Cs 2017 Online Travel Primer

10 January 2017
Americas/United States
Equity Research
Consumer Internet
2017 Online Travel Primer

Research Analysts
INDUSTRY PRIMER
Paul Bieber
212 325 5774
paul.bieber@credit-suisse.com Scale Matters—Too Early to Call OTA
Stephen Ju
212 325 8662 Downfall
stephen.ju@credit-suisse.com
Vikram Kesavabhotla ■ Paul Bieber assumes coverage of Priceline, Expedia, and TripAdvisor.
212 538 8118
■ In this report, we provide a comprehensive overview of the online travel
vikram.kesavabhotla@credit-suisse.com
sector with take-aways from our proprietary consumer survey, travel and
Christopher Ford
212 538 8446 hotel market size, market share analysis, 2017 performance drivers,
christopher.ford@credit-suisse.com competitive analysis, hist. valuations, key risks, and key data for the sector.
■ Constructive on OTAs Despite Intense Competitive Landscape:
Despite intense competition, diminishing ADR tailwinds, and a new entrant
unlocking potentially cannibalistic supply, we have a constructive view on
the online travel market in 2017. Our positive view is based on: (1) a more
favorable global macro backdrop vs. 2016; 2) attractive room night unit
growth (mid-teens for EXPE and low-mid-20's for PCLN); (2) consolidation
and scale creating a duopoly between PCLN and EXPE, with Airbnb gaining
some share; (3) reasonable valuations, especially on 2018 estimates; and
(4) continued secular tailwinds with OTA inventory advantages vs. supplier
sites driving share gains (i.e., OTAs have a deeper inventory/selection).
■ Market Remains Large and Fragmented: The $1.3 trillion global travel
market is very large and fragmented. According to Phocuswright and our
estimates, we expect the online travel sector to reach $540bn in 2017, up
8% y/y and with $38bn in 2017 incremental growth. We expect the hotel
and total accommodation markets (hotel, vacation rental, and sharing
economy) to reach $473bn and $612bn, respectively, in 2017.
■ PCLN and EXPE Market Shares Remain Relatively Low: We estimate
PCLN and EXPE have 10.3% and 4.9% market share of room nights,
which implies a very fragmented market with significant opportunity to drive
additional share gains over the coming years.
■ PCLN (OP and $1,900 TP): Positive on: (1) low market share with runway
for growth, (2) marketing efficiency leadership and beneficiary of new
Google ad formats, (3) unparalleled scale in online travel, (4) well
positioned for Asia/China growth, (5) underappreciated alternative
inventory and review ecosystem, and (6) strong track record of execution
and EPS upside.
■ EXPE (OP and $145 TP): Positive on: (1) sum-of-parts valuation, (2)
HomeAway 2018 EBITDA opportunity, (3) attractive room night growth with
potential for acceleration, (4) inventory supply catch-up opportunity, and (5)
Trivago IPO providing public market valuation for attractive asset.
■ TRIP (Neutral and $51 TP): Instant book revenue headwinds, depressed
hotel shopper growth, uncertainty regarding cadence of marketing spend,
and review competition from Booking.com are concerns.
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST
CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit
Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware
that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report
as only a single factor in making their investment decision.
10 January 2017
Online Travel Primer—Executive Summary

Despite intense competition, diminishing ADR tailwinds, and a new entrant unlocking
potentially cannibalistic supply, we have a constructive view on the online travel market
and Online Travel Agencies (OTAs) in 2017. Our positive view is based on: (1) a more
favorable global macro backdrop vs. 2016 (see 2017 Global Outlook: A New Narrative
(Not a New Normal); 2) attractive room night unit growth (mid-teens for EXPE and low-
mid-20's for PCLN); (2) consolidation and scale creating a duopoly between PCLN and
EXPE, with Airbnb gaining some share; (3) reasonable valuations, especially on 2018
estimates; and (4) continued secular tailwinds with OTA inventory advantages vs. supplier
sites driving share gains (i.e., OTAs have a deeper inventory/selection).
While we believe the online travel market is more mature than the Street perceives, we
expect online secular tailwinds to continue in 2017, with healthy room night growth, OTA
scale in demand generation, and the unlocking of alternative inventory opportunity
(vacation rental and sharing economy) contributing to attractive growth for Priceline and
Expedia. We estimate that approximately $38bn in total travel bookings and $13bn in hotel
bookings will shift to the online channel in 2017. In addition, we expect alternative
inventory to fuel incremental growth for the OTAs.
We anticipate the online travel market will continue to evolve with the big (Priceline and
Expedia) getting bigger and an emerging new entrant (Airbnb) unlocking supply and
gaining some share in the alternative accommodation category, cannibalizing some hotel
bookings but also opening up a new category for OTAs. We expect competitive dynamics,
company-specific execution, cash deployment (acquisitions and/or share repurchases),
the macro-backdrop, and Asia demand to be the primary drivers of stock performance in
2017.
Finally, we believe that competition, potential ADR pressure, macro-volatility, and
unforeseen events such as terrorism will likely create stock volatility and periods of
multiple compression, creating opportunity for prudent stock selection.
Our Key Sector Take-aways Include:
 Large and Fragmented Global Market: The global travel market is very large
($1.3 trillion) and fragmented, and we expect $38bn in travel bookings to shift
online in 2017, with alternative inventory representing additional growth. We also
expect the total hotel and accommodation markets (hotel, vacation rental and
sharing economy) to reach $473bn and $612bn, respectively, in 2017.
 Priceline and Expedia Market Shares Remain Relatively Low: We estimate
Priceline and Expedia have 10.3% and 4.9% market share of room nights, which
implies a very fragmented market with significant opportunity to drive additional
share gains despite an increasingly mature market.
 Asia Driving Most Online Dollar Growth: The Asia travel market is the largest
travel market and will reach $392bn in 2017, with online travel reaching $146bn.
Importantly, the Asia online travel market has much lower total penetration rates
than the U.S. and Europe, so we expect the online share shift to support higher
growth rates in Asia for the foreseeable future. We expect Asia online bookings to
double by 2020 from $105bn in 2015, and we expect Asia online bookings to be
the largest driver of incremental sector growth over the coming years.
 ADRs No Longer a Tailwind; Could Become a Headwind: ADRs are no longer
a sector tailwind and could become a headwind, especially if hotel supply growth
accelerates in 2017-18.
 U.S. Online Travel More Mature than the Street Perceives: The sector is more
mature than investors perceive, with U.S. leisure market penetration approaching
70% in 2017 vs. investor perception of sub-50%.
2017 Online Travel Primer 2

10 January 2017
 Will China Outbound Travel Recover in 2017?: The China outbound market
deteriorated significantly in 2016 owing to yuan depreciation, the impact of
European terrorism, and anti-corruption measures by the Chinese government.
The key question is whether the China outbound market rebounds in 2017-18.
 Airbnb Is Top of Mind with Investors: Airbnb is a new entrant unlocking new
supply, some of which is cannibalistic to OTA and hotel bookings. The emergence
of Airbnb over the past several years has coincided with a generally favorable
macro-backdrop and within the context of a healthy hotel cycle, so the impact on
OTAs has been relatively limited thus far. Looking forward, several factors could
magnify the impact of Airbnb on OTAs, including (1) more mainstream consumer
adoption of Airbnb; (2) a weak macro environment that results in a flood of
inventory on Airbnb, causing Airbnb ADR pressure and potential hotel ADR
pressure; (3) removing some of the friction from the Airbnb experience (i.e.,
customer service, more online booking, etc.); (4) adding more hotel-like inventory
to Airbnb; and (5) Airbnb investing more in demand generation and brand
marketing to raise awareness, especially in the United States.
Key Sector Risks Include:
 FX: The Street has not adjusted sector estimates for 4Q FX volatility, so there is
some risk to 1Q and 2017 estimates.
 Competition: The online travel sector is extremely competitive, with many
companies competing to gain share of the $1.3 trillion market. In addition, the
market is extremely dynamic, with business models constantly evolving and
converging. We expect the emergence of Airbnb, hotels efforts to drive direct
bookings on their sites, competition between Expedia and Priceline, Google's
efforts to evolve its travel search results and travel offerings and TripAdvisor's
efforts to drive adoption of Instant Book to affect investor sentiment in 2017.
 Take Rate Pressure: We expect chains to extract some value from OTAs in the
U.S. when/if contracts are renewed in 2017 assuming a stable macro-backdrop,
which we view as a larger risk for Expedia than for Priceline given Expedia's large
chain exposure. (Priceline's hotel supply is more fragmented, and Priceline
previously indicated that it has less than 15% chain exposure.)
 Online Marketing Pressure: OTAs have experienced marketing deleverage over
the past several years owing to increased online marketing customer acquisition
costs, investments in new international markets, and investments in TV
advertising for Priceline.
 Lodging Cycle and Hotel Supply: ADR growth has been a significant tailwind
for OTAs over the past several years, and it's likely that ADRs will become a
modest headwind over the coming years, especially if (1) hotel supply growth
accelerates in 2017 and 2018, (2) macro conditions deteriorate, and (3) Airbnb
increasingly cannibalizes hotel bookings and/or Airbnb starts offering hotel
inventory on its marketplace.
 Terrorism and Natural Disaster: Historically, terrorist events and natural
disasters have negatively affected travel demand.

10 January 2017
Figure 1: Expedia, Priceline, and TripAdvisor 2016 Return vs. 2017 EPS
Revisions
30%
18%
20%
10%
0%
-10% -4%
-8%
-20% -17%
-30%
-40%
-42%
-50% -46%
EXPE PCLN TRIP
YTD Return 2017 EPS Change YTD
Source: Company data, Thompson Reuters, Credit Suisse.

10 January 2017
Figure 2: Online Travel Cheat Sheet and Investment Highlights and Risks
Priceline Expedia TripAdvisor

Rating OUTPERFORM OUTPERFORM NEUTRAL
Price Target $1,900 $145 $51
Market Cap (mn) $74,200 $17,207 $7,168

3 Month Stock Performance 0% -4% -25%
Last 12month Stock Performance 29% 1% -37%
2016 Gross Profit Growth Est. 19% 33% -2%
2017 Gross Profit Growth Est. 16% 14% 6%
2016 EBITDA Growth Est. 18% 47% -20%
2017 EBITDA Growth Est. 18% 15% 5%
Organic Unit Growth (last quarter) 29% 11%; Expect acceleration 3%
17 Incremental EBITDA Margin Est. 43% 29% 23%
Last Quarter Estimate Trend Increase Modestly lower Decrease
Valuation vs. 5 yr. avg. Above Above In-line
Margin Trajectory Modest expansion Modest expansion Flat to down
Growth Trajectory Decelerating Decelerating Modest acceleration
LTM Execution Positive Mixed to Positive Mixed
▪ Low market share at ~10%; long ▪ Low market share at ~5%; long
runway for growth in fragmented runway for growth in fragmented ▪ Top of marketing funnel leader
market market
▪ Leader in marketing efficiency; big
▪ Attractive room night growth with
beneficiary of new Google ad ▪ Under-monetized platform vs. scale
potential for acceleration in 2Q/3Q
formats.
▪ AWAY on track to deliver $350mn in ▪ Hotel shopper deceleration a big
▪ Unparalleled scale in online travel
Investment Highlights EBITDA in '18 concern
▪ Supply catch-up could better
▪ Well Positioned for China/Asia ▪ Expect instant book headwinds to
position EXPE vs. Booking.com and
growth persist
Airbnb
▪ Long track record of execution and
▪ Attractive sum of the parts valuation ▪ Not the only review game in town
EPS upside
▪ Under-appreciated alternative ▪ Trivago IPO provides public market
▪ Strategic asset value
inventory and review ecosystem valuation on attractive asset
▪ Competition especially from ▪ Competition especially from

▪ Competition
Expedia and Airbnb Priceline and Airbnb
▪ Google and marketing deleverage ▪ Google and marketing deleverage ▪ Google traffic dependency
▪ FX volatility given Int'l bookings mix ▪ Take rate pressure and ADR ▪ Revenue concentration with OTAs
▪ Potential for higher taxes in the ▪ Reliance on partners for instant
Risks ▪ Diminished China exposure
Netherlands book
▪ Partnership with TRIP may seed a
▪ AWAY business model transition ▪ Mobile monetization headwinds
competitor
▪ Take rate pressure and ADR ▪ Complicated given acquisitions ▪ Hotel shopper deceleration
▪ Terrorism and Brexit ▪ Terrorism and Brexit ▪ Terrorism and Brexit
Source: Company data, Credit Suisse estimates, Thompson Reuters.

10 January 2017
Company Timelines
Figure 3: Priceline Company Timeline
Source: Company data, Credit Suisse.
Figure 4: Expedia Company Timeline
Source: Company data, Credit Suisse.

10 January 2017
Key Take-aways from Our Consumer Survey

In December, we surveyed approximately 1,000 U.S. consumers from a cross-section of
socio-economic backgrounds about the online travel market. While online surveys have
inherent methodology biases, we view the survey results as informative about consumer
behavior regarding online travel and usage of various online travel properties.
Below we highlight our key take-aways from our survey:
 Consumers Perceive OTAs as Cheaper than Hotel Sites: Of respondents,
52% indicated that they believe OTAs have better prices than supplier sites (hotel
sites). Given these survey results, we think hotels will need to spend significant
marketing dollars to change consumer perception of a misperceived OTA pricing
advantage.
 Expedia Properties Have Highest Awareness in the U.S.: Expedia properties
dominate awareness among U.S. consumers, while Booking.com and Airbnb
have relatively low consumer awareness in the U.S. We think relatively low
awareness of Booking.com and Airbnb underscores the opportunity to raise
consumer awareness of Booking.com and Airbnb in the U.S. over the coming
years.
 Expedia Properties and Hotel Sites Are Used Most Frequently to Book in the
U.S.: Hotel sites were the most frequently used site for booking among our survey
respondents followed by Expedia properties. The survey results make sense to us
within the context of a concentrated hotel supply base in the U.S. vs.
internationally.
 Mixed Results on Intent to Use TripAdvisor to Book Accommodation: Of our
respondents, 31% indicated they were very likely to book their next vacation on
TripAdvisor, while 31% indicated they were unlikely to book their next vacation on
TripAdvisor and 39% had a neutral view. We think the results support our view
that TripAdvisor will need to invest significantly in consumer awareness/education
of its booking capability (Instant Book).
 Airbnb Customers Attracted by Relative Cost vs. Hotels and Local
Neighborhood: While our sample size of Airbnb customers was small, 73%
highlighted the cheaper cost of Airbnb vs. hotels while 50% highlighted the local
neighborhood as reasons they liked their Airbnb experience.
 Mixed Results on Intent to Use Airbnb to Book Accommodation: Of our
Airbnb, while 44% indicated they were unlikely to book their next vacation on
Airbnb and 27% had a neutral view. Of respondents, 52% indicated they were
unlikely to book their next business accommodation on Airbnb.
 Airbnb Customers Have High Customer Satisfaction: While our sample size of
Airbnb customers was small, 73% of Airbnb customers think they will use Airbnb
again.

10 January 2017
Figure 5: Of which of the following travel/booking sites are you aware? (Purple
= Expedia properties, Green = Priceline properties, Grey = Airbnb, and Blue =
Other)
80%
74%
71%
70%
65%
63% 63%
60% 59%
60%
50% 50%
50%
44% 42%
40% 36%
30%
20%
10%
2%
0%
Source: Credit Suisse, luc.id (N=1,020).
Figure 6: Which sites do you use or plan to use most often to book for leisure
travel/accommodation? (Purple = Expedia properties, Green = Priceline
properties, Grey = Airbnb, and Blue = Other)
25%
20% 19%
18%
15% 14%
11%
11%
10% 9% 8%
7%
6% 6% 6%
5%
5%
0%
Source: Credit Suisse, luc.id.

10 January 2017
Figure 7: Do you think sites like Expedia, Orbitz, Figure 8: On a scale of 1-5, please rank how likely
and Booking.com have better prices than you are to book your next vacation accommodation
Marriot.com, Hilton.com, etc.? on TripAdvisor (1=unlikely, 5=very likely).
28% 31% 31%
Yes 1 or 2
No 3
52%
I Don't Know 4 or 5
20%
39%
Source: Credit Suisse, luc.id (N=555). Source: Credit Suisse, luc.id (N=340).
Figure 9: How much do you trust the reviews on

TripAdvisor? (1=I don't trust them at all, 5= I trust Figure 10: Which of the following travel/booking
them a lot) sites are you aware of? (Airbnb)
7%
18% 1 or 2 36%
Aware of Airbnb
3 64% NOT Aware of Airbnb
4 or 5
56%

10 January 2017
Figure 12: On a scale of 1-5, please rank how likely

Figure 11: What did you like about your Airbnb you are to book your next vacation accommodation
experience? on Airbnb (1=unlikely, 5=very likely).
80%
73%
70%
60%
50% 29%
50%
42% 1 or 2
39% 44%
40%
3
30%
4 or 5
20%
13%
10% 27%
0%
Cheaper than a Local neighborhood I liked the host Allows me to meet Other
hotel locals
Figure 13: Do you think you will use Airbnb again?

No
2%
Maybe
25%
Yes
73%
Source: Credit Suisse, luc.id (N=64).

10 January 2017
OTA Basics
Travel Market Size
The global travel market is very large and fragmented and is in the middle to late stages of
the online share shift. With increasing competition and macro-volatility, the online share
shift remains a large driver of bookings and room night growth for OTAs. According to
Phocuswright and our estimates, the global travel market will reach $1.3 trillion in 2017,
with online bookings for unmanaged/leisure travel expected to reach $540bn. By
geography, the U.S. will generate $171bn in online bookings in 2017 (46% online
penetration of the total travel market), Europe will generate $153bn in online bookings with
no dollar growth owing to European FX depreciation (52% online penetration of the total
travel market), and Asia will generate $146bn in online bookings (37% online penetration
of the total travel market). Importantly, Asia continues to increase in importance for the
sector, and we expect Asia online bookings to double by 2020 to $211bn from $105bn in
2015.
We have adjusted the Phocuswright estimates owing to European FX depreciation, which
negatively affects dollar bookings and growth in 2015-17. Our forward estimates for
Europe utilize our FX team's 2017 year-end estimates for the Euro and British Pound
($1.00 and $1.20, respectively).
Figure 14: Total Travel Bookings, Online Bookings, and Online Penetration
Total Bookings ($B) 2014E 2015E 2016E 2017E 2018E 2019E 2020E
US 324 338 357 376 396 408 418
EU 353 321 314 296 305 313 321
APAC 351 346 367 392 420 452 488
LATAM 86 92 98 105 111 117 122
ME 72 80 89 98 106 114 122
Total 1187 1177 1225 1267 1339 1404 1471
Online Bookings (Leisure/Unmanaged) ($B) 2014E 2015E 2016E 2017E 2018E 2019E 2020E
US 143 152 162 171 180 188 196
EU 156 152 156 153 162 170 178
APAC 95 105 125 146 168 189 211
LATAM 23 27 31 35 40 43 46
ME 18 22 28 35 41 48 53
Total 434 458 502 540 591 638 685
Online Penetration 2014E 2015E 2016E 2017E 2018E 2019E 2020E

US 44% 45% 45% 46% 46% 46% 47%
EU 44% 47% 50% 52% 53% 54% 55%
APAC 27% 30% 34% 37% 40% 42% 43%
LATAM 27% 29% 32% 34% 36% 37% 38%
ME 25% 27% 31% 35% 39% 42% 44%
Total 37% 39% 41% 43% 44% 45% 47%
Source: Phocuswright, Credit Suisse estimates.
Looking forward, we expect 2017 and 2018 online bookings growth of 8% y/y and 9% y/y.

10 January 2017
Figure 15: Total Travel and Online Travel Bookings Growth

Y/Y Growth Total Bookings 2014E 2015E 2016E 2017E 2018E 2019E 2020E
US 4% 6% 5% 5% 3% 2%
EU -9% -2% -6% 3% 3% 2%
APAC -1% 6% 7% 7% 7% 8%
LATAM 7% 7% 6% 6% 5% 5%
ME 12% 11% 10% 9% 7% 6%
Total -1% 4% 3% 6% 5% 5%
Y/Y Growth Online Bookings 2014E 2015E 2016E 2017E 2018E 2019E 2020E
US 6% 7% 6% 5% 4% 4%
EU -3% 3% -2% 6% 5% 4%
APAC 11% 19% 17% 15% 12% 12%
LATAM 17% 17% 13% 12% 8% 7%
ME 23% 27% 25% 19% 15% 12%
Total 5% 10% 8% 9% 8% 7%
The U.S. and Asia will each contribute $9bn and $21bn in 2017 dollar growth, while
European bookings will be down y/y owing to European FX depreciation. We expect
Europe to again contribute to growth in 2018-2020. Asia is now the largest overall travel
market, and Asia online bookings are the largest driver of dollar growth for the sector.
Figure 16: Incremental Online Dollars and % of Total

Incremental Online Dollars ($B) 2014E 2015E 2016E 2017E 2018E 2019E 2020E
US 9 9 10 9 9 8 8
EU 13 -4 5 -3 9 8 8
APAC 13 11 20 21 22 21 23
LATAM 4 4 4 4 4 3 3
ME 4 4 6 7 7 6 6
Total 42 23 45 38 51 47 47
Incremental Online Dollars %

US 20% 40% 23% 25% 18% 17% 16%
EU 30% -19% 10% -8% 17% 18% 16%
APAC 30% 45% 44% 55% 44% 45% 48%
LATAM 9% 17% 10% 11% 8% 7% 7%
ME 10% 18% 13% 18% 13% 13% 12%
Total 100% 100% 100% 100% 100% 100% 100%
As for the U.S., the online travel industry is much more mature than investors perceive.
Historically, investors view online penetration within the context of Phocuswright data and
estimates that calculate online penetration as leisure/unmanaged bookings as a
percentage of the total travel market. If we exclude corporate travel from the potential
market opportunity (approx.one-third of the travel market in the U.S.), then the leisure
online penetration rate is significantly higher than investor perception.
We estimate that the online penetration for U.S. leisure travel in 2017 will approach 70%
vs. the conventional perception of sub-50% penetration. We concede that OTAs have
some exposure to corporate travel, but corporate travel constitutes only about 15-20% and
10% of bookings for Priceline and Expedia, respectively. The bottom line is that U.S.
leisure travel online penetration is higher than investors historically perceive, which implies

10 January 2017
the U.S. market is in the late stages of the online share shift and probably more mature
than the Street perceives.
Figure 17: U.S. Online Total Travel Penetration and Leisure Online Penetration
(Excluding Corporate)
100%
80%
60%
40%
20%
0%
2013A 2014E 2015E 2016E 2017E 2018E 2019E 2020E
Online Penetration Leisure Online Penetration
Source: PhoCusWright, Credit Suisse estimates.
Hotel Market Size

For purposes of our coverage universe, we focus on the hotel market, as hotel bookings
are the primary driver of OTA profit dollars and stock performance, especially for Priceline.
According to Phocuswright and our estimates, the global hotel market will reach $473bn in
2017, with online hotel bookings expected to reach $166bn (35% online penetration of the
total hotel market). North America will generate $62bn in online hotel bookings in 2017,
Europe will generate $38bn, and Asia will generate $44bn. North America and Asia will
each contribute $5bn and $6bn in 2017 dollar growth, while Europe will be a growth
headwind owing to European FX headwinds.
We note that Phocuswright European estimates appear low to us, as they include only
countries in the European Union. We have also adjusted the Phocuswright estimates
owing to European FX depreciation, which negatively affects dollar bookings and growth in
2015-17. Our forward estimates for Europe utilize our FX team's 2017 year-end estimates
for the euro and pound ($1.00 and $1.20, respectively).

10 January 2017
Figure 18: Total Hotel Bookings, Online Bookings, and Online Penetration
Total Hotel Bookings ($B) 2014E 2015E 2016E 2017E 2018E 2019E 2020E
US 133 144 157 168 176 181 185
EU 121 109 107 100 102 104 106
APAC 115 110 117 124 134 145 159
LATAM 45 48 51 55 59 61 63
ME 19 21 23 25 27 29 31
Total 432 433 454 473 498 521 544
Online Hotel Bookings ($B)

US 47 53 57 62 66 70 73
EU 39 38 39 38 40 42 44
APAC 30 33 38 44 50 55 62
LATAM 9 11 13 15 17 18 19
ME 4 5 7 8 10 11 13
Total 130 139 153 166 182 197 212
Hotel Online Penetration

US 36% 36% 36% 37% 37% 38% 40%
EU 32% 35% 37% 38% 39% 40% 42%
APAC 26% 30% 33% 35% 37% 38% 39%
LATAM 20% 22% 25% 27% 29% 30% 31%
ME 22% 25% 28% 32% 36% 39% 42%
Total 30% 32% 34% 35% 37% 38% 39%
In North America, hotel supply is concentrated among large chains and approximately
49% of online hotel bookings occur on supplier sites (hotel sites) vs. 51% on OTAs.
In Europe, hotel supply is fragmented and the hotel market is dominated by independent
hotels. As a result, only 30% of online booking bookings occur on supplier sites (hotel
sites) vs. 70% on OTAs. OTAs are the dominant booking channel in Europe.
Figure 19: North America Online Channel Mix Figure 20: Europe Online Channel Mix
Supplier
30%
Supplier
49% OTA
51%
OTA
70%
Source: Phocuswright, Credit Suisse estimates. Source: Phocuswright, Credit Suisse estimates.
Vacation Rental and Sharing Economy Market Size

Given Priceline's organic investment in alternative accommodation inventory over the past
several years, Expedia's acquisition of HomeAway, and the emergence of Airbnb as an
alternative booking channel, we think it's important to add vacation rental and sharing
economy bookings to our market size analysis. We expect vacation rental and sharing
economy bookings to collectively reach $139bn in 2017.

10 January 2017
Total Accommodation Market Size

We expect the total accommodation market opportunity to reach $612bn in 2017,
comprising $473bn in hotel bookings, $111bn in vacation rental bookings, and $29bn in
sharing economy bookings.
We note that our sharing economy bookings estimate does not represent a single
company.
Figure 21: Total Accommodation Bookings, Growth, Incremental Dollars, and Incremental Dollar Share
Total Accomodation Bookings ($B) 2014E 2015E 2016E 2017E 2018E 2019E 2020E
Hotel 432 433 454 473 498 521 544
Vacation Rental 101 105 108 111 114 118 121
Sharing Economy 4 9 17 29 44 62 81
Total 538 547 579 612 656 700 746
Y/Y Growth
Hotel 6% 0% 5% 4% 5% 5% 5%
Vacation Rental 3% 3% 3% 3% 3% 3% 3%
Sharing Economy NA 140% 80% 70% 55% 40% 30%
Total 6% 2% 6% 6% 7% 7% 7%
Incremental Dollars ($B)

Hotel 21 18 25 23 23
Vacation Rental 3 3 3 3 3 4
Sharing Economy 5 7 12 16 18 19
Total 9 32 33 44 44 46
Incremental Dollars %
Hotel 5% 67% 55% 57% 52% 51%
Vacation Rental 34% 10% 10% 8% 8% 8%
Sharing Economy 61% 23% 35% 35% 40% 41%
Total 100% 100% 100% 100% 100% 100%
Note: We note that our sharing economy bookings estimate does not represent a single company.
Importantly, as we look forward to 2017-2020, the sharing economy will likely become a
much larger drive of the sector's dollar growth.

10 January 2017
Figure 22: Sharing Economy Share of Incremental Growth for Accommodation

Market
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
2016E 2017E 2018E 2019E 2020E
OTA Market Share Analysis

Priceline and Expedia have emerged as the dominant global OTAs, as they have created
large marketplaces that connect consumers with a vast hotel supply. (Priceline has 550K+
hotels on its site and 1mn+ total properties, while Expedia has 320K+ hotels on its site.)
Priceline and Expedia also leverage their scale to drive demand globally through online
marketing spend. (We estimate Priceline and Expedia will spend $4.4b and $3.5bn+ on
marketing in 2017.) Finally, OTAs are very profitable with attractive free cash flow
generation, which has enabled Expedia to consolidate the sector with the recent
acquisitions of Wotif, Orbitz, Travelocity, and HomeAway, while Priceline made bolt-on
acquisitions several years ago (OpenTable and Kayak).
On the 3Q16 earnings call, Priceline indicated that it has 24.4mn bookable rooms on the
platform, comprising 16.9mn hotel rooms and 7.5mn alternative accommodation rooms
(vacation rental). If we assume a 65% occupancy rate in 3Q, then Priceline's 150mn room
nights sold in 3Q (disclosed) represents only 10.3% of the bookable rooms on the
platform. Similarly, if we assume Priceline's bookable rooms represent the overall market,
then Expedia's 72.0mn room nights booked in 3Q represents 4.9% market share excluding
HomeAway bookings.

10 January 2017
Figure 23: Priceline and Expedia Room Night Market Figure 24: Priceline and Expedia Room Night Market
Share Share
2Q16 3Q16 100%
Priceline Room Nights Sold 140,700 149,600
Priceline Bookable Rooms 23,700 24,400 80%
Priceline Quarterly Bookable Rooms 2,156,700 2,244,800
Assumed Occupancy Rate 65.0% 65.0%
60%
Bookable Bookable Rooms 1,401,855 1,459,120
Priceline Implied Market Share 10.0% 10.3%
40%
Expedia Room Nights Booked 60,900 72,000

20%
Expedia Implied Market Share 4.3% 4.9% 10.3%
4.9%
0%
Priceline Expedia
Source: Company data, Credit Suisse estimates. Source: Company data, Credit Suisse estimates.
Using a different methodology, we estimate 2017 Priceline and Expedia accommodation

bookings of $72.4bn and $32.4bn, which implies that Priceline and Expedia command
11.7% and 5.3% market share of the total accommodation market.
Figure 25: Another Take at Priceline and Expedia Market Share

Accomodation Bookings ($B) 2014E 2015E 2016E 2017E 2018E
Priceline 45.4 50.2 61.2 72.4 84.4
Expedia excluding HomeAway 20.2 25.7 30.0 32.4 36.9
Total Accomodation Market 537.6 546.6 578.7 612.1 656.4
Implied Market share

Priceline 8.4% 9.2% 10.6% 11.8% 12.9%
Expedia excluding HomeAway 3.7% 4.7% 5.2% 5.3% 5.6%
Y/Y Change
Priceline 0.7% 1.4% 1.3% 1.0%
Expedia excluding HomeAway 0.9% 0.5% 0.1% 0.3%
Source: PhoCusWright, Company data, Credit Suisse estimates.
Room Night Scale and Growth

While the online travel sector is very competitive and the emergence of Airbnb as a
potential alternative booking channel is top mind with investors, Priceline remains the
dominant OTA. We expect Priceline to sell 551 million and 669 million room nights in 2016
and 2017 vs. Expedia at 246 million and 276 million. Priceline sells more than two times
the room nights than Expedia, which is very impressive given that Priceline's growth is
organic. For some context, media reports (Reuters) indicate that Airbnb sold 40 million and
80 million room nights in 2014 and 2015, and we assume Airbnb room night growth
remained robust throughout 2016.

10 January 2017
Figure 26: Priceline, Expedia, and Airbnb Room Nights (in mns)
800
700
600
500
400
300
200
100
0
2013 2014 2015 2016E 2017E
Expedia Priceline Airbnb
Source: Company data, Reuters, Credit Suisse estimates.
Despite significant bookings scale and an online travel sector in the late stages of the
online share shift, Priceline and Expedia organic room night growth averaged 28% y/y and
16% y/y in 2016 through 3Q16. Priceline has a very long history of strong organic room
night growth, while Expedia room night growth has improved over the past few years as it
has realized the benefits of a large technology investment cycle that improved conversion
rates on Expedia.com
Figure 27: Priceline and Expedia Room Night

Growth Figure 28: Priceline Room Night Growth
35% 60%
30%
50%
25%
40%
20%
30%
15%
10% 20%
5% 10%
0%
1Q15A 2Q15A 3Q15A 4Q15A 1Q16A 2Q16A 3Q16A 0%
Expedia Priceline
U.S. Hotel Market

After a strong 2015, U.S. hotel industry fundamentals softened in 2016, as occupancy rate
and average daily rate (ADR) trends were volatile owing to the combined impact of
increasing supply (both hotel rooms and alternative accommodation inventory), macro-
volatility, and FX headwinds for European travelers visiting the U.S. As a result, 2016
RevPAR growth softened vs. 2015.

10 January 2017
Figure 29: North America RevPAR Growth

10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Source: STR, Credit Suisse estimates.
According to Smith Travel Research, U.S. ADRs averaged approximately $122 in 2016, up
approximately 15% from the prior 2008 peak. While ADRs remain strong in 2016, 2016 we
expect ADR growth to decelerate in 2017.
Figure 30: North America ADR Growth

5%
5%
4%
4%
3%
3%
2%
2%
1%
1%
0%
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Source: Company data, Credit Suisse estimates.
U.S. occupancy rates remain healthy at approximately 67% in 2016, which remains well
above the 15-year average occupancy of approximately 62%, but occupancy rates appear
to have peaked and we anticipate occupancy rates will soften in 2017.

10 January 2017
Figure 31: North America Occupancy Rate

80%
70%
60%
50%
40%
30%
20%
10%
0%
1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Importantly, as we look forward to 2017, ADR growth will likely soften owing to increased
hotel room and alternative accommodation supply and potential alternative
accommodation price deflation. Smith Travel Research expects 2017 ADR growth of 3.8%
in 2017, and CBRE Hotels expects 3.3% ADR growth in 2017.
From an OTA perspective, softening hotel fundamentals in the U.S. has a mixed effect on
OTAs, as diminishing ADR growth and potential ADR declines are a headwind to OTA
bookings, which are somewhat offset by increased access to hotel inventory as occupancy
rates weaken. Deteriorating hotel fundamentals also help the OTA opaque channel (i.e.,
Expedia's Hotwire brand and Priceline.com's Name Your Own Price product), which is a
liquidation channel, but the opaque channel has become a less important driver of OTA
financials and stock performance over the past several years.

10 January 2017
Mobile Continues to Be a Tailwind for OTAs

Mobile continues to be a tailwind for OTAs as mobile shifts some historically last-minute
bookings to the mobile/online channel. According to Phocuswright, U.S. total mobile
bookings will exceed $43bn in 2017 and drive almost $10bn in incremental dollar growth.
We also note that mobile bookings growth rates are very robust vs. high-single-digit
growth rates for total online travel globally. In 2017, U.S. mobile bookings will account for
26% of the online travel market and 12% of the total travel market.
Figure 32: U.S. Mobile Gross Bookings and % of Online and Total Travel
US$ in millions, unless otherwise stated
2013 2014 2015 2016 2017
Total Mobile Gross Bookings 12,109 17,068 25,472 34,044 43,853
growth y/y 95% 41% 49% 34% 29%
Share of Online Travel 9% 12% 17% 21% 26%
Share of Total Travel Market 4% 5% 7% 9% 12%
Source: Phocuswright, Credit Suisse.
According to Phocuswright, European total mobile bookings will exceed €35bn in 2017
and drive almost €7bn in incremental dollar growth. We also note that mobile bookings
growth rates are very robust vs. high-single-digit growth for total online travel globally. In
2017, Europe mobile bookings will account for 24% of the online travel market.
Figure 33: Europe Mobile Gross Bookings and % of Online and Total Travel
€in millions, unless otherwise stated
2013 2014 2015 2016 2017
Mobile Gross Bookings 10 15 21 28 35
growth y/y 50% 40% 33% 25%
Mobile Share of Online Gross Bookings 10% 13% 17% 21% 24%
growth y/y 3% 4% 4% 3%
According to Phocuswright, China, India, and Japan total mobile bookings will exceed
$53bn in 2017 and drive almost $15bn in incremental dollar growth. In 2017, China, India,
and Japan mobile bookings will account for 37% of the online travel market and 14% of
the total travel market.
Figure 34: China, India, and Japan Mobile Gross Bookings and % of Online and
Total Travel
2014 2015 2016 2017

Total Mobile Gross Bookings 15,395.0 24,939.0 38,218.0 53,635.0
growth y/y NA 62% 53% 40%
Share of Online Travel 16% 24% 31% 37%
Share of Total Travel Market 4% 7% 10% 14%
Interestingly, U.S. and U.K mobile booking penetration lags mobile booking penetration in
China, and we expect mobile bookings penetration to converge over the long term with
China's sector mobile booking penetration.

10 January 2017
Figure 35: U.S., U.K., India, Japan, and China Mobile Booking Penetration
U.S.
U.K.
India 2020
2015
Japan
China
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Importantly, mobile also offsets marketing deleverage by driving direct bookings to an OTA
app vs. through other paid channels such as Google. While OTAs have experienced
marketing deleverage over the past several years owing to increased online marketing
customer acquisition costs (especially in the search channel), investments in new
international markets, and investments in TV advertising for Priceline, over the long term,
it's possible that higher mobile booking mix could result in online marketing shifting from
an OTA industry headwind to a tailwind as a larger mix of bookings are made directly on
mobile apps vs. paid channels. However, we do not expect online marketing leverage over
the near to medium term. We expect OTAs to reinvest gains from higher mobile mix in
driving additional share gains.
Figure 36: Expedia Sales and Marketing as % of Revenue and Priceline

Marketing as % of Gross Profit
55%
50%
45%
40%
35%
30%
25%
20%
2013 2014 2015 2016E 2017E 2018E
Priceine Expedia

10 January 2017
Asia Travel Market Growing, but China

Outbound Soft in 2016
According to Phocuswright, the Asia travel market is the largest travel market and will
reach $392bn in 2017 with online travel reaching $146bn, up from $125bn in 2016.
Importantly, the Asia online travel market has much lower total penetration rates than the
U.S. and Europe, so we expect the online share shift to support higher growth rates in
Asia for the foreseeable future. We expect Asia online bookings to double by 2020 from
$105bn in 2015, and we expect Asia online bookings to be the largest driver of
incremental sector growth over the coming years.
Figure 37: Asia Total and Online Travel Market Size Figure 38: U.S., Europe, and Asia Online Penetration
US$ in millions, unless otherwise stated 60%
450.0
50%
400.0
350.0
40%
300.0
250.0 30%
200.0
20%
150.0
100.0
10%
50.0
.0 0%
2013A 2014E 2015E 2016E 2017E 2018E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
Total Travel Online travel US EU APAC
In 2012, China overtook the U.S. and Germany to become the world's largest market in
terms of international travel expenditure, and we expect China to be a big driver of the
travel market going forward. According to Phocuswright, China is the largest travel market
in Asia, with total travel bookings approaching $140bn in 2017.

10 January 2017
Figure 39: International Tourism Expenditure, 1995–2012

China
140
120
US
100
$ billions
80 Germany
60 UK
40 France
20 Australia
0
'95 '96 97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 15
Source UNWTO, Credit Suisse.
China is also the global leader in leisure travelers with approximately 230mn leisure
travelers, which compares with 127mn leisure travelers in the U.S.
Figure 40: Leisure Travelers by Country (in mns)

250
231
200
150
127
100
55
49
50 39
32 29
9
0
China U.S. Brazil Russia Germany U.K. France Australia
Over the near term, we anticipate some softness in outbound travel from China owing to
yuan depreciation, the lingering impact of recent terrorist attacks in Europe, and China's
anti-corruption campaign. According to the China National Tourism Administration (CNTA),
the growth of Chinese outbound visitors was 4.3% in 1H16, the slowest growth rate in six
years and the first time the growth rate has fallen into the single digits. CNTA expects
outbound visitors to drop to 3.9% in 2H16. According to a recent Phocuswright survey, the

10 January 2017
top ten outbound destination countries were Japan, Thailand, South Korea, United States,
Malaysia, Singapore, France, United Kingdom, Italy, and Canada.
Figure 41: China Outbound Travelers (in mns) Figure 42: China Outbound Travelers Growth
140 25%
120
120
109
20%
100 91
15%
80
59
60
10%
40
5%
20
0 0%
2013 2014 2015 1H16 2014 2015 1H16 2H16E
Source: CNTA, Credit Suisse. Source: CNTA, Credit Suisse.
Priceline has more exposure to the Asia travel market through its $2 billon investment in
Ctrip (the leading OTA in China), its ownership of Agoda (an Asia-focused OTA), local
Booking.com sites in multiple countries (i.e., the Philippines, Vietnam, Malaysia,
Indonesia, South Korea, Japan, Taiwan, etc.), and efforts to build out organic Booking.com
business in China. We think Priceline is strategically better positioned to capitalize on the
growth of the Asia travel market vs. Expedia.
Expedia sold its ownership stake in eLong (the number-two OTA in China) in 2015 and
has more limited exposure to the China market now. Expedia has exposure to Asia via its
ownership of Wotif (Australia-based OTA focused on Asia), local Expedia sites in multiple
countries (Taiwan, India, Japan, South Korea, New Zealand, Singapore, China, etc.),
Hotels.com local sites in multiple countries (Vietnam, China, Japan, South Korea,
Indonesia, India, Philippines, Singapore, Thailand, etc.), Trivago sites in multiple countries
(India, Singapore, Philippines, Malaysia, Indonesia, Australia, etc.), and through the
Expedia affiliate network.

10 January 2017
Airbnb
Airbnb has emerged as a disruptive force in the travel sector by opening a new category of
inventory to travelers. With 2.5mn+ listings on Airbnb, the selection of inventory on Airbnb
is vast, and we think a sub-set of Airbnb inventory competes with OTA hotel and vacation
rental inventory (i.e., home/apartment listings and some portion of room listings).
Figure 43: 2015 Airbnb Listing Mix

Shared
3%
Room
34%
Home/Apartment
63%
Source: AirDNA.
While Airbnb has emerged as a competitive force for OTAs and hotels, friction still exists
with certain aspects of the Airbnb marketplace (i.e., lack of 100% online booking,
consumer booking fee, customer service, regulatory issues, etc.). Also, Airbnb
differentiates itself by offering unique accommodation experiences, but the lack of
uniformity (like hotels) sometimes works against Airnbnb. (Sometimes travelers just want a
hotel with hotel amenities.) Despite some near-term limitations, we generally think some
Airbnb demand is incremental to the industry, while some Airbnb demand cannibalizes
bookings that historically flowed through OTAs and supplier sites (i.e., hotels).
In addition, OTAs have invested heavily in alternative inventory for their platforms.
Priceline has invested in building out bookable alternative inventory on Booking.com, and
Expedia acquired HomeAway to provide Expedia with vacation rental inventory.
Booking.com now has more than 560K vacation rental listings vs. 1.2mn for HomeAway
and 2.5mn listings for Airbnb. While Booking.com has less available inventory than
HomeAway and Airbnb, Booking.com's vacation rental inventory is 100% online bookable,
which is not currently true for Airbnb and HomeAway. As a result, there is less friction on
Booking.com than on HomeAway and Airbnb given that inventory is 100% online
bookable. In addition, Booking.com commissions are paid by the property owner, while
Airbnb and HomeAway have some consumer booking fees, which detracts from the
consumer booking experience and likely lowers overall conversion rates.
Figure 44: Booking.com, Airbnb, Expedia, and HomeAway Key Differences

Priceline (Booking.com) Expedia Airbnb HomeAway
Listings 550k hotels; 560k alternative 320K hotels 2.5mn 1.3mn+
Online Bookable 100% 100% 30% 1mn+
2015 Room Nights (Organic) 432mn 190mn 80mn NA
2015 Room Night Growth 25% 27% 100% NA
2016 Room Nights Growth (Organic) 27% 16% NA NA
2016 Room Night Growth 27% 21% NA NA
2016 Marketing Spend $3.7bn $3.5bn NA NA
Property Owner Fee ~15% ~13-20% 3% 8%
Consumer Booking Fee 0% 0% 6-12% 4-7%
Source: Company data, Credit Suisse estimates, Reuters.

10 January 2017
We believe OTA efforts to build out alternative inventory, when combined with OTA's scale
in global demand generation (i.e., marketing spend), may soften the impact of Airbnb over
the near term. The key question is whether Airbnb becomes a more mainstream option for
travelers, removes some friction from the Airbnb experience, and/or begins to offer unique
hotel inventory on Airbnb, which would make Airbnb much more cannibalistic for OTAs.
It's also important to note that the emergence of Airbnb over the past several years has
coincided with a generally favorable macro-backdrop and within the context of a healthy
hotel cycle, so the impact on OTAs has been relatively limited thus far. As either the
macro-environment becomes less favorable or the hotel cycle experiences ADR deflation,
we believe the impact of Airbnb on OTAs will increase, especially if Airbnb experiences a
flood of supply during a weak economic environment and Airbnb ADRs weaken, resulting
in accelerating hotel ADR declines.
There are a few signs that Airbnb could become a larger headwind for OTAs over the
coming years:
 Search Activity Continues to Grow: Search activity for "Airbnb" continues to
grow rapidly globally, and we view search activity as a proxy for consumer interest
and business momentum.
Figure 45: U.S. Search Activity for "Airbnb" (Indexed to 100)

100
90
80
70
60
50
40
30
20
10
0
Source: Google, Credit Suisse estimates.

10 January 2017
Figure 46: European Search Activity for "Airbnb" (Indexed to 100)

100
90
80
70
60
50
40
30
20
10
0
France Germany Italy Spain UK
Figure 47: Asia Search Activity for "Airbnb" (Indexed to 100)

100
90
80
70
60
50
40
30
20
10
0
Japan Thailand Australia Indonesia
 OTA Customers Are Cross-Shopping More on Airbnb: According to

Phocuswright, the percentage of OTA shoppers who also visit Airbnb increased
significantly from 4% in July 2014 to 15% in February 2015. While we don't have
more recent data, we would expect the percentage of cross shopping to now
exceed 25%, and cross-shopping likely lowers conversion rates for OTAs.

10 January 2017
Figure 48: Percentage of OTA Hotel Path Shoppers Who Also Visit Airbnb
16%
14%
12%
10%
8%
6%
4%
2%
0%
Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15
 Airbnb Emerging as a Cheaper Alternative to Hotels: Average daily rates on

Airbnb in the U.S. are less expensive than hotels according to Slice Intelligence.
Data from Slice Intelligence indicate that Airbnb was on average approximately
40% cheaper than hotels in select cities. Assuming Airbnb maintains its price
differential, it's likely Airbnb will emerge as a low-cost alternative to hotels for
some consumers. We note that Slice Intelligence's panel of 4mn consumers may
not be fully representative of the U.S. population. Our consumer survey validated
that Airbnb consumers are attracted to Airbnb by the relative lower cost vs. hotels.
Figure 50: Airbnb ADR Discount vs. Hotels in Select

Figure 49: Airbnb ADR vs. Hotels in Select Cities Cities
0%
162 -5%
San Antonio 90
-10%
Philadelphia 203
113 -15%
Chicago 207 -20%
135
-25%
Washington, D.C. 219
125 -30%
Los Angeles 229 -35%
121
-35% -36%
261 -40%
San Francisco 167
-45% -42% -43%
New York 292 -44% -44%
170 -50% -47%
0 50 100 150 200 250 300 350
Hotels Airbnb
Source: Slice Intelligence - July 2015-July 2016, Credit Suisse. Source: Slice Intelligence - July 2015-July 2016, Credit Suisse.
Our proprietary consumer survey indicated:

 Airbnb Has a Relatively Low Awareness in the U.S.: Expedia properties
dominate awareness among U.S. consumers, while Booking.com and Airbnb
have relatively low consumer awareness in the U.S. We think a relatively low
awareness of Airbnb underscores the opportunity to raise consumer awareness of
Airbnb in the U.S. over the coming years.
 Airbnb Customers Attracted by Relative Cost vs. Hotels and Local
Neighborhood: While our sample size of Airbnb customers was small, 73%

10 January 2017
highlighted the cheaper cost of Airbnb vs. hotels while 50% highlighted the local
neighborhood as reasons they liked their Airbnb experience.
 Mixed Results on Intent to Use Airbnb to Book Accommodation: Of our
Airbnb, while 44% indicated they were unlikely to book their next vacation on
Airbnb and 27% had a neutral view. Of respondents, 52% indicated they were
unlikely to book their next business accommodation on Airbnb.
 Airbnb Customers Have High Customer Satisfaction: While our sample size of
Airbnb customers was small, 73% of Airbnb customers think they will use Airbnb
again.

10 January 2017
OTA Sector Key 2017 Performance Drivers

Macro
We expect global GDP growth to run at 3.0% this year, its strongest pace since 2011. The
global economy has already accelerated out of its languor of the last couple of years, and
we expect it to sustain that pace through the course of this year. This is not yet a game-
changer. Growth is moving from the bottom end of its range of recent years towards its
top. We don't yet see conditions for growth to break out of that range. A new era of
political economy will not gain traction on economic performance for some time. But this
quickening of global growth, accompanied by a surge in headline inflation, could
comfortably fit the new narratives of regime change.
 U.S. - US growth slumped in 2016, but several key headwinds are fading. We
expect the current rebound to continue into 2017, with strong consumption and
stabilizing business investment driving growth back into the mid-2% range.
However, political risks loom large, and forecasts will likely shift as policy details
emerge.
 Europe - Political shocks buffeted Europe in 2016, but economic activity
remained serene throughout. Euro area growth sustained a steady pace of over
1.5% through the course of the year, with remarkably little volatility. We expect
growth to remain resilient in the face of ongoing political stress in 2017.
 China - Politics will likely be dominant in 2017. The Chinese leadership will need
to deal with a highly uncertain internal and external political environment in 2017.
The Chinese Communist Party will host the 19th Party Congress in late 2017. The
event is pivotal for the future rule of President Xi Jingping. His retirement from rule
in China is scheduled for 2022, but this meeting could create conditions for him to
extend his rule beyond that time. So this meeting may decide China’s political
landscape in next decade.
Further, the new Trump administration in the US could add uncertainty to Chinese
external politics. So the authorities will likely place social and economic stability
as a top priority throughout 2017.
Ahead of the political transition, we believe the government will adopt pro-growth
measures to boost economic growth. We expect China's GDP growth to
accelerate to 6.8% in 2017; our projection is higher than the current consensus
forecast of 6.4%.
 Asia - We expect the region's nominal GDP growth to improve to 7.3% from 6.3%
this year, reflecting some pick-up in real GDP growth in all economies except
Singapore. We also expect inflation to rise. The likely acceleration in real GDP
growth stems from a combination of stronger commodity-related income,
expected recovery in global growth lifting exports, and fiscal policy boosts. We
think the macro backdrop is now more favorable for banks, while we continue to
be constructive on a consumer spending recovery in the Philippines, Indonesia,
and Thailand.
 Latin America - We project a modest improvement in regional growth prospects
for 2017 relative to 2016. Still, Latin America should continue to be the region
with the weakest growth globally, at approximately 1.0% in 2017. We project
slightly stronger growth in Chile, Colombia and Peru. We think that three of the
four economies we cover that saw a contraction in real GDP in 2016 will post zero
or positive growth this year (Argentina, Brazil and Ecuador), while the contraction
in Venezuela in 2017 should be less pronounced than in 2016. The only Latin
American country that we cover that will most likely see lower growth in 2017 than
in 2016 is Mexico, partly as a result of the shock to business confidence from the

10 January 2017
results from the US elections and despite expectations of stronger growth in the
US. Meanwhile, we project that inflation will remain largely in check in most
countries under our coverage, with Venezuela remaining a notable exception.
See 2017 Global Outlook: A New Narrative (Not a New Normal) for more details on the
Credit Suisse macro outlook.
Company-Specific Execution
Given a more difficult ADR backdrop coupled with increased competition, we think
execution will be a large driver of OTA performance in 2017. Historically, Priceline
execution as defined by delivering consistent room night and EPS growth has far
exceeded Street expectations. In addition, Priceline has managed to navigate the rapidly
evolving online marketing landscape without significant disruptions more consistently than
competitors. With increasing competition, a less favorable ADR environment, and the rapid
growth of a new entrant unlocking new supply, we think execution will be a more important
determinant of performance in 2017 vs. 2015-16.
Competition
We expect the following to shape the competitive landscape in 2017, affecting investor
sentiment:
 The emergence of Airbnb and consumers embracing alternative accommodation
inventory;
 Expedia increasing hotel supply and improving conversion rates on Expedia.com;
 Integration of HomeAway inventory on Expedia.com;
 TripAdvisor's efforts to drive bookings via its Instant Book product;
 Hotel companies efforts to drive direct bookings on their sites by offering lower
prices; and
 Google's efforts to evolve its travel offering by making changes to its search
results and introducing new travel-focused ad units and travel products.
Use of Cash
OTAs have attractive free cash flow characteristics, and we expect Priceline and Expedia
to generate $4.1bn and $1.3bn in 2017 free cash flow. Priceline has $13.6bn of cash,
short-term investment and long-term investments on its balance sheet, and $6.4bn in debt.
However, we highlight that $10.7bn of Priceline's cash was domiciled offshore as of
6/30/16 vs. $1.6bn onshore. Expedia has $755mn in net debt. We think both Priceline and
Expedia have the financial flexibility to deploy cash on either acquisitions or share
repurchases.
In 2014-15, Expedia embarked on an aggressive consolidation strategy and spent
approximately $7bn acquiring Trivago, Wotif, Travelocity, Orbitz, and HomeAway. Expedia
also invested $270mn in Decolar, a leading OTA in Latin America.

10 January 2017
Figure 51: Expedia Acquisition History

Date Acquirer Target Value Description
15-Jul-08 Expedia Venere €200 Corporate travel
18-Oct-10 Expedia Mobiata Not disclosed Mobile app
12-Mar-12 Expedia Via Travel Not disclosed Nordic corporate travel
12-Mar-14 Expedia Trivago (62% stake) $560 Hotel meta search
26-Jun-14 Expedia Auto Escape Group Not disclosed Rental car booking sites
6-Jul-14 Expedia Wotif $650 Australian online travel agency
23-Jan-15 Expedia Travelocity $280 Online travel agency
17-Sep-15 Expedia Orbitz $1,600 Online travel agency
4-Nov-15 Expedia HomeAway $3,900 Leading vacation rental site
Priceline acquired Active hotels and Booking BV more than ten years ago and combined
the two entities to form Booking.com. Booking.com drives the vast majority of Priceline's
financial performance, and Booking.com growth is organic. Given Booking.com's growth
and value creation for Priceline, the acquisitions of Active Hotels and Booking BV
combined are among the most successful acquisitions across the entire technology
landscape. Priceline acquired Kayak in 2012 and OpenTable in 2014, and Priceline's
recent acquisition activity is more bolt-on and hotel-technology-oriented acquisitions.
Priceline has also invested $1.9bn in Ctrip, the leading OTA in China, and $60mn in Hotel
Urbano, a leading OTA in Brazil.
Figure 52: Priceline Acquisition History

21-Sep-04 Priceline Active Hotels Not disclosed European online travel agency
14-Jul-05 Priceline Booking BV $133 European online travel agency
10-Nov-07 Priceline Agoda Not disclosed Asia online travel agency
18-May-10 Priceline Rentalcars.com Not disclosed Rental car booking site
9-Nov-12 Priceline Kayak $1,800 Meta search
10-Jun-14 Priceline Buteeq/Hotel Ninjas $100 Hotel software
19-Jun-14 Priceline OpenTable $2,600 Restaurant booking site
3-Sep-15 Priceline AS Digital Not disclosed Restaurant booking site
8-May-15 Priceline Pricematch Not disclosed Data analytics for hotels
Uncertainty Surrounding China Outbound Travel Growth

China outbound travel demand softened throughout 2016 owing to yuan depreciation and
the negative impact of European terrorist events. The key question is whether China
outbound travel growth will accelerate back to double-digit growth or remain in the low
single digits.
Competition
The online travel sector is extremely competitive, with many companies competing to gain
share of the $1.3 trillion market. In addition, the market is extremely dynamic, with
business models constantly evolving and converging. We expect the following to shape
the competitive landscape in 2017:
 The emergence of Airbnb and consumers embracing alternative accommodation
inventory;

10 January 2017
 Expedia increasing hotel supply, especially in international markets, and

improving conversion rates on Expedia.com;
 Integration of HomeAway inventory on Expedia.com;
 TripAdvisor's efforts to drive bookings via its Instant Book product;
 Hotel companies efforts to drive direct bookings on their sites by offering lower
prices; and
 Google's efforts to evolve its travel offering by making changes to its search
results and introducing new travel-focused ad units and travel products.
Figure 53: Online Travel Competitive Landscape
Top of Funnel Vacation Hotel Corporate Ride Restaurant

Priceline Expedia Other OTAs Demand Rental/Alternative Companies Travel Sharing Reservations
Booking.com Expedia.com Ctrip (PCLN TripAdvisor Airbnb Marriot Carlson Wagonlit Uber OpenTable (PCLN)
minority
Priceline.com Hotwire.com shareholder) Google HomeAway (EXPE) Starwood American Express Lyft LaFourchette
(TRIP)
Agoda.com Orbitz.com Hotel Urbano Trivago (EXPE VRBO (EXPE) Intercontinental Thomas Cook BlaBlaCar
(PCLN minority majority Seatme (YELP)
Kayak.com Travelocity.com shareholder) Holiday Lettings Wyndham Tui Travel Zipcar (Avis)
shareholder) (TRIP) Zomato
Rentalcars.com Wotif Qunar (Ctrip Choice Hotels Egencia (EXPE) Gett
Despegar/Decolar Niumba (TRIP) Bookable
OpenTable.com Cheaptickets (EXPE minority minority Accor Booking.com Didi Kuaidi
shareholder) shareholder) Flipkey (TRIP) (PCLN) Quandoo
eBookers Best Western Ola
Laterooms (Tui) Kayak (PCLN) Vacation Home
HotelClub Retals (TRIP) Jing Jiang
HRS Skyscanner
Carrentals.com (BIDU) Onefinestay (Accor) Hilton
Hotel.de
Venere Momondo Wimbdu Carlson
eDreams Odigeo
HomeAway HotelsCombined 9flats Hyatt
Opodo
Trivago Traveloka Couchsurfing Motel 6
Travel Republic
Egencia Tripping HouseTrip La Quinta
Promovacances
Cheapoair VayStays Premier
eLong
VacayHero Whitbread
(CTRP minority
shareholder)
Roomorama
ViajaNet
Travelmob
HotelTonight
Stopsleepgo
Bookit, Getaroom
Bedycasa
Makemytrip
WaytoStay
AutoEurope
Bravofly. Webjet
Hipmunk, Iibibo
Source: Credit Suisse Lola
Source: Credit Suisse.
Overall, we think OTAs have a favorable competitive position vs. supplier direct (hotel
sites), as OTAs offer vast supply selection, app ease of use, and widespread app
distribution, which are supported by billions of dollars in marketing spend for demand
generation. We estimate Priceline and Expedia will spend $4.5b and $3.5bn+ on
marketing in 2017. Consumer preference for OTAs vs. suppliers' sites is also a global
trend evidenced by OTA vs. supplier survey results highlighted in Figure 54 and Figure 55.

10 January 2017
Figure 54: Which of the following travel Web sites or

apps do you use to shop for hotels or
accommodations? Figure 55: Reasons Travelers Book with OTAs
100%
90% I am a member of the online agencies…
80% I couldn't find what I was looking for…
70% I like their mobile app
60% It's easy to change/cancel a booking
50% The site has more selection
40% It's easy to book travel in one place
30% Online sites typically have better prices
20% I trust the brand
10% I am used to booking with online travel…
0% The site is easy to use
U.S. UK Australia France Germany Russia China Brazil
0% 10% 20% 30% 40% 50%
OTA Supplier
While we note that the majority of travel bookings still take place on desktops, looking at
the top travel apps on the iOS and Android app stores across several geographies
enables us to make several conclusions about the global competitive landscape:
 Booking.com has a leading position in most European markets, and its position in
the U.S. lags its position in Europe;
 Expedia is playing catch-up to Booking.com internationally;
 TripAdvisor is very popular globally;
 Airbnb is emerging as a global competitor for OTAs;
 Agoda (Priceline) has strong position in Asia (ex-China);
 Expedia appears well positioned in Brazil given its ~$300mn investment in
Decolar; and
 Hotels do not appear as top ten apps in any of the selected countries we
examined.

10 January 2017
Figure 56: Top Ten Travel Apps Across Select Geographies

U.S Germany UK France
Rank iOS Android iOS Android iOS Android iOS Android
1 Uber Yelp DB Navigator Google Earth Uber Booking.com Uber BlaBlaCar
2 Lyft Google Earth Booking.com Immobilien Scout24 Trainline UK TripAdvisor SNCF Airbnb
3 Yelp Airbnb TripAdvisor Booking.com TripAdvisor Ryanair BlaBlaCar Booking.com
4 Uber Driver GasBuddy FlixBus FlixBus Booking.com Google Earth Voyages-scnf.com Google Earth
5 Google Earth United Airlines Airbnb clever-tanken.de easyJet Airbnb Airbnb TripAdvisor
6 Airbnb TripAdvisor Google Earth TripAdvisor Ryanair easyjet Booking.com PagesJuanes
7 TripAdvisor Booking.com WelectGo Airbnb Google Earth The AA RATP OUIBUS
8 United Airlines Southwest Airlines Ryanair BlaBlaCar National Rail Enquiries London Live TripAdvisor Mappy
9 Southwest Airlines Google Maps Lufthansa Ryanair Airbnb Skyscanner FlixBus OUIGO
10 Fly Delta Fly Delta mytaxi GPS Navigation/Maps The AA RinGo Parking Heetch FlixBus
Spain Italy Netherlands Russia

1 Booking.com Booking.com TripAdvisor TripAdvisor 9292 9292 Yandex.Taxi 2GIS: map & directory
2 Ryanair TripAdvisor Trenitalia Google Earth NS Reisplanner NS Reisplanner Uber Yandex.Navigator
3 TripAdvisor Google Earth Ryanair Booking.com Parkmobile Parking Parkmobile Gett Yandex.Maps
4 Airbnb BlaBlaCar Booking.com Ryanair Uber Booking.com BlaBlaCar BlaBlaCar
5 BlaBlaCar Ryanair FlixBus FlixBus Booking.com Google Earth Rutaxi GPS АнтиРадар
6 RenfeTicket Airbnb eDreams Airbnb TripAdvisor Onderweg Rail Russia MAPS.ME
7 Uber Wikiloc Airbnb GPS Navigation Airbnb VakantieVeilingen Aeroflot Navitel Nvigator GPS
8 Vueling Airlines SocialDrive Google Earth MAPS.ME KLM Airbnb OneTwoTrip Live Camera Viewer
9 Skyscanner MAPS.ME Skyscanner Skyscanner Pechhulp Allsecur Booking.com Aeroflot
10 Cabify mytaxi Trainline Europe BlaBlaCar OV-chipkaart OV-chipkaart Maxim Aviasales
Brazil Thailand Indonesia Australia

1 Uber Decolar.com Traveloka Traveloka Grab GO-JEK Uber Airbnb
2 Airbnb Google Earth Grab Google Maps GO-JEK Traveloka Airbnb Booking.com
3 Decolar.com Airbnb AirAsia Google Earth Uber Google Maps Jetstar Google Earth
4 Booking.com Trivago Agoda AirAsia Traveloka Google Earth Virgin Australia TripAdvisor
5 99Taxis Booking.com Nok Air DekDev, Inc. Agoda Friend Locator Booking.com TripView Lite
6 Cabify Google Maps Uber Nok Air Tiket.com GPS Navigation/Maps Qantas Public Transport Victoria
7 LATAM Entertainment WiFi Map Booking.com Agoda Pegipegi.com Tiket Kereta TripAdvisor Qantas Airways
8 Azul Airlines Friend Locator Thai Lion Air GPS Navigation/Maps Google Street View Pegipegi otel TripView Lite Opal Travel
9 TripAdvisor Multiplus Cheap flights Thailand Post Garuda Tiket.com Public Transport Victoria Pass2U Wallet
10 Trivago TripAdvisor THAI Smile Airways Thai Lion Air Kereta Trivago Google Earth Jetstar
Source: App Annie (November 2016), Credit Suisse.
Figure 57: Booking.com, Expedia, TripAdvisor, and Airbnb App Rankings in Select Countries
U.S Germany UK France
App iOS Rank Android Rank iOS Rank Android Rank iOS Rank Android Rank iOS Rank Android Rank
Booking.com 15 7 2 3 4 1 6 3
Expedia 13 11 48 57 30 25 68 70
trivago 29 18 43 24 26 14 51 33
TripAdvisor 7 6 3 6 3 2 8 5
Airbnb 6 3 5 7 9 5 5 2
Spain Italy Netherlands Russia

Booking.com 1 1 4 3 5 4 9 12
Expedia 68 65 29 37 40 43 NR NR
trivago 29 24 20 18 46 28 39 28
TripAdvisor 3 2 1 1 6 11 14 23
Airbnb 4 6 7 6 7 8 24 32
Brazil Thailand Indonesia Australia

Booking.com 4 5 7 14 18 19 5 2
Agoda NA NA 4 7 5 NA NA NA
Expedia 56 79 19 23 51 NA 22 23
trivago 10 4 21 21 12 10 18 13
TripAdvisor 9 10 15 18 17 22 7 4
Airbnb 2 3 17 31 14 27 2 1
Source: App Annie (November 2016), Credit Suisse.
Take Rate Pressure

While hotel fundamentals weakened in the U.S. in 2016, occupancy rates remain above
historical averages and hotel sector consolidation has increased the bargaining power of
large chains in the U.S. We expect chains to extract some value from OTAs in the U.S.
when/if contracts are renewed in 2017 assuming a stable macro-backdrop, which we view
as a larger risk for Expedia than for Priceline given Expedia's large chain exposure.
(Priceline's hotel supply is more fragmented, and Priceline had indicated that it has less

10 January 2017
than 15% chain exposure.) We note that take rate pressure on Expedia abated in 3Q16,
but recent commentary from Marriot indicates that Marriot’s contract with Expedia has
better terms than Starwood, so it’s likely Marriot will revisit commission rates with Expedia.
In addition, Expedia take rates declined in 2016, as Expedia used consumer loyalty
incentives and lower hotel commissions to increase supply in international markets to drive
bookings. Also, the Expedia Traveler Preference program drove mix-shift to agency
bookings (lower commission vs. merchant) over the past few years (lower take rate vs.
merchant).
It has been a challenge to determine Expedia's organic take rates given its recent
consolidation efforts, but investors may focus more on take rates in 2017 as year-over-
year take rate comparisons become cleaner. Investors have largely given Expedia a pass
on take rate compression over the past 18 months, as lower take rates have been offset
by faster room night growth. Should Expedia's room night growth decelerate, we expect
take rate pressure to become an investor focal point for Expedia. We note that Priceline's
take rate at Booking.com has been very stable over the past few years largely owing to
fragmented international supply.
Figure 58: Priceline Take Rate (Agency Figure 59: Expedia Take Rate (Core OTA
Revenue/Bookings) Bookings/Revenue
15.0% 15.0%
14.5% 14.5%
14.0% 14.0%
13.5% 13.5%
13.0% 13.0%
12.5% 12.5%
12.0% 12.0%
11.5% 11.5%
11.0% 11.0%
10.5% 10.5%
10.0% 10.0%
2013A 2014A 2015A 2016E 2017E 2018E 2013A 2014A 2015A 2016E 2017E 2018E
Terrorism and Natural Disasters

Historically, terrorist events and natural disasters have negatively affected travel demand.
For example, the Paris terrorist attacks (2015), Hurricane Sandy (2012), Japan Tsunami
(2011), Thai flooding (2011), Thai civil unrest (2010 and 2014), etc. have disrupted travel
demand over the short term, but demand quickly recovers from these disruptions. Also, we
highlight that recent terrorist attacks in Europe have negatively affected Chinese outbound
travel to Europe.
Foreign Exchange Volatility
Expedia generates approximately 45% of revenue in international markets, and Priceline
generates 85% of gross profit in international markets (approx. 60% of which is in Europe).
As a result, FX volatility can create demand volatility and positively or negatively affect
both companies' financial performance, as operating results from international operations
are translated in U.S. dollars. The Credit Suisse Foreign Exchange Strategy Team 12-
month euro and pound forecasts are $1.00 and $1.20.

10 January 2017
Marketing Deleverage and Google

OTAs have experienced marketing deleverage over the past several years owing to
increased online marketing customer acquisition costs, investments in new international
markets, and investments in TV advertising for Priceline. Google remains a large X factor
for the OTA sector, as it is an important traffic acquisition channel. Google constantly
makes changes to its search engine results that drive inflation in search marketing costs
and lower the volume of free traffic generated on Google for OTAs. Newsflow surrounding
Google changes to the way it displays travel-related search results or potential new
Google travel-focused products historically negatively affect OTA sentiment. According to
SimilarWeb, search drives approximately 39% of desktop traffic on average for online
travel sites.
Figure 60: Desktop Search Traffic Mix for Online Travel

80%
72%
69%
70%
60%
50%
41% 41% 39%
40% 34% 34% 33%
30%
30% 26% 25%
22%
20%
10%
0%
Source: SimilarWeb, Credit Suisse estimates.

10 January 2017
Figure 61: Desktop Traffic Mix for Online Travel

100%
80%
60%
40%
20%
0%
Direct Referral Search Social e-Mail Display
Source: SimilarWeb, Credit Suisse estimates.
The three most important recent Google travel initiatives are Google Hotel Ads, Google
Destinations, and Google Trips.
 Google Hotel Ads: Google launched Google Hotel Ads in 2015. The ad format
enables hotels to display available rates on Google search results and is priced
on a commission basis vs. conventional Google AdWords that are priced on a
CPC basis. Commission-based pricing enables hotels to compare ad costs vs. the
OTA channel and creates more competition on Google, creating search channel
cost inflation for OTAs.
 Google Destinations: Google Destinations is a new search experience that
helps consumers discover and plan vacations. Google Destinations offers
consumers a curated search results page, which could be disruptive to OTAs and
content providers given that the search results are more curated than
conventional search results. Google Destinations is currently a mobile-only
experience.
 Google Trips: Google recently launched Google Trips, a stand-alone Android
and iOS app that helps users plan travel, including integrating itinerary information
from Gmail and providing information on things to do, restaurants, potential
itineraries, and important city-specific information. Importantly, Google Trips
includes crowdsourced information as well as information from Google Maps
(business listings, photos, and reviews) and has the potential to negatively affect
companies such as Yelp and TripAdvisor.

10 January 2017
Figure 62: Google Trips Screenshot Figure 63: Google Trips Screenshot
Figure 64: Google Hotel Ads Screenshot Figure 65: Google Destinations Screenshot

10 January 2017
Brexit
Uncertainty exists about the long-term impact of Brexit. Generally, we expect British
travelers to trade down as they travel to Europe or internationally owing to the depreciation
of the pound (less affordable), but the impact to OTAs will likely be somewhat offset by
more inbound travel to Britain owing to increased affordability. Priceline has significantly
higher exposure to Britain and Europe vs. Expedia
Lodging Cycle and Hotel Supply
According to Smith Travel Research, weakening occupancy rates and RevPAR growth
likely signal a weakening lodging cycle. While ADR growth was 3.3% y/y in 2016, it
decelerated from 3.7% y/y in 2015. With hotel supply growth returning to historical levels,
it's likely that ADR growth will compress again in 2016. ADR growth has been a significant
tailwind for OTAs over the past several years, and it's likely that ADRs will become a
modest headwind over the coming years, especially if (1) hotel supply growth accelerates
in 2017 and 2018, (2) macro conditions deteriorate, and (3) Airbnb increasingly
cannibalizes hotel bookings and/or Airbnb starts offering unique hotel inventory on its
marketplace. Smith Travel Research expects ADR growth of 3.8% in 2017, while CBRE
Hotels expects 3.3% ADR growth in 2017.

10 January 2017
Valuation
We use P/E multiples for the online travel companies for ease of comparability.
We note that Priceline changed its Non-GAAP reconciliation methodology recently (no
longer excludes SBC from its Non-GAAP reconciliation). The methodology change
reduced Priceline's Non-GAAP EPS by ~$6 and makes Priceline look optically more
expensive by 1-2 multiple points.
Priceline has traded at a 10-25x forward P/E multiple over the past ten years with an
average P/E of 18x on FY2 estimates. Priceline currently trades at ~21x our 2017 EPS
estimate of $72.75 and 18x our 2018 EPS estimate of $84.35. Priceline also trades at a
6% FCF yield on our 2018 FCF estimate of $4.6bn.
Figure 66: Priceline Historical P/E – FY2

30.0x
25.0x
20.0x
FY2 P/E
15.0x
High
Average
10.0x
Low
5.0x
0.0x
Source: Company data, Thompson, Credit Suisse estimates.
Expedia has traded at a 5-25x forward P/E multiple over the past ten years with an
average P/E of 12x on FY2 estimates. Expedia currently trades at 22x our 2017 EPS
estimate of $5.77 and 18x our 2018 EPS estimate of $6.86. Expedia also trades at a 8%
FCF yield on our 2018 FCF estimate of $1.5bn. We note that the combined impact of
faster organic room night growth and the positive Street view on acquisitions drove
Expedia's multiple expansion over the past several years. While we use P/E multiples for
comparability with Priceline and TripAdvisor, we also use a sum-of-the-parts analysis in
our target price methodology.

10 January 2017
Figure 67: Expedia Historical P/E – FY2

25.0x
20.0x
15.0x
FY2 P/E
High
10.0x
Average
Low
5.0x
0.0x
TripAdvisor has traded at a 17-40x forward P/E multiple over the past five years with an
average P/E of 29x on FY2 estimates. TripAdvisor currently trades at 33x our 2017 EPS
estimate of $1.58 and 26x the 2018 Street EPS estimate of $1.99. TripAdvisor also trades
at a 5% FCF yield on our 2018 FCF estimate of $356mn.
Figure 68: TripAdvisor Historical P/E – FY2

45.0x
40.0x
35.0x
30.0x
FY2 P/E
25.0x
High
20.0x Average
Low
15.0x
10.0x
5.0x
0.0x
12/23/2011 12/23/2012 12/23/2013 12/23/2014 12/23/2015

10 January 2017
Figure 69: Priceline, Expedia and TripAdvisor Historical P/E – FY2

45.0x
40.0x
35.0x
30.0x
25.0x PCLN
EXPE
20.0x
TRIP
15.0x
10.0x
5.0x
0.0x
3/23/2012 3/23/2013 3/23/2014 3/23/2015 3/23/2016
Figure 70: Online Travel Comp Sheet

EV/EBITDA P/E EV/Sales
Company Name 2016 2017 2018 2016 2017 2018 2016 2017 2018
Online Travel Agency (OTAs)
Expedia Inc. 12.0x 9.5x 7.9x 25.5x 19.6x 16.2x 2.2x 1.9x 1.7x
Ctrip.com International, Ltd. NM 47.4x 25.0x NM 63.1x 32.4x 7.2x 5.3x 4.0x
MakeMyTrip Ltd. NM NM NM NM NM NM 6.9x 6.4x 4.3x
The Priceline Group Inc. 19.0x 16.0x 13.4x 23.7x 20.4x 17.1x 7.6x 6.4x 6.4x
Travelzoo Inc. 9.5x 10.5x 11.0x 23.1x 24.9x 25.1x 0.9x 0.9x 0.9x
OTA Average 13.5x 20.9x 14.3x 24.1x 32.0x 22.7x 5.0x 4.2x 3.5x
Metasearch
Qunar Cayman Islands Limited NM 80.9x 38.2x NM 85.5x 27.0x 5.5x 4.3x 3.1x
TripAdvisor Inc. 18.0x 18.1x 11.9x 36.4x 37.3x 22.9x 4.4x 4.1x 3.7x
Average 18.0x 49.5x 25.1x 36.4x 61.4x 25.0x 4.9x 4.2x 3.4x
OTA and Metasearch Average 14.6x 30.4x 17.9x 27.2x 41.8x 23.5x 5.0x 4.2x 3.4x
The Priceline Group Inc. 19.0x 16.0x 13.4x 23.7x 20.4x 17.1x 7.6x 6.4x 6.4x
Expedia Inc. 12.0x 9.5x 7.9x 25.5x 19.6x 16.2x 2.2x 1.9x 1.7x
Priceline and Expedia Average 15.5x 12.8x 10.7x 24.6x 20.0x 16.7x 4.9x 4.1x 4.0x
Source: Company data, Credit Suisse estimates, Thompson.

10 January 2017
ADRs, Occupancy Rates, and RevPAR

Figure 71: Europe, North America, and Asia Occupancy, ADR and RevPAR Growth
Europe Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 1Q16 2Q16 3Q16 4Q16
Occupancy 54.7% 63.1% 66.2% 71.4% 73.4% 77.1% 76.7% 75.8% 81.0% 75.3% 70.3% 61.3% 74.0% 77.8% 72.8%
ADR (in Euros) € 100.5 € 103.0 € 105.3 € 109.5 € 114.3 € 119.5 € 118.8 € 115.9 € 123.2 € 113.5 € 107.1 € 102.9 € 114.4 € 119.3 € 110.3
RevPAR € 55.0 € 65.0 € 69.7 € 78.2 € 83.9 € 92.1 € 91.1 € 87.9 € 99.8 € 85.5 € 75.3 € 63.2 € 84.7 € 92.9 € 80.4
Y/Y Change
Occupancy 70 bps 90 bps 20 bps 240 bps -30 bps -60 bps -30 bps -110 bps 70 bps -30 bps 280 bps 60 bps 50 bps -23 bps 125 bps
ADR (in Euros) 1.6% 3.7% 1.9% 3.8% 2.1% 1.3% 3.9% 0.0% 2.6% -1.6% 1.5% 2.4% 2.4% 2.2% -0.1%
RevPAR 2.9% 5.2% 2.2% 7.5% 1.7% 0.5% 3.5% -1.4% 3.4% -2.0% 5.7% 3.4% 3.2% 1.8% 1.9%
North America
Occupancy 53.9% 61.5% 66.1% 67.8% 66.9% 72.9% 74.5% 70.5% 68.9% 68.4% 60.8% 60.5% 69.2% 71.3% 64.6%
ADR (in U.S. Dollars) $116.0 $120.0 $123.5 $122.1 $122.9 $125.3 $128.1 $124.9 $126.3 $125.5 $118.8 $119.9 $123.4 $126.4 $122.2
RevPAR $62.51 $73.82 $81.66 $82.80 $82.19 $91.36 $95.44 $88.03 $87.03 $85.86 $72.23 $72.66 $85.45 $90.17 $79.05
Y/Y Change
Occupancy -20 bps -60 bps -20 bps 140 bps -30 bps 20 bps -60 bps -30 bps 110 bps -20 bps 150 bps -33 bps 43 bps 7 bps 65 bps
ADR 3.1% 3.8% 3.5% 3.0% 2.7% 3.5% 3.8% 2.8% 4.3% 2.1% 3.5% 3.5% 3.1% 3.6% 2.8%
RevPAR 2.7% 2.8% 3.2% 5.2% 2.2% 3.8% 2.9% 2.3% 5.9% 1.8% 6.2% 2.9% 3.7% 3.7% 4.0%
Southeastern Asia
Occupancy 68.6% 71.3% 70.3% 68.8% 67.3% 62.3% 71.3% 73.1% 67.5% 67.0% 69.6% 70.1% 66.1% 70.6% 68.3%
ADR (in U.S. Dollars) $123.6 $123.5 $112.6 $108.7 $104.9 $104.4 $111.0 $110.9 $107.7 $106.5 $107.8 $119.9 $106.0 $109.8 $107.2
RevPAR $84.78 $88.05 $79.18 $74.81 $70.62 $65.02 $79.14 $81.05 $72.66 $71.38 $75.02 $84.00 $70.15 $77.62 $73.20
Y/Y Change
Occupancy 330 bps 180 bps 240 bps 380 bps 250 bps -170 bps 450 bps 80 bps 260 bps -70 bps -30 bps 250 bps 153 bps 263 bps -50 bps
ADR -1.5% 1.4% -1.6% -2.5% -0.7% -2.1% -1.0% -1.7% -4.2% -3.0% -1.7% -0.6% -1.8% -2.3% -2.3%
RevPAR 3.5% 4.1% 1.9% 3.2% 3.1% -4.7% 5.7% -0.6% -0.4% -4.0% -2.1% 3.1% 0.5% 1.6% -3.0%
Australia & Oceania

Occupancy 73.4% 78.8% 77.5% 76.4% 72.9% 71.9% 77.2% 76.5% 78.4% 78.9% 80.7% 76.6% 73.7% 77.4% 79.8%
ADR (in U.S. Dollars) $135.2 $142.0 $136.8 $128.0 $125.4 $125.9 $130.5 $130.7 $131.9 $138.2 $139.3 $138.0 $126.4 $131.0 $138.7
RevPAR $99.23 $111.89 $106.00 $97.79 $91.38 $90.55 $100.77 $99.99 $103.40 $109.02 $112.42 $105.70 $93.24 $101.39 $110.72
Y/Y Change
Occupancy 140 bps 50 bps 30 bps 210 bps 100 bps 220 bps 150 bps 170 bps 170 bps -10 bps 110 bps 73 bps 177 bps 163 bps 50 bps
ADR 3.8% 4.6% 2.0% 3.4% 2.0% 3.1% 2.4% 1.6% 3.6% 2.5% 3.0% 3.5% 2.8% 2.5% 2.8%
RevPAR 5.9% 5.2% 2.4% 6.3% 3.4% 6.3% 4.4% 4.0% 5.8% 2.4% 4.4% 4.5% 5.3% 4.7% 3.4%
Source: Smith Travel Research, Credit Suisse estimates.
Figure 72: Europe and North America RevPAR Growth

10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
Europe North America
Source: STR, Credit Suisse estimates.

10 January 2017
Airbnb RevPAR in Top 25 Cities

Figure 73: Airbnb RevPar – 50th Percentile
16-Jan 16-Feb 16-Mar 16-Apr 16-May 16-Jun 16-Jul 16-Aug 16-Sep 16-Oct
Anaheim 119.03 133.20 134.10 130.11 128.29 159.59 192.28 154.40 126.50 134.20
Atlanta 77.41 75.65 89.18 89.94 85.47 76.40 96.23 74.75 89.43 82.70
Boston, MA 77.14 84.32 104.27 140.22 156.53 161.62 172.71 163.70 174.60 168.82
Chicago 49.78 56.34 72.78 85.53 103.13 119.95 125.84 102.64 113.70 100.63
Dallas, TX 75.80 76.84 75.48 80.53 81.19 85.89 81.31 69.74 84.98 79.67
Denver 73.17 79.88 86.11 96.54 102.11 122.56 132.73 124.50 122.15 111.32
Detroit, MI 64.64 52.30 51.35 62.33 72.29 80.89 70.86 68.07 73.73 63.42
Houston 66.15 67.41 85.37 71.02 74.91 72.38 73.26 63.65 63.30 65.43
Los Angeles 97.87 114.70 115.62 112.11 110.85 124.99 140.04 133.70 106.09 99.43
Miami Beach 120.43 139.35 144.14 109.34 101.76 93.55 106.37 92.81 79.63 78.40
Minneapolis-St Paul, MN-WI 54.34 54.36 55.96 66.21 81.45 95.01 104.04 100.49 93.29 85.42
Nashville, TN 71.25 90.11 120.65 136.07 140.50 144.95 143.17 117.87 139.60 143.46
New Orleans, LA 76.73 128.52 117.12 156.59 113.28 90.41 80.79 69.52 85.20 105.96
New York 76.88 92.38 111.91 134.68 150.90 150.07 137.41 133.73 161.74 157.15
Norfolk-Virginia Beach, VA 59.24 65.36 70.04 77.91 105.63 138.27 145.34 136.35 82.70 63.80
Honolulu 140.63 153.34 118.34 108.09 109.72 126.18 141.50 133.08 121.31 103.40
Orlando 84.52 104.22 107.62 65.47 61.36 73.40 80.29 66.75 58.97 60.94
Philadelphia, PA-NJ 58.85 57.31 75.28 119.59 108.81 100.95 144.33 95.32 93.76 86.12
Phoenix 107.69 129.60 129.52 75.22 66.03 58.43 54.86 52.61 62.66 66.92
San Diego 94.58 113.89 124.05 111.08 109.43 136.78 170.12 141.35 114.13 97.23
San Francisco/San Mateo, CA 164.40 163.26 164.39 133.97 150.07 172.35 187.24 183.48 166.07 161.28
Seattle 62.96 68.63 81.19 80.70 99.94 130.21 145.88 140.92 120.04 89.41
St Louis, MO-IL 41.00 46.48 64.45 73.23 73.27 78.63 87.73 73.84 75.61 72.81
Tampa 88.18 104.90 104.55 82.05 67.29 69.52 70.17 77.21 60.74 71.17
Washington, D.C 65.60 74.25 112.83 120.98 119.30 120.55 113.38 94.77 109.77 115.31
Washington, DC-MD-VA 64.98 101.67 121.13 103.78 118.58 137.30 119.54 100.59 108.11 112.23
Average 82.05 93.40 101.44 100.90 103.54 112.34 119.90 106.38 103.38 99.10
y/y Change 12% 9% 28% 6%
London 84.99 98.73 100.19 107.01 114.74 126.48 136.07 111.09 119.30 111.91
Paris 60.11 68.33 71.19 63.54 70.06 85.57 68.61 53.65 75.47 73.51
Barcelona 40.13 73.47 65.21 87.27 89.52 98.77 109.08 109.79 95.96 99.53
Florence 36.32 43.18 49.78 71.32 81.28 85.86 74.03 67.80 81.28 74.50
Berlin 38.82 48.92 50.05 54.96 62.31 65.84 69.84 64.84 70.18 65.40
Amsterdam 65.38 90.07 93.52 121.98 122.15 119.18 115.09 109.85 114.30 115.61
Madrid 45.57 52.48 53.16 61.24 63.61 61.10 51.92 47.72 64.56 71.18
Munich 49.30 53.31 58.55 70.07 63.62 69.70 76.59 64.63 91.67 69.40
Rome 35.62 47.90 55.28 79.20 83.56 81.90 74.64 69.29 80.85 84.40
Prague 29.56 32.93 34.87 41.99 55.11 48.79 55.31 54.86 55.55 47.92
Average 48.58 60.93 63.18 75.86 80.60 84.32 83.12 75.35 84.91 81.34
y/y Change 4% 2% 9% -3%
Source: AirDNA, Credit Suisse.

10 January 2017
Airbnb Occupancy in Top Cities

Figure 74: Airbnb Occupancy Rates – 50th Percentile
16-Jan 16-Feb 16-Mar 16-Apr 16-May 16-Jun 16-Jul 16-Aug 16-Sep 16-Oct
Anaheim 43% 52% 53% 57% 55% 64% 80% 62% 60% 63%
Atlanta 52% 53% 65% 61% 57% 53% 67% 58% 60% 58%
Boston, MA 42% 50% 57% 60% 70% 73% 80% 75% 77% 74%
Chicago 33% 38% 55% 60% 68% 72% 74% 64% 68% 58%
Dallas, TX 55% 61% 60% 60% 60% 65% 67% 54% 61% 58%
Denver 54% 61% 68% 70% 71% 83% 87% 82% 80% 73%
Detroit, MI 45% 49% 48% 50% 45% 67% 55% 56% 60% 48%
Houston 53% 57% 61% 48% 56% 58% 60% 48% 48% 50%
Los Angeles 68% 79% 79% 74% 72% 77% 84% 79% 69% 67%
Miami Beach 58% 68% 60% 53% 48% 47% 55% 53% 43% 42%
Minneapolis-St Paul, MN-WI 44% 41% 49% 55% 64% 77% 83% 78% 68% 65%
Nashville, TN 32% 41% 60% 57% 59% 59% 61% 48% 58% 60%
New Orleans, LA 32% 52% 57% 63% 52% 43% 38% 34% 40% 48%
New York 40% 55% 65% 74% 81% 80% 74% 74% 85% 83%
Norfolk-Virginia Beach, VA 31% 30% 45% 43% 48% 64% 74% 57% 41% 29%
Honolulu 75% 80% 65% 60% 68% 72% 81% 73% 73% 62%
Orlando 52% 61% 60% 40% 36% 45% 52% 45% 40% 39%
Philadelphia, PA-NJ 33% 38% 55% 60% 62% 70% 65% 65% 60% 58%
Phoenix 64% 76% 80% 40% 42% 40% 45% 39% 47% 48%
San Diego 50% 62% 65% 56% 52% 63% 71% 65% 57% 48%
San Francisco/San Mateo, CA 65% 59% 70% 56% 70% 77% 81% 79% 74% 71%
Seattle 47% 52% 64% 59% 73% 83% 88% 84% 79% 63%
St Louis, MO-IL 32% 36% 50% 59% 61% 71% 74% 62% 61% 57%
Tampa 67% 82% 81% 60% 52% 57% 59% 61% 52% 56%
Washington, D.C 48% 52% 79% 82% 80% 80% 77% 68% 75% 79%
Washington, DC-MD-VA 37% 54% 75% 66% 74% 76% 65% 55% 59% 59%
Average 48% 55% 63% 59% 61% 66% 69% 62% 61% 58%
y/y Change 3% 0% 15% 3%
London 48% 59% 58% 60% 65% 71% 77% 65% 74% 74%
Paris 50% 55% 61% 61% 67% 77% 60% 48% 76% 75%
Barcelona 31% 48% 55% 77% 72% 71% 81% 80% 77% 82%
Florence 26% 41% 42% 67% 77% 75% 68% 65% 77% 73%
Berlin 48% 63% 61% 67% 74% 80% 83% 75% 80% 77%
Amsterdam 45% 65% 65% 81% 79% 78% 75% 72% 76% 77%
Madrid 48% 59% 58% 67% 68% 67% 54% 55% 73% 77%
Munich 46% 55% 61% 59% 62% 67% 77% 62% 52% 58%
Rome 25% 46% 46% 69% 71% 70% 65% 65% 73% 77%
Prague 26% 47% 43% 53% 68% 64% 76% 76% 77% 70%
Average 39% 54% 55% 66% 70% 72% 72% 66% 74% 74%
y/y Change -1% -2% 6% 5%
Source: AirDNA, Credit Suisse.

10 January 2017
Online Travel Acquisition History

Figure 75: Expedia, Priceline, and TripAdvisor Acquisition History
15-Jul-08 Expedia Venere €200 Corporate travel
18-Oct-10 Expedia Mobiata Not disclosed Mobile app
12-Mar-12 Expedia Via Travel Not disclosed Nordic corporate travel
12-Mar-14 Expedia Trivago (62% stake) $560 Hotel meta search
26-Jun-14 Expedia Auto Escape Group Not disclosed Rental car booking sites
6-Jul-14 Expedia Wotif $650 Australian online travel agency
23-Jan-15 Expedia Travelocity $280 Online travel agency
17-Sep-15 Expedia Orbitz $1,600 Online travel agency
4-Nov-15 Expedia HomeAway $3,900 Leading vacation rental site

21-Sep-04 Priceline Active Hotels Not disclosed European online travel agency
14-Jul-05 Priceline Booking BV $133 European online travel agency
10-Nov-07 Priceline Agoda Not disclosed Asia online travel agency
18-May-10 Priceline Rentalcars.com Not disclosed Rental car booking site
9-Nov-12 Priceline Kayak $1,800 Meta search
10-Jun-14 Priceline Buteeq/Hotel Ninjas $100 Hotel software
19-Jun-14 Priceline OpenTable $2,600 Restaurant booking site
3-Sep-15 Priceline AS Digital Not disclosed Restaurant booking site
8-May-15 Priceline Pricematch Not disclosed Data analytics for hotels

September, 2006 TripAdvisor Travelpod Not disclosed Blogging platform
February, 2007 TripAdvisor Bookingbuddy.com Not disclosed Travel comparison shopping sites
February, 2007 TripAdvisor Smartertravel.com Not disclosed Travel comparison shopping sites
March, 2007 TripAdvisor Seatguru.com Not disclosed Airline seat maps
May, 2007 TripAdvisor Cruisecritic.com Not disclosed Cruise review site
February, 2008 TripAdvisor HolidayWatchdog.com Not disclosed Travel information and comparison site
April, 2008 TripAdvisor Airfarewatchdog.com Not disclosed Travel information and comparison site
June, 2008 TripAdvisor Virtualtrourist.com Not disclosed Travel guides
August, 2008 TripAdvisor Flipkey.com Not disclosed Vacation rental site
October, 2009 TripAdvisor Kuxun Not disclosed Chinese hotel search
June, 2010 TripAdvisor HolidayLettings.com Not disclosed Vacation rental site
February, 2011 TripAdvisor Everytrail.com Not disclosed Social trail site
April, 2013 TripAdvisor Jetsetter Not disclosed Travel flash sale site
May, 2013 TripAdvisor Niumba Not disclosed Vacation rental site
May, 2013 TripAdvisor Cruisewise.com Not disclosed Cruise research
June, 2013 TripAdvisor GateGuru.com Not disclosed Flight and airport information
October, 2013 TripAdvisor Oyster Not disclosed Hotel reviews
May, 2014 TripAdvisor Vacation Home Rentals Not disclosed Vacation rental site
May, 2014 TripAdvisor La Fourchette $240 Restaurant reservations
July, 2014 TripAdvisor Viator $200 Tours and activities
February, 2015 TripAdvisor ZeTrip Not disclosed Personal journal app
April, 2015 TripAdvisor BestTables Not disclosed Restaurant reservations
May, 2015 TripAdvisor Dimmi $25 Restaurant reservatiosn
August, 2015 TripAdvisor CityMaps Not disclosed City guides

10 January 2017
comScore Travel Data

Figure 76: Desktop Unique Visitors for Priceline and Expedia
Total Unique Visitors (MM) - Desktop, United States Y/Y Growth
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q16 2Q16 3Q16 4Q16
Expedia 21.8 25.0 24.2 22.0 26.3 30.7 31.3 25.2 20% 23% 29% 14%
Priceline 16.0 17.5 17.2 13.8 15.8 18.0 18.6 13.6 -2% 3% 8% -1%
TripAdvisor 29.4 31.0 37.2 33.2 31.5 33.5 32.4 28.4 7% 8% -13% -15%
Internet 230.6 231.3 232.7 232.2 233.8 232.7 231.9 231.9 1% 1% 0% 0%
Total Unique Visitors (MM) - Desktop, Worldwide Y/Y Growth

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q16 2Q16 3Q16 4Q16
Expedia 79.1 80.8 74.4 63.9 76.2 82.6 88.9 74.1 -4% 2% 19% 16%
Priceline 101.8 103.5 106.0 88.7 97.1 95.3 103.1 83.9 -5% -8% -3% -5%
TripAdvisor 113.4 131.8 157.9 139.4 124.8 127.3 128.9 115.1 10% -3% -18% -17%
Internet 1,812.1 1,841.9 1,864.2 1,877.5 1,903.7 1,918.1 1,923.2 1,925.9 5% 4% 3% 3%
Total Unique Visitors (MM) - Desktop, Worldwide Y/Y Growth

1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q16 2Q16 3Q16 4Q16
Expedia 57.3 55.9 50.2 41.8 50.0 51.9 57.6 48.8 -13% -7% 15% 17%
Priceline 85.7 86.1 88.8 74.9 81.3 77.3 84.5 70.3 -5% -10% -5% -6%
TripAdvisor 84.0 100.8 120.7 106.2 93.4 93.7 96.5 86.7 11% -7% -20% -18%
Internet 1,581.5 1,610.6 1,631.5 1,645.3 1,669.9 1,685.4 1,691.3 1,694.0 6% 5% 4% 3%
Source: comScore, Credit Suisse.

10 January 2017
Global Travel Market

Figure 77: Global Travel Market Estimates
2014E 2015E 2016E 2017E 2018E 2019E 2020E CAGR
Global Travel Market ($B) '16-'20
US 324 338 357 376 396 408 418 4.0%
% Total 27% 29% 29% 30% 30% 29% 28%
Air 138 139 143 149 154 158 162 3.2%
Hotels 133 144 157 168 176 181 185 4.2%
Other 53 54 57 59 66 68 71 5.7%
EU* 353 321 314 296 305 313 321 0.5%
% Total 30% 27% 26% 23% 23% 22% 22%
Air 150 137 134 127 131 134 138 0.7%
Hotels 121 109 107 100 102 104 106 -0.2%
Other 83 75 73 70 72 75 77 1.2%
APAC 351 346 367 392 420 452 488 7.4%
% Total 30% 29% 30% 31% 31% 32% 33%
Air 163 157 164 172 182 193 206 6.0%
Hotels 115 110 117 124 134 145 159 8.1%
Other 74 79 87 95 104 113 123 8.9%
LATAM 86 92 98 105 111 117 122 5.6%
% Total 7% 8% 8% 8% 8% 8% 8%
Air 33 35 38 40 42 45 48 6.1%
Hotels 45 48 51 55 59 61 63 5.3%
Other 8 9 9 10 10 11 11 4.9%
ME 72 80 89 98 106 114 122 8.1%
% Total 6% 7% 7% 8% 8% 8% 8%
Air 52 59 66 72 79 85 90 8.2%
Hotels 19 21 23 25 27 29 31 7.9%
Other .5 .5 .5 .5 .5 .6 .6 2.9%
Total 1187 1177 1225 1267 1339 1404 1471 4.7%
Air 536 527 544 560 588 615 644 4.3%
Hotels 432 433 454 473 498 521 544 4.6%
Other 218 217 227 234 253 268 282 5.6%

10 January 2017
Figure 78: Global Accommodation Market

PhocusWright Estimates except vacation rental and sharing economy Credit Suisse estimates
2014E 2015E 2016E 2017E 2018E 2019E 2020E CAGR
Accomodation Market ($B) '16-'20
U.S Hotel 133 144 157 168 176 181 185 4.2%
% Total Hotel 31% 33% 34% 36% 35% 35% 34%
Offline 86 92 100 107 111 112 112 2.9%
Online 47 53 57 62 66 70 73 6.5%
Online Penetration 36% 36% 36% 37% 37% 38% 40% 2.2%
EU Hotel* 121 109 107 100 102 104 106 -0.2%
% Total Hotel 28% 25% 23% 21% 20% 20% 19%
Offline 82 71 68 62 62 62 62 -2.1%
Online 39 38 39 38 40 42 44 3.0%
APAC Hotel 115 110 117 124 134 145 159 8.1%
% Total Hotel 27% 25% 26% 26% 27% 28% 29%
Offline 85 77 79 81 83 85 86 2.4%
Online 30 33 38 44 50 55 62 13.0%
LATAM Hotel 45 48 51 55 59 61 63 5.3%
% Total Hotel 10% 11% 11% 12% 12% 12% 12%
Offline 36 37 39 40 41 43 44 3.2%
Online 9 11 13 15 17 18 19 11.0%
ME Hotel 19 21 23 25 27 29 31 7.9%
% Total Hotel 4% 5% 5% 5% 5% 6% 6%
Offline 15 16 16 17 17 18 18 2.4%
Online 4 5 7 8 10 11 13 19.0%
Online Penetration 22% 25% 28% 32% 36% 39% 42%
Total Hotel 432 433 454 473 498 521 544 4.6%
Offline 302 293 301 307 314 318 322 1.7%
Online 130 139 153 166 182 197 212 8.4%
Online Penetration 30% 32% 34% 35% 37% 38% 39%
Vacation Rental 101 105 108 111 114 118 121 3.0%
Sharing Economy 4 9 17 29 44 62 81 48.0%
Total Accomodation Market 538 547 579 612 656 700 746 6.6%
Note: Sharing economy does not refer to one company. EU estimates reflect FX depreciation in 2015-16.

10 January 2017
Figure 79: Credit Suisse Economic Forecast

Real GDP Growth (%, Annual Average) Inflation (%, Annual Average)
Weights (%) 2015 2016E 2017E 2018E 2015 2016E 2017E 2018E
Global 100% 2.9 2.5 3.0 2.9 2.3 4.0 4.3 4.0
DM 61.7% 2.2 1.6 2.0 1.9 0.2 0.8 1.7 1.7
EM 38.3% 4.1 3.8 4.5 4.6 5.7 9.1 8.5 7.6
US 26.9% 2.6 1.6 2.3 2.2 0.1 1.3 2.2 2.1
Canada 2.3% 1.1 1.2 1.9 1.9 1.1 1.6 2.1 2.1
LatAm 7.5% -0.4 -1.3 0.9 1.9 18.8 38.0 33.6 28.9
Brazil 2.7% -3.8 -3.5 0.0 1.5 10.7 6.3 5.7 5.5
Mex ico 1.7% 2.6 2.1 1.7 2.5 2.1 3.4 4.0 3.5
Argentina 0.8% 2.5 -2.2 2.9 2.8 20.6 37.1 20.1 14.9
Venezuela 0.4% -5.7 -10.0 -6.1 -2.8 180.9 501.7 468.7 403.3
Colombia 0.4% 3.1 2.0 2.7 3.1 6.8 5.7 4.2 3.3
Chile 0.4% 2.3 1.8 2.2 2.6 4.4 3.0 3.2 3.0
Peru 0.3% 3.3 4.0 4.5 3.7 4.4 3.1 2.6 2.5
Euro area 17.3% 1.9 1.6 2.0 1.8 0.0 0.2 1.5 1.2
Germany 1.5 1.8 2.0 1.8 0.1 0.4 1.5 1.4
France 1.2 1.3 1.7 1.8 0.1 0.3 1.4 1.1
Italy 0.6 1.0 1.3 1.2 0.1 0.0 1.0 1.0
Spain 3.2 3.2 2.8 2.1 -0.6 -0.3 1.5 1.6
Netherlands 2.0 2.0 2.1 1.8 0.2 0.1 1.2 0.8
Belgium 1.5 1.2 1.5 1.6 0.6 1.8 2.8 2.4
Austria 0.8 1.5 1.7 1.8 0.8 1.0 2.4 2.0
Greece -0.3 0.4 3.2 3.3 -1.1 0.0 0.8 0.4
Finland 0.2 1.5 1.3 1.3 -0.2 0.4 1.7 1.3
Portugal 1.6 1.3 1.7 1.5 0.5 0.7 1.5 1.1
Ireland 26.3 4.4 4.0 3.3 0.0 -0.2 0.8 0.4
UK 4.3% 2.2 2.1 1.2 1.3 0.0 0.6 2.3 2.5
Sw itzerland 1.0% 0.8 1.0 1.3 1.5 -1.1 -0.4 0.0 0.5
Sw eden 0.7% 3.9 3.2 2.2 2.2 0.7 1.1 1.4 1.7
Norw ay 0.6% 1.7 1.2 1.6 1.8 2.2 3.2 2.3 2.5
EEMEA 6.9% 1.0 0.9 2.1 2.3 1.9 1.3 1.4 1.3
Russia 2.0% -3.7 -0.4 1.5 1.7 12.9 5.5 4.2 4.0
Turkey 1.1% 6.1 2.3 3.1 3.0 8.8 7.6 8.4 8.0
South Africa 0.5% 1.3 0.4 1.1 2.0 5.2 6.5 6.0 4.7
Israel 0.4% 2.5 3.4 3.2 3.3 -1.0 -0.1 1.0 1.2
Ukraine 0.1% -9.9 1.6 3.4 2.2 43.3 12.0 7.7 6.2
Japan 6.2% 1.2 0.9 0.8 0.7 0.6 -0.3 0.4 1.1
Australia 2.0% 2.4 2.9 2.7 2.9 1.5 1.3 2.1 2.4
New Zealand 0.3% 3.0 2.8 2.7 2.6 0.3 0.7 1.6 1.9
NJA 23.8% 6.0 5.8 6.0 5.8 1.7 2.4 2.6 2.6
China 16.3% 6.9 6.6 6.8 6.5 1.3 2.2 2.3 2.2
India 3.1% 7.6 6.9 7.4 7.5 4.8 5.0 5.2 5.3
South Korea 2.1% 2.5 2.5 2.5 2.7 1.1 1.4 1.5 1.9
Indonesia 1.3% 4.8 5.1 5.3 5.2 3.4 3.0 4.5 4.7
Taiw an 0.8% 0.7 1.2 1.8 2.0 0.1 2.6 1.5 1.7
Thailand 0.6% 2.8 3.2 3.3 3.4 -0.9 0.9 1.9 2.3
Malay sia 0.4% 5.0 4.1 4.5 4.2 2.7 1.6 2.8 2.4
Singapore 0.4% 2.0 1.4 1.1 1.1 -0.6 0.0 0.0 0.2
Hong Kong 0.5% 2.4 1.3 1.7 2.0 2.5 1.4 1.6 1.5
Philippines 0.4% 5.9 6.8 6.4 6.2 1.5 1.7 2.6 3.7
Source: Company data, Credit Suisse estimates

10 January 2017
Companies Mentioned (Price as of 06-Jan-2017)

Accor (ACCP.PA, €37.88)
Alphabet (GOOGL.OQ, $825.21)
American Express Co. (AXP.N, $75.47)
Choice Hotels (CHH.N, $54.5)
Ctrip.com International, Ltd. (CTRP.OQ, $42.5)
Delta Air Lines, Inc. (DAL.N, $49.68)
Expedia (EXPE.OQ, $116.45, OUTPERFORM, TP $145.0)
Hilton Worldwide Holdings (HLT.N, $57.47)
Hyatt Hotels (H.N, $54.97)
Intercontinental Hotels (IHG.L, 3666.0p)
La Quinta Holdings Inc. (LQ.N, $14.3)
Lufthansa (LHAG.F, €12.43)
Marriott International (MAR.OQ, $82.3)
Qantas (QAN.AX, A$3.33)
Qunar (QUNR.OQ, $30.3)
Ryanair Hldgs (RYAAY.OQ, $82.75)
Southwest Airlines Co. (LUV.N, $49.93)
The Priceline Group Inc (PCLN.OQ, $1520.57, OUTPERFORM, TP $1900.0)
Travelzoo (TZOO.OQ, $10.2)
TripAdvisor, Inc. (TRIP.OQ, $50.77, NEUTRAL, TP $51.0)
Trivago (TRVG.OQ, $11.91)
United Continental Holdings, Inc. (UAL.N, $71.37)
Virgin Australia (VAH.AX, A$0.23)
Whitbread (WTB.L, 3941.0p)
Wyndham Worldwide Corp (WYN.N, $76.88)
Yelp (YELP.N, $39.31)
Disclosure Appendix
Analyst Certification
I, Paul Bieber, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and
securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in
this report.
3-Year Price and Rating History for Expedia (EXPE.OQ)
EXPE.OQ Closing Price Target Price Target Price Closing Price EXPE.OQ
Date (US$) (US$) Rating 140
07-Feb-14 74.45 78.00 N
01-Aug-14 84.45 85.00 120
31-Oct-14 84.97 87.00
21-Nov-14 84.69 * 100
14-Jan-15 85.39 93.00 N
80
06-Feb-15 77.87 88.00
14-Apr-15 98.09 105.00
60
01-May-15 101.69 104.00 01- Jan- 2015 01- Jan- 2016 01- Jan- 2017
10-Jul-15 107.97 102.00
31-Jul-15 121.44 116.00 N EU T RA L
09-Oct-15 125.34 138.00

30-Oct-15 136.30 140.00
12-Jan-16 111.90 136.00
11-Feb-16 103.37 130.00
29-Apr-16 115.77 134.00
15-Jul-16 114.62 132.00
29-Jul-16 116.65 130.00
17-Oct-16 121.78 133.00
* Asterisk signifies initiation or assumption of coverage.

10 January 2017
3-Year Price and Rating History for The Priceline Group Inc (PCLN.OQ)
PCLN.OQ Closing Price Target Price Target Price Closing Price PCLN.OQ
Date (US$) (US$) Rating 1,900
13-Feb-14 1276.07 1450.00 O
21-Feb-14 1315.65 1500.00 1,700
11-Aug-14 1309.28 1600.00 1,500

15-Oct-14 1058.75 1550.00
1,300
04-Nov-14 1097.70 1450.00
21-Nov-14 1151.46 * 1,100
14-Jan-15 1035.67 1400.00 O
900
10-Jul-15 1143.19 1500.00 01- Jan- 2015 01- Jan- 2016 01- Jan- 2017
05-Aug-15 1351.21 1550.00
09-Oct-15 1313.29 1600.00 O U T PERFO RM
05-May-16 1240.85 1580.00

15-Jul-16 1330.57 1570.00
05-Aug-16 1414.22 1660.00
17-Oct-16 1437.65 1750.00
08-Nov-16 1578.13 1790.00
3-Year Price and Rating History for TripAdvisor, Inc. (TRIP.OQ)
TRIP.OQ Closing Price Target Price Target Price Closing Price TRIP.OQ
Date (US$) (US$) Rating 140
12-Feb-14 90.27 94.00 O
15-Apr-14 83.30 105.00 120
14-Jul-14 104.05 125.00 100

24-Jul-14 101.79 120.00
80
05-Nov-14 71.95 105.00
21-Nov-14 71.31 * 60
14-Jan-15 69.73 92.00 O
40
12-Feb-15 82.40 88.00 01- Jan- 2015 01- Jan- 2016 01- Jan- 2017
14-Apr-15 83.27 90.00
07-May-15 78.47 91.00 O U T PERFO RM
REST RI C T ED
24-Jul-15 80.86 86.00
09-Oct-15 67.98 83.00
06-Nov-15 77.42 82.00
12-Jan-16 77.36 88.00
12-Feb-16 59.90 80.00
18-Apr-16 65.44 74.00
06-Jun-16 71.46 R
08-Jun-16 68.63 74.00 O
05-Aug-16 60.81 73.00
17-Oct-16 61.46 78.00
10-Nov-16 51.83 65.00
The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's
total revenues, a portion of which are generated by Credit Suisse's investment banking activities
As of December 10, 2012 Analysts’ stock rating are defined as follows:
Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months.
Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.
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Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned

10 January 2017
where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18
May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July
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Global Ratings Distribution
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Underperform/Sell* 15% (53% banking clients)
Restricted 3%
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Target Price and Rating

Valuation Methodology and Risks: (12 months) for Expedia (EXPE.OQ)
Method: Our Outperform rating and target price is a blended average of Sum of the Parts, P/E, and DCF valuations. In our Sum of the Parts
valuation, we assign values to the Core OTA business, Trivago, Egencia, HomeAway, and Overhead to arrive at sum of $160. In our P/E
valuation, we apply a 20x multiple to our 2018 Adj. EPS estimate to arrive at a value of $130. In our DCF, we apply a 10% WACC and 3%
terminal growth rate to arrive at a value of $146. Taking the average of these results, we arrive at a value of $145.
Risk: Risks to our Outperform rating and $145 target price include: 1) Increased competition - particularly from Priceline, TripAdvisor, Google,
Airbnb, and hotel chains; 2) Online marketing deleverage due to higher customer acquisition costs; 3) Increased pressure on take rates.
Valuation Methodology and Risks: (12 months) for The Priceline Group Inc (PCLN.OQ)
Method: Our Outperform rating and target price are based on a blended average of EV/EBITDA, P/E, and DCF valuations. In our EV/EBITDA
valuation, we apply a 16x multiple to our 2018 Adj. EBITDA estimate to arrive at a value of $1,935. In our P/E valuation, we apply a 22x
multiple to our 2018 Adj. EPS esitmate to arrive at a value of $1,893. In our DCF, we apply a 10% WACC and 3% terminal growth rate to
arrive at a value of $1,872. Taking the average of these results, we arrive at a target price of $1,900.
Risk: Risks to our Outperform rating and $1,900 target price include: 1) FX Volatility; 2) Potential marketing deleverage; 3) Increased
competition - particularly from Expedia, TripAdvisor, Google, Airbnb, and hotel chains; 4) Potential higher tax rate in the Netherlands; 5)
Terrorism and natural disasters.
10 January 2017

Valuation Methodology and Risks: (12 months) for TripAdvisor, Inc. (TRIP.OQ)
Method: Our Neutral rating and target price are based on a blended average of P/E, EV/EBITDA, and DCF valuations. In our P/E valuation, we
apply a 25x multiple to our 2018 Adj. EPS estimate to arrive at a value of $47. In our EV/EBITDA valuation, we apply a 15x multiple to our
2018 Adj. EBITDA estimate to arrive at a value of $53. In our DCF valuation, we apply a WACC of 11% and terminal growth rate of 2.5%
to arrive at a value of $55. Taking the average of these results, we arrive at a target price of $51.
Risk: Risks to our Neutral rating and $51 target price include: 1) Persistence of Instant Book headwinds; 2) Hotel shopper growth deceleration;
3) Potential multiple compression.
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See the Companies Mentioned section for full company names
The subject company (EXPE.OQ, PCLN.OQ, TRIP.OQ, CTRP.OQ, AXP.N, QAN.AX, ACCP.PA, WTB.L, VAH.AX, GOOGL.OQ, YELP.N) currently
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10 January 2017
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2017 Online Travel Primer

Online Travel Primer—Executive Summary

2017 Online Travel Primer 2

2017 Online Travel Primer 3

Source: Company data, Thompson Reuters, Credit Suisse.

2017 Online Travel Primer 4

Priceline Expedia TripAdvisor

Market Cap (mn) $74,200 $17,207 $7,168

▪ Competition especially from ▪ Competition especially from

Source: Company data, Credit Suisse estimates, Thompson Reuters.

2017 Online Travel Primer 5

Source: Company data, Credit Suisse.

Figure 4: Expedia Company Timeline

Source: Company data, Credit Suisse.

2017 Online Travel Primer 6

Key Take-aways from Our Consumer Survey

2017 Online Travel Primer 7

Source: Credit Suisse, luc.id (N=1,020).

Source: Credit Suisse, luc.id.

2017 Online Travel Primer 8

28% 31% 31%

Figure 9: How much do you trust the reviews on

2017 Online Travel Primer 9

Figure 12: On a scale of 1-5, please rank how likely

Figure 13: Do you think you will use Airbnb again?

Source: Credit Suisse, luc.id (N=64).

2017 Online Travel Primer 10

Online Penetration 2014E 2015E 2016E 2017E 2018E 2019E 2020E

Source: Phocuswright, Credit Suisse estimates.

2017 Online Travel Primer 11

Figure 15: Total Travel and Online Travel Bookings Growth

Source: Phocuswright, Credit Suisse estimates.

Figure 16: Incremental Online Dollars and % of Total

Incremental Online Dollars %

Source: Phocuswright, Credit Suisse estimates.

2017 Online Travel Primer 12

Source: PhoCusWright, Credit Suisse estimates.

Hotel Market Size

2017 Online Travel Primer 13

Online Hotel Bookings ($B)

Hotel Online Penetration

Vacation Rental and Sharing Economy Market Size

2017 Online Travel Primer 14

Total Accommodation Market Size

Incremental Dollars ($B)

2017 Online Travel Primer 15

Figure 22: Sharing Economy Share of Incremental Growth for Accommodation

Source: Phocuswright, Credit Suisse estimates.

OTA Market Share Analysis

2017 Online Travel Primer 16

Expedia Room Nights Booked 60,900 72,000

Using a different methodology, we estimate 2017 Priceline and Expedia accommodation

Figure 25: Another Take at Priceline and Expedia Market Share

Implied Market share

Source: PhoCusWright, Company data, Credit Suisse estimates.

Room Night Scale and Growth

2017 Online Travel Primer 17

Source: Company data, Reuters, Credit Suisse estimates.

Figure 27: Priceline and Expedia Room Night

U.S. Hotel Market

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Figure 29: North America RevPAR Growth

Figure 30: North America ADR Growth