Priceline 2014 Annual Report Download - page 17

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advertising in the United States since 2013. Google offers "Hotel Finder", a meta-search service that Google has at times placed at or near the
top of hotel-related search results. Through our KAYAK meta-search service, we compete directly with other meta-search services. KAYAK
depends on access to information related to travel service pricing, schedules, availability and other related information from OTAs and travel
service providers. To the extent OTAs or travel service providers do not provide such information to KAYAK, KAYAK's business and results of
operations could be harmed.
Consumers may favor travel services offered by meta-search websites or search companies over OTAs, which could reduce traffic to
our travel reservation websites, increase consumer awareness of our competitors' brands and websites and increase our advertising and other
customer acquisition costs. To the extent any such consumer behavior leads to growth in our KAYAK meta-search business, such growth may
not result in sufficient increases in profits from our KAYAK meta-search business to offset any related decrease in profits experienced by our
OTA brands. Further, meta-search services may evolve into more traditional OTAs by offering consumers the ability to make travel reservations
directly through their websites. For example, TripAdvisor facilitates hotel reservations on its transaction websites Tingo and Jetsetter and intends
to allow consumers to make a reservation while staying on TripAdvisor through its "Instant Booking" offering. We currently do not participate
in "Instant Booking" and therefore risk losing share of reservations sourced through TripAdvisor. Other meta-search providers may also offer
direct booking services with travel service providers, which may lead to more consumers booking directly with a travel service provider rather
than an OTA. To the extent consumers book travel services through a meta-search website or directly with a travel service provider after visiting
a meta-search website or meta-search utility on a traditional search engine without using an OTA like us, or if meta-search services limit our
participation within their search results, we may need to increase our advertising or other customer acquisition costs to maintain or grow our
reservation bookings and our business, gross bookings and results of operations could be adversely affected.
As a result of our acquisition of OpenTable, we now compete or may in the future compete with other restaurant reservation providers,
such as LaFourchette, a European restaurant reservation business owned by TripAdvisor, and Yelp's SeatMe service.
Travel service providers, including multi-national hotel chains, rental car companies and airlines with which we conduct business,
compete with us in online channels to drive consumers to their own websites in lieu of third-party distributors such as us. Travel service
providers may charge lower prices and, in some instances, offer advantages such as loyalty points or special discounts to members of closed user
groups (such as loyalty program participants or customers with registered accounts), any of which could make their offerings more attractive to
consumers than our services. Discounting may increase as competition authorities seek to allow increased pricing flexibility among providers of
travel service reservations. We may need to offer similar advantages to maintain or grow our reservation bookings, which could adversely
impact our profitability.
There has been a proliferation of new channels through which accommodation providers can offer reservations. For example,
companies such as HomeAway and Airbnb offer services focused on providing vacation rental property owners, particularly individuals, an
online place to list their accommodations where travelers can search and book such properties. Companies such as HotelTonight, Tingo and
Hipmunk have developed new and differentiated offerings that endeavor to provide savings on accommodation reservations to consumers and
that compete directly with us. Further, meta-search services may lower the cost for new companies to enter the market by providing a
distribution channel without the cost of promoting the new entrant's brand to drive consumers directly to its website. If any of these services are
successful in attracting consumers who would otherwise use our services, our business and results of operations would be harmed.
Competition in U.S. online travel remains intense and online travel companies are creating new promotions and consumer value
features in an effort to gain competitive advantages. In particular, the competition to provide "opaque" accommodation reservation services to
consumers, an area in which our priceline.com business has been a leader, has become more intense. For example, Expedia makes opaque
accommodation room reservations available through its Hotwire brand and on its principal website under the name "Expedia Unpublished Rates"
and has, we believe, supported this initiative with steeper discounts through lower margins. We believe these offerings, in particular "Expedia
Unpublished Rates," have adversely impacted the market share and year-over-year growth rate for priceline.com's Name Your Own Price
®
opaque hotel reservation service, which has been experiencing a decline in room night reservations since 2011. These and other competitors
could also launch opaque rental car services, which could negatively impact priceline.com's opaque Name Your Own Price
®
rental car
reservation service. If Expedia or others are successful in growing their opaque reservation services, we may have less consumer demand for our
opaque reservation services over time, and we would face more competition for access to the limited supply of discounted reservation rates. As a
result of this increased competition, our share of the discount accommodation reservation market in the United States could further decrease,
which could harm our business and results of operations. In addition, high hotel occupancy levels in the United States have had an adverse
impact on our access to hotel rooms for our opaque hotel reservation services. Further, growth in discounted closed user group retail prices for
hotel rooms lessens the
13