Big Bucks Behind OTA’s

The Online Travel Agency (OTA) industry continues to grow and evolve on an almost daily basis. There are very few instances when one does not come across William Shatner, negotiating prices for Priceline, or Travelocity’s gnome doing something entertaining. The hundreds of millions of dollars that these powerhouse OTA’s spend annually on advertising, is quickly trumped by their billion dollar annual revenues. The big bucks behind these OTA’s, compensates not only the management, but also the “owners”…, us shareholders.

The millions of dollars that The Priceline Group pays William Shatner, “the negotiator”, is meager as compared to the company’s 2013 revenue of $6.79 Billion. And after a year of successful commercials, acquisitions, and business proficiency, revenues grew 24%, to $8.44 Billion in 2014. Some analysts predict the number to be even more this year, substantiating the big bucks behind these OTA’s.

The clever and witty garden gnome, owned by Travelocity’s parent company Expedia, has created an immense amount of brand recognition, while delivering billions of dollars to the company’s balance sheets. In 2013, Expedia’s revenues exceeded $4.7 Billion, and in 2014, profits jumped 20% to $5.76 Billion.

What is the one consistent measure between the two companies? Profit… and lots of it!

To put this into perspective, the national average interest rate for a U.S. savings account is 0.17%. An investment in The Priceline Group, versus your money languishing in a savings account, would be a difference of roughly 14,000%. In other words, 14,000% more profit!

While the interest rates at banking institutions and the profits among OTA’s are of no real comparison, one thing is for sure, the big bucks behind OTA’s, result in big gains, big acquisition opportunities, and big profits for OTA shareholders.