To get a sense of Priceline.com Inc.”™s improbable run in the recession of 2009 under CEO Jeff Boyd, consider this: Cashing in a single share of the company”™s stock early this year could have bought the lucky investor air tickets to within an easy drive of the Winter Olympics games in Vancouver ”“ if booking a deal on Priceline.com.
Who knows ”“ hang onto that share another couple years and perhaps that investor can swing a ticket to the summer games in London.
Priceline wrapped up a stellar year, reporting an incredible $490 million profit as revenue increased 24 percent on an adjusted basis from 2008 to more than $2.3 billion. That included a $78 million profit in the fourth quarter, with the Norwalk-based company”™s sales similarly up a third to $541 million.
Entering February, Priceline.com had just over 2,000 employees, up 13 percent from the year earlier, with slightly fewer than 500 of them in the U.S.
Flipping back through Priceline”™s faded postcards from a decade ago show a very different picture. Ten years ago next week, the Internet bubble was pricked in a tech-sector selloff, sending Priceline stock plunging from $567 on March 20, 2000 to below $8 that December.
After rallying in the first half of 2001, the terrorist attacks of Sept. 11 destroyed any near-term confidence of investors and travelers alike, and it would be four years before Priceline.com shares would see any measurable recovery.
By comparison, the company”™s journey through the Great Recession of 2009 has been first class all the way. After staying stuck at the gate throughout 2005, Priceline.com stock began taxiing for takeoff in 2006 rising to nearly $140 a share as of May 2008 before plunging on fears of what collapsing home values could do to the overall economy, and on leisure and business spending for travel.
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As airlines struggled to fill seats, however, Priceline”™s promise was borne out as an alternative purchase option for “value-conscious” travelers, and the company”™s shares have since shot past the $225 mark.
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If Boyd and company have figured out the formula to a recession-proof travel company, the question becomes whether they will be able to continue to capitalize as the industry recovers this year. White Plains, N.Y.-based Starwood Hotels & Resorts Worldwide Inc. said it noted an increase in traveler spending in the fourth quarter, an observation borne out by a range of companies.
“I think we saw the airlines”™ operating results were better in the fourth quarter as traffic came back,” said Greg Hayes, chief financial officer of Pratt & Whitney parent United Technologies Corp., in a briefing with investment analysts. “We hear premium traffic is coming back in the U.S.”
Airlines and hoteliers like Starwood would like nothing better than to have travelers book trips on their own websites rather than dumping excess inventory to Priceline.com or competing sites, a potential development which Boyd suggested the company is tracking.
“Our first task is to improve our product and our offerings and our functionality on the website, to encourage people to come back and hopefully come back to us directly,” Boyd said, in a conference call with investors in February. “I think what”™s happened in the last year is the hotels have gotten less focused on margin and more focused on getting people into the hotel. Going back three or four years ago, margin and distribution cost was much more of a concern for the hotels, because they had high levels of occupancy and yields were growing up, but in the current environment that really hasn”™t been front burner issue.”
Expedia CEO Dara Khosrowshahi chimed in on the topic as well last month, dismissing any suggestion that his company would falter as hotels and airlines work to reconnect with the premium traveler.
“I”™d like to comment on a frequent topic of investor discussion which is the notion of Expedia as a counter-cyclical play,” Khosrowshahi said. “I want to reiterate that we are not concerned about our hotel inventory availability in an upturn. We made significant investments in (our partner services group) to ensure that we maintain industry-leading access to inventory in all environments.”
