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Stock pick: An investor's must-know guide to The Priceline Group

Part 6
Stock pick: An investor's must-know guide to The Priceline Group (Part 6 of 7)

Why Priceline expects mobile bookings to catalyze growth

Mobile bookings

Priceline said it has seen a significant business shift to mobile platforms and believes that mobile bookings present an opportunity for growth and are necessary to maintain and grow its business, as consumers increasingly turn to mobile applications and devices instead of a personal computer. It said in February that mobile bookings for Booking.com grew 160% in 2013. The total transaction value of mobile accommodation bookings more than doubled from over $3 billion in 2012 to over $8 billion in 2013. The release said, “We’re seeing a shift in consumer behavior from simply booking last minute accommodations on mobile devices to planning, researching, booking and utilizing post booking functionality on our mobile platforms.” Management said on its fourth quarter earnings call that “mobile execution and innovation continued to be key areas of focus in investments for all our businesses.”

Priceline mobileEnlarge Graph

In the U.S., eMarketer estimates that digital travel sales will grow at a CAGR (compound annual growth rate) of 5.9% between 2012 and 2017. It said that by 2017, mobile travel sales are expected to total nearly $50 billion and account for almost 30% of all digital travel sales. eMarketer said last year that mobile traffic is becoming increasingly significant for the travel industry, and hotels in particular. It estimated that 40% of digital travel researchers will plan trips via tablets and smartphones in 2013, and that more than one-quarter of digital travel bookers will buy on their mobile devices. eMarketer also recently estimated that China, India, and Italy will see double-digit growth rates in terms of digital travel sales by 2017. The article added that China’s robust 20.0% growth rate will be a significant outlier, with Italy and India increasing at 11.5% and 11.1%, respectively.

According to a PhoCusWright Global Edition report U.S. Online Travel Overview Thirteenth Edition, mobile travel bookings will more than triple to reach $39.5 million by 2015. The report said last year U.S. travel market growth slowed slightly in 2013 due to a sluggish economic recovery. However, mobile adoption continued unabated at a faster pace, with mobile travel bookings sustaining triple-digit growth in 2013. The report further noted that mobile travel bookings are projected to comprise over one quarter of the U.S. online travel market in 2015—up from just 2% in 2011. PhoCusWright said mobile will lead to competition between suppliers and OTAs over the next two years, as U.S. travel market growth remains in the 4%to-5% range. Despite the maturity of the online channel, online growth is expected to outpace the overall travel market through 2015. In Europe, mobile is expected to represent one-fifth of bookings by 2015, PhoCusWright estimates.

Google predicted that U.S. hotel searches would be up 24% in 2013 overall, but that includes a 68% uptick in searches from mobile devices against a 4% decrease in desktop queries. Searches from tablets, in particular, were expected to increase by 180%. JiWire, a leading location-powered mobile advertising and data platform, released the findings of its quarterly Mobile Audience Insights Report in May 2013 that said nearly 50% of active mobile consumers use their smartphone and tablet for travel research and that 44% of consumers are comfortable spending over $500 when booking travel from a mobile device.

Priceline recently partnered with General Motors (GM) to build a custom Priceline.com app for Chevolet owners that gives last-minute bookers an ability to locate, compare, and book their preferred hotel in seconds with the touch of a button. The release said that with access to last-minute deals and the flexibility to conduct location-based searches in real time, mobile users can tap the best pricing and inventory up until moments before they check in. The company also launched a new version of its Android app and said that with the attractive pricing of mid- to lower-end Android devices, the platform could see significant gains in coming years. The company said that in 2013, Priceline.com’s Android app experienced the highest year-over-year growth of all mobile platforms, more than doubling in 2013.

Expedia (EXPE) said in 2013, it saw over 90 million global downloads of its mobile applications across its brands. Its listed China-based subsidiary, eLong (LONG), shifted the focus of its distribution strategy to better address China’s rapidly expanding mobile travel market. The mobile hotel strategy involved continual upgrades to eLong’s mobile user experience in an effort to encourage traffic to that channel. Expedia expects to book 20% of its transactions through mobile devices before the end of 2014.

Expedia redesigned its homepage recently with a focus on mobile devices. It cited PhoCusWright’s U.S. Mobile Travel Report from February 2013 on its blog and said that the travel industry would see a $25.8 billion mobile booking market in 2014: 8% of the total travel market and 18% of the online travel market. The company also unveiled three new features in its mobile app designed to aid customers through the travel planning process: Flight Recommendations, Scratchpad, and Itinerary Sharing.

Peer TripAdvisor (TRIP) said it saw strong mobile user uptake for 2013, as aggregate downloads of its TripAdvisor, City Guides, SeatGuru, Jetsetter, and GateGuru mobile apps reached 82 million and average monthly unique visitors via smartphone and tablet devices grew over 170% year-over-year from 32 million to 87 million. The company said it continues to invest heavily in the rapidly growing mobile channel by providing 80 mobile city guides and integrating Facebook login into its mobile websites as well as tablet and smartphone applications that are currently available in 21 languages. It has also developed content-related partnerships with mobile carriers and device manufacturers.

Orbitz Worldwide (OWW) said mobile apps and solutions drive approximately 30% of Orbitz’s hotel transactions. The China-based Ctrip (CTRP) also said in its fourth quarter 2013 earnings release that cumulative downloads for Ctrip mobile app reached 100 million, with around 50% of hotel and 30% of air transactions booked through mobile channels during peak days.

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