With all its fiscal problems, Europe may not seem the best place to do business. But it’s been a great place for leisure-travel Web operator Priceline (PCLN) .
Year-over-year traffic at Priceline’s prized Europe-based hotel site Booking.com has been growing close to 30% the last couple of quarters.
Austerity measures or not, the European leisure travel market remains the largest in the world in terms of money spent on travel, says Raymond James analyst Aaron Kessler, citing research from PhoCusWright.
And Priceline, through its Booking.com site, is the leader and fastest-growing company in the European online hotel booking market.
Since online penetration in Europe is still only about 25% for hotels, “there is still a lot of market share to be gained over the next few years,” Kessler said.
Priceline has morphed into an international company. Growth in the U.S. from Priceline.com’s famous “Name Your Own Price” product has slowed while Booking.com and Asian website Agoda.com have grown rapidly.
“The U.S. is doing okay, but it’s not driving the growth,” Kessler said.
It grew 13% in 2011 and will grow about 10% this year, he figures.
In the third quarter, the last reported by Priceline, international bookings grew 61% over the prior year after growing 79% in the second quarter.
About 80% of the company’s profits come from international markets, and more than 50% from selling hotel rooms to European travelers, says analyst Mark Mahaney of Citigroup.
“If any Internet consumer company has material exposure to Europe, it is Priceline,” he said.
“(Priceline’s) stock is very sensitive to the market’s perceptions of Europe,” he said. “If we had talked two months ago, we would have talked about how much correction Priceline’s stock went through.”
As anxiety over Europe eased in recent weeks, Priceline’s stock broke out.
On Feb. 13, shares jumped nearly 5% to 571 on news of a Greek austerity deal. On Feb. 21, the stock reached a 10-year high of 593.
“People are a little more positive that Europe is stabilizing,” Kessler said.
Europe is still a fluid situation.
After reporting a blowout third quarter in early November, Priceline tamped down expectations for the fourth quarter, typically a light period in the travel industry anyway. Some of the reasons included foreign-exchange head winds and economic uncertainty, including concerns over Greece’s potential default.
The Norwalk, Conn.-based company expects quarterly revenue to rise 27% to 32% to $928.7 million to $965.3 million. It guided per-share profit of $4.90 to $5. Both were lower than Wall Street views at the time.