Tracking customer reviews left on Priceline (NASDAQ:PCLN) websites on their hotel bookings provides a strong predictor for future EPS and the company's advertising spends. The live nature of customer reviews helps us get a peek into performance for the current-quarter results. Also it gives a snapshot of the hotel reservation seasonality, split across various regions. Scraping through the reviews on PCLN, reveals the third quarter to be their best, with reviews peaking across all three websites including Booking.com, Priceline.com and Agoda.com.
Booking.com accounts for the lion's share of hotel bookings and consequently the reviews. In December 2013, Booking.com accounts for about 90% of the reviews clocked across the three websites. Below is the breakdown for the latest three months of reviews garnered.
Booking.com has grown its reviews by 19% in January 2014 (month-on-month) compared to January 2013 at 24%. The Trailing-Twelve-Months total (TTM) comes in at an impressive 22.225 million reviews. Booking.com has effectively retained its customers through their shift to mobile devices, as revealed by the growing mobile bookings ($8 billion in mobile bookings in 2013 compared to $3 billion in 2012). This also confirms that customers are not only browsing hotels through mobile, but have also transitioned to making their reservations through it.
The standout variable in the January data is that 63% of reviews are attributable to the European Hotels, the stronghold of Booking.com compared to 67% in January 2013 and 75% overall in 2013. This plays well with the company's expansion plans in US and other global regions.
The detailed breakdown of reviews that we collected for Booking.com is available here (February 2014 data). It contains the last 14 months' reviews clocked, summarized by countries and regions. In our models, we summarize totals without including the current month, as reviews are still being generated by customers for the current month. Also we start our collection at an optimum time each month so as to capture all of the previous month's reviews, leading to lower restatements in future.
Agoda.com, the go-to brand for Asian travelers and for global travelers inbound to Asia, has scored another strong month of reservations in December 2013. Asian Hotel reviews account for 86% of a total of 116k reviews in December 2013. Further looking at country-level reviews reveals that Southeast Asian countries account for 65% of total Agoda.com reviews in December 2013. On a TTM basis, Agoda.com has clocked 1.608 million reviews.
Click here to download the latest (January 2014) full data breakdown for Agoda.com reviews.
Given its brand strength in the United States, Priceline.com reviews are also concentrated amongst such hotels. North America accounts for almost 98% of reviews each month in the previous year. The US outbound intercontinental travel market is lower than intracontinental travel (2013 Figures) and the reviews also capture this domestic bias. This domestic concentration of Priceline.com hotel reservations also increases the cannibalization risk owing to Booking.com expansion plans in the US. December 2013 for Priceline.com has been weak at 44k reviews, while the TTM figures stand at 768k reviews.
Click here to download the latest (January 2014) full data breakdown for Priceline.com reviews.
Though the consensus EPS analyst estimate for first quarter of 2014 has been revised downwards to $6.25, post the tepid management guidance, we believe there is room for a positive surprise. The strong growth in customer reviews in Booking.com offers a glimpse of a robust quarter. The momentum in mobile bookings also bodes well for customer retention throughout the spectrum of digital devices. Kayak's integration with Priceline has also helped boost its advertising leverage, through a combination of netting any company payments to Kayak and Kayak's own lower gross advertising spends compared to Priceline's other brands (10-K filing). Since a year to year comparison of EPS makes more sense owing to the seasonal nature of Priceline's business, the relevant 2013 first quarter EPS of $5.35 is however devoid of the Kayak acquisition. This allows us to have a rosier expectation of performance this quarter.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.