Priceline Isn’t the Company You Think it Is

Marketplace interviewed me for this morning’s coverage of Priceline’s earnings report.

“It’s not just William Shatner, but the whole company has to boldly go where no travel company has gone before,” says Gary Leff, who writes the blog. “They haven’t quite figured out how to teleport themselves into the future of online travel.”

Leff says Priceline’s third quarter earnings report will give a glimpse of the success of the company’s strategy of growth through the acquisition of other companies.

Priceline as a company bears almost no relation to the brand that you think of — William Shatner, bidding for hotels and airfare.

At one point years ago they were going to revolutionize travel — and everything else. They were going to be the platform to liquidate excess unsold inventory well beyond room nights and into gas and home mortgage lending. They didn’t become that and we now talk about Uber as revolutionizing the way we take underutilized resources and put them to work much more efficiently. (It’s what makes me skeptical of Uber’s valuations, as much as I love Uber’s convenience as a user.)

As I explained in late spring:

Fifteen years ago the most valuable thing Delta owned was shares in Priceline — the company liquidating unsold airline inventory was worth more than the carrier that actually had that inventory.

…In a blast from the past, two years ago Priceline had a market capitalization greater than all US airlines combined. That’s no longer the case, with Delta, American, United, and Southwest alone combining for about 50% more market value than Priceline today. But that means Priceline is worth nearly twice as much as any single U.S. airline.

Priceline took their big valuations and acquired other businesses — like Kayak and, and this past summer OpenTable.

They’ve added revenue to their financials, and in some cases purchased good businesses. Kayak is a market leader. OpenTable doesn’t have competitors with the same kind of reach. They’ve paid a real premium for some of these acquisitions.

What Priceline doesn’t have is a clear idea of how it will revolutionize an industry any longer. And with their acquisitions it’s not obvious how their ownership makes these other companies better off, or how bringing together these various strategic assets makes the whole more valuable than the sum of the parts.

The best explanation of OpenTable in this regard that I’ve heard to date is that Priceline can sell dining reservations alongside travel. That’s an underwhelming narrative, to say the least.

Cross-selling happens now, such as event tickets on Expedia when you buy related travel.

It’s been the dream at least since United CEO Dick Ferris renamed the company ‘Allegis’ in 1987 to represent the integration of the airline with its owned hotel and car companies. That experiment lasted about 15 months before Ferris was gone and the company was again called ‘United’. (At various points, Westin, Hilton, and Hertz were United subsidiaries — so it’s interesting to see Hertz again in such close partnership with United, while Westin’s parent is hooked up with Delta and Hilton without an exclusive airline dance partner.)

Priceline had an early lead and was dubbed sufficiently revolutionary that it was able to attract capital and buy good businesses. But I view its revenue growth as being mostly about bringing other companies onto its own financials, rather than reflecting the strong successes of its core capabilities.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. Did you know that Shatner never got paid from Priceline? He took stock instead. 😉
    The stock was $20 in 2006. In 2009 it was $75.
    Today, the stock trades at over $1100.

    I’m not worried.

  2. @dhmammer53 — Shatner has not made the $100s of millions rumored from his Priceline stock. Sadly, he sold most of it at a very low price.

  3. I worked for Worldspan in 1999 and was being handed a ton of work to do with Priceline (I was only the SQL Server DBA on staff at the time since most of the GDS systems were on larger scale RDBMSs). They really were set to be revolutionary but had limited strategies. I left at the end of 2000 but the promise of Priceline, Expedia, and Orbitz (we were in process of dropping Priceline and the airlines were starting Orbitz) was a big driver for us.

  4. groans in terminals across the country reading those star trek allusions.

    i would say shareholders would disagree. the stock is up 6x in 4 years. they did their job well.

  5. Priceline’s valuation is purely due to – it’s the cash cow for Priceline. is very straightforward for hotels & guests and is very simple to use for both as well. The language & translation capabilities of far exceed Expedia and their model, which is 100% commission based vs. Expedia’s net-rate based, is of a value to hotels as well.

  6. OK, it’s clear now… you’re not just on Chase payroll… Uber pays you for hidden marketing as well.


  7. there are not. but why is Uber even mentioned here? you could have just as well written article about Priceline without mentioning Uber at all.
    but clearly you must have some contract to include them in as many posts as possible.
    the credit card link push doesn’t bother me, i kinda understand it. but Uber has some highly UNETHICAL business practices… it’s just not cool to push them.

    i think you should have moral limitations as well.

  8. I have no contract with Uber. The point about Uber is that their business model is very similar to the original Priceline idea, taking underutilized resources and finding a way to get those used.

    Funny thing, I was being critical of Uber in this post, suggesting that Priceline didn’t live up to expectations and the fanciful valuation of Uber is something I’m skeptical of as a result.

    If the word “Uber” sets you off, sorry for that, I was negative on their value as a company in the post so I genuinely don’t understand where you’re coming from here.

  9. you know, someone on flyertalk did the work and counted your posts mentioning Chase cards and also number of posts mentioning Chase cards unnecessarily (both numbers very high). it’s a fun thread, you should check it out.

    i should start a new thread, counting your posts mentioning Uber and also post mentioning Uber unnecessarily or outright just promoting it. my guess is both numbers will be similar and very high.

    and i am actually one of those who doesn’t mind the credit card pushing unless it’s obscene.

  10. @Lantean,

    I’ve offered an explanation for why Uber is a part of this post, you think I’m somehow shilling for Uber when I’m being critical of their valuation, so be it.

    But I write what’s on my mind, I’m not trying to balance content or appeal to anyone in particular. Frequent commenter @mark, for instance, feels that I write about food too often. So be it.

    I have no interest at all in a thread on Flyertalk where some folks think I should be writing more or less on a given topic. My blog, my thoughts, what interests me, and if folks think it’s interesting to read I think it’s great but the only way this works is that I write about what’s on my mind. I couldn’t keep up with it otherwise!

    I appreciate my readers, I do think it’s fantastic that anyone wants to read my writings at all. So thanks for your perspective, even if in this case it resonates with me not at all.


  11. Then “Lantean, ” I must ask why you read this blog, let alone post commentary?

    And while I like lively discussions, I read the blog because it’s of interest. I wouldn’t waste time reading or posting on a blog that annoyed me.

    It seems to me, Gary’s been upfront about his biz model. I do not feel any obligation to use his links. But if I do use them, I don’t mind that Gary benefits as his knowledge has been a big help to me.

    Lastly, there may be a lot of references to Chase simply because Gary writes about cc offers frequently.

  12. Gary, if I were you, I wouldn’t give much credence to these posts from people whining about your Chase and Uber mentions/links. Your points were salient, but there will always be disgruntled people who take umbrage at any perceived slight even if it in no way impacts them whatsoever.

    As for Priceline, I suspect the valuation has more to do with potential–as is true for most companies. Priceline may not have figured it out quite yet, but they are pretty well positioned to take advantage of a number of online sales platforms for the future.

    Personally, I only use Priceline to bid for rental cars–which I do every time I rent a car. I NEVER care about rental company loyalty, since I’ve saved SO much money bidding and getting rental cars for usually half or even less than what I’d have paid otherwise. I recommend bidding for rental cars (it helps to reserve a rental car regularly so you’re safe, then bidding on priceline towards the 11th hour before your trip departure to get the best possible rates!) to all of my friends and colleagues/clients, and they agree it’s the easiest way to save tons of money when needing a rental car.

    Otherwise, Priceline doesn’t really save me much money. But there have been exceptions with airfare. I always book hotels through the hotel website to ensure I get my credited loyalty points, so the only times I would ever try to use Priceline is when it isn’t a chain or there is such a good deal (as sometimes happens with Kimptons, as it were) that I can’t resist.

  13. And there we have it. @HaveTrunk has hit the nail on the head. I read a few blogs. I have a choice of which blogs I read, and this is one of several. Most of the blogs that I don’t read, or that I take a look/see every so often, don’t really interest me.
    When you read a blog, you know what to expect; and take whatever is written with a grain of salt (whether you like the blogger or not).

  14. If I wrote a blog, I couldn’t have a have a comments section. All of these infra digs from all of these trolls are so irritating, I wouldn’t sleep well at night, I’d just be rolling around gritting my teeth.

    I appreciate most of your credit card posts, I’ve clicked on them and garnered 100s of thousands of points thanks to you. Reading your blog and clicking on your links is a nice compromise for those of us who want some free travel but don’t have any interest in the “job” of Manufactured Spend.

  15. This was the first travel blog I ever read. It has given me many wonderful travel opportunities and priceless memories. For this, I thank you Gary! For those of you counting company references in posts, get a life.

  16. I used Priceline for both cars and hotels. Saved a bunch on MONEY.
    As far as UBER I agree with Gary. $18B valuation is a joke

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