Priceline concerned over of bed situation in Europe

Priceline.com, owner of booking.com, has revealed a number of concerns it has over the state of the accommodation-only market in Europe.


However, during the second quarter, it still managed to lift international gross bookings by 80% compared with Q2 07 at $1.2bn. Wall Street had been told by the company that the growth would be 80-90%.


While booking.com’s European business makes up the bulk of this number, APAC bedbank Agoda is starting to gain traction. chief executive Jeff Boyd told analysts: “We think the amount of our business represented by the UK is a smaller percentage than our competitors.”


On its Q2 earnings call this week, CFO Robert Mylod explained to analysts why the growth had come in at the lower end of its guidance, offering details beyond the widely acknowledged global economic conditions slowdown.


The “Euro soccer cup tournament” – Euro 2008 – in Austria and Switzerland this summer led to a softness in demand, while Easter falling in Q1 this year was a “forecasting challenge” for the business.


Of greater concern is a slight drop in the average selling price of hotel room nights. During the quarter ASPs fell by 1.5% when the business was expecting them to remain flat. This drop more than cancelled out the foreign exchange  benefits, which were greater than expected.


Mylod also said: “We also saw an increase in our reservation cancellation rate during the quarter, which knocked several percentage points off of our hotel room night growth.”


There were some positive developments in Europe, particularly on the marketing front. Boyd said there was a “healthy increase in the percentage of our business that comes to booking.com on an organic basis.” This pushed priceline’s marketing spend below guidance and helped lift operating margins.


It is also continuing to add hotels, and currently has more than 52,000 properties in 85 countries.


In the Q&A, Boyd was asked about Expedia‘s purchase of Italy-based specialist venere.com. “It’s going to be relatively challenging to expand that brand beyond its strength in Southern Europe,” he said.


“Time will tell on that but that’s our view and that informed our thought process as we considered the process with Venere.”

This website uses cookies to ensure you get the best experience. Learn more