Is Priceline Still Best of Breed?


Planning a vacation? Just want to peruse available vacation packages so you can dream about a vacation in an effort to get a temporary escape from your high-stress environment? After all, winter is coming, and it's getting cold outside. If so, you're not alone, as online travel booking has become big business to multiple companies. This trend has major implications for Foolish investors looking to take advantage of this secular trend.

Whatever the case may be, what Internet paradigm do you visit when in need of escapism? Is it ,,, or If so, then you're using a Priceline platform. Yes, Priceline owns all those brands, as well as Priceline has established itself as the clear leader in the online travel market, which is consistently growing. However, Expedia and Orbitz Worldwide are making big moves in an effort to steal market share.

Gross is pretty
Priceline recently released its third-quarter results, and they were impressive (all numbers year over year):

  • Gross Travel Bookings: Up 37.50%

  • Gross Profit: Up 42.4%

  • Diluted EPS: $15.72 vs. $11.66 in the year-ago quarter

Priceline attributed the impressive results to a strong summer and operating performance, with and playing big growth roles. Looking ahead, Priceline plans on driving growth via geographic expansion, supply and content, and product and marketing.On the company's conference call, Priceline management mentioned the following:

  • Mobile Apps are Receiving Good Reviews

  • It's Extremely Pleased with's U.S. Market Penetration

  • Business Performing Well in Latin America and Asia

One of the key points investors should be aware of is that within its mobile apps Priceline has noticed that same-day bookings are higher on this platform, due to impulse buying. Therefore, there is an opportunity for increased sales as long as Priceline continues to deliver value. At the same time, it will aim to grow on the Internet, as consumer traffic continues to shift in that direction from more traditional means.

Additional targeting of impulse buyers
Moving on to Expedia, part of its strategy it to increase its social media exposure with daily deals, which is expected to lead to more impulse purchases. One of Expedia's goals is to increase mobile bookings to 20% of transactions by the end of its 2014 fiscal year.

Expedia's recent acquisition of Trivago also helps it compete with Priceline in the metasearch travel space, allowing travelers to compare prices for airlines, hotels, vacation packages, and more. Trivago is very popular in Europe, and Expedia plans on expanding the brand's popularity throughout the world. In the meantime, Expedia's scale of operations leads to competitive rates with suppliers, which allows it to pass on great value to customers.

Finally ... a simple loyalty program
Consumers love simplicity. It's one of the most powerful marketing forces. And Orbitz is looking to capitalize on this behavior. Orbitz recently launched a travel loyalty program where customers can earn and redeem Orbucks instantly. One Orbuck equals one U.S. dollar. You can earn Orbucks when booking air, hotel, and vacation packages, and they can be used instantly on hotels (5% rewards). And you can combine this promotion with others.

Orbucks is also offering a "Zap That Bag Fee" promotion through November 30, 2013. If you take a picture of your bag fee receipt and send it to Orbitz, you will receive $25 in Orbucks, another incentive for consumers to choose Orbitz over its peers. Orbitz seems to be making some wise moves, but it still might not be enough to make it a better long-term investment than its peers.

Peer comparisons
The good news is that all three companies have demonstrated top-line growth over the past year:

PCLN Revenue (TTM) Chart
PCLN Revenue (TTM) Chart

Priceline revenue data by YCharts.

Priceline is the clear leader. Now let's take a look at some key metric comparisons


Forward P/E

Profit Margin

Dividend Yield

Debt-to-Equity Ratio
















Source: Company financial statements.

All three companies have been good at managing debt, so that's not a factor. What stands out right away is that Orbitz sports a negative profit margin while presenting the highest valuation. Despite recent initiatives that have potential to improve the business, this immediately negates Orbitz as the best potential long-term investment. With a profit margin north of 26%, Priceline is clearly the best at turning revenue into profit. And it has been the best performer on the top line.

Expedia offers the most appealing valuation, a positive profit margin, and a 1% yield, combined with increased exposure in the metasearch travel space, and good top-line growth. This makes Expedia somewhat enticing, but for now, it's still not quite as impressive as Priceline.

The bottom line
All three companies have the potential to improve their current standing, but you always want to go with best of breed. With superior growth, the highest profit margin, a decent valuation, quality debt management, and broad brand diversification, Priceline is the cream of the crop going forward. As always, Foolish investors should do their own research before making any investment decisions.

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Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends The Motley Fool owns shares of Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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