A BACKGROUND PEEK ON PRICELINE GROUP`S OPERATIONS
Utility is perhaps one of the most important terminologies in economics, as it cover the basic intention behind every transaction--to get a maximum level of satisfaction. Next in line would be convenience, as a company that makes every financial activity effortless is bound to lure customers.
The Priceline Group has always been a prominent name in the online travel industry. This firm mainly operates several sites that may seem identical at first but offers a wide range of options for backpackers. For example, if you are looking for an indoor vacation, you can go to Booking.com. Just recently, the company has also acquired a restaurant booking website, OpenTable.com.
Basically, the differences among Priceline's websites mostly lies on their headquarters location. It is also not uncommon for an online travel services firm to have subsidiaries, as similar entities have their own as well.
Since it is primarily based in the US, many would assume that the biggest chunk of its revenue is generated from the country, however this is not the case. In fact, 72% of their operating income comes from other countries and despite the figure declining over the years, it remains remarkably high. Why? This is because America's hospitality sector is controlled by chains to a greater extent than other states.
For instance, if you are currently in the US and want a hotel to stay in, you are likely going to book through the chain's own site. If you have registered for several nights, your loyalty will be rewarded with discounts and complimentary rooms, pushing aside whatever incentives you can acquire at Priceline.
The business’ revenue is categorized into three parts:
Agency: This is not to be taken literally, and should rather be interpreted as the site acting as an ‘agent’ for the party that is offering their services. Merchant: It mainly comes from transactions recorded under the firm, which has a share of the proceeds while the rest goes to the hotelier. Advertising: The squares you see bearing the subsidiaries names are paid for, sometimes even by competitors themselves.
The entity’s stock has been trading at around $1,000 per share and has never split. In addition, their balance sheet often ranges above satisfactory level, with figures hiking annually. Their cost of revenue has also displayed an impressively consistent decline, while profit margins managed to hit 20% in 2016.
At first glance, rival Expedia.com seems to be the market leader as it is more publicized, but Priceline has proven to be the more successful one. Through its unique offers such as allowing the buyer to set a reasonable price and upgrading to a more conventional model, it placed itself in a stable position to expand through acquisitions.
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