In 1998, Priceline had pioneered the revolutionary 'Name Your Own Price' pricing system that was theinverse of the of the customer-retailer relationship. Some analysts had raised concerns that a business model based on the path-breaking NYOP system might not be sustainable. Priceline had since moved beyond the NYOP system by providing customers with the option of choosing from a list of published prices for its travel products and services as well. In a bold move in end2007, the company permanently eliminated all booking fees on published airfares taking the analysts and competitors by surprise. Business Model Demand Collection System -- the patented "name-your-price" model pioneered by Priceline.com. Prospective buyer makes a final (binding) bid for a specified good or service, and the broker arranges fulfillment. com's business model The fundamental concept of Priceline. and rental car companies. hotel room reservations. it functions more as a middleman. Priceline's model is geared toward industries which have rapidly aging inventory. Its name your own price system is geared more toward bargain hunters seeking low prices as selecting the brand of hotel and airline using the Priceline system is not possible . items such as airplane tickets. airlines.com's model lies in its reverse auction pricing system which allows its users the ability to find discount travel related items by placing bids. The company is not a direct supplier of these services. providing price quotes from various major hotel chains. and car rentals.What are the core components of Priceline. However. Since its turnaround in 2003 it has been able to reach and maintain sustained profitability. This is due to the demand from consumers for discount travel tickets and hotels.Do you think Priceline will ultimately succeed or fail? Why? While Priceline initially started out running in the red unable to generate a profit running at a loss of upwards of $1 billion during its infancy. The reverse auction model which Priceline uses to link the sellers with buyers is what has made it profitable. it has since reached the point of profitability. during times of recession luxury items are usually sacrificed by the consumer and thus the impending recession will have a significant impact on the travel and tourism industry which in turn could cut into Priceline's profitability . This allows vendors the opportunity to gain additional revenue by selling its products for below retail prices without having to change its existing pricing structure.How has Priceline (and similar online services) impacted the travel services industry? The use of these business models has given the travel services industry more flexibility in arranging for the sales of its services. It also allows the general population an alternate means to book more affordable vacations . com.2 million a 60. According to Forbes.com. Its gross profit for the quarter was $160.com Priceline reported its 2007 4th quarter earnings at $334.9% increase from the previous year. and cruise services remain at the heart of Priceline's business model to this day. hotels. rental cars. Orbitz. Travelocity. The same fundamental sections which appear on its website flights. Priceline core business model appears to have remained relatively the same to the 2005 version of itself.9 million a 28. vacation packages.com.com. Its competition comes from other online middleman companies which exist and operate to this day such as Expedia. Travelocity. and Cheaptickets. It also details various strategic moves made by the company to gain and edge over competitor travel booking sites such as Expedia. and Orbitz. The update article outlines the recent acquisitions made by Priceline as well as its earnings per share and overall profitability during the four quarters of 2007.8% increase from over a year ago.com. Hotels. . With this in mind the core components of Priceline s business model are based around their pioneered and patented reverse auction pricing model which is a unique offering within the travel market place. Michael Rappa explains that Priceline uses a business model known as brokerage model where a business creates their own market by bringing buyers and sellers together. . Priceline operate as the middle man or broker bringing the two parties together in a seamless and friendly manner. This innovative model allows consumers to purchase travel services at a discounted prices by trading off brand and features. Priceline receives it s revenue based on the difference between the Name your own price amount entered by the customer and the amount charged by the service provider such as the airline. This is evident by the fact that Priceline improved from a $1 billion loss to a profit of over $10 million between the years of 1999 to 2003. compared with 11 percent at Expedia and 4 percent at Orbitz. Since 2003 Priceline has continued to be profitable and grow. . just maybe. During Priceline s early start up days they experimented with variations of its business model by offering groceries and gasoline. If the past few years are any indication. (Priceline Investor Relations) Although the travel industry is saturated and has ever increasing competition. As part of their expansion and growth they recently acquired the multinational car hire reservation service TravelJigsaw to provide more their value added services to their customers. Priceline s revenues are expected to grow 20 percent in 2010. which initially had negative impacts on profitability. bad times aren t that bad for Priceline . increasing its stock price over 27 times from its lowest to slightly under $200 USD in 2010 and is now sporting a market valuation of $8.8 billion. Additionally Priceline recently announced a ground breaking hotel price guarantee that pays customers a nominal reward if they find a lower price than the one offered by Priceline. maybe. However Priceline s management were able to adapt and focus their model so that it started producing significant returns. This should also assist Priceline with its well known and strong brand advertising to help maintain their reasonably dominant market share. the population of the internet and those willing to buy goods and services over the web also continues to grow. These efficiencies have reduced the costs to travel providers such as cuts in the booking fees airlines pay distributors. and simple easy to use (user friendly) facilities (Business trends in the travel industry). Services like Priceline have caused a shift in consumer demographics to consumers with a short attention span. Without the online services of companies like Priceline it would be difficult if not impossible for travel service providers to advertise these niche deals without impacting their normal retail offering. As Priceline and other similar services aggregate airline and hotel services they turn them into commodities where people only shop based on price. Brand and other features become non existent when products and services are aggregated against each other purely based on price . Niche travel deals allowing travel services such as airlines and hotels to offer fairly unique one off deals to sell just a few remaining seats or rooms. Additionally opening up a new demographic of consumers who previously could not afford airline travel.How has Priceline and similar online services impacted the travel services industry Priceline and other online services have changed the travel industry by acting as the go between providing consumers access to deals with travel providers such as airlines or hotels therefore reducing the layers of separation and the need for agents and broker fees. Additionally Priceline and similar services have provided an avenue for travel services to clear excess inventory and receive revenue from airline seats or hotel rooms which would have otherwise remain unfilled. Ultimately lowering costs to consumers. Alongside the improvement in customer satisfaction.1% Net income: $489.com Priceline s strongest competitors would be: Expedia Orbitz Worldwide Travelocity As shown in the direct competitor comparison chart provided here by Yahoo Finance Priceline is well above the industry average and competing quite strongly against it s direct competitors. while service quality has improved. Priceline is currently operating at a profit which can be seen in these key statistics published on Answers. 2009: Sales: $2.5M Income growth: 153.0% Employee growth: 12. Priceline also continues to strive towards providing customers with a superior user-friendly service such as the launch in Jan 2009 of a The Travel Ekspert blog providing advice to consumers and also offering over 2.338. The Priceline website is now organized much like those of its competitors. As detailed by Answers.Has Priceline s business model changed since 2007? And if so how? Who are its strongest competitors? Is it profitable or operating at a loss? Priceline has changed its business model since 2007 focusing more on traditional online reservation services where customers have the flexibility to select from brand and features rather than their more restrictive and discount Name your own price model. strengthened by elimination of booking fees. Priceline s stock value soared by nearly 200% in 2009 (ACSI). Customers can still choose to bid. However due to the fact that Travelocity is a privately held company they can not be included in the comparison and their position is relatively unknown. usually increase customer satisfaction and this has been the case for Priceline. up to a point.5 million hotel reviews (PhoCusWright). but this is no longer the only option.9% . Value for money remains high. More alternatives. now up 6% to an all-time high ACSI score of 76.2M One year growth: 24.com Key numbers for fiscal year ending December. This profit and growth is quite positive given that the world has recently been through a global financial crisis and is still recovering from this and the fact that during this time travel generally takes a lower priority. Given this Priceline is doing all the right things to keep consumers traveling. . 000 $1.500 $3.Gross Booking $4.000 $3.500 $4.000 $500 $0 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 Domestic International** Total .500 $1.000 $2.500 $2. 433 1.006 .238 1.481 $1.154 $1.051 $1.885 $2.092 1.Domestic International** Total 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 $872 $800 $689 $851 $964 $999 $831 $989 $1.379 $2.964 $3.251 792 1.724 1.723 $2.264 $2.415 1.121 1.410 $4.975 2.110 $2.256 2.943 $2. 000 $1.Gross Booking $4.000 $3.500 $4.500 $3.500 $1.500 $2.000 $2.000 $500 $0 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 Agency Merchant** Total . 470 $1.168 Merchant** 453 447 373 474 555 592 498 591 727 838 Total 2110 2051 1481 1944 2380 2723 2264 2965 3410 4006 .131 $1.108 $1.825 $2.766 $2.604 $1.657 $1.683 $3.374 $2.Agency 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 $1. 0% 70.0% 20.0% 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 Domestic International Total .0% 80.0% 50.0% 10.Growth Yr/Yr 90.0% 60.0% 40.0% 0.0% 30. 9% 20.9% 47.1% 10.6% 16.6% 24.9% 52.8% 59.1% .5% 67.5% 5.Domestic 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 59.3% 47.3% Total 70.2% 19.8% 31.1% 58.5% 43.0% 80.3% 14.9% 10.8% 32.2% International 80.2% 32.3% 37.8% 81.6% 16.5% 12.1% 18.6% 12.8% 52.4% 22. 0% 80.0% 60.0% 50.0% 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 Agency Merchant Total .0% 40.0% 0.0% 70.Growth Agency/Merchent 90.0% 10.0% 20.0% 30. 3% 10.9% 22.0% 48.8% 21.5% 12.6% 33.9% 47.8% 31.1% 41.5% 47.7% Merchant 43.3% 27.1% 32.2% 53.5% 43.8% 52.8% 32.6% 28.3% 47.4% 22.9% 10.4% 7.5% 24.9% 52.4% Total 70.Agency 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 80.4% 32.4% 61.5% 21.1% .9% 59. 0 Hotel Room-Nights Rental Car Days Airline Tickets 25.0 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 .0 5.0 15.Units Sold 30.0 20.0 10. 8 2.5 Rental Car Days Airline Tickets 2.2 2.2 1.0 3.9 11.6 1.8 15.5 1.6 20.5 .0 23.3 1.6 1.0 4.1 1.4 1.6 2.3 2.7 17.5 1.2 3.2 27.9 14.3 5.1 1.5 1.4 9.1 12.4 3.Hotel RoomNights 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 10. 0% 100.0% 0.Growth 120.0% -20.0% 60.0% 40.0% Hotel Room-Nights Rental Car Days Airline Tickets .0% 80.0% 20. 0% 13.3% Airline Tickets 98.9% 56.1% Rental Car Days 23.8% 43.6% -0.2% 11.1% 15.6% 38.0% 11.2% 43.7% 28.6% .9% 30.4% 15.2% 54.8% 4.4% 44.2% 2.6% -0.0% 56.0% 36.9% 32.1% -4.3% 59.0% 97.2% 44.6% 6.Hotel RoomNights 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 50.8% 48.2% 16. 0 Revenue Gross Profit .0 $200.$1.0 $1.200.0 $400.0 $0.0 $800.0 $600.000. 2 .0 $462.3 $666.7 $541.8 Gross Profit $253.7 $730.2 $434.3 $305.001.4 $767.6 $406.1 $603.2 $319.8 $584.Revenue 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 $514.7 $316.0 $561.1 $445.1 $208.4 $1.1 $205.0 $313. 0% 40.0% 0.0% 50.0% 60.0% 20.Growth 70.0% 10.0% Revenue 30.0% 2Q8 3Q8 4Q8 1Q9 2Q9 3Q9 4Q9 1Q10 2Q10 3Q10 Gross Profit . 4% 26.1% 37.1% 33.2% 28.3% 14.4% 56.9% 53.6% 21.7% 45.4% 34.5% 2Q8 3Q8 4Q8 1Q9 2Q9 3Q9 4Q9 1Q10 2Q10 3Q10 .3% 52.3% 37.7% 52.0% 15.1% 61.5% 30.Revenue Gross Profit 44.6% 17.5% 27.0% 20.