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Priceline: The Demand For Travel Is Likely To Trump Fears Due To Terrorism 0 comments

Negative news such as the recent terrorist attacks in Paris may have some temporary effects on travel. However, people tend to travel when the negative news subsides. The Priceline Group (NASDAQ:PCLN) stated in its Q3 conference call that the news doesn't have to be positive for consumers to travel. CEO, Darren Houston, explained that when the headlines are not negative, people will travel. So, my thoughts are that the negativity regarding the recent attacks will subside and consumers will continue to book their travel plans. Therefore, I think that travel demand and Priceline's business will remain strong going forward.

Another headwind for the company has been the effect of currency negatively affecting the company's results in terms of dollars. Priceline derives 90% of gross bookings from international brands. So, fluctuating currencies will negatively impact the company's results. However, investors should be more concerned with the company's organic growth rather than currency headwinds. For example, Priceline reported a 22% increase in gross bookings for Q3. This was only a 7% increase when expressed in U.S. dollars due to the stronger value of the dollar. Gross profit increased by 29% in Q3, but only by 11% as expressed in U.S. dollars. So, my thoughts are that even though the effect of currency looks large, the company is still showing healthy growth even after accounting for the effect. If all currencies traded at parity and Priceline reported that gross bookings increased 7% and that gross profit increased by 11%, it would still reflect attractive growth. Plus, the 22% increase in gross bookings before the effect of currency shows that the underlying business is performing well.

Some investors may point to competition as a headwind. However, I think that there will always be plenty of competition in the travel industry. I also think that there will always be a large amount of demand for travel so that most players in the industry will get their piece of the pie. Priceline can grow its market share even with companies like Airbnb in the industry growing its market share. Airbnb does represent competition for Priceline. However, Airbnb is more for connecting people to unique accommodations such villas, or for travelers to find someone renting an extra room, house, or condo. Priceline also offers alternative accommodations along with standard accommodations, which makes the company more of a one-stop shop for a variety of travel needs. What makes...