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Priceline’s 3Q17 Revenue Defies Tough Conditions

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Revenue growth

For the third quarter of 2017, Priceline’s (PCLN) revenue rose 20.2% YoY or year-over-year to $4.4 billion, driven by strong gross bookings growth of 19% YoY. This growth was despite the travel industry facing a slew of adverse conditions in the quarter. Three major hurricanes hit the United States’ important travel destinations like Florida and the Caribbean. Hurricanes also affected travel in key business hubs like Houston, Texas.

Competition impacts

Online travel sites including Priceline, Expedia (EXPE), and TripAdvisor (TRIP) are facing increased competition from hotels and unconventional sites like Airbnb.

Hotels especially are getting increasingly aggressive to gain a slice of the online travel business pie. Hotel majors like Hilton (HLT) and Marriott (MAR) are offering increasing discounts to customers. The problem for online travel players comes from the fact that the prices for direct booking on these hotel sites are lower than what customers get on these online travel sites.

Growth to continue

One point that most analysts agree on is that the travel industry is set for long-term growth, given increasing income levels and increasing interest in travel. Growth is especially expected to come from emerging markets like China. Priceline is aware of the fact and is increasing its investment in the country. See How the Meituan–Dianping Investment Could Help Priceline for details.

However, growth wouldn’t happen without a fight. For now, Priceline’s huge number of bookable properties gives its customers diverse options to choose from, which is what gave it an edge in the past. As Priceline founder Jay Walker recently said in a CNBC interview, online travel sites will have to “reinvent themselves for customers.”

Investors can gain exposure to Priceline stock by investing in the PowerShares Dynamic Large Cap Growth Portfolio (PWB), which invests ~3.2% of its portfolio in the stock.

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