Priceline Group said fourth-quarter earnings would lag
analysts' estimates, as the OTA spends more on advertising for Booking.com and
expands its vacation-rentals business.
By the end of the year, Booking.com will have TV advertising
campaigns in as many as 30 countries, up from 12 last year, Priceline CEO Glenn
Fogel said on a conference call with analysts Monday.
Additionally, the company will try to further its growth in
sales of vacation-rental units. As of Sept. 30, Priceline boosted its
vacation-rental inventory by 58% from a year earlier to about 816,000 units.
As a result, Priceline forecast fourth-quarter earnings,
excluding certain items, to be about $13.70 a share, about 14% less than the
average analyst estimate of $15.57 a share. Priceline shares fell more than 9%
in after-hours trading on Monday.
"There's a lower number of bookable rooms [per property],
the partners require more services, and there's a higher level of customer
contact," Fogel said of the vacation-rentals business. "As we further
develop this business segment, we expect that some of these investments will
put pressure on operating margins."
Oppenheimer analyst Jed Kelly wrote in a note to clients
Tuesday, "Global OTAs are clearly shifting advertising strategies to
channels that can potentially drive more direct traffic to their sites, but
will likely cloud near-term visibility around marketing efficacy. We believe
Priceline is well positioned to drive long-term global accommodation share
gains, despite trading at a discount to lodging peers."
Priceline boosted third-quarter room nights by 19% from a
year earlier, to 178 million.
"Booking.com has posted very healthy growth rates
during the past few quarters," said Priceline CFO Daniel Finnegan on
As for vacation rentals, he added that he didn't know "if
it'll ever be as profitable as our core hotel business, but the opportunity to
improve the profitability is there."
Priceline's net income of $1.72 billion was more than triple
a year earlier, when the company took a $940.7 million goodwill impairment charge.