It’s the end of an era. Almost twenty years after Jay Walker founded the company, Priceline eliminated its most famous feature: the ability to name your own price.
Priceline Also Feels The Effects Of Consolidation
Consolidation did them in. When there were a dozen major US carriers, each one was constantly fighting with the others for business. Fare wars and overcapacity ruled the day, meaning that airlines struggled to achieve a 75% load factor. With all those empty seats generating no revenue, airlines turned to Priceline to help them fill seats that would have otherwise gone empty.
But they couldn’t beat out the laws of supply and demand. The airlines haven’t eliminated fare wars, but they have become more careful about capacity after spent time in bankruptcy over the past two decades. The days of rampant growth and FU-coded fares are, for the most part, in the past. With load factors running into the 90s, airlines have no spare capacity to sell to Priceline. When was the last time that you had an empty seat next to you?
What’s Next for Priceline?
It’s not completely over for the “name your own price” crowd. Priceline will continue to offer the feature for hotels and rental cars, who don’t have the market positions that the airlines do. And, while you will no longer be able to name your own price for airfare, you can still search for cheap fares or packages.
I’m not too concerned for the future of Priceline, though. They have adapted their model numerous times over the years (Anyone remember Priceline’s grocery business?) and seem to come out ahead. And they’ve been through more than one cycle. Had you bought the stock when it bottomed after the internet bubble, you would have made almost 200X your money, from just over $7 per share to Friday’s close of $1,413.90. Now that’s a price that I’d like to name.
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