From Priceline, Few Surprises Left

Published November 2013 Analyst: Douglas Quinby

 

From Priceline, Few Surprises Left

It was not the likeliest of turnarounds.

The year was 2002. Once an Internet princeling, the online brand synonymous with "name your own price" had fallen out of favor. Moves into mortgages, groceries and gas proved misguided. Its share price had plummeted. In online travel, the company was effectively the fourth horse in what was quickly becoming a three-horse race among the leading online travel agencies. It was considered likely to get acquired or – worse – fizzle out.

When Jeff Boyd assumed the role of CEO in November of that year, the odds were against a resurgent Priceline. Iconic commercials starring the famed former captain of Star Trek notwithstanding, few would have expected over the next decade that the company would, on pretty much every metric that matters, become the global leader in online travel. Looking back, that was certainly one surprise.

While some captured headlines with expensive acquisitions, Priceline quietly plotted: shift focus from air to hotels, and from the slowing U.S. market to bigger opportunities abroad. Acquire solid businesses with great potential, leave them (largely) alone to thrive, and heavily incentivize management to succeed. The acquisitions of Active Hotels, Booking.com (then Bookings B.V.) and Agoda remain models not just for travel, but for all industry.

As Priceline ascended from a distant fourth to become the global leader by market capitalization, profits and – in just this past quarter – gross bookings, the question has certainly been posed: how long will Boyd remain at the helm? Last week, this question was addressed. Boyd will remain chairman but on January 1, 2014, hand over the president and CEO roles to Darren Huston, currently CEO of Booking.com.

Some have called it a shock, and such an announcement always grabs headlines, but to those who follow the firm closely, it should not surprise. Such a transition was no doubt meticulously planned, long in advance. Brought in to run Booking.com in September 2011, Huston seemed the likely successor. In January 2013, his portfolio was expanded to include responsibility for the group's other international brands. And Priceline's overseas performance has not exactly disappointed since his arrival: total international gross bookings have nearly doubled, from $13 billion in the nine months through 3Q11, to $25.5 billion in the same period this year.

Financial filings typically advise that past performance may not be predictive of future results. Huston certainly has his work cut out for him. Priceline's remarkable growth will be tough to sustain as the company goes from large to larger, and global competition is only accelerating. The acquisition of Kayak (another surprise) was bold, but a repeat of Booking.com's successful global rollout will take time, and it is no sure thing. However, considering Priceline's 10-year trajectory and Huston's track record, the transition should hold few surprises.



On Thursday, November 21, 2013, Phocuswright's Lorraine Sileo will host outgoing CEO and chairman Jeff Boyd and incoming CEO Darren Huston on Center Stage at The Phocuswright Conference for a rare joint interview. Join us in Hollywood, Florida, for unique insight from the current and incoming chief executives of The Priceline Group, as they share their thoughts on the road ahead for Priceline and the global online travel industry.

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