- Booking.com, a subsidiary of Priceline group, yesterday announced the acquisition of Buuteeq.
- Buteeq provides digital marketing services to hoteliers using a host of cloud based services.
- The hotel mix of booking.com platform could be an ideal target pool for the services of Buuteeq, creating value for both the firms.
Priceline (PCLN), the global leader in the online travel industry, announced the acquisition of Buuteeq yesterday, June 10 2014. The acquisition has been officially confirmed with messages on the websites of both Priceline as well as Buuteeq.
Buuteeq is a good fit with booking.com
Buuteeq was acquired by booking.com, the largest unit among the Priceline group and this is a deal which makes the case for a perfect fit. Buuteeq offers hotel marketing services to its clients and helps bring them online by building/designing websites and providing other cloud based services to manage and optimise their operations.
According to a post mentioning Pricline acquistion, on Buuteeq.com:
“Buuteeq’s cloud-based digital marketing software helps hoteliers manage their brand and drive bookings with responsively designed websites, robust user analytics, and intuitive content-management tools.”
Booking.com has a business model which differs from most other online travel companies. At a time when the world of online travel industry was focussed on the merchant model, due to its higher commission structure, booking.com came in as a disruptor with its agency model. The difference is that booking.com sells inventory of its client hotels rather than buying the hotels and then selling the same to consumers. The hotels fix the price and pay a commission to the online travel agent (OTA), whereas merchants booked profits and then sold the hotel inventory for a price decided by the OTA. The success of the agency business model can be gauged from the growth in Priceline group’s agency revenue. The chart below displays Priceline revenue from its two main segments, merchant and agency segment.
Booking.com represents a major part of the agency revenues and it is seen that the agency revenues have outpaced the merchant revenues over the last 9 years, since booking.com’s acquisition by the Priceline group.
Booking.com’s growth can be linked to a couple of factors. Firstly, the agency model pioneered by the company and secondly, the firm’s ability to loop in various single property hotels onto its platform, apart from the big chain hotels which are also available on most other online travel properties. The presence of various single property customers in its client base is something which will be of great value to Buuteeq, which could help them build an online presence with a booking link back to booking.com. The two would make a perfect match given the mix of properties listed on booking.com. The graph indicating agency revenue growth could be in for an acceleration following the Buuteeq acquisition.
Buuteeq, in our opinion, is a perfect match to booking.com which could result in improved or sustained high growth in Priceline groups agency revenue. Priceline group historically has proved its capabilities in creating new revenue streams from small acquisitions. Booking.com and Agoda.com are supportive examples of Priceline groups success with acquisitions. Given these two factors, it is very likely that Buuteeq could be the next value driver at the Priceline group. We continue to reiterate our long term bullish outlook on Priceline. View our Priceline stock analysis.
To see Priceline’s latest stock price movement, click here Priceline (PCLN)