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Priceline Finds Some Room in the Hotel Market

Priceline.com says its name your-own-price business model appears to be especially well suited to the hotel reservations procedure, as first-quarter-to-date hotel revenue increased approximately 35 percent over the corresponding period in 2002.

And that's a good thing, since Norwalk, Conn.-based Priceline saw its airline ticketing revenue decline in the last quarter of 2002 as the airline industry's financial difficulties continued in the wake of the terrorist attack on the United States on Sept. 11, 2001.

Priceline's chief financial officer, Robert Mylod, was expected to tell analysts at the Goldman Sachs Technology Investment Symposium in La Quinta, Calif., that the company's hotel revenue increase is partly the result of a new advertising campaign that shows how consumers can use Priceline.com's Name Your Own Price hotel room service to purchase discounted accommodations at hotels of all kinds.

In fact, Mylod's presentation showed that the hotels segment now represents more than half of all the booked offers on Priceline.

Priceline.com President and CEO Jeffery H. Boyd was quoted as saying earlier this month that "...hotel room nights sold were up 47 percent in 2002 compared to the previous year."

Priceline claimed that its "median customer savings" are 45 percent vs. Expedia and 46 percent vs. Hotels.com . Priceline guarantees its prices and says that if customers can find a better price for a similar room online, the company will refund the difference.

The company said its online ad budget is focused on its air travel service but hotels are being pushed in television and other off-line campaigns, including radio. And it expects to see a 25 percent gain in hotel revenue for 2003, as revenues begin to climb on a year-over-year basis in the second half of the year.

Clearly the market liked what it heard, as Priceline's stock was up 15 percent in mid-morning to $1.45. It had closed last Friday at $1.26. Priceline.com now has more than 9,000 hotel properties participating in its hotel program, covering the U.S., Europe, Asia, Canada, Mexico and the Caribbean. The company has predicted a return to profitability by the second quarter.