Priceline 2014 Annual Report Download - page 14

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 or that we currently
believe are immaterial may also impair our business, results of operations or financial condition. If any of the following risks occur, our
business, financial condition, operating results and cash flows could be materially adversely affected.
Declines or disruptions in the travel industry could adversely affect our business and financial performance.
Our financial results and prospects are significantly dependent upon the sale of travel services, particularly leisure travel. Travel,
including accommodation (including hotels, bed and breakfasts, hostels, apartments, vacation rentals and other properties), rental car and airline
ticket reservations, is dependent on discretionary spending levels. As a result, sales of travel services tend to decline during general economic
downturns and recessions when consumers engage in less discretionary spending, are concerned about unemployment or inflation, have reduced
access to credit or experience other concerns or effects that reduce their ability or willingness to travel. For example, the recent worldwide
recession led to a weakening in the fundamental demand for our travel reservation services and an increase in the number of consumers who
canceled existing travel reservations with us. Also during the recession, the accommodation industry experienced a significant decrease in
occupancy rates and average daily rates ("ADRs"). While lower occupancy rates have historically resulted in accommodation providers
increasing their distribution of accommodation reservations through third-party intermediaries such as us, our remuneration for accommodation
reservation transactions changes proportionately with price, and therefore, lower ADRs generally have a negative effect on our accommodation
reservation business and a negative effect on our gross profit. Further, during periods of higher occupancy rates, accommodation providers may
decrease their distribution of accommodation reservations through third-party intermediaries like us, in particular through our discount services
such as priceline.com's Name Your Own Price
®
and Express Deals
®
.
Many governments around the world, including the U.S. government and certain European governments, are operating at large financial
deficits, resulting in high levels of sovereign debt in such countries. Greece, Ireland, Portugal and certain other European Union countries with
high levels of sovereign debt at times have had difficulty refinancing their debt. Failure to reach political consensus regarding workable solutions
to these issues has resulted in a high level of uncertainty regarding the future economic outlook. This uncertainty, as well as concern over
governmental austerity measures including higher taxes and reduced government spending, could impair consumer spending and adversely affect
travel demand. Greece's newly elected government, which campaigned against austerity measures, may not be able to reach an acceptable
solution to the country's debt crisis with the European Union. This may increase the likelihood that Greece, and in turn other countries, could exit
the European Union, which could lead to added economic uncertainty and further devaluation or eventual abandonment of the Euro common
currency. At times, we have experienced volatility in transaction growth rates and weaker trends in hotel ADRs across many regions of the
world, particularly in those European countries that appear to be most affected by economic uncertainties. We believe that these business trends
are likely impacted by weak economic conditions and sovereign debt concerns. Disruptions in the economies of such countries could cause,
contribute to or be indicative of deteriorating macro-economic conditions.
The uncertainty of macro-economic factors and their impact on consumer behavior, which may differ across regions, makes it more
difficult to forecast industry and consumer trends and the timing and degree of their impact on our markets and business, which in turn could
adversely affect our ability to effectively manage our business and adversely affect our results of operations.
In addition, other unforeseen events beyond our control, such as oil prices, terrorist attacks, unusual weather patterns, natural disasters
such as earthquakes, hurricanes, tsunamis, floods and volcanic eruptions, travel related health concerns including pandemics and epidemics such
as Ebola, Influenza H1N1, avian bird flu and SARS, political instability, regional hostilities, imposition of taxes or surcharges by regulatory
authorities or travel related accidents, can disrupt travel or otherwise result in declines in travel demand. Because these events or concerns are
largely unpredictable, they can dramatically and suddenly affect travel behavior by consumers, and therefore demand for our services, which can
adversely affect our business and results of operations. For example, in late 2012 Hurricane Sandy disrupted travel in the northeastern United
States. In early 2011, Japan was struck by a major earthquake, tsunami and nuclear emergency. In October 2011, severe flooding in Thailand, a
key market for our agoda.com business and the Asian business of Booking.com, negatively impacted booking volumes and cancellation rates in
that market. In addition, Thailand recently experienced disruptive civil unrest, which negatively impacted booking volumes and cancellation
rates in this market. In early 2010, Thailand also experienced civil unrest, which caused the temporary relocation of agoda.com's Thailand-based
operations. Future natural disasters, health
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