NEW YORK -- Priceline.com took a majority stake -- 85.7% -- in
Travelweb, a Web distributor of merchant hotel rooms, and entered
into an agreement to buy the remaining shares from the
InterContinental Hotel Group.
So Priceline, which owned some 14.3% of Travelweb, will have a
merchant-hotel distribution program to go along with its
name-your-own-price product.
To increase its stake, Priceline bought the shares of Travelweb
owners Marriott, Starwood, Hilton, Hyatt and Pegasus Solutions for
$20.8 million, plus 954,547 shares of common stock if Travelweb
meets certain earnings goals after 12 months.
Priceline CEO Jeffrey Boyd said he expects Travelweb will lose
money in 2004, but that in 2005 and beyond, Travelweb will be
"accretive to our earnings per share."
Boyd said by acquiring Travelweb, Priceline can expand the
selection of travel products it sells.
Priceline already has a successful opaque hotel business, in
which consumers submit a price they're willing to pay and Priceline
matches the consumer with a hotel willing to pay that price.
Selling Travelweb rooms enables Priceline to expand its reach by
offering a hotel service to customers who want to know the brand
before they buy, Boyd said. Since Priceline will own 100% of
Travelweb, the company can keep all the margin from transactions,
he added.
No date has been set for the launch of Travelweb inventory on
Priceline, but Priceline will continue to sell that inventory on Travelweb.com.
Travelweb's affiliate relationships with companies like Orbitz and AAA remain
intact also, Boyd said.
Priceline also released first-quarter earnings. Its net profit
was $5.1 million. Priceline lost $7.7 million in the year-ago first
quarter. Gross travel bookings rose 46% to $360.2 million and
revenue rose 12% to $224.1 million.
Travelweb, meanwhile, settled its dispute with Orbitz, which
sells Travelweb inventory on the Orbitz site.
The agreement ends the two companies' litigation, which centered
on whether Travelweb was the exclusive merchant-hotel distributor
on the Orbitz site and whether Orbitz had the right to negotiate
deals with other properties.
Under terms of the settlement, Travelweb will remain the
exclusive third-party provider of merchant hotel inventory on
Orbitz from Hilton, Hyatt, Marriott, InterContinental and Starwood
hotels.
According to a statement, the agreement "provides Orbitz with
complete flexibility to market hotel inventory in a manner that
best meets consumers' needs, assures Orbitz of an adequate supply
of merchant inventory from the major brand-name chains and gives
the site flexibility to work directly with other chain and
independent hotels to continue the growth of the Orbitz Merchant
Hotel program." Travelweb agreed to pay Orbitz higher commissions
in return for a minimum room-night commitment.
In addition, Orbitz agreed to a one-time waiver of the right to
terminate the contract if Travelweb experiences a change in
ownership (which it has, as Priceline.com is now the majority
owner). The Orbitz-Travelweb agreement expires in December
2005.
To contact reporter Jerry Limone, send e-mail to [email protected].