Latest / Bloomberg Intelligence / Morningstar's Wasiolek Says Priceline is Well Positioned(Audio)

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Morningstar's Wasiolek Says Priceline is Well Positioned(Audio) · Bloomberg Intelligence

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  Speaker 1: you're listening to taking Stock with Kathleen Hayes and on
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  Speaker 1: Bloomberg Radio. In the easter holiday, a lot of spending
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  Speaker 1: on new advertising campaigns, and weaker demand for travel to
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  Speaker 1: France in China. All of these hit price Line Group
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  Speaker 1: second quarter profit now suffering according to price Line and
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  Speaker 1: saying this in a statement. Investors are not in a
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  Speaker 1: very forgiving mood though, because price Lines share is share
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  Speaker 1: prices tell me the most in three and a half years.
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  Speaker 1: Putting a whole lot more on Price Line Group's interim
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  Speaker 1: in chief executive Jeffrey Boyd, who has been back just
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  Speaker 1: a week reclaiming an old job that he had left.
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  Speaker 1: Let's bring in our next guest to bring this all
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  Speaker 1: together for us, Dan Musselic, senior equity analyst at morning
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  Speaker 1: start joining us from Chicago. So Dan, first of all,
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  Speaker 1: let's talk about Jeffrey Boyd, what brought him back and
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  Speaker 1: Boyle boy, they need all the help they can get
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  Speaker 1: right now? Uh? Yeah, I mean, I guess that remains
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  Speaker 1: that you've seen. If they need all the health they
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  Speaker 1: can get, we probably we'll talk about that in a minute,
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  Speaker 1: but yeah, I mean, so we heard last week that
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  Speaker 1: the former CEO, Darren Houston, who we view as an
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  Speaker 1: effective CEO, had to resign for um uh conduct that
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  Speaker 1: was contrary to the code of Ethics. So that brought
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  Speaker 1: Jeffrey Boyd, who was still the chairman of price Line
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  Speaker 1: back as CEO at least in the interim, and as
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  Speaker 1: you alluded to, he was a former CEO. He was
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  Speaker 1: really paramount and making price Line into the domino t
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  Speaker 1: a that it is today. He was the CEO from
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  Speaker 1: two thousand and one to two thousand thirteen, and at
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  Speaker 1: that time he made a big acquisition in two thousand
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  Speaker 1: five of Booking dot Com that really made price Line
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  Speaker 1: into this dominant otia that we see today. So, Danny,
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  Speaker 1: what do you think is it a stock worth buying
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  Speaker 1: right now? It's down a hundred and ten dollars, it's
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  Speaker 1: down about eighty three the last print. Yeah. You know,
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  Speaker 1: our view, as we see this as an opportunity, price
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  Speaker 1: Line is a high quality company. We believe it's well
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  Speaker 1: positioned in a large in the large and growing online
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  Speaker 1: travel industry, and that it's trading at attractive valuation here.
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  Speaker 1: So you know, what we saw essentially was a very
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  Speaker 1: very strong first quarter where the key metrics we're ahead
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  Speaker 1: of expectations and actually superior growth to Expedia on an
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  Speaker 1: organic to organic comparison. And then you know the reason
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  Speaker 1: the stock is down is that the second quarter guidance
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  Speaker 1: was quite weak and implies that there's going to be
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  Speaker 1: a meaningful decline in demand as well as a pickup
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  Speaker 1: in near term spending. Our view on that is, you know,
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  Speaker 1: we have several reasons to believe that that space. The
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  Speaker 1: weaker guidance is based more on macro and conservatism factors
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  Speaker 1: versus any increased competitive situation for Priceline. Speaking of competitive
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  Speaker 1: why is Priceline so dominant? Is it? Captain Kirk's a
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  Speaker 1: William Shatner. There's so much competition in that space. You
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  Speaker 1: mentioned Expedient, how about Kayak? How about so many discount
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  Speaker 1: websites that are easy to navigate. Um, you can get
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  Speaker 1: all kinds affairs out there. What is Priceline doing so well? Yeah? So,
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  Speaker 1: I mean there's been a lot of consolidations, so Expedient
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  Speaker 1: and Priceline have been part of that consolidation, and they've
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  Speaker 1: reached reached a point in our opinion where it's really
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  Speaker 1: tough for any others to compete against them. You mention
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  Speaker 1: and Kayak. Priceline actually acquired Kayak in two thousand thirteen,
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  Speaker 1: And Expedia has made a bunch of acquisitions recently, such
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  Speaker 1: as Orbits. Orbits was the number three competitor before it
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  Speaker 1: was acquired by Expedia and really was unable to effectively
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  Speaker 1: compete on a marketing and technology scale that expedient Priceline
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  Speaker 1: are able to, so they have that scale advantage, they
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  Speaker 1: have you know, the network effect advantage where they have
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  Speaker 1: a bunch of properties and other travel supply on their
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  Speaker 1: network um. And in addition to that, the reason why
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  Speaker 1: pricelines growth has been so strong is their focus is
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  Speaker 1: really more in international markets, and those international markets have
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  Speaker 1: hotels that are more independent or boutique versus in the
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  Speaker 1: US they are more made of large brands such as
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  Speaker 1: Hilton and Marriott and for the vet reason, and international markets,
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  Speaker 1: those smaller hotels really depend on the channels such as
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  Speaker 1: Priceline to try to drive um booking bookings to to
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  Speaker 1: their to their to their hotels. What kind of margins
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  Speaker 1: are we talking about for these international sal and small
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  Speaker 1: boutique hotels you describe, Yeah, so I guess, uh, Priceline
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  Speaker 1: Expedia get a commission um on each hotel room that's sold,
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  Speaker 1: and internationally, you know, the companies don't disclose those for
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  Speaker 1: competitive reasons, but you know, for international markets often probably
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  Speaker 1: commissioned rates for hotels are probably around mid to high
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  Speaker 1: teams and that compares with you know, the US markets
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  Speaker 1: that are more consolidated with those larger brands where those
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  Speaker 1: commission rates might be high single digit, low double digits.
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  Speaker 1: So it is uh, you know, it is a stronger
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  Speaker 1: economic channel to be uh well positioned in those markets.
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  Speaker 1: You know, how the global economy and the macro picture,
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  Speaker 1: how does it look right now for hotels, for travel
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  Speaker 1: websites broadly because there is still concern kind of goes
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  Speaker 1: up and down in terms of the temperature of that
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  Speaker 1: concern in the markets that that there's a lot of
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  Speaker 1: there's a lack of demands and would say in many
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  Speaker 1: parts of the world. Yeah, I mean, I think there's
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  Speaker 1: been two things with the with the macro environment. So
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  Speaker 1: the one are the terror tacks, uh, you know, the
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  Speaker 1: last several months in Paris and Brussels and not having
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  Speaker 1: some impact, but you know, barring I guess continued to tax.
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  Speaker 1: What we have seen historically are though those pauses are
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  Speaker 1: are short lived and that people you know, value travel,
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  Speaker 1: especially Europeans, and that they do return to travel. But
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  Speaker 1: that is one reason why there might be a near
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  Speaker 1: term pause. And the second one is you know, economic growth, uh,
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  Speaker 1: you know, I guess globally and especially internationally has shown
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  Speaker 1: some some signs of weakening. Dan Wessiliak, Thanks very much
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  Speaker 1: for joining US senior equity analyst to morning Star based
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