Case Study - Priceline

24.12.2015

Karim Omaya

Doctor Ahmed Hesham

Fundamental of e-business

Overview
Priceline start by Jay Walker in 1997. It is is a commercial website that claims to help
users obtain discount rates for travel-related purchases such as airline tickets, hotel
stays, tours and attraction, vacations, cruises and rental cars. - w
ikipedia
According to Priceline spokesperson, Leslie Cafferty, Priceline was formed in 1997, and
kicked off its advertising campaign in 1998. when it opened its travel booking website. it
was a good start for priceline the price of the share was $96 a share.
After one month the share price increased by 1000% it was 974,37$ a share
after 9/11/2002 the price of the share in priceline decrease from 1000$ to 6.60$ in a
share.
In fact, 9/11 hurt Internet travel companies far more than any sector.

Priceline Business Model

The original vision of priceline founder jay walker was called "demand collection".
The main business model of priceline "name your own price".
Customers logs onto priceline specifies the origin and the destination of the trip. the date
he or she wishes to depart, the price the customer willing to pay and a valid credit card to
guarantee the offer. the customer must agree to fly on any major airline, leave at any
time of day between 6 AM to 10 PM. accept at least one stop or connection receive no
frequent flier miles or upgrades and accept tickets that cannot be refunded or changed.
Priceline check the available fares, rules and inventories provided by its participating
airlines and determine whether it fulfill the order at the requested price. if so it notifies
the customer that his or her offer has been accepted.
the power of this bussiness model "name your own price" is that many product and
service categorized.
Priceline think that sellers have a lot of inventory and they will always give them offers
and discount and they will always buy to consumers at lower prices available.(for
example airline seats not sold by the time a flight takes off or hotel rooms not rented).

The picture no longer looked so rosy

At the beginning of 2000, PriceLine attempted to extend the models to groceries and
gasoline, and perfect yard sale, which used the model to sell used goods online and
added long distance and travel insurance. and plans to expand internationally. the new
business model named "webhouse club".

The Fall Of Priceline

in october 2000 after 10 month of publish web house club. the financial climate of
priceline make Jay Walker can't pay additional hundreds of millions that would required
required before web house might become profitable. he didn't see that his business
model is failure he think that the reason of this fail is the investors.
the reason of fails:
1. Many of the major manufacturers of food and dried goods chose not to
participate in Priceline Webhouse.
2. Bidding on groceries and gasoline did not exactly provide a way to shop.
Customers were required to bid on and pay for groceries online then use a special
identication card to pick them up at a participating supermarket. If the particular
items purchased were not available at the store the customer will either have to
go to another store, or return at another time.
3. Consumer adoption has been hurt by poor Web site functionality and a rigid
bidding system that locks customers into buying products such as plane tickets
without any control over specific flight details.
4. the bigger problem facing Priceline is a lack of support from investors, who have
driven the company's stock down 98% from its 52-week high.

The Rise Of Priceline Again

New management sharply curtailed Priceline's expansion and laid off over a thousand
employees. Priceline chairman Richard Braddock, said Priceline will entertain selective
expansion... With stringent financial controls. We're going to make money on this and
move forward."
In 2002, Priceline focused on its core business of travel reservations.
in 2003-2004, it tweaked its business model once again adding new discounts retail
airline ticket and rental car services, offerings, in other to compete more effectively with

rms such as Expedia,Travelocity, Hotwire, and Orbit: for the business of the consumer
who prefers to book a specic airline or rental cars. Although these services are not as
lucrative as the name your own price model ( it takes 15 to 25 retail plane tickets to bring
in the same gross profit as a single name your own price ticket), and to a certain extent

cannibalize its name your own price tickets, Priceline has made up at least some of the
difference in increased volume. To further support this strategy, Priceline requires a
majority interest in TravelWeb, a consortium of ve large hotel chains that provides
Priceline with access to discount hotel rooms, purchased
active hotels and bookings, and in 2005 extended it retail strategy to the hotel market.

References
1. http://www.cbsnews.com/news/the-rise-and-fall-and-rise-of-pricelinecom/
2. http://marketrealist.com/2015/12/priceline-expedia-control-90-us-online-travel-m
arket/?utm_source=market-watch-headline&utm_medium=feed&utm_content=ma
in_permalink&utm_campaign=priceline-expedia-control-90-us-online-travel-marke
t
3. http://marketrealist.com/2015/12/revenues-grew-24-priceline-year-year-2014/?ut
m_source=market-watch-headline&utm_medium=feed&utm_content=main_perm
alink&utm_campaign=revenues-grew-24-priceline-year-year-2014
4. http://www.marketwatch.com/investing/stock/pcln/profile
5. https://en.wikipedia.org/wiki/Priceline.com
6. http://www.slideshare.net/asamaniwah/e-commerce-case2