Strategic Audit of Booking Holdings Inc. (Formerly Priceline)

Mathias Escobar (Finance), Trevor Fitzpatrick (Marketing), Clare Herbert (Corporate Structure), Casey Kuczynski (Corporate Governance)

BUAD 455.0 Strategy and Policy

Due: May 6, 2018

I A. History and Background information about the company

Time table:1997 - Priceline Founder Jay Walker launches priceline.com2000-Priceline Founder Jay Walker steps down from Priceline’s Board of Directors.2002- Jeffery H. Boyd is named Chief Executive Officer of Priceline.2003- Priceline moves beyond its Name Your Own Price® service and enters the retail air space.2004- Priceline enters the retail hotel business by acquiring a majority stake in TravelWeb. Priceline also acquired ActiveHotels.com, a leading online hotel booking service in Europe.2005-Priceline acquired Booking.com, the leading hotel booking website in Europe2007- Priceline acquires agoda.com, an Asia-based leader in hotel accommodations.2009-Priceline is added to the S&P 500 Index. 2010-Priceline acquires TravelJigsaw, a multinational rental car service which is known today as Rentalcars.com. Priceline also surpasses Expedia to become the largest online hotel reservation service2012-Priceline launches Priceline Ventures in order to invest in small growth companies that align with strategic interests across the Priceline businesses.2013-Darren Huston is named Chief Executive Officer of Priceline. Jeffery H. Boyd becomes Chairman of the Priceline Board of Directors. Priceline acquires global travel search tech company KAYAK.2014- The Priceline Group acquires OpenTable. Priceline changes its name to The Priceline Group to reflect its evolution as a company with multiple independently-operated brands.2015- The Priceline Group acquired PriceMatch, a leading cloud-based data and analytics solution for hotels. The Priceline Group also acquired RocketMiles, a Chicago-based company that allows travelers to book hotels while earning airline miles. The Priceline Group also acquired ASDigital, a leading provider of restaurant table and reservation management solutions based in Australia.2017- Glenn Fogel becomes Chief Executive Officer and President of The Priceline Group. Jeffery H. Boyd becomes Executive Chairman of the Priceline Group’s Board of Directors. The Priceline Group purchased Momondo Group, a leading European search engine that offers flights.2018- The Priceline Group changes its name to Booking Holdings. 1

I. Current SituationCurrent Performance

1 BookingHoldings.com/About/History

In 2017, Priceline has brought in its highest revenue since the start of the company with $12.68 billion which is a 18% change from the end of 2016. Overall financial performance is very good with everything growing each year. The net income for Booking Holdings Inc in 2017 was $2.34 billion or 9.9% increase from 2016. 2 Booking Holdings also had the smallest return on investment in the last five years in 2017 with 10.66% ROI while the previous year of 2016 saw 12.59% which is a decrease of 18%.3 The market share of Booking Holdings Inc however is 17.96%.

Strategic Posture Mission: Booking Holdings current mission statement is “to help people experience the world” 4 Objectives: Booking Holdings operates their business with three core objectives in their minds. They are to 1) provide consumers with the best choices and prices at any time, in any place, on any device, 2) make it easy for people to find, book and experience their travel wants and needs and 3) provide platforms, tools and insights to their business partners to help them be successful. 5

Strategies: Booking Holdings follows multiple strategies that are aimed to support growth in the travel/service industry. The first main strategy they have is have the best customer experience to support future success. The websites need to be easy to use while being intuitive. If the customers don’t have a good online experience, they will take their business to one of the competitors who has a better site.6

The next strategy Booking Holdings follows is to partner with various travel service providers and restaurants throughout the world. If Priceline did not get new providers to their services, people would go elsewhere. There are always trendy locations for people and restaurants that coincide with the locations. These providers will help Booking Holdings grow their business throughout the world.7

Another strategy persuaded by Booking Holdings is to invest in profitable and sustainable growth companies. This intends to both expand both the customer and the company’s horizons. Priceline is always on the lookout for companies that are threatening them, so they

2 MarketWatch.com “Booking Holdings Inc. Financials” March 26, 20183 CSIMarket.com “Booking Holdings Inc. Annual ROI”4 Booking Holdings “Factsheet5 SEC “Booking Holdings Inc. 10-K” 20176 SEC “Booking Holdings Inc. 10-K” 20177 Booking Holdings “Code of Conduct”

offer to buy them out. A great example of this is Priceline acquiring OpenTable in 2014 to enter them into the restaurant space online. 8

Policies: Booking Holdings have a very intensive Code of Conduct that every employee in the company has to follow including the board of directors. 9 There is a large emphasis on the “Trust” ethical decision model making for all the employees. Booking Holdings also has zero tolerance for bribery, stance on retaliation of whistleblowers, and for seeking competitive advantages with illegal or unethical business practices.

II. Corporate Governance .A. Board of Directors 10

1. Jeffery H. Boyd- Executive Chairman of the Boarda. Jeffery Boyd has served on Priceline’s Board since October of 2001b. He has served as the Chairman of the Board since January 2013, and Executive Chairman of the Board since January 2017c. Mr. Boyd was the President and CEO from November 2002 until December 2013d. Prior to joining Priceline, Jeffrey Boyd was the Executive Vice President, General Counsel and Secretary of Oxford Heath Plans, Inc.e. Mr. Boyd was also member of the Board of Directors of The Home Depot as well as Bankrate, Inc.

2. Tim Armstrong- Director, Member of the Compensation Committeea. Timothy Armstrong has served on Priceline’s Board since January 2013 and is a member of the Compensation Committeeb. Previously, Mr. Armstrong served as the CEO of Oath, Inc since 2015c. Also, he served as Chairman and CEO of AOL, Inc from 2009 to 2015

3. Jan L. Docter- Director, Audit Committeea. Jan Docter has served on Priceline’s Board since November of 2007b. Previously, Mr. Docter was a self employed business consultant since 2006, but was actively involved in many early stage companiesc. Mr. Docter also served as the Chief Financial Officer for Booking.com from 2003 to 2005

4. Glenn D. Fogel- Chief Executive Officer and President

8 Pricelinegroup.com “Directors”9 Federal Reserve Bank of New York “The Outlook for the U.S. Economy in 2018 and Beyond”10 HR Block “How the Tax Cuts and Jobs Act impacts U.S. tax returns” 2017

a. Glenn Fogel has been Priceline’s CEO and President since January 2017.b. Previously, he served as Head of Worldwide Strategy and Planning from November 2016 to December 2016c. Mr. Fogel has been with Priceline since February 2000d. Prior to his engagement with Priceline, he was an investment banker and a graduate of Harvard Law School

B. Top Management1. Jeffery Boyd- Executive Chairman of the Board since 2017 (see Board of Directors)2. Glenn Fogel- Chief Executive Officer and President since 2017 (see Board of Directors)3. Peter J. Millones, Jr-Executive Vice President and Corporate Secretary since 2001

a. Previously worked with the law firm of Latham & Watkins LLP 4. David Goulden- Chief Financial Officer since 2018

a. Previously served as Dell Technologies’ Chief Financial Officer up until February 2018.

III. External Environment: Opportunities and Threats (SWOT)

A. Societal Environment Economic trends:As of March 2018, the economy is looking very healthy. Consumer spending is growing a moderate pace according to the Federal Reserve Bank of New York. Household income is also increasing. These two factors are opportunities for Priceline as that means more people will be likely to travel. When household income goes up, that means more disposable income. People will be willing to spend money on traveling and exploring the world as they can not worry about paying the bills. This is not limited to Priceline however as their competitors will also be seeing the same benefit. 11

Another trend for 2018, is the tax reform. Trump signed into law the Tax Cuts and Jobs Act that reduced the corporate tax rate from 35 percent to a 21 percent. This law should give corporations a lot more money eventually. Companies can use this to acquire new companies, fund new projects, or if they are smart, invest it in Research and Development. This is an opportunity for most businesses to gain more business as well. Most people get a little more

11 SEC “Booking Holdings Inc. 10-K” 2017

money in their paychecks, they could use this potentially spend on the services offered by Booking Holdings Inc. This could include rental cars as well as vacations.12

Another trend that this company should take a look at is the currency exchange rates. The vast majority of Booking Holdings’ revenue actually comes from outside of the United States. This company reports its financial in U.S dollars. For this reason, this company is subject to the exchange rates that fluctuate from time to time. Some of their major currencie s are in Euros, Brazilian Reals, British Pounds, Russian Rubles and Australian Dollars13. Whenever these currencies fall in value, Booking Holdings faces a lower revenue reports. They also have to take a higher monetary value as well. For example, if the U.S dollar were to strengthen when compared to the Euro, European travelers would be less inclined to visit the United States because of higher costs. As of now, there is a trend in which the U.S Dollar is growing. This could be a threat for Booking Holdings in the near future for international travelers. Technological trends:Technology is moving at an unbelievable pace. Every week it seems there are new technical advances that the previous week seems irrelevant. The one that is going to be most beneficial to the travel services industry is the use of augmented (AR) and virtual (VR) reality. AR and VR will give the customers a look into where they are staying or even the restaurant they are looking to eat at. They can virtually try it out and see if they like what they see if they don’t want to pay just yet. People can view their destinations from their own houses and then make a decision on an app like Priceline and book right away. This is a huge opportunity for the travel services industry. 14

Another opportunity for the travel services industry is the use of artificial intelligence (AI). AI’s can learn quickly and have the ability to adapt quickly to questions customers might have when traveling. The travel industry is looking into using conversational AI’s to help the customer get what they want. For example, a customer can ask “Where can I stay in London tonight?” and the AI would be able to answer, and you could book a hotel right then and there through tech. Booking Holdings has the ability to develop this kind of technology and would put them on the forefront of using AI in the industry.

Another trend this industry is seeing is the overall an increase in the usage of mobile devices. There is a shift in how consumers are spending their time on purchasing various travel packages. Consumers are shifting from desktop usage to mobile usage. According to a study by Hotelscombined, hotel bookings on mobile devices increase 67 percent in the U.S. in 2016 when compared to the previous year. Bookings on tablets also grew by 30 percent during the

12 TravelShift “Report Digs in Travel Technology Trends for 2018” March 12, 201813 Travel Agent Central 2017 “Stats: Hotel Bookings on Mobile Devices Up 67 Percent”14 New York Times “Trump’s Latest Travel Ban Suffers Blow From a Second Appeals Court” Feb 15, 2018

past year, while desktop bookings only increased by 4 percent 15. This is a great opportunity for Booking Holdings to get their hands on and to market to.

Political-legal trends:A political/legal trend that will directly influence Booking Holdings Inc. is Trump’s travel ban. Trump wants to ban travel to eight nations throughout the world with six of them being Muslim.16 People traveling to those countries especially from the United States and the United Kingdom will not be using a travel service industry to book their flights to the destinations. This is a threat to all those in the service industries that slightly deal with travel. A customer couldn’t book a restaurant or a hotel if they cannot even travel to those countries. There was massive outrage from the public when it first went into effect and it remains a hot political issue. The Supreme Court is stated to make a decision on the constitutional rights sometime in April. A big threat to the travel industry is the United Kingdom’s decision to leave the European Union. The UK leaving the EU is called Brexit. In Booking Holdings 10-K SEC filing, they state “Upon leaving the European Union, among other things, the United Kingdom could lose access to the single European Union market and travel between the United Kingdom and European Union countries could be restricted.” 17 This would be a huge loss for the company. The customers, both personal and business, would be facing new regulations between traveling countries. It would be a huge decline in business. They also state “we are unable to predict the effect of Brexit will have on our business and results of our operations.” The vote causes huge uncertainty throughout the world and not just Priceline will be affected. Another trend this company has to take into consideration is the political unrest in foreign countries. Several countries throughout the world are in the midst of a variety of political unrest. Some of these countries that fall in this category are North Korea (Nuclear/missile testing, political structure), the Middle East (political tensions between several countries and the United States), Bangladesh (The Rohingya Crisis), Afghanistan (War on Terrorism), Syria (Civil War), Venezuela (National crisis) and Ukraine (Political tension between them and Russia). Consumers are less likely to spend their time and money to go visit these locations for their safety and concerns. This leads to lower travel demand to these locations18.

Socio-cultural trends:Cultural trends for younger people especially these days is working in community spaces. These spaces are for those who want to work in a space with like-minded people, but they are

15 SEC “Booking Holdings Inc. 10-K” 201716 ForeignPolicy.com “10 Conflicts to Watch in 2018”17 Forbes “Trends for 2018: The Upside-Down, Tech Reckoning, Time’s up, Citizenship” Jan 3, 201818 CNN “Your guide to Commercial Space Travel in 2018” January 4, 2018

not necessarily working in the same company. It is sort of a think tank of sorts. Priceline could benefit from this is if they dive into the micro-leasing trend. 19While it is not in the hotel/restaurant services industry it does fit into people renting out spaces. It would be similar to an Air BnB service for those who want to just work in a space. Booking Holdings could develop a service or buy one out and it would be a huge opportunity for them. Another trend the world as been after for a while is space travel. Last year, Space X announced it would be sending people to space as a vacation. While this is a very expensive vacation, it is still a vacation. Instead of having solely airline tickets, Booking Holdings Inc. could have space travel vacations. They could team up with Space X or whatever company is going to be doing space travel next. This would be a monumental moment for the world. It would be a whole new frontier of tourism, if people were to spend money on going to the moon. There are already two people who have signed up and made a deposit on the Space X trip to the moon.20

Another trend the world is seeing is the overall rise in the usage of social media from many consumers. Throughout the 21st century, social media has seen an astronomical growth. With media platforms such as Facebook, Instagram, Snapchat and Twitter, consumers are able to see how other parts of the world look and feel like. With a growing presence in social media for platforms such as photos and vlogs, consumers are more likely to visit different parts of the world in order to show the world. This is a good opportunity for Booking Holdings to advertise travel to certain destinations that people would not have ever thought of.

B. Task Environment Threat of new entrants (Medium): The threat of new entrants for the travel services industry is of a medium level. Anybody can make a website these days but the real barriers to entry are getting the hotels/restaurants onto your service. The biggest threat right now to Priceline is Google and Airbnb. Google obviously has huge brand equity, so they could get more vendors more quickly than any other brand in the world. Startups could try to enter the travel services space, but they will most likely cause the vendors a little hesitation. The hotels and restaurants could also just build themselves a section on their website that they would get 100% of the profits instead of giving a percentage away to a company. These hotels/restaurants who are doing this are acting as new entrants in a sense to the industry. Bargaining power of buyers (High):

19 SEC “Booking Holdings Inc. 10-K” 201720 Priceline Group Inc, “Priceline Group Inc, SWOT Analysis 1-7” 2018

The bargaining power of buyers is high. The Booking Holdings Inc’s customers are not necessary loyal to the company. They can easy switch to Expedia or Orbitz based off of a better deal. Customers have a lot of insight of what the cost of using Priceline costs. They can find out the average price of the hotel they are staying at and then look at the prices offered by Priceline which creates high bargaining power in the buyers. They know whether or not they are getting a good deal with the service provided by Booking Holdings. Threat of substitute products or services (Low): The threat of substitute services for Booking Holdings Inc. is basically non-existent. The customer can do it themselves if they do not want to use a travel service. Bargaining power of suppliers (High):The suppliers bargaining power is high. The partners that Priceline is working with are most likely on other travel sites. The partners can pick and choose what other online business travel agencies they would like to participate in. The suppliers get a certain percentage of the revenue brought in by each order. If the supplier gets a higher percentage from a competitor. They can easily switch to them which would cause Booking Holdings Inc. to lose a supplier. Another factor in the high bargaining power of suppliers is the prices. If their partners increase their prices on their services, they would not be able to compete with the pricing in an industry that is mostly ruled by the prices of the services. Rivalry among competing firms (High):The rivalry among competing firms is high. Booking Holdings considers the industry they are in to be intensely competitive for both new and current competitors. The whole industry is price-based which means if one company offers a slightly lower price on a hotel, the customer will easily move to them. Their main competitors are Google, Apple, Amazon and Facebook. If these companies take advantage of their search engines it could greatly affect the strategy of the company. 21 The biggest concern is Google as they can place their pages above any of the Booking Holdings subsidiaries and they can place the “Google Hotel Ads” first in the customer's eyes. Every single service Booking Holdings Inc. has intense competition from the car rentals to the airline bookings What key factors in the immediate environment:The key factors that are either opportunities or threats for Booking Holdings Inc. are the economical trends, intense competition, and the quickly advancing technology.· The economic trends are opportunities for the company. The recent Tax reform has brought more money to both the consumer and the companies in the United States. This could mean more traveling for the customer or a potential R &D opportunity. The stock market is also performing very well.

21 Priceline Group Inc, “Priceline Group Inc, SWOT Analysis 1-7” 2018

· Intense competition is a threat to the company. Almost any company that has a good search engine can start their own travel services business. Google is the biggest concern right now as they can place their ads above the Booking Holdings Inc and customers will be able to see it. You can also book flights/hotels right on Google now which the customer doesn’t have to go to a third party to do so.· The quickly advancing technology is an opportunity for Booking Holdings. They can take advantage of the recent developments in both artificial intelligence and voice recognition to provide a better customer experience from booking the trip to deciding where to eat. Opportunities and threats that are facing the organization: There are a variety of opportunities and threats that not only Booking Holdings Inc are but the entire online travel services industry is facing. The big opportunity for all the organizations are the growing global travel and tourism industry. Visitor exports around the world are expected to increase to $2,221 billion in 2027 which means people are traveling more. This is due to an expected average increase GDP of 4.1% every year from 2017-2027. 22 Another opportunity the Booking Holdings Inc will benefit from is the strong growth in the global hotels and motel industry worldwide. According to Marketline, there is an expected compounded annual growth rate in the industry of 6.8% over the next ten years. If there is an increase in the amount of hotel/motel reservations worldwide, Booking Holdings will see a steady increase of their services if they team up with the hotels/motels. 23 The company also recently acquired Momondo Group in July 2017. 24 The acquisition of the search engine will help bring more attention to Priceline Group’s offerings. This will offer new markets for the company to penetrate. Alongside of opportunities come threats. The main threat facing the online travel services industry is the foreign currency exchange risk.25 A majority of the company’s in the travel services industry is operated outside of their domestic location. Since currency fluctuates so often it can be hard to keep track of the sales. This could cause the company to reevaluate their goals for a particular country if the exchange rate either goes up or down. The other side of the currency exchange rate is from the consumer side. If the U.S. dollar goes down, the American citizens are less likely to travel. This mentality can be applied to any country. Another threat similar to the exchange rate is the regulatory and legal uncertainties for particular countries. 26Countries regulations can ban certain countries from traveling to other countries such as the recent US travel ban to the seven Muslim countries. The US also had a travel ban to Cuba for a while which these types of regulations would be a threat to any travel industry. The final

22PR Newswire “The Priceline Group Completes the Acquisition of Momondo Group” July 24, 201723 Priceline Group Inc, “Priceline Group Inc, SWOT Analysis 1-7” 201824 Priceline Group Inc, “Priceline Group Inc, SWOT Analysis 1-7” 2018

25 Priceline Group Inc, “Priceline Group Inc, SWOT Analysis 1-7” 2018

26 Medium.com “Priceline Spends $4.3 Billion on Digital Ads Each Year. It’s Shifting to TV for the Future.” 2017

threat to Booking Holdings Inc is the intense competition between all the online travel companies.27 Their main competitors of Expedia and Orbitz are a huge threat to the Priceline Group. They can easily steal a customer by offering a better deal. Typically, customers are not loyal online to a travel company. They will make impulse decisions based on the price alone. Priceline does have a majority of the current market share, but they are worried about Air BNB.

Strategic Group Analysis

Table of External Environment

27 Forbes “Priceline’s Market Share Growing Faster Than Competitors” 2017

Summary of External FactorsThese factors outlined in the table above are ranked for their importance to Booking Holdings Inc. These are both opportunities and threats. The total average weight for Booking Holdings is a 3.27 which means they are performing above the industry standard. The key factors affecting the company as a whole are the increasing household incomes, the Tax reform bill, and Brexit. The number one opportunity for Booking Holdings as a company is the economical trends in the USA. The average consumer income per household is increasing about 3% per year. This is an opportunity because the more money the household has, the more disposable income there is which means more vacations or going out to eat. The next highest weighted external is about the recent Tax reform. More Americans are seeing more money go into their paychecks. This money is a bonus for the working class. This money could lead to more vacations. However, the main external threat for Booking Holdings is Brexit. The United Kingdom leaving the European Union could affect the company. The UK citizens would have a lot more hoops to jump through if they wanted to travel to the rest of the EU. It is really easy for people to travel from country to country. If they leave, barriers will go up for travel between countries. This could lead to a decrease in travel. Internal Environment: Strengths and Weaknesses

A. Corporate StructurePriceline is one division of six under Booking Holdings Inc.. A president and CEO of

Booking Holdings Inc governs Priceline and its five other branches. Each individual division under Booking Holdings reports to a CAO, Worldwide Strategy and Planning and EVP, and General Counsel and EVP. That division of management reports to the EVP for Global Operations. Finally, each branch reports to the CEO and President of the company. The segments of Booking Holdings Inc. include; Booking, Priceline, Agoda, KAYAK, Rentalcars, and Opentable. Booking.com, lead by Chief Executive Officer and president, Gillian Tans, is the leading brand for booking online accommodations. These accommodations are offered in more than 200 countries and territories and provide more than 600,000 options. Priceline.com, lead by Chief Executive Brett Keller, is an online travel reservations service provider. Priceline offers hotel, rental car, airline tickets, vacation packages and cruise accommodations. They became the leader in their industry through pioneering the “Name Your Own Price” campaign. Agoda.com, lead by CEO Robert Rosenstein, headquartered in Singapore, caters to consumers primarily in the Asia-Pacific region.Rentalcars.com, lead by CEO Ian Brown, is the world leader for online rental car reservations. This service offers the opportunity to make car reservations in more than 28,000 locations throughout the world. OpenTable, lead by CEO Christa Quarles, is the world's leading provider of restaurant reservations made through

mobile apps. KAYAK, lead by CEO Steve Hafner, overs consumers an online price comparison in order to find the right flights, hotels, rental cars and vacation packages.

B. Corporate CultureBooking Holdings Inc is a corporation composed of three shared values, innovation,

collaboration, and ownership. Booking Holdings’ culture of innovation is simply put as “why not”. They strive to be first movers in the market and want everyone to be able to share any ideas they might have. Having an innovative culture is consistent with their current objectives and strategies. The value of collaboration in Booking Holdings Inc is sharing responsibility to bring out the best in each other by communicating clearly, sharing information and knowledge, and building effective relationships. Having a collaborative culture within the company is consistent with Booking Holdings’ objectives and strategies of growing the company. The third value, ownership, is important to Booking Holdings because they believe everyone within the company is an owner and should act in an ethical manner, lead by example, and prioritize professional development. This value is consistent with the policies of Booking Holdings in operating with integrity and honesty.

Booking Holdings Inc.’s culture remains the same through all of their locations regarding productivity, performance, and adapting to changing conditions. Their objectives of making sure they are providing consumers with the best choices at the best price and providing platforms and tools to help their business partners achieve success is forever adapting to the continuous evolution of technology. The corporation is constantly looking to increase productivity internationally, by acquiring new services around the world. Booking Holdings’ culture is very well meshed with any issues that the company could face, because they are striving to be the best.

The culture of Booking Holdings Inc is compatible with employees’ diverse backgrounds. The corporation believes that bringing employees from all walks of life helps them ensure that every customer is understood.This position is consistent with Booking Holdings current objective and policies of striving to meet all of their customers needs. Booking Holdings Inc. strives to be integrated in all of their “local” cultures around the world. Each nation’s locations’ culture and values are taken into consideration to ensure that the needs of all employees and customers are met, which is also consistent with the company’s goal to best suit all of their consumers wants and needs. Booking Holding’s corporate culture is one of their biggest internal strengths28.

Marketing:

Booking Holdings Inc has a marketing/brand awareness strategy to “promote brand awareness through both online and offline advertising efforts, including by expanding brand

28 SEC “Booking Holdings Inc. 10-K” 2017

campaigns into additional markets.” Since they are primarily focused in on the online side of business they must rely on ranking on various search engines, primarily Google. In 2017, the company spent $4.1 billion dollars on affiliate marketing and metasearch sites in the travel research industry. However, their goal in 2018 is to increase the investment into online marketing efforts by building and operating effective mobile/desktop sites, apps, and online reservation sites.29 Booking Holdings wants to effectively market their separate brands online by effectively relying on third party distribution channels that fit their needs. The goal of the online marketing efforts is to drive traffic to their website and then get them to buy. If they do not purchase, they will engage in a remarketing effort There is no stated budget expressed publicly that Booking Holdings intends to use on marketing alone but you can assume it will be over $4 billion.

Since Booking Holdings has six entities under the same umbrella name, Priceline has a different strategy towards marketing than the other five brands. Priceline has a variety of different products they offering including their “Name Your Own Price” on hotel deals, cruises, cars, flights, and packages. For the purpose of identifying the 4 “P”s of marketing, the audit will focus on cruises product offered by Priceline. The cruises product has partnered with nine cruise lines including Disney and Royal Caribbean. The various cruise partners have a hand in almost every corner of the world except for Antarctica. You can choose your destination and where you take off from which makes the cruise product line worldwide.

The pricing for the cruises depends on different variables. These variables include the destination, launch point, the room you choose to stay in, and the length of the cruise. For instance, a cruise departing from New York to Bermuda departing in June 2018 costs the same amount for each of their competitors. Expedia, Orbitz, Travelocity all offered the same price on a Norwegian Cruise Interior room for $749 however, Priceline offered the room for $729 as of April, 2018.

Priceline does offer promotions and special offers to their email subscribers. This is a marketing tactic that gets people to view certain deals quickly. Priceline might put out a deal for a cruise that isn’t sold out and is departing soon so they will send out emails to their subscribers in hopes of converting them into a customer. It is a quick sale for the company if the person converts.

Priceline has been growing roughly 18% each year over the last three years. This trend of growing rapidly will result in a higher budget in the marketing and brand advertising budgets in hopes of driving more customers to the websites. In the past years of 2016 and 2015, the sales & marketing expenditures grew roughly 10% while the gross profits increased 20%. There is a direct correlation between the gross profits and the marketing revenues. The future for the marketing department depends entirely on what the company can bring in.

Since one of Priceline’s marketing goals for 2018 is to increase their online presence through digital marketing, it is safe to say that will be achieved. However, they are adjusting their strategy to using TV campaigns. Skift, an online travel insight media company, has noted a

29 MarketWatch “BKNG Key Statistics”

55.8% increase in TV expenditures.30 The budget went from $4.3 million to $35.4 million from October 2017 to January 2018. This is evidence of the increase in the marketing budget. CEO Glenn Fogel said “it represents an important long term investment in the franchise…” The industry, Booking.com and Kayak, have been keeping up with the TV ad war but Priceline is out in front in terms of its strategic marketing goals.

Booking Holdings has competitive advantage over their competitors when using their marketing strategies. According to Forbes, “The advantage that Priceline has is that its vacation rental properties are instantly bookable and don’t have a booking fee, unlike Expedia’s

HomeAway which charges fees and is still trying to make properties instantly bookable.”31 The marketing team is well aware of this and uses the no booking fee as leverage against the competitors. They can use this to get customers to book with them and not with the others. The vacation rental properties are also growing faster than both Airbnb and Expedia. The another big strength for the marketing department is the size of the budget. It increases when the company’s revenues increase which happens almost every year. They are able to get there name out there without having to worry about money.

FinanceBooking Holdings’ main financial objective is to run the company with the belief that

they will operate successfully so that they have long term-growth and profitability. This statement is clearly mentioned in their 10-K reports. In order to achieve this objective, Booking Holdings has some key strategies that they are implementing. They are to commit to continuous investment and innovation for their company, grow their businesses in new and current markets around the world, expand their services and to ensure that they provide an appealing, intuitive and easy-to-use online experience through their websites and mobile apps. The company adjusts to the conditions in each country they operate in, in order to accurately depict how they are doing financially.

Overall, this company is doing extremely well when we look at their ratios. This company is noticing a positive trend when it comes to their ratios. This table is shown below. Their liquidity ratios (current, quick and cash) are all in the low to mid 2’s. This gives Booking Holdings a competitive advantage because they are able to have a better liquidity position than their competitors and are also able to meet with short-term obligations. Their overall profitability margins have also been high as shown in the table below32. This shows that the company is able to generate profitable sales from its resources. Their valuation ratios have also been seeing some high numbers. This shows that this company is able to give back to their shareholders. Booking Holdings has had an overall positive impact on the current trends and past performance. This will likely lead to an even greater future performance for the company as they continue to grow.

30 SEC “Booking Holdings Inc. 10-K” 201731 SEC “Booking Holdings Inc. 10-K” 201732 SEC “Booking Holdings Inc. 10-K” 2017

This company is also doing extremely well when we look at their income statement. Their total revenue has increased by 16.5% since last year in 2016. Their gross profit has also increased by 20.1%. Their net income also increased from $2.1 billion to $2.3 billion. This Corcompany is also taking in more expenses such as sales and marketing, information technology, personnels and advertising in order to keep up with their ever expanding company. All of these are strengths for this company because it shows that they are extremely profitable.

The same is true when we look at Booking Holdings’ balance sheets. Overall, they are seeing an increase in many different aspects in this document. Looking at their assets, the’ve increased their long term investments (from $9.6 billion in 2016 to $10.4 billion in 2017), cash ($2.0 billion to $2.5 billion), short term investments ($2.2 billion to $4.9 billion) and their intangible assets ($2.0 billion to $2.2 billion)33. This shows that Booking Holdings have the available resources in order for them to keep growing in this market.

Now we look at their liabilities. Their long term term increased from $6.2 billion to $8.8 billion. Their current liabilities increased from $2.9 billion to $3.5 billion34. This company is taking in more debt in order to keep growing in this market. This is an advantage because it shows that this company wants to keep investing in themselves.

33 MarketWatch “BKNG Key Statistics”34 MarketWatch “Expedia Key Statistics

The company is also profitable when we look at their equity. Their earnings per share has increased from -13.75 to 9.87. Their stocks have also shown a positive increase throughout the years (from 1,600.93 during 2016 in the last quarter to 1,961.45 in 2017)35. This is a strength for Booking Holding because it shows their overall return for their stockholders is strong. Overall, Booking Holdings shows to use accepted financial concepts and traditional techniques when calculating financial leverage, capital budgeting, etc.

35 careers.priceline.com “Working Here” 2018

36

Ratios- ExpediaBooking Holdings’ closest competitor is Expedia Group. This company is a global travel

agency company. Their websites, which are primarily travel fare aggregators and travel metasearch engines, include Expedia.com, Hotels.com, Hotwire.com, CarRentals.com, trivago, Venere.com, Travelocity, Orbitz, and HomeAway. Looking at Expedia's ratios shows that Booking Holdings is doing a much better job financially. This table is shown below.

When we compare both of these companies when it comes to their liquidity ratios, Booking Holdings has the competitive advantage. Expedia’s overall ratios are below 1 while Booking Holdings’ ratios are above 2.37 The same is true if we compared Expedia’s overall profitability ratios to that of Booking Holdings. Expedia is beat in every single type of profitability ratio for the year of 2017. This is a great competitive advantage for Booking Holding. This shows that the company runs their company with an extreme abundance of profits. Expedia’s capital structure and valuation ratios are relatively the same when compared with Booking Holdings. Overall, Booking Holdings’ has the upper hand.

Ratios- IndustryOverall, Booking Holdings is doing really well when we compare their ratios with those of the travel agency industry. Several ratios are shown below. When we compare Booking Holdings liquidity ratios (current and quick ratios) to the industry average, the company has higher ratios than the industry38. This company is able to pay back its liabilities quicker than the overall industry. When we look at their profitability ratios (return on assets, return on equity, gross margin), Booking Holdings is slightly below average when compared to the industry.

37 Skift “Priceline Group Revamps TV Strategy With Whopping Spending Hikes” 201838 Bizminer “Industry Financial Report: Travel Agencies”

Analysis of Strategic Factors (SWOT)

Table of Internal Environment

Strategic Alternatives and Recommended Strategy

Alternative Strategy Table

Recommendation

We recommend Booking Holdings Inc to pick the “ad-match” strategy (S1,T1) from the table above. With their consistent financial growth, they are able to “ad-match” their competitors price and refund the customer the difference of price paid and price the

competitor offers. The pros of implementing this strategy would be gaining a competitive advantage, gaining customer loyalty, and making sure they are offering the lowest price. The cons to implementing this strategy would be it creates room for risk and could potentially be more expensive than anticipated. Implementation

To implement this strategy, Booking Holdings could offer a trial run to their email subscribers to see how it performs. Once the trial run proves to be a success, they can then begin to advertise their new “ad-match” strategy on their website, on television commercials, as well as social media postings. After the strategy takes off, their customers word-of-mouth will be able to provide a good source of recommendation without having to pay for advertising.

Evaluation and Control There are a couple of evaluation and control protocols that Booking Holdings can

implement. One of them is to view the amount of sales they have generated form the new “ad-match” program. This company can view previous sales data and compare them with the sales data when the program goes into effect. Another protocol they can implement is a benchmarking system. With this, Booking Holding can set a benchmark for the amount of sales, web traffic and brand awareness and compare them with previous years.

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