Priceline.com prefers waiting game for China

China Special: By EyeforTravel.com Correspondent in Beijing

Last year, when Glenn D. Fogel, managing director - Corporate Development and International...

Last year, when Glenn D. Fogel, managing director - Corporate Development and International, Priceline.com, spoke to EyeforTravel.com during the first edition of Travel Distribution China conference, he had said the company is looking for the right time to make an investment in China.

Nothing much has changed after one year.

Fogel, who is here in Beijing to attend the second edition, says, “We continue to explore the possibilities (in China). The growth rate is very exciting but there are also substantial risks involved. So we continue to evaluate the situation carefully.”

He acknowledged that even as the online travel growth rate is growing faster than travel in general in China, it still only contributes a single digit percentage of the total travel industry in China. “We are weighing different factors. We have not decided when, how, or if we are going to enter the market.  While early participation is usually helpful for success, our track record in Europe, where we were not an early entrant, shows that one can be a late entrant and still be very successful,” he told EyeforTravel.com’s Ritesh Gupta, citing Priceline’s recent claim to be the largest online hotel service in Europe with projected gross bookings in Europe of $1.3 billion for 2006.

On what is critical before going ahead with operations in new markets, Fogel says, “We measure several things - opportunity, the  associated risk, what our capabilities are and we then compare all of these factors to other opportunities around the world.”

He added, “Both in the US and Europe, the percent of our business from call centres is very small. In China, the  great majority of so-called online transactions are  actually being done in call centres.   And all of our transactions  require a credit card while in China, the credit card penetration is quite low. Therefore, we recognise that doing Chinese domestic business would require changes to our model and this is another consideration for us.”

The company may not have decided about expansion in Asia but it is clearly bullish about Europe. 

“In September 2004, we bought activehotels.com and in July last year, we bought Bookings NV  which together with Priceline.co.uk comprise our European effort. We are pleased with our growth rate in Europe.”
 
He attributes Priceline’s strong European growth to several factors.

“First, growth in the online travel market in Europe in general is high, particularly in Germany, Spain, Italy and several other countries. Second thing is Priceline's European model; unlike many competitors, we use an agency model not a merchant model.  The benefit for hotels is they get to process the credit card, they can set their own prices at will, and they can add or subtract inventory to our extranet as they need, which is very different from the classic merchant and wholesale models. For consumers, the benefit is their credit card isn’t charged until they leave the hotel, as opposed to having their credit card charged at booking which could be months before they show up at the hotel. We believe we will continue to grow and taking Europe on the whole, we believe there is a great deal of ramp left.”

On how recent positive  financial results by airlines in the US may affect the online travel agency business, Fogel underlined the fact that consumers have many choices when they are booking travel service.

“Different sites have different advantages. We believe Priceline provides a valuable services to the consumer and as proof our sales continue to grow,” he says.

Speaking about his plans after being appointed as managing director and continuing to oversee all of Priceline’s corporate development efforts, Fogel says, “My agenda is to look for opportunities for Priceline and further expand our reach globally. We were very fortunate to find the superb teams at Bookings and Active. When I look at opportunities, the most important factor is judging the local management. We strongly believe to be successful in a market  the effort has to be managed by the people who truly know that market.  Just transferring Americans to other areas of the world is usually not a recipe for success.”