Priceline 2015 Annual Report Download - page 43

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our Consolidated Financial Statements, including the notes to those statements, included
elsewhere in this Annual Report on Form 10-K, and the Section entitled "Special Note Regarding Forward-Looking Statements" in this Annual Report on
Form 10-K. As discussed in more detail in the Section entitled "Special Note Regarding Forward-Looking Statements," this discussion contains forward-
looking statements which involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking
statements. Factors that might cause those differences include those discussed in "Risk Factors" and elsewhere in this Annual Report on Form 10-K.
We evaluate our results of operations on both an as reported and constant currency basis. We calculate constant currency by converting our current-
period financial results for transactions recorded in currencies other than U.S. Dollars using the prior-period monthly average exchange rates rather than the
current-period monthly average exchange rates.
Overview
We help people experience the world by providing consumers, travel service providers and restaurants with leading travel and restaurant reservation and
related services. Through our online travel companies ("OTCs"), we connect consumers wishing to make travel reservations with providers of travel services
around the world. We are the leader in the worldwide online accommodation reservation market based on room nights booked. We offer consumers a broad array
of accommodation reservations (including hotels, bed and breakfasts, hostels, apartments, vacation rentals and other properties) through our Booking.com,
priceline.com and agoda.com brands. Our priceline.com brand also offers consumers reservations for rental cars, airline tickets, vacation packages and cruises. We
offer rental car reservations worldwide through rentalcars.com. We also allow consumers to easily compare airline ticket, hotel reservation and rental car
reservation information from hundreds of travel websites at once through KAYAK. We provide restaurants with reservation management services and consumers
with the ability to make restaurant reservations at participating restaurants through OpenTable, a leading provider of online restaurant reservations. We refer to our
company and all of our subsidiaries and brands, including Booking.com, priceline.com, KAYAK, agoda.com, rentalcars.com, OpenTable and various smaller
brands, collectively as "The Priceline Group," the "Company," "we," "our" or "us."
We launched our business in the United States in 1998 under the priceline.com brand and have since expanded our operations to include five other
primary, independently operated brands: Booking.com, KAYAK, agoda.com, rentalcars.com and OpenTable. Our principal goal is to help people experience the
world by serving both consumers and our travel service provider and restaurant partners with worldwide leadership in online reservation and related services. Our
business is driven primarily by international results, which consist of the results of Booking.com, agoda.com and rentalcars.com and the results of the
internationally-based websites of KAYAK and OpenTable (in each case regardless of where the consumer resides, where the consumer is physically located while
making a reservation or the location of the travel service provider or restaurant). During the year ended December 31, 2015 , our international business (the
substantial majority of which is generated by Booking.com) represented approximately 88% of our gross bookings (an operating and statistical metric referring to
the total dollar value, generally inclusive of all taxes and fees, of all travel services booked by our customers, net of cancellations), approximately 86% of our
consolidated gross profit and approximately 94% of our consolidated operating income. A significant majority of our gross profit is earned in connection with
facilitating accommodation reservations. See Note 17 to the Consolidated Financial Statements for more geographic information.
We derive substantially all of our gross profit from the following sources:
• Commissions earned from facilitating reservations of accommodations, rental cars, cruises and other travel services;
• Transaction gross profit and customer processing fees from our accommodation, rental car, airline ticket and vacation package reservation services;
• Beginning on May 21, 2013, advertising revenues primarily earned by KAYAK from sending referrals to OTCs and travel service providers, as well
as from advertising placements on KAYAK's websites and mobile apps;
• Beginning on July 24, 2014, revenues recognized by OpenTable, which consist of reservation revenues (reservation fees paid by restaurants for
diners seated through OpenTable's online reservation service), subscription fees for restaurant reservation management services and other revenues;
and
• Damage excess waiver fees, travel insurance fees and global distribution system ("GDS") reservation booking fees, in each case related to certain of
our travel services.
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