2/26/2018 Cinemark Holdings, Inc., 2015 www.cinemark.

com, CNK

The Priceline Group, Inc., 2015

www.priceline.com, PCLN

Headquartered in Norwalk, Connecticut, Priceline is the world’s leading travel services company, achieving
an impressive $50.3 billion in gross bookings in 2014. Renamed The Priceline Group, Inc. in 2014 to reflect

its multiple, independently owned brands, this successful, fast-growing company provides travel-related
services in 200 countries, through six popular brands:

n
1. Booking.com

io
2. Priceline.com

uot r
3. Agoda.com
4. KAYAK

5. Rentalcars.com

6. OpenTable
ibt f
tro
With its unique Name Your Own Price service, travelers can name their price for airline tickets, hotel rooms,

car rentals, and vacation packages. The purchaser can select a general location, service level, price, hotel,
isN

rental car company, and airline, but the customer cannot cancel after the purchase has gone through.

Priceline’s mobile products have been featured multiple times by Apple in iTunes, highlighted by Google,

and voted as some of the best tools for travelers by several leading media reports, including Travel+Leisure,
Conde Nast, and USA Today.
D

In July 2015, Priceline paid $60 million to enter into a strategic partnership with the Brazilian online travel

company, Hotel Urbano. The 2016 Olympic Games are to be held in Rio de Janeiro, Brazil. Priceline now
offers Hotel Urbano customers access to lodging outside of Latin America from the Priceline worldwide

network of over 680,000 affiliates. Also, as part of the agreement, Priceline’s Booking.com will be Hotel

Urbano’s exclusive provider for its non-Latin American retail hotels product, and Priceline will be the

preferred provider for Urbano’s global packages. Based in Rio, Urbano has commercial deals with 8,000
hotels—more than its competitors such as Decolar.com and CVC. Priceline has been steadily adding

affiliates and forming alliances in emerging international markets. The agreement with Urbano is Priceline’s

first investment in Brazil.

Copyright by Fred David Books LLC; www.strategyclub.com (Written by Raj Selladurai, Indiana University Northwest, and Roshan Selladurai, a

student at Indiana University’s Kelley School of Business)

https://pxe-sdk.pearson.com/readersdk/printpreview.html?https://content.openclass.com/eps/pearson-reader/api/item/5237b030-dfc9-11e5-95f5-cd3b… 1/17
2/26/2018 Cinemark Holdings, Inc., 2015 www.cinemark.com, CNK

History
Mr. Jay Walker founded priceline.com in 1997 with its famous Name Your Own Price service. In 1999,

Priceline had an initial public offering (IPO) and on the very first day reached a $12.9 billion market value,

the highest first-day value for a corporation at that time. In 2004, Priceline entered the retail hotel business

by acquiring a major share in TravelWeb and ActiveHotels.com, a leading online hotel-booking service in
Europe. In 2005, Priceline acquired Booking.com, the leading hotel-booking website in Europe, and the

world’s largest accommodations website today, and combined it with ActiveHotels. In 2010, Priceline

surpassed Expedia as the world’s largest online hotel service, and in 2013, it acquired KAYAK, a travel

search company.

Priceline named Mr. Darren Huston as the President and Chief Executive Officer in 2014, the same year the
company received special recognition as a Fortune Most Admired Company. Among the company’s

n
spokespersons over the years, William Shatner of Star Trek fame has remained a constant, enduring

celebrity synonymous with Priceline as “Priceline Negotiator,” while being featured in its advertising from

io
uot r
its early days in 1997 through today.

Internal Issues
ibt f
tro
Vision/Mission/Ethics Statements
Priceline’s vision statement is “to continue the company’s geographic expansion and expansion of hotel
isN

supply around the world, and to coordinate collaboration among the company’s different brands, all while

maintaining the company’s market-leading growth and operating leverage.” The company’s mission

statement is “to be the leading on-line travel business for value-conscious leisure travelers in North
D

America.”

The company has a detailed Code of Business Conduct and Ethics policy, which focuses on several issues,

including corporate governance practices related to reporting and investigation, workplace respect,

antibribery and corruption, and financial integrity and reporting. It also includes gifts and conflict of

interest; fair competition/antitrust; international trade; insider trading; privacy and data security; protection

of company assets; fair dealing; and communications with public, investors, and the media.

©February 26, 2018 5:49 pm

https://pxe-sdk.pearson.com/readersdk/printpreview.html?https://content.openclass.com/eps/pearson-reader/api/item/5237b030-dfc9-11e5-95f5-cd3b… 2/17
2/26/2018 Cinemark Holdings, Inc., 2015 www.cinemark.com, CNK

Organizational Structure
As shown in Exhibit 1 , Priceline is divisionally structured by product.

Exhibit 1 Priceline’s Organizational Structure

n
io
uot r
ibt f
tro
isN

Source: Based on company documents.

D

©February 26, 2018 5:49 pm

https://pxe-sdk.pearson.com/readersdk/printpreview.html?https://content.openclass.com/eps/pearson-reader/api/item/5237b030-dfc9-11e5-95f5-cd3b… 3/17
2/26/2018 Cinemark Holdings, Inc., 2015 www.cinemark.com, CNK

Business Segments
Priceline provides financial statements for three key business segments: (1) agency revenues, (2) merchant

revenues, and (3) advertising and other revenues. Agency revenues are those generated from travel-related

transactions conducted by third parties. These include all travel commissions, Global Distribution System

(GDS) reservation booking fees related to certain travel services, and customer processing fees. Most of the

revenue for Booking.com is agency revenue, which the company has generated from travel commissions.

Priceline’s merchant revenues are from services where the company is not the merchant of record, and

therefore charges the customer’s credit card for the travel services provided. Merchant revenues include the

following:

1. Transaction revenues that represent the selling price of Name Your Own Price® hotel room night, rental car

and airline ticket reservations, and vacation packages.

n
2. Transaction revenues that represent the amount charged to a customer, minus the amount charged by

io
travel service providers. These providers offer (a) the accommodation room reservations provided

uot r
through its merchant price-disclosed hotel service at agoda.com and priceline.com; and (b) the

reservations provided through its merchant rental car service at rentalcars.com and merchant Express

Deals® hotel service at priceline.com.

ibt f
3. Customer processing fees charged in connection with the sale of Name Your Own Price® hotel room night,

rental car and airline ticket reservations, and merchant price-disclosed hotel reservations.
tro
4. Ancillary fees, including GDS reservation booking fees related to certain of the services listed.
isN

Exhibit 2  shows that agency revenues in 2014 increased 32.5 percent compared to the prior year, mainly

because of the growth in the business of Booking.com. The revenues resulted from growth in its retail

rental car, agency airline ticket, and hotel reservation businesses. In addition, merchant revenues for 2014

decreased 1.1 percent compared to 2013, because of decreases in revenues from priceline.com’s Name Your
D

Own Price reservation services. However, increases in its agoda.com business, rentalcars.com business,

priceline.com’s Express Deals and retail merchant hotel reservation services, and priceline.com’s Express

Deals rental car reservation services made up for the decreases.

©February 26, 2018 5:49 pm

https://pxe-sdk.pearson.com/readersdk/printpreview.html?https://content.openclass.com/eps/pearson-reader/api/item/5237b030-dfc9-11e5-95f5-cd3b… 4/17
2/26/2018 Cinemark Holdings, Inc., 2015 www.cinemark.com, CNK

Exhibit 2 Priceline’s Revenue by Segment (in millions of USD); Year Ended December 31, 2014

n
io
uot r
ibt f
Source: Based on Priceline’s 2014 Annual Report.
tro
Priceline’s advertising and other revenues during 2014 were derived primarily from restaurant reservation
isN

revenues and subscription revenues for restaurant reservation management services. Advertising and other

revenues are obtained primarily from KAYAK for sending referrals to travel service providers and online

travel agents, as well as from advertising placements on KAYAK’s websites and mobile applications. These

showed a substantial increase of 139.6 percent from 2013 to 2014. Other revenues for 2014 include $100.6
D

million of OpenTable revenue, which came since July 24, 2014, when the company acquired OpenTable, a

restaurant reservation system.

Priceline’s volume of units purchased by its travel reservation services customers, referred to as gross

bookings, is an operating and statistical metric widely used in the travel business. The metric captures the

total dollar value, generally inclusive of taxes and fees, of all travel services booked by Priceline customers.

International gross bookings reflect gross bookings generated principally by its Booking.com, agoda.com,

and rentalcars.com businesses; and the domestic gross bookings reflect gross bookings generated

principally by the priceline.com business, in each case regardless of where the consumer resides, where the

consumer is physically located while making a reservation, or the location of the travel service provider or

restaurant. Gross bookings resulting from accommodation room nights, rental car days, and airline tickets

reserved through the company’s international and U.S. operations for 2014 and 2013 are given in Exhibit

3 .

©February 26, 2018 5:49 pm

https://pxe-sdk.pearson.com/readersdk/printpreview.html?https://content.openclass.com/eps/pearson-reader/api/item/5237b030-dfc9-11e5-95f5-cd3b… 5/17
2/26/2018 Cinemark Holdings, Inc., 2015 www.cinemark.com, CNK

Exhibit 3 Priceline’s Gross Bookings by Region (in millions of USD)

n
io
uot r
ibt f
Source: Based on Priceline’s 2014 Annual Report.
tro
Exhibit 3  reveals that gross bookings increased by 28.4 percent for 2014, compared to 2013, primarily due
isN

to growth of 27.9 percent in accommodation room night reservations, growth of 18.1 percent in rental car

day reservations, and 12.0 percent growth in airline ticket reservations. International gross bookings grew

by 31.0 percent in 2014, primarily due to growth in accommodation room night reservations for the

company’s Booking.com and agoda.com businesses, as well as growth in rental car day reservations for its
D

rentalcars.com business.

Priceline’s domestic gross bookings increased by 13.4 percent for 2014, primarily due to increases in

Priceline’s retail airline ticket, retail hotel, Express Deals® hotel, and retail rental car services. However,

declines in priceline.com’s Name Your Own Price® reservation services offset these increases. Travel service

providers—especially hotels—typically provide a limited amount of availability to opaque services such as

Priceline, usually during periods of healthy travel demand. As a result, the recent healthy travel

environment in the United States has had an adverse impact on its access to availability for Priceline’s

opaque reservation services.

Exhibit 4  gives Priceline’s gross bookings resulting from reservations of accommodation room nights,

rental car days, and airline tickets made through Priceline agency and merchant models for 2014. Agency

gross bookings increased 31.3 percent for 2014, due primarily to growth in Booking.com hotel reservations,

priceline.com’s retail airline ticket, rental car and hotel reservation services, and rentalcars.com reservation

service. Merchant gross bookings increased 14.0 percent in 2014. This was mainly because of increases in

agoda.com hotel reservation services, rentalcars.com rental car reservation services, and priceline.com

Express Deals hotel and retail hotel reservation services, which were partially offset by declines in

priceline.com’s Name Your Own Price services.

©February 26, 2018 5:49 pm

https://pxe-sdk.pearson.com/readersdk/printpreview.html?https://content.openclass.com/eps/pearson-reader/api/item/5237b030-dfc9-11e5-95f5-cd3b… 6/17
2/26/2018 Cinemark Holdings, Inc., 2015 www.cinemark.com, CNK

Exhibit 4 Priceline’s Gross Bookings by Agency and Merchant Models (in millions of USD)

n
io
uot r
ibt f
Source: Based on Priceline’s 2014 Annual Report.
tro
Priceline helps connect consumers wishing to make travel reservations with providers of travel services

around the world, offering consumers accommodation reservations (including hotels, bed and breakfasts,
isN

hostels, apartments, vacation rentals, and other properties) through its Booking.com, priceline.com, and

agoda.com brands. Priceline.com offers reservations for rental cars, airline tickets, vacation packages, and

cruises, all through six major brands/segments as follows:

D

1. Booking.com: Headquartered in the Netherlands, booking.com is the world’s leading brand for booking

online accommodation reservations with operations worldwide for more than 600,000 properties in over

200 countries and territories on its various websites and in 42 languages, which includes over 245,000

vacation rental properties. Booking.com has begun to offer website and other marketing services to

accommodation providers as part of its BookingSuite initiative.

2. Priceline.com: This online travel reservation service provider primarily operates in the United States,

providing hotel, rental car, and airline ticket reservations services, as well as vacation packages and

cruises. Priceline.com is a leader in the “opaque” travel reservation business (not disclosing service

provider identity until after reservation completed) through its pioneering Name Your Own Price and

Express Deals hotel, rental car, and airline reservation services.

3. Agoda.com: Headquartered in Singapore, agoda.com is a leading online accommodation reservation

service catering primarily to consumers in the Asia-Pacific region, with operations in Bangkok, Thailand,

and throughout the region. Agoda.com operates primarily under a merchant model, by filing rates and

information about the property in agoda.com’s proprietary extranet.

4. Rentalcars.com: Headquartered in Manchester, England, rentalcars.com is a leading worldwide online

rental car reservation service offering merchants online retail and opaque rental car reservation service. It

allows consumers to make rental car reservations in more than 28,000 locations throughout the world,

with excellent customer support provided in 40 languages.

©February 26, 2018 5:49 pm

https://pxe-sdk.pearson.com/readersdk/printpreview.html?https://content.openclass.com/eps/pearson-reader/api/item/5237b030-dfc9-11e5-95f5-cd3b… 7/17
2/26/2018 Cinemark Holdings, Inc., 2015 www.cinemark.com, CNK

5. KAYAK: Headquartered in Stamford, Connecticut, KAYAK provides an online price comparison service

(often referred to as “meta-search”) that allows consumers to easily search and compare travel itineraries

and prices, including airline tickets, accommodation reservations, and rental car reservation information

from hundreds of travel websites all at once. KAYAK derives revenues from advertising placements on its

websites and mobile apps, and from sending referrals to travel service providers. KAYAK does business

primarily in the United States, but has plans to expand globally.

6. OpenTable: Headquartered in San Francisco, California, OpenTable provides online restaurant

reservation services to consumers and to restaurants. OpenTable does business primarily in the United

States, although plans are to grow globally.

Strategies

n
Priceline wants to aggressively grow globally while continuing to offer excellent customer service through

its call centers and websites. The company focuses on developing mutually beneficial relationships with

io
travel service providers and restaurants around the world. Travel service providers and restaurants can

uot r
benefit from participating in its services. For example, an independent hotel may not have the means or

expertise to market itself to international travelers, including the use of other languages, building and
ibt f
operating effective desktop and mobile websites and online reservation services, or engaging in

sophisticated online marketing techniques. The company maintains multiple, independently managed

brands to appeal to a variety of target audiences while maintaining an entrepreneurial, competitive spirit
tro
among its brands.
isN

Marketing
Priceline has established widely used and recognized e-commerce brands through aggressive marketing
D

and promotion campaigns. As a result, the company’s online and offline advertising expense has increased

significantly in recent years, a trend most likely to continue. During 2014, Priceline’s total online advertising

expense was approximately $2.4 billion, and the company spent a substantial portion of it internationally

through Internet search engines (primarily Google), meta-search and travel research services, and affiliate

marketing. The company also invested $231 million in offline advertising, and it plans to continue a strategy

of aggressively promoting brand awareness, primarily through online means, as well as expanding offline

campaigns into additional markets. For example, building on its first offline advertising campaign, which it

launched in the United States in 2013, Booking.com has begun offline advertising campaigns in other

markets, including Australia, Canada, the United Kingdom, and Germany.

©February 26, 2018 5:49 pm

https://pxe-sdk.pearson.com/readersdk/printpreview.html?https://content.openclass.com/eps/pearson-reader/api/item/5237b030-dfc9-11e5-95f5-cd3b… 8/17
2/26/2018 Cinemark Holdings, Inc., 2015 www.cinemark.com, CNK

Finance
Priceline’s recent income statement and balance sheet are provided in Exhibits 5  and 6 , respectively.

Priceline’s revenues increased 24 percent in 2014, but the firm’s goodwill almost doubled (increased by 88

percent).

Exhibit 5 Priceline’s Income Statement (in millions of USD)

Report Date December 31, 2014 December 31, 2013

Revenues $8,442 $6,793

Operating expenses 5,365 4,413

n
EBIT 3,077 2,380

io
uot r
Interest 88 83

EBT ibt f 2,989 2,297

Tax 568 403

tro
Other items — (2)
isN

Net income 2,421 1,892

©February 26, 2018 5:49 pm

D

Source: Based on company documents and Yahoo Finance.

©February 26, 2018 5:49 pm

https://pxe-sdk.pearson.com/readersdk/printpreview.html?https://content.openclass.com/eps/pearson-reader/api/item/5237b030-dfc9-11e5-95f5-cd3b… 9/17
2/26/2018 Cinemark Holdings, Inc., 2015 www.cinemark.com, CNK

Exhibit 6 Priceline’s Balance Sheet (in millions of USD)

n
io
uot r
ibt f
tro
isN
D

©February 26, 2018 5:49 pm

https://pxe-sdk.pearson.com/readersdk/printpreview.html?https://content.openclass.com/eps/pearson-reader/api/item/5237b030-dfc9-11e5-95f5-cd3… 10/17
2/26/2018 Cinemark Holdings, Inc., 2015 www.cinemark.com, CNK

Report Date December 31, 2014 December 31, 2013

Assets

Cash and equivalents $3,149 $1,300

Accounts receivable 797 610

Other current assets 1,321 5,570

Total current assets 5,267 7,480

Long-term investments 3,756 —

n
Property, plant, & equipment 199 135

io
uot r
Goodwill 3,326 1,768

Intangible assets 2,334 1,020

ibt f
Other assets 58 41
tro
Total assets 14,940 10,444
isN

Liabilities
D

Short-term debt 37 152

Accounts payable 882 793

Other current liabilities 461 437

Total current liabilities 1,380 1,382

Long-term debt 3,850 1,751

Other liabilities 1,144 402

Total liabilities 6,374 3,535

Common stock 0 0

©February 26, 2018 5:49 pm

©February 26, 2018 5:49 pm

https://pxe-sdk.pearson.com/readersdk/printpreview.html?https://content.openclass.com/eps/pearson-reader/api/item/5237b030-dfc9-11e5-95f5-cd3… 11/17
2/26/2018 Cinemark Holdings, Inc., 2015 www.cinemark.com, CNK

Report Date December 31, 2014 December 31, 2013

Retained earnings 6,640 4,219

Treasury stock (2,737) (1,987)

Paid in capital and other 4,663 4,677

Total equity 8,566 6,909

Total liabilities & equity 14,940 10,444

n
©February 26, 2018 5:49 pm

io
uot r
Source: Based on company documents and Yahoo Finance.

ibt f
tro
isN
D

©February 26, 2018 5:49 pm

https://pxe-sdk.pearson.com/readersdk/printpreview.html?https://content.openclass.com/eps/pearson-reader/api/item/5237b030-dfc9-11e5-95f5-cd3… 12/17
2/26/2018 Cinemark Holdings, Inc., 2015 www.cinemark.com, CNK

Competitors
Priceline competes with hundreds of online and traditional travel agencies and reservation services,
including even Google, Apple, Alibaba, Amazon, and Facebook, all of which have access to significantly

greater and more diversified resources than Priceline does. Social media and search engine sites continue to
leverage other aspects of Priceline’s business. Google has entered various aspects of the online travel

market through its ITA Software, Inc., a major flight information software company, its hotel meta-search
service known as “Hotel Finder,” and its license of hotel-booking software known as Room 77.

Priceline faces strong competition from online travel services including Expedia, Hotwire, Hotels.com,

Travelocity, Orbitz, and others. Traditional travel service companies such as American Express, Thomas
Cook, Tui Travel, and others also pose major threats to Priceline. Meta-search companies—for example,

TripAdvisor, Google, and Trivago—compete with Priceline. Even Apple has acquired a patent for “iTravel”

n
that would enable consumers to make quick and convenient travel arrangements on their phones. With
“Passbook” being in its repertoire of products, Apple seems ready and eager to offer some new services to

io
uot r
its many users worldwide to penetrate the travel services industry in the near future.

Priceline’s closest and most intense rival firm is Expedia.

ibt f
Exhibit 7  provides a comparative analysis of Priceline with Expedia and Orbitz. Notice that Priceline is the

best company on all measures.

tro
Exhibit 7 Priceline’s 2014 Profitability versus Rival Firms
isN

Priceline Expedia Orbitz

$ Revenues 8.5 B 5.8 B 940 M

D

# Employees 13 K 19 K NA

$ Revenues per Employee 654,000 305,000 NA

$ Net Income 2.4 B 400 M 18 M

$ EPS 46 3.0 0.16

$ Market Capitalization 64 B 12 B 1.3 B

©February 26, 2018 5:49 pm

Source: A variety of sources.

©February 26, 2018 5:49 pm

https://pxe-sdk.pearson.com/readersdk/printpreview.html?https://content.openclass.com/eps/pearson-reader/api/item/5237b030-dfc9-11e5-95f5-cd3… 13/17
2/26/2018 Cinemark Holdings, Inc., 2015 www.cinemark.com, CNK

Expedia (EXPE)
Headquartered in Bellevue, Washington, Expedia owns Travelocity and plans to acquire Orbitz. Expedia’s

brands include Expedia.com, Hotels.com, Hotwire.com, Classic Vacations, Travelocity, Expedia Local
Expert, Egencia, Expedia CruiseShipCenters, eLong, and Venere.com, as well as Trivago, carrentals.com,
Wotif.com, lastminute.com.au, travel.com.au, Asia Web Direct, LateStays.com, GoDo.com.au, and Arnold

Travel Technology. Both Priceline and Expedia have been aggressively acquiring smaller competitors for
years, as the online travel booking industry has rapidly consolidated. Expedia has about 3,000 employees in

Bellevue, but is running out of space in its building, so is considering moving out of the city to a new
location, possibly in Seattle. Expedia currently owns over an 8 percent market share in the travel industry,

making it the largest player with rival Priceline owning a 5 percent market share. Expedia is heavily
expanding its presence outside the United States and now generates approximately 50 percent of its

revenues from outside the country.

n
io
uot r
ibt f
tro
isN
D

©February 26, 2018 5:49 pm

https://pxe-sdk.pearson.com/readersdk/printpreview.html?https://content.openclass.com/eps/pearson-reader/api/item/5237b030-dfc9-11e5-95f5-cd3… 14/17
2/26/2018 Cinemark Holdings, Inc., 2015 www.cinemark.com, CNK

External Issues
Rapid consumer adoption and use of mobile devices globally creates new challenges for Priceline because

such trends enable device companies such as Apple to offer travel services. The iPhone and Android-
enabled smartphones, coupled with improved web browsing functionality and development of thousands of

useful “apps” available on these devices, is driving substantial online traffic and commerce to mobile
platforms. Priceline has experienced a significant shift of business to mobile platforms; its advertising

partners are also seeing a rapid shift of traffic to mobile platforms.

Priceline’s business is dependent on leisure travel. People booking hotels, bed and breakfasts, hostels,

apartments, vacation rentals, rental car and airline ticket reservations, and so on, are dependent on
discretionary spending levels. The U.S. economy and most global economies are improving, and so long as

that trend continues, Priceline benefits. The company also benefits from lower gasoline prices.

n
Unforeseen events such as oil prices, terrorist attacks, unusual weather patterns, earthquakes, hurricanes,

io
tsunamis, floods, and volcanic eruptions can affect travel. Further, travel-related health concerns—including

uot r
pandemics and epidemics such as Ebola, Influenza H1N1, avian bird flu, and SARS, as well as political
instability, regional hostilities, imposition of taxes or surcharges by regulatory authorities or travel related
ibt f
accidents—can disrupt travel or otherwise result in declines in travel demand.

The value of the U.S. dollar affects Priceline’s business because millions of their customers reside outside
tro
the United States. In March 2015, the U.S. dollar hit an 11-year high to the Euro.
isN
D

©February 26, 2018 5:49 pm

https://pxe-sdk.pearson.com/readersdk/printpreview.html?https://content.openclass.com/eps/pearson-reader/api/item/5237b030-dfc9-11e5-95f5-cd3… 15/17
2/26/2018 Cinemark Holdings, Inc., 2015 www.cinemark.com, CNK

Market Segmentation
Historically, customers were forced to book travel accommodations through a travel agent or directly

through an airline, often at high commissions for the customer. However, customers today are increasingly
using websites, such as Priceline and Expedia, that control 5 and 8 percent, respectively, of the market, to

book their travel arrangements, generally at a great cost savings for the customer. There are over 10,000
travel agencies in the United States, and even though Priceline and Expedia make up 13 percent of the total

revenues generated, the market is still quite fragmented, potentially leaving large market shares to be
gained by top firms. Overall, the industry growth rate remains sluggish, with growth of less than 2 percent

expected through 2020.

Exhibit 8  reveals the percent breakdown between the most common markets for the industry. It is
interesting to note that among U.S. travel industry revenues, approximately 50 percent of revenues are

derived from international-based travel. As international travel becomes more affordable, many customers

n
are venturing overseas. In addition, a significant portion of international travel is booked through

io
traditional travel agencies, as many tourists who are visiting overseas for the first time appreciate and value

uot r
the one-on-one service a traditional travel agent provides.

Exhibit 8 Most Common Revenue Sources for the U.S. Travel Industry
ibt f
tro
isN
D

Source: Based on a variety of sources.

Aside from customer type, the industry is fairly well split between service type among customers. Tour

packages account for 30 percent of total revenues, and, like international travel packages, they are routinely
booked through traditional travel agencies. U.S. cruises and airline bookings account for 50 percent of the

total, with approximately equal weight between them. Surprisingly, rental car bookings account for little
more than 2 percent of all travel revenues, yet on any travel site such as Priceline and Expedia, offering a

car is almost always forced on the customer to accept or opt out of before continuing with their desired
transaction of a hotel, flight, or whatever they may be purchasing. International-based market segmentation

has a profile similar to that of the United States, with tours being the most popular, followed by cruises and
airline bookings.

©February 26, 2018 5:49 pm

https://pxe-sdk.pearson.com/readersdk/printpreview.html?https://content.openclass.com/eps/pearson-reader/api/item/5237b030-dfc9-11e5-95f5-cd3… 16/17
2/26/2018 Cinemark Holdings, Inc., 2015 www.cinemark.com, CNK

Future
Priceline’s year-over-year growth rates have generally decelerated in recent years. For example, in 2014,

Priceline’s accommodation room night reservation growth was 28 percent, a deceleration from 37, 40, and
53 percent in the years prior, respectively. Given the size of its hotel reservation business, the company

expects that its year-over-year growth rates will continue to decelerate.

Priceline’s mobile offerings have received strong reviews and achieved solid download trends, and are
driving an increasing share of its business. Mobile bookings present an opportunity for growth and are

necessary to maintain and grow its business as consumers increasingly turn to mobile devices instead of a
personal computer and to mobile applications in addition to a web browser.

Several factors affect online advertising efficiency, including costs per click, cancellation rates, foreign

n
exchange rates, the ability to convert paid traffic to booking customers, and the extent to which consumers
come directly to websites or mobile apps for bookings. KAYAK and OpenTable spend significantly less on

io
advertising that the other brands, so Priceline expects its online advertising efficiency to increase

uot r
dramatically.

ibt f
Typically, hotels make available only a limited number of hotel rooms for opaque services such as

Priceline’s, especially during periods of high occupancy. As a result, recent high hotel occupancy levels in
the United States have had an adverse impact on its access to hotel rooms for its opaque hotel reservation
tro
services, which has negatively affected the company’s opaque hotel reservation gross profits.
isN

Priceline’s shareholders are accustomed to high growth rates. The company needs a clear three-year
strategic plan. Prepare this document for CEO Darren Huston.
D

For additional assurance of learning questions which prove you understand and are able to apply

the strategic concepts in this case, go to the assignment section of your MyLab.

©February 26, 2018 5:49 pm

https://pxe-sdk.pearson.com/readersdk/printpreview.html?https://content.openclass.com/eps/pearson-reader/api/item/5237b030-dfc9-11e5-95f5-cd3… 17/17