Despite its focus on converting hotel sales, Priceline has been quietly adding B&Bs, vacation apartments and guest houses to its portfolio in markets such as the UK and Germany, and CEO Jeffery Boyd said yesterday he doesn’t think cannibalization of hotels sales is a significant concern.
Speaking during Priceline’s first quarter of 2012 earnings call May 9, Boyd said:
We have substantial hotel inventory for customers who want to stay in hotels. The other accommodations typically are attractive to people who are searching for other accommodations, and our marketing efforts would tend to be more focused on people who are looking for other accommodations. There may be some spillover, but our belief is that adding that inventory to the total mix has been additive.
To get a hint at what Priceline is up to, just do a search on Priceline’s Booking.com for a London stay June 7 to 14. In addition to 657 available hotels shown, you may also view listings for 128 apartments, 84 “guest accommodations,” 39 B&Bs and 26 hostels.
There is a similar story in Berlin, beyond the 249 hotels shown as available. In Berlin on Booking.com, you will also see listings for 68 apartments, 27 hotels, 26 guest accommodations and one resort.
Booking.com primarily deals with small chains and independent hotels, and many undoubtedly would bring more benefits to Priceline than might guest houses.
Still, Priceline sees advantages in broadening its accommodation mix.
After all, there are only a finite number of hotels in the world.
“The efficiency may not be the same as adding a large hotel who’s got a professional revenue manager, who’s keeping the prices up to date,” Boyd said. “It may take a little bit more time and attention to make sure that the people who are running a smaller business can keep their inventory up to date and get their pricing right. But we believe it’s additive to the business.”
While Priceline has been adding B&Bs and hostels in dribs and drabs, just think how the initiative could change if Priceline established partnerships with large vacation-rental providers and professionally managed properties such as TripAdvisor has recently done.
If Boyd doesn’t believe B&Bs and guest houses would cannibalize hotel sales, then why wouldn’t Priceline go all-in with some major partnerships?
One possible reason is that ¬†Priceline’s corporate culture tends to be a bit conservative in some respects.
Would it want to risk the headaches of dealing with owners of far-flung, individual properties and the prospect of taking damaging hits to its brand of the kind that Airbnb withstood last year?
Boyd wasn’t necessarily referring to Airbnb, but he addressed related issues, saying:
Again, I think staying at a bed-and-breakfast is different than staying at a hotel. So if a customer is confused, you could have an issue there. But our sites have great disclosure on them and our business processes are designed to make sure that the process of making a reservation is smooth. And if we have an accommodation where we’re getting a lot of complaints from customers, we would deal with it.
HomeAway already cites online travel agencies getting into the vacation-rental business as a potential risk factor. And, if Priceline accelerates on the road it has already modestly embarked on, then perhaps the threat could become more real than imagined.
This does not mean that Priceline would blow HomeAway out of the water, but the online travel agency could in the long-term make things interesting for HomeAway and other vacation rental sites given Priceline’s global reach and marketing clout.
On the financial front in the first quarter, Priceline saw its gross bookings climb 43.9% to $6.7 billion.
Priceline’s net income rose 73.6% to nearly $182 million on revenue of $1.03 billion, a jump of 28.2%.
Hotel room nights sold grew 47% to 45.9 million.