{"id":1600,"date":"2015-12-06T02:58:37","date_gmt":"2015-12-06T07:58:37","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/priceline-outperforming-the-online-travel-agency-business-globally\/"},"modified":"2015-12-06T15:30:28","modified_gmt":"2015-12-06T20:30:28","slug":"priceline-outperforming-the-online-travel-agency-business-globally","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/priceline-outperforming-the-online-travel-agency-business-globally\/","title":{"rendered":"Priceline: Outperforming the Online Travel Agency Business Globally"},"content":{"rendered":"

\"priceline1\"<\/a><\/p>\n

The Priceline Group is an Online Travel Agency (OTA) which offers discounted prices for travel related services (i.e. airlines, hotel chains, car rental companies) to both leisure and business consumers. Growing mainly through a successful acquisition strategy that has included Bookings.com, Kayak.com and Agoda.com among others, the Priceline Group\u2019s results have become particularly impressive between 2010 and 2014. During this period total revenues grew at a CAGR of 28.6%, going from 3.08 to 8.4 billion USD, while its net income grew even faster, at a CAGR of 46.3%, going from 528 million US$ to 2.billion USD. Moreover by December 2014 Priceline showcased an ROE of 30.86%, the highest of the Online Travel Agent (OTA) segment, above Expedia (20.55%) and TripAdvisor (22.39%). These results evidence that Priceline\u2019s business model and operational model have been very well aligned, making it a company worth analyzing to understand how is it that both elements work together.<\/p>\n

https:\/\/youtu.be\/o5-XidvLF_Y?list=PLg5_wcdn25Vw5Ew3FPQzSRP8TDoSDMnUX<\/a><\/p>\n

Priceline\u2019s Business Model <\/u><\/strong><\/p>\n

When Priceline was founded, it became famous for being the first OTA to offer the \u201cname your price\u201d scheme. Under this model, customers would state their willingness to pay for a travel related service and in return Priceline would show them several options without disclosing the name of the providers offering them. Whenever the customer chose one, Priceline would earn the spread between what the customer was willing to pay and what the service actually cost. This is a revenue source was a competitive advantage because it allowed the firm to differentiate in front of consumers and to charge an attractive fee to providers by acting as merchant when choosing the provider for consumers instead of having consumers choose themselves.<\/p>\n