Priceline plans overseas expansion

Priceline.com Inc. yesterday announced it has signed a deal with Equant Inc. to build European, Asian and Australian Web sites.

The move comes after a month in which it has seen its stock price tumble in the wake of customer complaints. At a high of $104 over the past 52 weeks, Priceline stock closed this afternoon at $6.72 -- up about 20% for the day.

Atlanta-based Equant helped develop the Norwalk, Conn., online auctioneer's offer processing system in 1997, linking Priceline's air-fare searching engine with the databases and distribution system that provide its inventory.

It will perform similar work overseas with a European launch planned before year's end, but analysts say Priceline will face a tougher entry into that market and that it cannot expect global expansion to mask its domestic problems.

Krista Pappas, director of travel analysis for Gomez Advisors Inc. of Lincoln, Mass., said that traditional air carriers are facing a stiff challenge from discount airlines in Europe. That challenge is forcing down prices and creating shopping habits for Internet ticket buyers.

"They aren't going to be the only low-cost player there," Pappas said of Priceline's "name-your-own-price" model. "And they're going up against some pretty solid businesses."

Henry Harteveldt, senior analyst for Forrester Research Inc. of Cambridge, Mass., noted that the major European carriers are banding together to form a group called the Online Travel Portal, which will supposedly distribute their seats at the lowest published prices.

U.S. airlines originally tapped Priceline to move some of their 650,000 unoccupied daily seats, but those airlines now have an ownership stake in San Francisco-based online auctioneer Hotwire.com. Many industry watchers believe the airlines will move their tickets through that site.

Harteveldt warned that the European carriers could follow suit, leaving Priceline as a secondary auction channel on two continents.

Both Pappas and Harteveldt believe Priceline should expand its name brand overseas, but they warned that the company must do a better job of customer service.

Pappas said Priceline's buyer beware notices that its tickets are not refundable and that the flight times on those tickets are not negotiable runs counter to the expectations of shoppers

"People have become accustomed to customer care and they want the freedom to change their minds, it's inherent in the behavior of people buying products," Pappas said.

Harteveldt said customer dissatisfaction has eroded Priceline's brand image and that the company can ill afford to allow that dissatisfaction to define its business.

"And they certainly can't take that approach to Europe," he said. "They need to improve the model."

Priceline officials could not be reached for comment by press time. However, the company has said in previous statements that "Priceline.com continues to be one of the strongest brands in e-commerce . . . intends to continue to extend its business model into new areas such as business-to-business and will support its various international initiatives.

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