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What Priceline’s Key Metrics Suggest

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Priceline’s gross bookings grow

Gross bookings is the metric used to measure the total value of all travel services purchased by customers. On a constant dollar basis, gross bookings have shown strong growth. However, the strong US dollar has been a bit of a spoilsport. 

From 2012 to 2014, gross bookings grew at an average of 30%. In 2015, accounting for the strong US dollar, growth was just 10%—25% on a constant currency basis.

Priceline’s growth momentum seems to have resumed in 2016. Its gross bookings rose 21% year-over-year (or YoY) to $16.7 billion in 1Q16, 26% on a constant currency basis. Its gross bookings rose 19% YoY to $17.2 billion in 2Q16, 21% on a constant currency basis. Its gross bookings rose 24.9% YoY to $18.5 billion in 3Q16, 26% on a constant currency basis.

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Accommodation business a major contributor

Most of Priceline’s growth has come from its Accommodation business. The segment’s number of hotel room nights sold rose ~28% in 2014 and 25% in 2015. It continued its strong growth at 31% YoY in 1Q16, 24.4% YoY in 2Q16, and 29.4% YoY in 3Q16. 

As more and more people shift to online booking, PCLN’s Accommodation business is set to strengthen.

Rental car days

PCLN’s Rental Car business continues to grow, too, albeit at a slower pace. In 1Q16, the segment’s rental car days rose 11% YoY, and in 2Q16, its rental car days rose at a slower rate of 7.9% YoY. In 3Q16, its rental car days rose 12.5%. Rental car days account for ~12% of Priceline’s total bookings.

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Air ticket sales falling, but contribution is small

Sales of online air tickets have been on a falling trend in the last few quarters. Sales fell 2.5% YoY in 3Q16. However, the fall won’t have an impact on PCLN’s business, as air ticket sales form just 1% of PCLN’s total bookings.

Outlook

Priceline’s management expects its 4Q16 gross bookings to rise 16%–21% YoY. Again, most of this rise is expected to come from its Accommodation business. The number of room nights sold is expected to rise 20%–25%.

Investors can gain exposure to Priceline by investing in the iShares U.S. Consumer Services ETF (IYC), which invests 2.6% of its holdings in Priceline. It also holds 0.4% in Expedia (EXPE) and 0.18% in TripAdvisor (TRIP). It has no holdings in Ctrip (CTRP).

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