Darren Huston Booker In Chief

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Why Pricelines booker-in-chief is spending big
Darren Huston was trying to watch a hockey game,
half-listening to a headhunter talk about a
company he had never heard of before. But as the
headhunter went on, the then-45-year-old
executive in charge of Microsofts global
consumer and online businesses tuned out the
arena noise and began listening to what he
thought was an impossible story. I said,
Theres nothing that big in Europe on the
Internet,?? he recalled, laughing.
The 2011 call was from Booking.com, the
Amsterdam-based unit of Priceline Group that
dominates the European online travel market. By
last year, Huston became president and CEO of
Priceline Group itself, which has come from
dot-com laughingstock to the fifth most-valuable
U.S. Internet companyif one still really
considers it a U.S. company, because 90 percent
of its profits come from overseas, most of them
from Booking.com. Everyone knows Bookingand
Pricelinenow. A year after taking over from
now-chairman Jeffery Boyd, Huston is building a
Priceline in his own image. Its bigger,
certainly, and makes bigger deals than ever,
dwarfing the 135 million buy of Booking itself
in 2005. But its also becoming more of a
technology-services business, reflecting Hustons
own software background. Andreflecting Hustons
early career stops in consumer services (at
Starbucks) and as a McKinsey consultantHustons
Priceline is keeping Boyds focus on maniacally
minding the details of online-advertising
tactics and software design.
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When they recruited him for Booking, it was
clear he was the guy,? said Philip Wolf, founder
of PhoCusWright, an online-travel consulting
group that runs the industrys most influential
annual conference. If you get the job to fill
Jeff Boyds shoes, thats pretty tough. Darren
not only stepped in but picked up the
pace. Im a hands-on operator, and I have a
background in software. Right outside my door,
they are building the site. Theres not a
semicolon on any of our sites that isnt A/B
tested. Darren Huston Priceline Group CEO The
most obvious difference is the size of the deals
Priceline is making, like buying
restaurant- reservation site OpenTable for 2.6
billion last year, after Huston helped with
Boyds 1.8 billion 2013 purchase of the travel
metasearch site Kayak.com. Hustons also making
an expanded push into back- office technology
for hotels, to wring more revenue from the
600,000-plus lodging establishments for which
Priceline sells rooms. As well, Hustons
consulting background is evident in how he
orchestrates small teams of executives to dig in
to the nitty-gritty of what appears on each of
the companys sites, with Huston himself watching
the results of tests that try selling the same
resort two different ways. Im a hands-on
operator, and I have a background in software,
Huston said. Boyd was a lawyer who worked in
health insurance before joining Priceline in
1999. Right outside my door, they are building
the site. Theres not a semicolon on any of our
sites that isnt A/B tested.? With Priceline now
a 60 billion colossus selling 50 billion worth
of travel in 2014, Hustons at pains to
emphasize that he and Boyd are closer in strategy
than they are in background. Boyd, too, became
known as an operatorafter Priceline bought
Booking.com, it zoomed past rival Expedia to
become Europes consumer-travel leader, relying
primarily on a nuts-and-bolts mastery of online
advertising. And, as Huston said, I was there
when Jeff bought Kayak, and he was still here
when I bought OpenTable. Read MoreGolf legend
Greg Normans new shark fund Just a regular,
data-savvy guy The most obvious thing they have
in common is a no-drama style. Boyds even keel
helped to right Pricelines course after the
carnival-barker days of founder and ex-CEO Jay
Walker, who led the onetime Name Your Own
Price pioneer to a 16-a-share 1999 initial
public offering and a stock price that
multiplied 10-fold within two months of the
IPOfollowed by a crash that took shares to
1.05, even as 1999's 1 billion net loss
narrowed to 7.3 million by 2001, the year Boyd
became president. After a 6-1 reverse stock
split in 2003, shares now trade at 1,175 after
approaching 1,380 last year.
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Hes such a regular guy, Wolf said, adding that
Hustons management mantra, repeated often around
the industry, is humble and hungry. The
former aide to Canadian Labor politicians went
from business school at Harvard to McKinsey and
jumped to Starbucks, where he bought the Tazo tea
business and launched the coffee chains then-
cutting-edge in-store Wi-Fi. Recruited by Steve
Ballmer, his Microsoft stint taught him how to
create new products and run large franchises,
like Microsoft Japan. Put together, his blend of
international experience, data savvy and
consumer marketing led Booking to his cell phone
during a Vancouver Canucks game. It has really
all been about performance-fueled cultures led by
entrepreneurs, Huston said.
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While the recent deals may seem big, RBC Capital
Markets analyst Mark Mahaney pointed out that
OpenTable and Kayak are no bigger, relative to
the market value of Priceline itself, than
Booking.com was 12 years ago. Wolf added that
Hustons most important deals may be the 98
million that Priceline
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spent last year to buy Barcelona-based Hotel
Ninjas and Seattle-based Buuteeq, which make
relationship-marketing and back-office management
software for hotels, to create an integrated
product called BookingSuite. The idea is to let
hotels use sophisticated data-mining to sell
rooms, which is especially attractive to the
independent hotels that lead the European and
Asian markets and dont have the backing of big
chains with their own data systems. Theyre
going after thousands of hotels, trying to take
over 8 to 10 different bills for
technology vendors that each of them pays every
month, Wolf said. Its an aggregation of
different services, and the price and quality
will be much superior. Huston described that
strategy as using Pricelines scale to deliver a
better product in the same way big technology
companies often roll up, or roll over, smaller
competitors in fragmented emerging markets. Its
too soon to know how well its working Priceline
doesnt break out results. And, he said, new
things have to be a pretty good size to make a
difference at a company as big as
Priceline. The company also isnt saying much
yet about the OpenTable deal, other than that
they are investing heavily enough in the
business to narrow the entire companys operating
margins, according to Mahaney. (Huston said some
of that money is going to re-engineer OpenTable
to work in the cloud.) Kayak has already proved
its usefulness in helping the company contain the
growth of its online advertising budget, since
money Priceline spends at Kayak is kept in-house,
he said. The idea behind the acquisition
strategy is that each deal adds some new
capability to Priceline. OpenTable adds
restaurants and some technology that may be
useful in expanding BookingSuite, while Kayak
adds a broader audience, a base in advertising
revenue and expertise in metasearch. At the same
time, rival Expedia has been making deals to
broaden its hold on its core businesstravel-agenc
y services for hotels and airlines, mostly in
the U.S.by buying Travelocity (280 million) and
Orbitz (1.3 billion), as well as acquiring
Asia-Pacific online travel company Wotif, for
more than 600 million in 2014. Acquisitions
like that take years to play out, said Mahaney,
who rates Priceline outperform and predicts
its shares will hit 1,450. They have been very
patient in the deals theyve done, and they
never overpay.? In the short term, Hustons
success or failure wont really be determined by
the deals hes made. As usual for Priceline, it
will boil down to the companys mastery of
details and the macroeconomic path of economies
in Asia and especially Europe. Mahaney has even
backed off his guess that Priceline might make a
new acquisition in the vacation-rental
businessspeculation has centered around HomeAway
as a counterpoint to sharing-economy leader
Airbnb. With Priceline boosting its
vacation-rental business organically, Mahaney
said Priceline doesnt need a deal. The more
assured path to gains for Priceline is for a
recovering European economy to meet up with the
companys consistent execution and the winding
down of the post-merger reinvestment in Kayak and
OpenTable, Mahaney said. Pricelines growth
slowed in late 2014 as Europe stumbled, but
revenue still rose 19 percent in the fourth
quarter and 24 percent for the year. With shares
below 21 times this years
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• consensus profit estimate of 57.32 a share, that
  gives Priceline room to zoom as both margins and
  top- line growth re-accelerate, the RBC analyst
  said. Mahaney said fast growth in the companys
  Asian business will also boost profits.
• Europeans will give up cars and coffee before
  their vacations,? Mahaney said. Were talking
  about an acceleration outlook, which usually
  works well for stocks, especially those like
  Priceline that began the year with trough
  multiples.??
• Read MoreJack Bogles success principles to live
  by
• Only over time will it become clear whether
  Hustons deal-making and re-engineering is taking
  Priceline to a new place. But Wolf is betting
  that it will.
• Hes like Boyd in keeping his hands off division
  managers and keeping their organization lean,?
  Wolf said. And he understands that his job is
  to build new shoes.??
• Lessons learned
• Small teams attention to detail results.
• Hustons consulting background at McKinsey made
  him a fan of using small teams that intensely
  study specific operations questions. At
  Priceline, which was already a detail-oriented
  culture, hes using these teams to handle issues
  as small as A/B tests for specific features on
  the companies sites and as important as
  re-engineering technology acquired in the
  OpenTable deal.
• Small acquisitions can bring big results.
• Pricelines huge success has stemmed principally
  from the acquisition of Booking.com, a deal that
  cost less than 200 million. More recent small
  deals to build out Pricelines technology
  platform may let it become a behind-the-scenes
  services provider to hotels, making a significant
  new business.