For consumers, online travel sites like Priceline, Orbitz, and Expedia all do roughly the same stuff. You probably still book through the one that first captured your credit card number or you use a metasearch engine like Kayak to search more widely for a good deal. They seem like commodity businesses, and as we'll see, in the U.S., they mostly are.
But for Wall Street, there is a clear winner in the online travel wars. In the past year, Priceline's stock price is up almost 90 percent, while its competitors have flatlined (Expedia) or lost value (Orbitz).
Over the past five years, the trend is even more striking. While Orbitz is down 60 percent and Expedia's up 44 percent, Priceline's stock price has increased 16 fold (that's 1,600 percent). And it's not just revenue or earnings growth driving that progress. The market now values Priceline at 36 times its earnings. Expedia merits a a mere 17.5 P/E ratio.
So, why is Priceline a Wall Street darling? No, it's not William Shatner. A big part of the reason is that they're not nearly as exposed to the American consumer and our hypercompetitive market. Seventy percent of Priceline's bookings and 82 percent of their operating income comes from the international part of their business, according to the quarterly report the company released this week. The money in online travel, it turns out, is booking hotel rooms in Europe.