Priceline 2010 Annual Report Download - page 87

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Item 1A. Risk Factors
The following risk factors and other information included in this Annual Report should be carefully
considered. The risks and uncertainties described below are not the only ones we face. Additional risks and
uncertainties not presently known to us may also impair our business operations. If any of the following risks
occur, our business, financial condition, operating results and cash flows could be materially adversely affected.
Booking.com, Agoda and TravelJigsaw face risks related to their growth rate and expansion, and subject
us to risks that can adversely affect our operating results.
We derive a substantial portion of our revenues from, and have significant operations, outside of the United
States. Our international operations include the Netherlands-based hotel reservation service Booking.com, the
Thailand-based hotel reservation service Agoda and the U.K.-based rental car reservation service TravelJigsaw.
Each year since 2007, our international operations achieved significant year-over-year growth in their gross
bookings (an operating and statistical metric referring to the total dollar value, generally inclusive of all taxes and
fees, of all travel services purchased by our customers) and hotel room night reservations. This growth rate has
contributed significantly to our growth in revenue, gross profit and earnings per share. Over time, Booking.com,
Agoda and TravelJigsaw will experience a decline in their growth rate as the absolute level of their gross bookings
and unit sales grow larger. Other factors may also slow the growth rates of our international operations, including,
for example, worldwide economic conditions, any strengthening of the U.S. Dollar versus the Euro, declines in hotel
average daily rates (“ADRs”), increases in cancellations, travel market conditions and the competitiveness of the
market. A decline in the growth rates of our international operations could have a negative impact on our future
revenue and earnings per share growth rates and, as a consequence, our stock price.
The strategy of Booking.com, Agoda and TravelJigsaw involves rapid expansion into regions around the
world, including Europe, Asia-Pacific, North America, South America and elsewhere, many of which have different
customs, different levels of customer acceptance of the Internet and different legislation, regulatory environments,
tax laws and levels of political stability. In addition, compliance with foreign legal, regulatory or tax requirements
will place demands on our time and resources, and we may nonetheless experience unforeseen and potentially
adverse legal, regulatory or tax consequences. If Booking.com, Agoda and TravelJigsaw are unsuccessful in rapidly
expanding into other countries, our business, results of operations and financial condition would be adversely
affected.
We are dependent on the travel industry.
Our financial prospects are significantly dependent upon our sale of travel services. Travel, including hotel
room reservations, rental car reservations and airline tickets, is dependent on discretionary spending levels. As a
result, sales of travel services tend to decline during general economic downturns and recessions. Accordingly, the
recent worldwide recession led to a weakening in the fundamental demand for our services and an increase in the
number of customers who cancelled existing travel reservations with us. In addition, unforeseen events beyond our
control, such as terrorist attacks, unusual weather patterns, including natural disasters such as hurricanes, tsunamis
or earthquakes and other weather phenomena such as the volcanic ash cloud that grounded European air travel for
several days in April 2010, travel related health concerns including pandemics and epidemics such as H1N1
influenza (swine flu), avian bird flu and SARS, political instability, regional hostilities, increases in fuel prices,
imposition of taxes or surcharges by regulatory authorities and travel related accidents, also may adversely affect the
travel industry and our business and results of operations. Further, work stoppages or labor unrest at any of the
major airlines could materially adversely affect the airline industry and, as a consequence, have a material adverse
effect on our business, results of operations and financial condition.
For example, in early 2010, civil unrest in Thailand, a key market for our Agoda business and the Asian
business of Booking.com, negatively impacted booking volumes in this market at the time. In addition, clashes
involving Thai security forces, anti-government demonstrators and groups supporting the government resulted in
violence in various locations in Bangkok, causing the temporary relocation of Agoda’s Thailand-based operations.
Thailand has experienced disruptive civil unrest in prior years as well and continued or future civil or political unrest
could further disrupt Agoda’s Thailand-based business and operations.