October 12, 2007: While the top three OTAs have the potential for sizable growth, a Credit Suisse analyst says they all face growing pains - Expedia’s heavy reliance on user-generated content, Orbitz’s over-reliance on air bookings, and Priceline.com’s dependence on Booking.com.
Credit Suisse analyst Scott Barry gave a “Neutral” rating to Orbitz Worldwide Inc., Expedia Inc. and Priceline.com Inc.
Bellevue, Wash.-based Expedia has positioned itself well for global business, especially in Europe and Asia, using its financial flexibility and superior reach, Barry said. Since the company can’t always offer deep discounts to customers, Expedia relies heavily on user-generated reviews to drive customer loyalty, an angle that sets its apart from its peers, he said.
While Orbitz has high bookings and a diverse portfolio, Barry labeled it a “show-me stock based on legacy performance and uninspiring second-quarter results.”
Long term, Orbitz hopes to grow with new flights to new destinations, though Barry said its over-reliance on air bookings at the expense of other offerings such as car rentals and hotels, may prove to be a negative.
Norwalk, Conn.-based Priceline, whose shares are the most expensive out of the three companies, has significant cachet as the “leading online travel distributor targeting value-conscious consumers in the U.S.,” Barry said.
The company’s Booking.com - the largest hotel reservation processor in Europe - consumer loyalty and price advantage should continue to fuel Priceline’s growth in future periods, Barry said. He noted, however, that Booking.com’s growth rate may slow in 2008.
