Expedia Vs Priceline - Financial Analysis

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Table of Contents

Industry overview        2

Introduction of Priceline        3

Introduction of Expedia        4

Financial Analysis:        5

Analysis of Profitability: Revenue and Net Income        6

Analysis on Operating and Non-Operating Segments        8

Analysis of Net Operating Asset Turnover (NOAT)        8

Analysis of Net Operating Profit Margin (NOPM)        8

Cash Flow Statement        10

Operating Activities        10

Investing Activities        10

Financing Activities        11

Working capital and Current ratio analysis        11

Conclusion        12

Industry overview

The online travel industry, one critical proportion of global travel and tourism industry, is growing stably with a decreasing rate and is mainly driven by higher demand of expanding global market, digitalization, and sophisticated marketing channels. The network effect is the main source of gaining competitive advantage in this industry. The online travel industry is generally transformed into an imperfect competition market due to the duopoly of two industry leaders, Priceline and Expedia, each generating roughly 16 billion sales revenues in 2015. Since variety of options is major preference for potential customer, large companies have competitive advantage in providing wide range of services tailored for segments. Scale enhances company’s ability to buy travel products wholesale and resell to the customer in cheaper price. However, some start-ups, such as Airbnb and TripAdvisor, is improving traditional and digital marketing to shrink market shares from the large players. Small companies instead try to specialize in niche market. The existence of new entrants with well-earned reputation for customer services, such as Google (“Book on Google”) and Amazon, may distort the duopoly as well. Those trusted online operators started from a limited service range with a potential growth trend.[pic 5][pic 6]

Moreover, online travel industry also affected by people’s lifestyle or life behaviour. According to most recent statistics, 53% of annual revenues in the travel industry comes from Online Travel Agencies (OTAs) as more people travel for business and leisure purposes choose to book their travel online (Patel, 2016). The industry is highly competitive and booming with new players coming in. The overall industry generated $149,045 billion in 2014 and $168,654 billion in 2015. The number of users increased from 357.66 million to 409.72 million at the same time period (Valuentum, 2016).