Priceline 2014 Annual Report Download - page 15

concerns or civil or political unrest could further disrupt our business and operations and adversely affect our results of operations.
We face risks related to the growth rate and expansion of our international business.
We derive a substantial portion of our revenues, and have significant operations, outside the United States. Our international operations
include the Netherlands-based accommodation reservation service Booking.com, the Asia-based accommodation reservation service agoda.com,
the U.K.-based rental car reservation service rentalcars.com and, to a lesser extent, KAYAK's international meta-search services and
OpenTable's international restaurant reservation business. Our international operations have 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). This growth rate, which has contributed significantly to our growth in consolidated revenue, gross profit
and earnings per share, has declined, a trend we expect to continue as the absolute level of our gross bookings grows larger. Other factors may
also slow the growth rates of our revenues derived from our international business, including, for example, worldwide economic conditions, any
strengthening of the U.S. Dollar versus the Euro and other currencies, declines in ADRs, increases in cancellations, adverse changes in travel
market conditions and the competitiveness of the market. A decline in the growth rates of our international businesses could have a negative
impact on our future gross profit and earnings per share growth rates and, as a consequence, our stock price.
Our strategy involves continued rapid international expansion in regions throughout the world. Many of these regions have different
customs, currencies, levels of consumer acceptance and use of the Internet for commerce, legislation, regulatory environments, tax laws and
levels of political stability. International markets may have strong local competitors with an established brand and travel service provider or
restaurant relationships that may make expansion in that market difficult and costly and take more time than anticipated. In addition, compliance
with legal, regulatory or tax requirements in multiple jurisdictions places demands on our time and resources, and we may nonetheless
experience unforeseen and potentially adverse legal, regulatory or tax consequences. In some markets such as China, legal and other regulatory
requirements may prohibit or limit participation by foreign businesses, such as by making foreign ownership or management of Internet or
travel-related businesses illegal or difficult, or may make direct participation in those markets uneconomic, which could make our entry into and
expansion in those markets difficult or impossible, require that we work with a local partner or result in higher operating costs. If we are
unsuccessful in rapidly expanding in new and existing markets and effectively managing that expansion, our business, results of operations and
financial condition could be adversely affected.
Certain markets in which we operate that are in earlier stages of development have lower operating margins compared to more mature
markets, which could have a negative impact on our overall margins as these markets increase in size over time. Also, we intend to continue to
invest in adding accommodations available for reservation on our websites, including hotels, bed and breakfasts, hostels and vacation rentals.
Vacation rentals generally consist of, among others, properties categorized as single-unit and multi-unit villas, apartments, "aparthotels" (which
are apartments with a front desk and cleaning service) and chalets and are generally self-catered (i.e., include a kitchen), directly bookable
properties. Many of the newer accommodations we add to our travel reservation services, especially in highly penetrated markets, may have
fewer rooms, lower ADRs or higher credit risk and may appeal to a smaller subset of consumers (e.g., hostels and bed and breakfasts), and
therefore may also negatively impact our margins. For example, because a vacation rental is typically either a single unit or a small collection of
independent units, vacation rental properties represent more limited booking opportunities than non-vacation rental properties, which generally
have more units to rent per property. Our non-hotel accommodations in general may be subject to increased seasonality due to local tourism
seasons, weather or other factors. As we increase our non-hotel accommodation business, these different market characteristics could negatively
impact our profit margins; and, to the extent these properties represent an increasing percentage of the properties added to our websites, our
gross bookings growth rate and property growth rate will likely diverge over time (since each such property has fewer booking opportunities).
As a result of the foregoing, as the percentage of non-hotel accommodations increases, the number of reservations per property will likely
decrease. In addition, non-hotel accommodations, including vacation rentals, tend to be more seasonal in nature and may close during "off-
season," which impacts our property counts quarter to quarter.
We believe that the increase in the number of accommodation providers that participate on our websites, and the corresponding access
to accommodation room nights, has been a key driver of the growth of our accommodation reservation business. The growth in our
accommodation bookings typically makes us an attractive source of consumer demand for our accommodation providers. However,
accommodation providers may wish to limit the amount of business that flows through a single distribution channel. As a result, we may
experience constraints on the number of accommodation room nights available to us, which could negatively impact our growth rate and results
of operations.
The number of our employees worldwide has grown from less than 700 in the first quarter of 2007, to approximately 12,700 as of
December 31, 2014 , which growth is mostly comprised of hires by our international operations, including as a
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