to its competitors.
It's still too early to say with certainty how mobile advertising and mobile customer flows will change acquisition costs, up or down. A couple of things are still in play that we haven't figured out.
Most major brands are investing heavily in mobile to hold share and make sure they're not missing something. The efficiency of those spends may not be steady state.
We don't know how sticky the customer is. You could hypothesize that if you get customers to download an app they would have high lifetime value in terms of overall marketing costs. But it's too early to map that out.
A lot of this activity doesn't happen on the mobile device. A lot of people are trying to figure out how multi-platform booking can work in a way we attribute correctly marketing spend and return on investment [ROI].
We're still learning the best way to acquire traffic to mobile and to improve the experience for our customers as they use those smaller screens.
How far would you buy advertising to accelerate growth?
I think we will try to be consistent and sustainable. Those are the two things we would try to focus on. We're opportunistic, but we want to have a discipline approach that we apply cross channels and we want our plans to be sustainable.
There has been some variability in the TV spend of our competition. That doesn't work well. Whatever benefits you get from reinforcing a brand's reputation in consumers' minds is sustained and growing. You can't start and stop.
What about China?
We continue to add hotels in China via our extranet for Agoda and Booking.com. We've had good success with inbound and exbound travelers, and our Ctrip partnership has gone well.
The latest earnings report is a full turnaround from a year ago, when headlines warned "Is the Priceline growth machine decelerating?" Since Boyd took over in 2002, he's focused Priceline on hotel bookings and savvy acquisitions.