Priceline drops fees. Will Orbitz react?
Posted
Nov 06 2007, 03:49 PM
by
Kim Peterson
Rating:
Priceline is permanently cutting its airline ticket booking fees, a move analysts say could hurt Orbitz the most. Investors seem to agree: Priceline shares barely moved today, while Orbitz shares plunged 14%.
Note that the fee cut only applies to published prices, and not the name-your-own-price service that Priceline is famous for.
Citi analyst Mark Mahaney
thinks this is a big score for Priceline that will give it a competitive advantage until others do the same. The cut, he says, is "a new negative overhang for the financial health of the online travel agent industry."
If other sites charge fees of $5 to $7 per ticket, as a Stifel Nicolaus analyst estimates, then cutting them could potentially be disastrous. Priceline eliminated its $5 domestic booking fee in June on a trial basis, and clearly must think it can withstand the revenue loss from a permanent cut. The company will announce third quarter earnings on Thursday.
Maybe Priceline is encouraged by its stock run-up over the last year, from $40 a year ago to nearly $89.
The ball is in your court, Orbitz, Expedia and Travelocity! But whatever you decide to do, can you do it soon? I haven't booked my Christmas flight yet!
