Berk Sure Has A Way

I think the time is right to buy Expedia (EXPE) and short Priceline (PCLN).  Admittedly, Priceline has been growing faster and has done a better job internationally. Expedia, while still larger than Priceline, did not move aggressively enough internationally. Expedia has made some odd moves but it has powerful brands and assets including TripAdvisor. 

Both firms are challenged by:

• Disintermediation. The hotel chains and airlines don't like their profits going to the intermediators and are working to reduce their reliance on the biggest ones by increasing bookings on their own sites and getting better terms from competitors.

• Not a natural monopoly. Hotels will continue to expand their distribution. Other competitors are trying hard to best the leaders – including Ctrip, Orbitz, Travelocity and Yahoo Travel.

• New entrants. Aggregators or meta-search sites like Kayak and Bing Travel and emerging competitors Google (GOOG) and HipMunk are gaining market share and mindshare.

• Energy shock. Rising oil prices crimps travel more than almost any other industry. If Peak Oil is imminent, the travel industry will get crushed.

• Unrest and Protest. Unrest can be quite unsettling for travelers. Revolutions in the Middle East. Drug killings in Mexico. Riots in Greece and soon the other PIIGS. Saber rattling on the Korean Peninsula. 

• Frugality and Austerity. Saving money is a theme during these deleveraging times – travel is often the first thing to go. 

You can read the full article with more metrics at Seeking Alpha:

Priceline vs Expedia

Disclosure:  I am long EXPE and short PCLN.