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Demand for Business Travel High Despite Turmoil

12 December 2016, 17:08 CET

Despite the global economic uncertainties brought about by political movements such as Brexit in the UK and the recent U.S. election results in November, global travel conglomerate Priceline Group are confident that travel is still in high demand after reporting strong results for their third quarter early in November, with the stock once again at an all-time high.

The company's results are flying in the face of the worldwide political and economic uncertainty that has adversely affected a number of companies, with investors forced to grapple with how the recent political changes have affected global currency and the financial markets.

Travel Still in Demand Despite Brexit

The United Kingdom voting in favour of Brexit and eventually putting steps in place to leave the European Union topped the headlines back in June, and sent the stock markets into a state of panic as the value of the British pound took a rapid decline. However, Priceline, which makes its money from people who travel, has reported accelerating growth throughout the late summer and early autumn, showing that although people around the world may be feeling the uncertainty, it hasn't stopped them from exploring. This could be due to an increase in facilities such as airbnb.com for cheaper accommodation, and spothero.com and yourparkingspace.co.uk, which make it easier for travellers to find cheaper parking options.

Priceline Enjoying High Demand

In the third quarter, Priceline enjoyed a total revenue increase of 19% and an increase in gross profit of 22%. Although net profits fell 58% due to a large impairment change related to the OpenTable company that Priceline acquired for around $2.6 billion in 2014, profits rose a total of 21% excluding that one item. Priceline's year-on-year increases demonstrate the power of the travel group's technology platform and the increasing demand for it from travellers, even as global events such as the U.S. election and Brexit have caused uncertainty and anxiety to rise.

OpenTable

During the third quarter, the big highlight was the loss from the OpenTable business, which included around $940 million related to goodwill impairment, which is used to describe the situation when the value accounted for on the books is more than the business' fair value. Although specific numbers were not given by Priceline in their press release regarding the OpenTable loss, management explained the loss as being due to a 'change in business strategy' and 'other growth opportunities' related to the international expansion of the company.

What Investors Should Look For

After a hugely successful third quarter for top-line growth, Priceline have seen booked-room nights slowing down during the fourth quarter. However, they reported that this is unlikely to be due to global uncertainty due to political events; but more due to the fact that this time of year tends to be slower for travel in general. In spite of this, the company has already seen profits growing from 13% to 18% during the fourth quarter.

Political events such as Brexit and the U.S. election results may have shocked the world and caused a great deal of uncertainty, but statistics show that no matter what, people still love to travel.

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