Monday, May 11, 2009

PCLN Still Outperforms its Rivals; Continues to Grow Despite Global Economic Woes

We all are painfully aware that online travel has been hurt by global recession woes, the swine flu outbreak and significant drop in overall travel bookings., has been bucking the trend, and increasing market share from its competitors because of its opaque model, and appeal to hotel suppliers. PCLN's business process and technology allow hotel revenue management to determine how little they are willing to earn to fill their inventory. This morning's earnings call revealed projected second-quarter earnings of $1.65 to $1.75 a share on an 8% to 13% increase in revenue. PCLN posted earnings of $25 million, or 53 cents a share, up from $13.8 million, or 28 cents a share, a year earlier.

As I predicted months ago, just as 9/11 catapulted the major OTAs' strength at that time; so too would this economic downturn be a boon to PCLN. Unlike 9/11, however, hotel revenue managers are calling the shots, and determining which of the four major OTAs should receive the lion's share of their distressed inventory. Also, unlike 2001, supplier websites are robust and appealing, offering loyalty points and a vastly improved UI. Suppliers can choose between allocating inventory to the OTA channel, GDS channel, Metasearch/SEM channel, other distribution options, or selling their own inventory on their sites - with unique benefits. According to a Q1 survey I conducted among 10 major hotel distributors, PCLN was projected as the clear winner in the OTA channel. I've found that asking the right questions of suppliers that lead up to aggregated supply intent can often help predict channel "winners and losers." Even though the major OTAs recently dropped air and hotel booking fees, suppliers want to play ball first and foremost with PCLN. As long as this continues, PCLN will continue to outperform. But be mindful of Travelocity's recently launched opaque model for hotels - this could slow PCLN's rapid growth going forward. I think it's time to poll hoteliers once again to see which way supply is headed.

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