UNIT III Case Study 1

Unit III Case Study: Priceline

Adam Shaw

Columbia Southern University

UNIT III Case Study 1

Unit III Case Study

In this case study we are reviewing the web based travel agency Priceline. Founded in

1997 with a patented business model,​ Priceline.com​ operates through the​ Booking.com​,

Priceline.com​, TravelJigsaw, and Agoda brand names also (David, Fred R., Forest David.

Strategic Management). Priceline is the largest .com travel site and consistently outperforms

others in their sector as well. The company generates annual sales of more than $4 billion in

what is virtually all in web based sales platform. Priceline provides set price hotel and rental car

reservation services on a worldwide basis with approximately 185,000 hotels and

accommodations in 160 countries. They also utilize a “Name your Price” campaign which

delivers users option to offer price they choose to pool of companies within criterias chosen. This

feature is unique to Priceline as standard practice availability.

Priceline's strengths come from their solid business plan which focuses on margins. For

airline tickets and hotel reservations,​ Priceline.com​ generates their sales on the margin between

customer price and corporate set price. In effect they are keeping the difference between the

price paid by the individual and what​ Priceline.com​ paid for the ticket or hotel room. Also

Priceline has no overhead cost aside from the various call and corporate centers. The 5,000

employees Priceline employs under the various business names represent the majority of

Priceline's cost.

Priceline consistently provides new locations for travel booking and deals change

frequently. The operation around the world via the web allows access to millions of additional

travelers for profit and gain. The competition of Expedia and others is relentlessly pursuing to

gain advantage. Expedia is currently ranked behind Priceline and actually started up prior to
UNIT III Case Study 1

Priceline by one year. The platforms however are far apart for customer buy-in and preference.

Priceline outperforms the profitability of Expedia by 4 times according to our ebook. It states

Priceline had a return on assets of 23.08 percent in 2011, compared to Expedia’s 4.19 percent

and Orbitz’s 2.60. The return on equity was 48.41 percent, much higher than Expedia’s 13.44

percent and Orbitz’s negative 21.25.

The effective strategies employed by Priceline have cast considerable distance between

them and the many others who have entered the market. The reputation, consistency, advertising

and overall performance and availability to achieve customers request, have put Priceline in the

rare position of dominating force for over twenty years. This is not a item likely to change in the

near future either with new partners in their network, continued innovation and web applications.

We can expect Priceline to retain and dominate the web travel sectors for foreseeable future.
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References

David, Fred R., Forest David. ​Strategic Management: A Competitive Advantage Approach, Concepts & 

Cases, 15th Edition​. Pearson Learning Solutions, 01/2014. [Bookshelf Online].