Hutch-Priceline asks Asia to 'name own price'

By Kristie Lu Stout
CNN

HONG KONG, China (CNN) -- After a delayed launch, Priceline.com is finally bringing its "name your own price" promise to bargain hunters in Asia.

Priceline, a tie-up between Priceline.com of the U.S. and Hong Kong tycoon Li Ka-Shing's Hutchison Whampoa, formally launched its service in Hong Kong on Tuesday.

Priceline.com become the latest U.S. Internet play to expand into Asia, following Ebay's recent push into China.

Priceline's debut originally was set for the end of last year, but it was deferred after the September 11 terror attacks in the United States.

'Sign of recovery'

"September 11 was a key event in the travel industry, as you can imagine," Hutchison-Priceline CEO Alfredo Gangotena told CNN.

"It was probably the right thing for us to wait until there is sign of recovery and recovery is underway now. You can see that people are smiling more, traveling more, it's the perfect time to launch Priceline and get people to enjoy their holidays."

The Priceline concept is simple. Airlines have unsold seats; hotels have vacant rooms. And Priceline invites customers to name their own price for these perishable products.

The venture will focus on the Hong Kong market before expanding to Singapore and Taiwan later this year.

"We chose to kick-off in Hong Kong because this is the home base for the Hutchison group and we do see possible synergy between Priceline and our other businesses," said Hutchison group managing director Canning Fok in a statement.

E-commerce shy

But analysts say the Priceline business model may not translate well in many parts of Asia – where e-commerce has yet to truly click with Net users.

In Hong Kong, only 4 percent of Internet users have ever made an online purchase, according to the latest survey by Nielsen//Netratings.

The research firm cites a lack of confidence in online purchases, online security concerns, and a vibrant "real world" shopping culture as the main factors hindering local acceptance of online commerce.

Acknowledging that its target market is e-commerce shy, Priceline says it is tailoring its service to meet local tastes by offering ticketing by Internet, call center and retail outlets.

"So we're trying to be as close as we can to the habits of Asian consumers," said Gangotena.

Inconvenient itineraries

Another challenge facing Priceline is the fundamental difference between the U.S. and Asian travel markets.

"In the U.S., sales of inconvenient itineraries is good for drawing bargain hunters, but in Asia it doesn't work that way," said Boston Consulting Group Senior Vice President David Michael.

"Asia has no such flights to combine to create something distinctively different to sell on Priceline... If you're an (Asian) airline, you want to sell it yourself and keep control of that."

The Asian venture is 62 percent owned by Hutchison, and 35 percent by the U.S. travel auctioneer.

Li's flagship firms Cheung Kong and Hutchison Whampoa represent the largest shareholder group of Priceline.com, holding 29 percent of it.

In the U.S., the site has attracted over 12 million customers. No forecasts have been released for the Asia venture.