Booking Holdings (BKNG) 10-K risk factor changes: FY2015 vs FY2014

Our financial results and prospects are significantly dependent upon the sale of travel [removed: services, particularly leisure travel.][added: services.]

Further, during periods of higher occupancy rates, accommodation providers may decrease their distribution of accommodation reservations through third-party intermediaries like us, in particular through our discount services such as priceline.com's Name Your Own Price® and Express [removed: Deals®.][added: Deals® services.]

At times, we have experienced volatility in transaction growth rates and [added: cancellation rates and] weaker trends in hotel ADRs across many regions of the world, particularly in those European countries that appear to be most affected by economic uncertainties.

Disruptions in the economies of such countries could cause, contribute to or be indicative of deteriorating macro-economic [removed: conditions.][added: conditions, which in turn could negatively affect travel to or from such countries or the travel industry in general and therefore have an adverse impact on our results of operations.]

In addition, other unforeseen events beyond our control, such as oil prices, terrorist attacks, unusual [added: or extreme] weather [removed: patterns,] [added: or] natural disasters such as earthquakes, hurricanes, tsunamis, [removed: floods] [added: floods, droughts] and volcanic eruptions, [removed: travel related] [added: travel-related] health concerns including pandemics and epidemics such as Ebola, [added: Zika,] Influenza H1N1, avian bird [removed: flu] [added: flu, SARS] and [removed: SARS,] [added: MERS,] political instability, regional hostilities, imposition of taxes or surcharges by regulatory authorities or [removed: travel related] [added: travel-related] accidents, can disrupt travel or otherwise result in declines in travel demand.

[added: Future terrorist attacks, natural disasters, health] concerns or civil or political unrest could further disrupt our business and operations and adversely affect our results of operations.

Our international [added: OTC] operations have achieved significant year-over-year growth in their gross bookings (an operating and statistical metric referring to the total dollar value, generally inclusive of all taxes and fees, of all travel services [removed: purchased] [added: booked] by our [removed: customers).][added: customers, net of cancellations).]

This growth rate, which has contributed significantly to our growth in consolidated revenue, gross profit and [removed: earnings per share,] [added: earnings,] has declined, a trend we expect to continue as the absolute level of our gross bookings [removed: grows larger.][added: increases.]

Other factors may also slow the growth rates of our [removed: revenues derived from our] international [removed: business,] [added: businesses,] including, for example, worldwide economic conditions, any strengthening of the U.S. Dollar versus the Euro and other currencies, declines in ADRs, increases in cancellations, adverse changes in travel market conditions and the competitiveness of the market.

A decline in the growth rates of our international businesses could have a negative impact on our future [added: consolidated revenue,] gross profit and earnings [removed: per share] growth rates and, as a consequence, our stock price.

Our strategy involves continued [removed: rapid] international expansion in regions throughout the world.

Many of these regions have different [added: economic conditions,] customs, [added: languages,] currencies, [added: consumer expectations,] levels of consumer acceptance and use of the Internet for commerce, legislation, regulatory [removed: environments,] [added: environments (including labor laws and customs),] tax laws and levels of political [removed: stability.][added: stability, and we are subject to associated risks typical of international businesses.]

As we increase our non-hotel accommodation business, these different market characteristics could negatively impact our profit margins; and, to the extent these properties represent an increasing percentage of the properties added to our websites, our gross bookings growth rate and property growth rate will likely [added: continue to] diverge over time (since each such property has fewer booking opportunities).

As a result of the foregoing, as the percentage of non-hotel accommodations increases, the number of reservations per property will likely [added: continue to] decrease.

The number of our employees worldwide has grown from less than 700 in the first quarter of [removed: 2007,] [added: 2007] to approximately [removed: 12,700] [added: 15,500] as of December 31, [removed: 2014,] [added: 2015,] which growth is mostly comprised of hires by our international [removed: operations, including as a][added: operations.]

We compete with both online and traditional travel [added: and restaurant] reservation [added: and related] services.

The market for the [removed: travel reservation] services we offer is intensely competitive, and current and new competitors can launch new services at a relatively low cost.

For example, Google has entered various aspects of the online travel market through its acquisition in 2011 of ITA Software, Inc., a major flight information software company, its hotel [removed: meta-search service known as "Hotel Finder" (discussed below)] [added: search] and [added: reservation booking business ("Book on Google") and] its license of hotel-booking software from Room 77.

We currently, or [removed: potentially] may [added: potentially] in the future, compete with a variety of companies, including:

| • | online travel reservation services such as Expedia, Hotels.com, Hotwire, [added: Orbitz,] Travelocity, [removed: eLong,] Wotif, [added: Cheaptickets, ebookers, HotelClub, RatesToGo,] CarRentals.com and Venere, which are owned by Expedia; [removed: Orbitz.com, Cheaptickets, ebookers, HotelClub and RatesToGo, which are owned by Orbitz Worldwide (which has agreed to be acquired by Expedia); laterooms and asiarooms,] [added: laterooms,] which [removed: are] [added: is] owned by Tui Travel; Hotel Reservation Service [added: (HRS)] and hotel.de, which are owned by Hotel Reservation Service; and AutoEurope, Car Trawler, [removed: Ctrip,] [added: Ctrip (in which we hold a minority interest), eLong (in which Ctrip has acquired a significant minority ownership interest),] MakeMyTrip, Webjet, Rakuten, Jalan, Hotel [removed: Urbano,] [added: Urbano (in which we hold a minority interest),] ViajaNet, Submarino Viagens, Despegar/Decolar, 17u.com, [added: HotelTonight,] Bookit.com, CheapOair, Mr. and Mrs. Smith and eDreams ODIGEO; |

| • | online accommodation search and/or reservation services, such as [removed: HomeAway] [added: Airbnb] and [removed: Airbnb,] [added: HomeAway (which is owned by Expedia), currently] focused on vacation rental [removed: properties,] [added: properties and other non-hotel accommodations,] including individually owned properties; |

| • | large online companies, including search, social networking and marketplace companies such as Google, Facebook, [removed: Alibaba, Amazon] [added: Alibaba] and Groupon; |

| • | online travel search and price comparison services (generally referred to as "meta-search" services), such as TripAdvisor, trivago (in which Expedia [removed: has acquired] [added: holds] a majority ownership interest), [removed: Qunar, Skyscanner and HotelsCombined;] [added: Qunar (which is controlled by Ctrip), Skyscanner, HotelsCombined] and [added: Traveloka;] |

| • | online restaurant reservation services, such as TripAdvisor's [removed: LaFourchette and] [added: LaFourchette,] Yelp's [removed: SeatMe.] [added: SeatMe, Zomato, Bookatable (which is owned by Michelin) and Quandoo (which is owned by Recruit); and] |

TripAdvisor, a leading travel research and review website, Google, the world's largest search engine, and other large, established companies with substantial resources and expertise in developing online commerce and facilitating Internet traffic have launched [added: search,] meta-search [added: and/or reservation booking] services and may create additional inroads into online travel, both in the United States and internationally.

Meta-search services leverage their search technology to aggregate travel search results for the consumer's specific itinerary across travel service provider (e.g., accommodations, rental car companies or airlines), online travel [removed: agent ("OTA")] [added: company ("OTC")] and other travel websites and, in many instances, compete directly with us for customers.

Meta-search services intend to appeal to consumers by showing broader travel search results than may be available through [removed: OTAs] [added: OTCs] or other travel websites, which could lead to travel service providers or others gaining a larger share of search traffic.

TripAdvisor has begun supporting its meta-search service with offline advertising, and trivago, a leading meta-search service in Europe, has been aggressively [added: advertising in the United States since 2013.]

KAYAK depends on access to information related to travel service pricing, schedules, availability and other related information from [removed: OTAs] [added: OTCs] and travel service providers.

To the extent [removed: OTAs] [added: OTCs] or travel service providers do not provide such information to KAYAK, KAYAK's business and results of operations could be harmed.

Consumers may favor travel services offered by meta-search websites or search companies over [removed: OTAs,] [added: OTCs,] which could reduce traffic to our travel reservation websites, increase consumer awareness of our competitors' brands and websites and increase our advertising and other customer acquisition costs.

To the extent any such consumer behavior leads to growth in our KAYAK meta-search business, such growth may not result in sufficient increases in profits from our KAYAK meta-search business to offset any related decrease in profits experienced by our [removed: OTA] [added: travel service reservation] brands.

Further, meta-search services may evolve into more traditional [removed: OTAs] [added: OTCs] by offering consumers the ability to make travel reservations directly through their websites.

For example, TripAdvisor facilitates hotel reservations on its transaction websites Tingo and Jetsetter [removed: and intends] [added: and, with respect] to [removed: allow] [added: some accommodations, allows] consumers to make a reservation while staying on TripAdvisor through its "Instant Booking" offering.

To the extent consumers book travel services through a [added: service such as Google's "Book on Google," a] meta-search website or directly with a travel service provider after visiting a meta-search website or meta-search utility on a traditional search engine without using an [removed: OTA] [added: OTC] like us, or if meta-search services limit our participation within their search [removed: results,] [added: results or evolve into more traditional OTCs,] we may need to increase our advertising or other customer acquisition costs to maintain or grow our reservation bookings and our [removed: business, gross bookings] [added: business] and results of operations could be adversely affected.

[removed: As a result of our acquisition of OpenTable, we now compete] [added: Our OpenTable restaurant reservation business competes] or may in the future compete with other restaurant reservation providers, such as [removed: LaFourchette, a European restaurant reservation business] [added: LaFourchette (which is] owned by [removed: TripAdvisor, and] [added: TripAdvisor),] Yelp's SeatMe [removed: service.][added: service, Zomato, Bookatable (which is owned by Michelin), and Quandoo (which is owned by Recruit).]

Travel service providers may charge lower prices and, in some instances, offer advantages such as loyalty points or special discounts to members of closed user groups (such as loyalty program participants or [removed: customers] [added: consumers] with registered accounts), any of which could make their offerings more attractive to consumers than our services.

For example, companies such as [removed: HomeAway and] Airbnb [added: and HomeAway (which is owned by Expedia)] offer services [removed: focused on] providing vacation rental property owners, particularly individuals, an online place to list their accommodations where travelers can search and book such properties.

[removed: These and other competitors] [added: Competitors] could also launch opaque rental car services, which could negatively impact priceline.com's opaque Name Your Own Price® rental car reservation service.

Further, growth in discounted closed user group retail prices for hotel rooms lessens the [added: price difference for members of the closed user group between a retail hotel reservation and an opaque hotel reservation, which we believe has led to fewer consumers using our opaque hotel reservation services.]

Greece, in particular, has recently faced and continues to face significant economic challenges, in large part due to its high levels of sovereign debt and difficulties re-financing that debt.

Similarly, while China's economy experienced rapid growth over the past 20 years, growth of the Chinese economy slowed in 2015 and concerns about its future growth have had an adverse impact on financial markets, currency exchange rates and other economies.

In addition, although lower oil prices may lead to increased travel activity as consumers have more discretionary funds and airline fares decrease, recent declines in oil prices and stock market volatility may be indicative of broader macro-economic weakness, which in turn could negatively affect the travel industry and our business.

For example, our business and operations were negatively impacted by

the terror attacks in Paris in November 2015; Hurricane Sandy, which disrupted travel in the northeastern United States in late 2012; a major earthquake, tsunami and nuclear emergency in Japan in 2011; severe flooding in Thailand in October 2011; and disruptive civil unrest in Thailand in 2010 and 2014.

In addition, MERS had an adverse impact on our business in northeast Asia in 2015.

Also, in 2015 regional hostilities in the Middle East spurred an unprecedented flow of migrants from that region to Europe.

As countries respond to the European migrant crisis, travel between countries in the European Union and to and from the region could be subject to increased restrictions or the closing of borders, which could negatively impact travel to, from or within the European Union and adversely affect our business and results of operations.

| • | companies offering new rental car business models or car- or ride-sharing services that affect demand for rental cars, some of which have developed innovative technologies to improve efficiency of point-to-point transportation and extensively utilize mobile platforms, such as Uber, Lyft, Gett, Zipcar (which is owned by Avis), BlaBlaCar, Didi Kuaidi and Ola. |

Instant Booking now includes participation from six out of the top 10 global hotel brands, including Marriott International, Hyatt Hotels and Best Western International.

We recently agreed to participate in "Instant Booking," and we do not yet know how this participation will affect our business.

For example, while we expect to benefit from incremental business generated through "Instant Booking," participation could cannibalize business that would otherwise come to us through other ad offerings on TripAdvisor, directly (including after a consumer first visits TripAdvisor) or through other channels, some of which may be more profitable to us than reservations generated through "Instant Booking." Other meta-search providers may also offer direct booking services with travel service providers, which may lead to more consumers booking directly with a travel service provider rather than an OTC.

For example, Google recently announced the discontinuation of its Hotel Finder meta-search service in favor of integrating hotels directly into search results and encouraging users to book hotel reservations directly through Google's "Book on Google" service, which it is now expanding from mobile phones to both desktops and tablets.

Airbnb may also seek to compete directly with us by offering hotel and other accommodations through their online and mobile platforms.

Companies offering new rental car business models and car- and ride-sharing services such as Uber, Lyft, Gett, BlaBlaCar and Zipcar (which is owned by Avis) provide alternative options for consumers considering renting a car.

These companies extensively utilize mobile platforms and new technologies to drive demand for their services.

If any of these services are successful in attracting consumers who would otherwise use our rental car reservation services, our business and results of operations could be harmed.

Further, consolidation among travel service providers, such as Marriott International's acquisition of Starwood Hotels & Resorts, could result in lower rates of commission paid to OTCs, increased discounting, and greater incentives for consumers to join closed user groups as such travel service providers expand their offerings.

If we are not as effective as our competitors in offering discounted prices to closed user groups or if we are unable to entice members of our competitors' closed user groups to use our services, our ability to grow and compete could be harmed.

During 2015, Expedia acquired Travelocity, Orbitz and HomeAway.

Consumers traveling from a country whose currency has weakened against other currencies may book lower ADR accommodations, choose to shorten or cancel their international travel

In 2015, online advertising efficiency declined compared to the prior year, mainly due to lower ROIs.

search results.

This

For several years, we participated in the U.S.-E.U. Safe Harbor Arrangement (the "Safe Harbor") to address the European Union's data transfer regulations that would otherwise restrict the transfer of certain data from the European Union to the United States.

In October 2015, the European Court of Justice invalidated the Safe Harbor, and, as a result, we may need to pursue consent and/or other solutions with respect to certain data transfers from the European Union to the United States.

Such consents and/or solutions could be time consuming, costly or complicated to obtain or implement, or we may not be successful in such efforts, any of which could adversely affect our operations and financial results.

consumers to use the services of our competitors, which would have a negative effect on the value of our brands, our market share, business and results of operations.

For example, French tax authorities recently concluded an audit that started in 2013 of the tax years 2003 through 2012.

The French authorities are asserting that Booking.com has a permanent establishment in France and are seeking to recover what they claim are unpaid income taxes and value-added taxes ("VAT").

In December 2015, the French tax authorities issued an assessment for approximately 356 million Euros, the majority of which represents penalties and interest.

We believe that Booking.com has been, and continues to be, in compliance with French tax law, and we intend to contest the assessment.

If we are unable to resolve the matter with the French authorities, we would expect to challenge the assessment in the French courts.

In order to contest the assessment in court, we may be required to pay, upfront, the full amount or a significant part of

French authorities may decide to also audit subsequent tax years, which could result in additional assessments.

Similarly, Italian tax authorities have initiated a process to determine whether we should be subject to additional tax obligations in Italy.

We believe that we have been, and continue to be, in compliance with Italian tax law.

The final reports were endorsed by the G20 leaders in November 2015.

The final reports propose 15 actions the OECD determined are needed to address base erosion and profit shifting, including: (a) enhancing transparency through the sharing of tax information between countries; (b) prescribing standardized country-by-country reporting and other documentation requirements aimed at identifying where profits, tax and economic activities occur; (c) preventing harmful tax practices including the use of preferential tax regimes; (d) modernizing the OECD's transfer pricing rules related to intangibles; (e) changing the definition of permanent establishment to prevent artificial avoidance of tax nexus; and (f) limiting tax base erosion through interest deductions and other financial payments.

The measures also contemplate the development of a multilateral instrument to incorporate and facilitate changes to tax treaties.

Greece's newly elected government, which campaigned against austerity measures, may not be able to reach an acceptable solution to the country's debt crisis with the European Union.

For example, in late 2012 Hurricane Sandy disrupted travel in the northeastern United States.

In early 2011, Japan was struck by a major earthquake, tsunami and nuclear emergency.

In October 2011, severe flooding in Thailand, a key market for our agoda.com business and the Asian business of Booking.com, negatively impacted booking volumes and cancellation rates in that market.

In addition, Thailand recently experienced disruptive civil unrest, which negatively impacted booking volumes and cancellation rates in this market.

In early 2010, Thailand also experienced civil unrest, which caused the temporary relocation of agoda.com's Thailand-based operations.

Future natural disasters, health

In addition, non-hotel accommodations, including vacation rentals, tend to be more seasonal in nature and may close during "off-season," which impacts our property counts quarter to quarter.

result of our international acquisitions.

We are subject to risks typical of international businesses, including differing economic conditions, differing customs, languages and consumer expectations, changes in political climate, differing tax structures and other regulations and restrictions, including labor laws and customs, and foreign exchange rate volatility.

advertising in the United States since 2013.

Google offers "Hotel Finder", a meta-search service that Google has at times placed at or near the top of hotel-related search results.

We currently do not participate in "Instant Booking" and therefore risk losing share of reservations sourced through TripAdvisor.

Other meta-search providers may also offer direct booking services with travel service providers, which may lead to more consumers booking directly with a travel service provider rather than an OTA.

Companies such as HotelTonight, Tingo and Hipmunk have developed new and differentiated offerings that endeavor to provide savings on accommodation reservations to consumers and that compete directly with us.

price difference for members of the closed user group between a retail hotel reservation and an opaque hotel reservation, which may lead to fewer consumers using our opaque hotel reservation services.

In addition, after entering into an exclusive, long-term strategic marketing agreement in August 2013, Expedia acquired Travelocity in January 2015.

On February 12, 2015, Expedia announced that it had entered into an agreement to acquire Orbitz.

Google's "Hotel Finder," a utility that allows consumers to search and compare hotel accommodations, has at times placed at or near the top of hotel-related search results.

including proprietary last-minute discounts for accommodation reservations.

and adversely affect our ability to conduct our business, satisfy our commercial obligations or meet our public reporting requirements in a timely fashion or at all.

Despite any precautions we may take, the occurrence of any disruption of service due to any

For example, French authorities have initiated an audit to determine whether we are in compliance with our tax obligations in France, and we expect to get a preliminary response in the first half of 2015.

The action plan identified 15 actions the OECD determined are needed to address "base erosion and profit shifting" and generally set target dates for completion of each of the items between 2014 and 2015.

Reports addressing 7 of these actions were released by the OECD in September 2014.

The proposed measures contained in these reports are not yet finalized as they may be affected by the proposals to be made with respect to the remaining actions.

Due to the large and expanding scale of our international business activities, any changes in U.S.

Booking.com obtained a ruling from the Dutch tax authorities confirming that a portion of its earnings ("qualifying earnings") is eligible for Innovation Box Tax treatment.

This ruling was renewed in July 2013 and is valid through December 31, 2017.

The changes endorsed by ECOFIN would, if adopted, limit such benefits only to profits derived from patentable intellectual property.

It is expected that the legislative process related to the proposed changes will begin in 2015.

However, the proposals may not be adopted in the form endorsed by ECOFIN or at all, and it is expected that any changes will include transition rules and will be fully implemented no later than July 2021.

The loss of the Innovation Box Tax benefit would substantially increase our effective tax rate and adversely impact our results of operations.

assessments or started inquiries relating to the payment of travel transaction taxes.

See Part I Item 3 Legal Proceedings and Note 16 to the Consolidated Financial Statements for a description of these pending cases and proceedings.

For example, in September 2012, the Superior Court in the District of Columbia granted a summary judgment in favor of the city and against online travel companies.

Similarly, in January 2013, the Tax Appeal Court for the State of Hawaii held that online travel companies, including us, are liable for the State's general excise tax on the full amount the online travel company collects from the customer for a hotel room reservation, without any offset for amounts passed through to the hotel.

We recorded an accrual for travel transaction taxes (including estimated interest and penalties) of approximately $16.5 million in December 2012 and approximately $18.7 million in the three months ended March 31, 2013, primarily related to this ruling.

During the year ended December 31, 2013 and December 31, 2014 the Company paid approximately $20.6 million and $2.2 million, respectively, to the State of Hawaii related to this ruling.

The Company has filed an appeal with the Tax Appeal Court and intends to vigorously appeal this ruling.

We [removed: are a leading provider of] [added: compete with both] online [removed: travel] and [added: traditional] travel [removed: related] [added: and restaurant] reservation and [removed: search] [added: related] services.

Through our online travel [removed: agent ("OTA") services,] [added: companies ("OTCs"),] we connect consumers wishing to make travel reservations with providers of travel services around the world.

We offer consumers [added: a broad array of] accommodation reservations (including hotels, bed and breakfasts, hostels, apartments, vacation rentals and other properties) through our Booking.com, priceline.com and agoda.com brands.

We refer to our company and all of our subsidiaries and brands, including Booking.com, priceline.com, KAYAK, agoda.com, [removed: rentalcars.com and, as of July 24, 2014, OpenTable,] [added: rentalcars.com, OpenTable and various smaller brands,] collectively as "The Priceline Group," the "Company," "we," "our" or "us."

We launched our business in the United States in 1998 under the priceline.com brand and have since expanded our operations to include [added: five other primary, independently operated brands:] Booking.com, KAYAK, agoda.com, rentalcars.com and [removed: OpenTable, which are independently managed and operated brands.][added: OpenTable.]

Our principal goal is to [removed: serve] [added: help people experience the world by serving both] consumers and our travel service provider and restaurant partners with worldwide leadership in online reservation [added: and related] services.

Our business is driven primarily by international results, which consist of the results of Booking.com, agoda.com and rentalcars.com and the results of the [removed: internationally based] [added: internationally-based] websites of KAYAK [removed: and, as of July 24, 2014,] [added: and] OpenTable (in each case regardless of where the consumer resides, where the consumer is physically located while making a reservation or the location of the travel service provider or restaurant).

During the year ended December 31, [removed: 2014,] [added: 2015,] our international business (the substantial majority of which is generated by Booking.com) represented approximately [removed: 87%] [added: 88%] of our gross bookings (an operating and statistical metric referring to the total dollar value, generally inclusive of all taxes and fees, of all travel services [removed: purchased] [added: booked] by our [removed: customers),] [added: customers, net of cancellations), approximately 86% of our consolidated gross profit] and approximately 94% of our consolidated operating income.

See Note [removed: 18] [added: 17] to the Consolidated Financial Statements for more geographic information.

| • | [removed: Advertising] [added: Beginning on May 21, 2013, advertising] revenues primarily earned by KAYAK from sending referrals to [removed: OTAs] [added: OTCs] and travel service providers, as well as from advertising placements on KAYAK's websites and mobile apps; |

| • | Beginning on July 24, 2014, revenues recognized by OpenTable, which consist of reservation revenues [removed: (a fee] [added: (reservation fees paid by restaurants] for [removed: restaurant guests] [added: diners] seated through OpenTable's online reservation service), subscription fees for restaurant reservation management services and other revenues; and |

Gross profit reflects the commission or net margin earned for [removed: our retail, Name Your Own Price® and semi-opaque travel services and] [added: all of] our [removed: advertising and other] services.

Consequently, gross profit is an important measure to evaluate growth in our business because, in contrast to our revenues, it is not affected by [added: the different methods of recording revenue and cost of revenue between our Name Your Own Price® travel reservation services and our other services.]

We believe this growth is the result of, among other things, the broader shift of travel purchases from offline to online, the widespread adoption of mobile devices, the high growth of travel overall in emerging markets such as Asia-Pacific and South America, and the continued innovation and execution by our teams around the world to build accommodation supply, content and distribution and to improve the [removed: customer] [added: consumer] experience on our websites and mobile apps.

For example, for the year ended December 31, [removed: 2014,] [added: 2015,] our accommodation room night reservation growth was [removed: 28%,] [added: 25%,] a deceleration from [removed: 37%] [added: 28%] in [removed: 2013, 40%] [added: 2014, 37%] in [removed: 2012] [added: 2013] and [removed: 53%] [added: 40%] in [removed: 2011.][added: 2012.]

However, international consumers are [removed: rapidly] [added: increasingly] moving to online means for purchasing travel.

We expect that over the [removed: long-term,] [added: long term,] international online travel growth rates will follow a similar trend to that experienced in the United States.

[removed: Booking.com, our most significant brand,] [added: Booking.com] included over [removed: 600,000] [added: 850,000] properties on its website as of February [removed: 13, 2015,] [added: 15, 2016,] which included [removed: over 245,000] [added: approximately 390,000] vacation rental properties (updated property counts are available on the Booking.com [removed: website).][added: website), compared to over 635,000 properties (including approximately 269,000 vacation rental properties) a year ago.]

As our international business represents the substantial majority of our financial results, we expect [removed: to continue to see] our operating results and other financial metrics [added: to continue to be] largely driven by international performance.

For example, because a vacation rental is either a single unit or a small collection of independent units, vacation rental properties represent more limited booking [removed: opportunities than non-vacation rental properties, which generally have more units to rent per property.]

As we increase our non-hotel accommodation business, these different market characteristics could negatively impact our profit margins; and, to the extent these properties represent an increasing percentage of the properties added to our websites, [added: we expect that] our gross bookings growth rate and property growth rate will [removed: likely] [added: continue to] diverge over time (since each such property has fewer booking opportunities).

As a result of the foregoing, as the percentage of non-hotel accommodations increases, [added: we expect that] the number of reservations per property will likely [added: continue to] decrease.

Concerns persist about the outlook for the global economy in general, [removed: and] [added: including] the European [removed: Union in particular,] [added: Union,] with recent declines in broad Eurozone economic indicators raising fears about the pace of economic growth and the risk of deflation.

Greece, Ireland, Portugal and certain other European Union countries with high levels of sovereign debt at times have had difficulty refinancing [added: their debt.]

At times, we have experienced volatility in transaction growth rates and [added: cancellation rates and] weaker trends in hotel ADRs across many regions of the world, particularly in those European countries that appear to be most affected by economic uncertainties.

Disruptions in the economies of such countries could cause, contribute to or be indicative of deteriorating macro-economic [removed: conditions.][added: conditions, which in turn could negatively affect travel to or from such countries or the travel industry in general and therefore have an adverse impact on our results of operations.]

[removed: The] [added: In March 2015, the] European Central Bank, in an effort to stimulate the European economy, [removed: recently] launched a quantitative easing program to purchase public [removed: debt, which in turn has caused the Euro exchange rate to weaken compared to the U.S. Dollar.][added: debt.]

[removed: Our] [added: As noted earlier, our] international business represents a substantial majority of our financial results.

Therefore, because we report our results in U.S. Dollars, we face exposure to adverse movements in currency exchange rates as the financial results of our international businesses are translated from local currency (principally [removed: the Euro] [added: Euros] and [removed: the] British [removed: Pound] [added: Pounds] Sterling) into U.S. Dollars.

The U.S. Dollar significantly strengthened against the Euro during [removed: 2014,] [added: 2015,] moving from an exchange rate of [removed: 1.38] [added: 1.21] U.S. Dollars per Euro as of January 1, [removed: 2014] [added: 2015] to [removed: 1.13] [added: 1.09] U.S. Dollars per Euro as of [removed: January] [added: December] 31, 2015.

[removed: For example, gross] [added: Gross] profit from our international operations grew year-over-year on a [removed: local] [added: constant] currency basis by approximately [removed: 32%] [added: 28%] for the [removed: three months] [added: year] ended December 31, [added: 2015 compared to the year ended December 31,] 2014, but, as a result of the impact of changes in currency exchange rates, grew [removed: 24%] [added: 11.6% for the year ended December 31, 2015,] as reported in U.S. Dollars.

The U.S. Dollar strengthened further in [removed: January] 2015 to an exchange rate of [removed: 1.13] [added: 1.09] U.S. Dollars per Euro as of [removed: January] [added: December] 31, 2015.

The U.S. Dollar has also strengthened against many other currencies since January 1, [removed: 2014.][added: 2015.]

At these exchange rates, the growth of our total and international gross bookings, expressed in U.S. Dollars, [removed: will be] [added: was] significantly adversely impacted in 2015.

However, such derivative instruments are [removed: short-term] [added: short term] in nature and not designed to hedge against currency fluctuations that could impact our gross bookings, revenues or gross profit (see Note 5 to the Consolidated Financial Statements for additional information on our derivative contracts).

Significant fluctuations in currency exchange [removed: rates] [added: rates, stock markets and oil prices] can also impact consumer travel behavior.

[removed: For example, recent] [added: Similarly,] dramatic depreciation of the Russian Ruble [removed: has] [added: in 2014 and 2015] resulted in it becoming more expensive for Russians to travel to Europe and most other non-Ruble destinations.

The market for the [removed: travel reservation and search] services we offer is intensely competitive, a trend we expect to continue, and current and new competitors can launch new services at a relatively low cost.

We currently, or [removed: potentially] may [added: potentially] in the future, compete with a variety of companies, including:

| • | online travel reservation services such as those owned by [removed: Expedia, Orbitz (which has agreed to be acquired by Expedia), Ctrip,] [added: Expedia (including Travelocity and Orbitz), Ctrip (in which we hold a minority interest),] Rakuten, eDreams ODIGEO and Jalan; |

We evaluate our results of operations on both an as reported and constant currency basis.

We calculate constant currency by converting our current-period financial results for transactions recorded in currencies other than U.S. Dollars using the prior-period monthly average exchange rates rather than the current-period monthly average exchange rates.

We help people experience the world by providing consumers, travel service providers and restaurants with leading travel and restaurant reservation and related services.

We are the leader in the worldwide online accommodation reservation market based on room nights booked.

We provide restaurants with reservation management services and consumers with the ability to make restaurant reservations at participating restaurants through OpenTable, a leading provider of online restaurant reservations.

| • | Damage excess waiver fees, travel insurance fees and global distribution system ("GDS") reservation booking fees, in each case related to certain of our travel services. |

Our growth has primarily been generated by our worldwide accommodation reservation service brand, Booking.com, which is our most significant brand, and has been due, in part, to the availability of a large and growing number of directly bookable properties through Booking.com.

Booking.com included over 850,000 properties on its website as of February 15, 2016, which included approximately 390,000 vacation rental properties (updated property counts are available on the Booking.com website), and compares to over 635,000 properties (including approximately 269,000 vacation rental properties) a year ago.

In September 2015, Booking.com changed the way it calculates property counts.

As a result, properties that are contracted with Booking.com but temporarily do not have availability on Booking.com (for example properties that are closed during their off-peak season or for renovations) will remain included in Booking.com's property counts during these temporary periods.

Booking.com previously excluded properties that were temporarily unavailable for booking.

We believe that continuously including them provides a more consistent and useful property count.

We believe that continuing to expand the number and variety of accommodations available through our services, in particular Booking.com, will help us to continue to grow our accommodation reservation business.

The approximately 390,000 vacation rental properties on Booking.com's website as of February 15, 2016 (updated property counts are available on the Booking.com's website) represent approximately 1.9 million instantly bookable and confirmable units within these properties.

opportunities than non-vacation rental properties, which generally have more units to rent per property.

Similarly, while China's economy experienced rapid growth over the past 20 years, growth of the Chinese economy slowed in 2015 and concerns about its future growth have had an adverse impact on financial markets, currency exchange rates and other economies.

Greece, in particular, has recently faced and continues to face significant economic challenges, in large part due to its high levels of sovereign debt and difficulties refinancing that debt.

Since our expenses are generally denominated in foreign currencies on a basis similar to our revenues, our operating margins are not significantly impacted by currency fluctuations.

The aggregate principal value of our Euro-denominated 2022 Notes, 2024 Notes and 2027 Notes, and accrued interest thereon, provide a natural hedge of the net assets of certain of our Euro functional currency subsidiaries.

For example, the strengthening of the U.S. Dollar relative to the Euro in 2015 resulted in it

becoming more expensive for Europeans to travel to the United States.

In addition, although lower oil prices may lead to increased travel activity as consumers have more discretionary funds and airline fares decrease, recent declines in oil prices and stock market volatility may be indicative of broader macro-economic weakness, which in turn could negatively affect the travel industry and our business.

| • | companies offering new rental car business models or car- or ride-sharing services that affect demand for rental cars, some of which have developed innovative technologies to improve efficiency of point-to-point transportation and extensively utilize mobile platforms, such as Uber, Lyft and Zipcar. |

During 2015, Expedia acquired Travelocity, Orbitz and HomeAway.

Further, given the device sizes and technical limitations of tablets and smart phones, mobile consumers may not be willing to download multiple apps

During 2015, our total online advertising expense was approximately $2.8 billion, primarily related to the use of online search engines (primarily Google), meta-search and travel research services and affiliate marketing to generate traffic to our websites.

We also invested approximately $215 million in offline advertising during that period.

In 2015, online advertising efficiency declined compared to the prior year, mainly due to lower ROIs.

Various NCAs, including those in France, Germany, Italy, Austria, Sweden, Ireland and Switzerland, opened investigations of Booking.com's contractual parity arrangements with accommodation providers in those jurisdictions, and a number of other NCAs are looking at these issues.

It is uncertain how these issues will finally be resolved.

For example, the French, Italian and Swedish NCAs accepted commitments offered by Booking.com to resolve and close their investigations and Booking.com

voluntarily implemented these commitments throughout the European Economic Area and Switzerland on July 1, 2015, which resolved the concerns of various other countries.

However, in August 2015 France adopted legislation known as the "Macron Law" making price parity agreements illegal, including those that had been approved by the French NCA.

For more information on these investigations and their potential effects on our business, see Note 15 to our Consolidated Financial Statements and Part I Item 1A Risk Factors - "As the size of our business grows, we may become increasingly subject to the scrutiny of anti-trust and competition regulators." To the extent that regulatory authorities impose fines or require changes to our business practices or to those currently common to the industry or legislation is enacted with a similar effect, our business, competitive position and results of operations could be materially and adversely affected.

Similarly to 2013, in 2016 Easter will fall in the first quarter instead of the second quarter, and will therefore likely have a positive effect on our first quarter 2016 year-over-year growth rates and a negative effect on our second quarter 2016 year-over-year growth rates as compared to the same periods in 2015 when Easter fell in the second quarter.

For example, our business and operations were negatively impacted by the terror attacks in Paris in November 2015; Hurricane Sandy, which disrupted travel in the northeastern United States in late 2012; a major earthquake, tsunami and nuclear emergency in Japan in 2011; severe flooding in Thailand in October 2011; and disruptive civil unrest in Thailand in 2010 and 2014.

In addition, MERS had an adverse impact on our business in northeast Asia in 2015.

For example, we are investing in growth initiatives at OpenTable, including international expansion, and in building our BookingSuite partner-facing software services platform.

| • | Valuation of Goodwill, Long-Lived Assets and Intangibles. The application of the purchase method of accounting for business combinations requires the use of significant estimates and assumptions to determine the fair value of the assets acquired and liabilities assumed. Our estimates of the fair value are based upon assumptions that we believe are reasonable and, when we deem appropriate, include assistance from a third party valuation firm. The purchase price consideration is allocated to the assets acquired and liabilities assumed based on their respective fair values at the acquisition date. The excess of the purchase price consideration over the net of the amounts allocated to the assets acquired and liabilities assumed is recognized as goodwill. Goodwill is assigned to reporting units that are expected to benefit from the synergies of the business combination as of the acquisition date. |

We review goodwill for impairment annually and whenever events or changes in circumstances indicate the carrying amount of goodwill may not be recoverable.

We recently acquired OpenTable, a leading provider of online restaurant reservations.

We believe that the online restaurant reservation business is complementary to our online travel businesses, and that both OpenTable and our travel businesses will benefit from adding OpenTable to The Priceline Group.

| | |

| --- | --- |

| • | Global distribution system ("GDS") reservation booking fees related to our Name Your Own Price® hotel, rental car and airline ticket reservation services, and price-disclosed airline ticket and rental car reservation services. |

the different methods of recording revenue and cost of revenue between our Name Your Own Price® travel services and our other services.

Our growth has primarily been generated by our international accommodation reservation service brands, Booking.com and agoda.com.

Booking.com has added properties over the past year in its core European market as well as higher-growth markets such as North America (which is a newer market for Booking.com), Asia-Pacific and South America.

An increasing amount of our business from both a destination and point-of-sale perspective is conducted in our newer markets which are growing faster than our overall growth rate.

In addition, non-hotel accommodations, including vacation rentals, tend to be more seasonal in nature and may close during "off-season," which impacts our property counts quarter to quarter.

their debt.

Greece's newly elected government, which campaigned against austerity measures, may not be able to reach an acceptable solution to the country's debt crisis with the European Union.

We compete with both online and traditional travel and travel related reservation and search services.

After entering into an exclusive, long-term strategic marketing agreement in August 2013, Expedia acquired Travelocity in January 2015.

On February 12, 2015, Expedia announced that it had entered into an agreement to acquire Orbitz.

During 2014, our total online advertising expense was approximately $2.4 billion, a substantial portion of

which was spent internationally through Internet search engines (primarily Google), meta-search and travel research services and affiliate marketing.

We also invested $231 million in offline advertising.

For example, Booking.com has been the subject of a competition investigation by U.K. competition authorities since July 2012.

Other national competition authorities, including those in the Czech Republic, France, Germany, Italy, Austria, Hungary, Sweden and Switzerland, have more recently opened investigations that focus on Booking.com's rate parity clause in its contracts with accommodation providers in those jurisdictions.

We are currently unable to predict the outcome of all of these investigations or how our business may be affected.

Possible outcomes include requiring Booking.com to remove its rate parity clause from its contracts with accommodation providers in those jurisdictions.

In the U.K. investigation, Booking.com and the other subjects of the investigation had reached a settlement with the competition authorities; however, that settlement has been vacated on appeal.

On December 15, 2014, the French, Italian and Swedish national competition authorities, working in close cooperation with the European Commission, announced their intention to seek public feedback on commitments offered by Booking.com in connection with investigations of Booking.com's rate parity provisions in its contractual arrangements with accommodation providers.

See Footnote 16 to our Consolidated Financial Statements and Part I Item 1A Risk Factors - "As the size of our business grows, we may become increasingly subject to the scrutiny of anti-trust and competition regulators." We note that the German competition authority has required Hotel Reservation Service, a leading OTA in Germany, to remove its rate parity clause from its contracts with hotels, and Hotel Reservation Service's initial appeal was denied.

To the extent that regulatory authorities require changes to our business practices or to those currently common to the industry, our business, competitive position and results of operations could be materially and adversely affected.

For example, in late 2012 Hurricane Sandy disrupted travel in the northeastern United States.

In early 2011, Japan was struck by a major earthquake, tsunami and nuclear emergency.

In October 2011, severe flooding in Thailand, a key market for our agoda.com business and the Asian business of Booking.com, negatively impacted booking volumes and cancellation rates in this market.

In addition, Thailand has recently experienced disruptive civil unrest, which has negatively impacted booking volumes and cancellation rates in this market.

In early 2010, Thailand also experienced civil unrest, which caused the temporary relocation of agoda.com's Thailand-based operations.

On July 24, 2014, we acquired OpenTable, a leading provider of online restaurant reservations, for $2.5 billion ($2.4 billion net of cash acquired) and on May 21, 2013, we acquired KAYAK Software Corporation, a leading travel meta-search service, for $2.1 billion ($1.9 billion net of cash acquired).

A substantial portion of the total consideration for these acquisitions related to identifiable acquired intangibles and goodwill (see Note 9 to the Consolidated Financial Statements).

As a result, we expect OpenTable's profitability in 2015 to decline year-over-year as we invest for future growth.

If the investments we intend to make in 2015 and beyond, in particular internationally, are unsuccessful in growing OpenTable's global online restaurant reservation business or OpenTable experiences a significant reduction in revenues or profitability due to factors such as competition, increased capital expenditures or investments in its business, we may incur an impairment.

Likewise, if KAYAK is unsuccessful in profitably growing its global online travel brand or it experiences a significant reduction in advertising revenues on its websites or mobile apps or profitability due to factors such as a loss of continued access to travel services information provided by other OTAs or travel service providers, we may incur an impairment.

| • | Accounting for Travel Transaction Taxes. As discussed in Note 16 to the Consolidated Financial Statements, we are currently involved in approximately forty lawsuits brought by or against states, cities and counties over issues involving the payment of travel transaction taxes (e.g. hotel occupancy taxes, excise taxes, sales taxes, etc.). In addition, over seventy-nine municipalities or counties, and at least eleven states, have initiated audit proceedings, issued proposed tax assessments or started inquiries relating to the payment of travel transaction taxes. Additional state and local jurisdictions are likely to assert that we are subject to travel transaction taxes and could seek to collect such taxes, retroactively and/or prospectively. Historically, we have not collected travel transaction taxes on the gross profit earned from merchant hotel transactions; however, in a handful of jurisdictions, we have been required recently by passage of a new statute or by court order to start collecting and remitting certain taxes (local occupancy and/or sales or excise tax) imposed upon our margin and/or service fee, or in the case of Hawaii, on the full amount collected from the consumer. The ultimate resolution of these matters in all jurisdictions cannot be determined at this time. We have established an accrual (including estimated interest and penalties) for potential resolution of issues related to travel transaction taxes for prior and current periods, consistent with applicable accounting principles and in light of all current facts and circumstances. We accrue for legal contingencies where it is probable that a loss has occurred and the amount can be reasonably estimated; our legal expenses for these matters are expensed as incurred and are not reflected in the amount accrued. A variety of factors could affect the amount of the liability (both past and future), which factors include, but are not limited to, the number of, and amount of gross profit represented by, jurisdictions that ultimately assert a claim and prevail in assessing such additional tax or negotiate a settlement and changes in relevant statutes. The ultimate resolution of these matters may be greater or less than the liabilities recorded. |

| • | Valuation of Goodwill, Long-Lived Assets and Intangibles. The application of the purchase method of accounting for business combinations requires the use of significant estimates and assumptions to determine |

the fair value of the assets and liabilities assumed in order to properly allocate the purchase price consideration between identifiable intangible assets from goodwill.

Our estimates of the fair value of assets and liabilities assumed are based upon assumptions that we believe are reasonable and, when appropriate, include assistance from a third party valuation firm.

We did not experience any material changes in interest rate exposures during the year ended December 31, [removed: 2014.][added: 2015.]

Based upon economic conditions and leading market indicators at December 31, [removed: 2014,] [added: 2015,] we do not foresee a significant adverse change in interest rates in the near future.

We performed a sensitivity analysis to determine the impact a change in interest rates would have on the fair value of our [removed: available for sale] [added: available-for-sale] investments assuming an adverse change of 100 basis points.

A hypothetical 100 basis point (1.0%) increase in interest rates would have resulted in a decrease in the fair values of our investments as of December 31, [removed: 2014] [added: 2015] of approximately [removed: $85] [added: $135.1] million.

As of December 31, [removed: 2014,] [added: 2015,] the outstanding aggregate principal amount of our debt [removed: is $4.2] [added: was approximately $6.5] billion.

We estimate that the market value of such debt was approximately [removed: $4.8] [added: $7.0] billion as of December 31, [removed: 2014.][added: 2015.]

A substantial portion of the market value of our debt in excess of the outstanding principal amount is related to the conversion premium on our outstanding convertible [removed: bonds.][added: notes.]

As a result, we face [removed: exposure] [added: exposures] to adverse movements in currency exchange rates as the operating results of our international operations are translated from local currency into U.S. Dollars upon consolidation.

Additionally, foreign exchange rate fluctuations on [removed: transactions] [added: transactions,] denominated in currencies other than the functional [removed: currency results] [added: currency, result] in gains and losses that are reflected in the Consolidated [removed: Statement] [added: Statements] of Operations.

From time to time, we enter into foreign exchange derivative contracts to minimize the impact of short-term foreign currency fluctuations [removed: on] [added: in] our consolidated operating results.

[removed: Our derivative contracts principally address foreign exchange] fluctuation risk for the Euro and the British Pound Sterling versus the U.S. Dollar.

As of December 31, [removed: 2014] [added: 2015] and [removed: 2013,] [added: 2014,] there were no such outstanding derivative [removed: contracts associated with foreign currency translation risk.][added: contracts.]

Foreign exchange [added: losses of $6.6 million for the year ended December 31, 2015 and foreign exchange] gains of $13.7 [removed: million, $0.3 million,] [added: million] and [removed: $0.7] [added: $0.3] million for the years ended December 31, [removed: 2014, 2013,] [added: 2014] and [removed: 2012,] [added: 2013,] respectively, were recorded in "Foreign currency transactions and other" in the Consolidated Statements of Operations.

The U.S. Dollar significantly strengthened against the Euro during 2014, moving from an exchange rate of 1.38 U.S. Dollars per Euro as of January 1, 2014 to 1.21 U.S. Dollars per Euro as of December 31, 2014.

The U.S. Dollar has strengthened further in 2015 to an exchange rate of 1.09 U.S. Dollars per Euro as of December 31, 2015.

The U.S. Dollar also strengthened significantly during this time frame as compared to many other currencies.

As a result, our foreign currency denominated net assets, gross bookings, gross profit, operating expenses and net income have been negatively impacted as expressed in U.S. Dollars.

Since our expenses are generally denominated in foreign currencies on a basis similar to our revenues, our operating margins are not significantly impacted by currency fluctuations.

The aggregate principal value of our Euro-denominated 2022 Notes, 2024 Notes and 2027 Notes, and accrued interest thereon, provide a natural hedge of the net assets of certain of our Euro functional currency subsidiaries.

Our derivative contracts principally address foreign exchange

We [removed: are a leading provider of] [added: compete with both] online [removed: travel] and [added: traditional] travel [removed: related] [added: and restaurant] reservation and [removed: search] [added: related] services.

Through our online travel [removed: agent ("OTA")] [added: reservation] services, we connect consumers wishing to make travel reservations with providers of travel services around the world.

We offer consumers [added: a broad array of] accommodation reservations (including hotels, bed and breakfasts, hostels, apartments, vacation rentals and other properties) through our Booking.com, priceline.com and agoda.com brands.

We also allow consumers to easily compare airline ticket, hotel reservation and rental car reservation information from hundreds of travel websites at once through [removed: KAYAK.]

[removed: We recently] [added: In July 2014, we] acquired OpenTable, a leading [removed: provider of] [added: brand for booking] online restaurant reservations.

We refer to our company and all of our subsidiaries and brands, including Booking.com, priceline.com, KAYAK, agoda.com, [removed: rentalcars.com and, as of July 24, 2014, OpenTable,] [added: rentalcars.com, OpenTable and various smaller brands,] collectively as "The Priceline Group," the "Company," "we," "our" or "us." [added: We determined that our brands constitute our operating segments.]

We launched our business in the United States in 1998 under the priceline.com brand and have since expanded our operations to include [added: five other primary, independently operated brands:] Booking.com, KAYAK, agoda.com, rentalcars.com and [removed: OpenTable, which are independently managed and operated brands.][added: OpenTable.]

Our [removed: principal goal] [added: mission] is to [removed: serve] [added: help people experience the world by serving both] consumers and our travel service provider and restaurant partners with worldwide leadership in online reservation [added: and related] services.

Our business is driven primarily by international results, which consist of the results of Booking.com, agoda.com and rentalcars.com and the results of the [removed: internationally based] [added: internationally-based] websites of KAYAK [removed: and, as of July 24, 2014,] [added: and] OpenTable (in each case regardless of where the consumer resides, where the consumer is physically located while making a reservation or the location of the travel service provider or restaurant).

During the year ended December 31, [removed: 2014,] [added: 2015,] our international business (the substantial majority of which is generated by Booking.com) represented approximately [removed: 87%] [added: 88%] of our gross bookings (an operating and statistical metric referring to the total dollar value, generally inclusive of all taxes and fees, of all travel services [removed: purchased] [added: booked] by our [removed: customers),] [added: customers, net of cancellations), approximately 86% of our consolidated gross profit] and approximately 94% of our consolidated operating income.

See Note [removed: 18] [added: 17] to the Consolidated Financial Statements for more geographic information.

| • | [removed: Advertising] [added: Beginning on May 21, 2013, advertising] revenues primarily earned by KAYAK from sending referrals to [removed: OTAs] [added: OTCs] and travel service providers, as well as from advertising placements on KAYAK's websites and mobile apps; |

| • | Beginning on July 24, 2014, revenues recognized by OpenTable, which consist of reservation revenues [removed: (a fee] [added: (reservation fees paid by restaurants] for [removed: each restaurant guest] [added: diners] seated through OpenTable's online reservation service), subscription fees for [added: restaurant] reservation management services and other revenues; and |

Gross profit reflects the commission or net margin earned for [removed: our retail, Name Your Own Price® and semi-opaque travel services and] [added: all of] our [removed: advertising and other] services.

Consequently, gross profit is an important measure to evaluate growth in our business because, in contrast to our revenues, it is not affected by the different methods of recording revenue and cost of revenue between our Name Your Own Price® travel [added: reservation] services and our other services.

For the year ended December 31, [removed: 2014,] [added: 2015,] we had gross profit of approximately [removed: $7.6] [added: $8.6] billion comprised of "agency" gross profit, "merchant" gross profit, and "other" gross profit.

Agency gross profit is derived from [removed: travel related] [added: travel-related] transactions where we are not the merchant of [removed: record] [added: record,] and [added: therefore do not charge the customer's credit card, and] where the prices of the travel services [removed: reserved through our websites] are determined by third parties.

Agency gross profit, which represented the substantial majority of our total gross profit in [removed: 2014,] [added: 2015,] consists primarily of: (1) travel [removed: commissions earned from reservations at Booking.com, priceline.com and rentalcars.com;] [added: commissions;] (2) GDS reservation booking fees related to certain [removed: of the agency services listed above; and] [added: travel services;] (3) [added: travel insurance fees; and (4) customer] processing fees.

Merchant gross profit is derived from [removed: transactions] [added: services] where we are the merchant of record and therefore charge the consumer's credit card for the travel services provided, and consists of: (1) transaction gross profit representing the amount charged to a consumer, less the amount charged to us by travel service [removed: providers in connection with (a) the accommodation reservations provided through our merchant accommodation reservation service at agoda.com and priceline.com and (b) the reservations provided through our merchant rental car service at rentalcars.com and Express Deals® service at priceline.com;] [added: providers;] (2) [removed: transaction gross profit representing revenue charged to a consumer less the cost of revenue amount charged to us by travel service providers in connection with the reservations provided through our Name Your Own Price® and vacation package reservation services; (3)] [added: customer] processing [removed: fees charged in connection with our priceline.com merchant reservation services;] [added: fees;] and [removed: (4)] [added: (3)] ancillary fees, including [added: damage excess waiver and travel insurance fees and] GDS reservation booking fees related to certain [removed: of the services listed above.][added: travel services.]

Advertising and other revenues are derived primarily from (1) revenues earned by KAYAK for [added: (a)] sending referrals to [removed: OTAs] [added: OTCs] and travel service [removed: providers; (2)] [added: providers and (b)] advertising placements on KAYAK's websites and mobile apps; [removed: (3) reservation] [added: and (2)] revenues earned by OpenTable [removed: (a fee] for [removed: each restaurant guest] [added: (a) reservation fees paid by restaurants for diners] seated through OpenTable's online reservation [removed: service);] [added: service] and [removed: (4)] [added: (b)] subscription fees earned by OpenTable for [added: restaurant] reservation management services.

Revenues from KAYAK are net of intercompany revenues earned [added: by KAYAK] from other Priceline Group brands.

[removed: The] [added: As the] online travel [removed: category has continued] [added: and dining categories continue] to [removed: experience significant worldwide growth] [added: grow] as consumer purchasing shifts from traditional off-line channels to interactive online channels, including mobile [removed: channels.][added: channels, our strategy is to continue to participate broadly in this online growth by expanding our service offerings and markets.]

In particular, we aim to be the world leader in online travel and [removed: travel] [added: restaurant reservation and] related services by (a) providing consumers with the best [removed: experience through relentless execution and constant innovation,] [added: experience,] (b) partnering with travel service providers and restaurants to our mutual benefit, (c) operating entrepreneurial, independent brands that share best practices, and (d) investing in profitable and sustainable growth.

| • | Providing the best consumer experience. We believe that offering consumers an outstanding online experience is essential for our future success. To accomplish this, we focus on providing consumers [removed: with] [added: with:] a variety of intuitive, easy-to-use online travel and restaurant reservation and search [removed: services,] [added: services;] a continually increasing number, location and variety of accommodations available through our [removed: services,] [added: services:] informative and useful content, such as pictures, accommodation details and [removed: reviews,] [added: reviews;] and excellent customer service. For example, Booking.com increasingly provides reservation services for accommodations other than [removed: hotels. Further, we endeavor to provide excellent customer service in a variety] [added: hotels, such as vacation rentals. Booking.com included over 850,000 properties on its website as] of [removed: ways, including through our call centers and websites, so that our customers can be confident that booking reservations through us will lead to a positive experience. We are] [added: February 15, 2016, which included] |

[added: We are] constantly innovating [removed: our] [added: in order to provide a best-in-class user experience with intuitive, easy-to-use] websites and mobile [removed: offerings] [added: apps] to ensure that we are meeting the needs of online consumers while aiming to exceed their expectations.

| • | Partnering with travel service providers and restaurants. We aim to establish mutually beneficial relationships with travel service providers and restaurants around the world. We believe that travel service providers and restaurants can benefit from participating in our services by increasing their distribution channels, demand and inventory utilization in an efficient and cost-effective manner. Travel service providers and restaurants benefit from our well-known brands and online marketing efforts, expertise in offering an excellent consumer experience through our websites and mobile apps and ability to offer their inventory in markets and to consumers that the travel service provider or restaurant may be unable or unlikely to reach. For example, an independent hotel may not have the means or expertise to market itself to international travelers, including in other languages, to build and operate effective desktop and mobile websites and online reservation [removed: services] [added: services,] or to engage in sophisticated online marketing techniques. [added: Further, we are increasingly providing services, other than reservations booked through our websites and mobile apps, designed to help our partners grow their business. For example, Booking.com's BookingSuite services are designed to offer accommodation providers with affordable and effective marketing and business analytics tools to help them attract guests and increase their profitability. Similarly, OpenTable is continuously working to improve its reservation management software services to help restaurants more effectively manage their reservations and more efficiently market their available tables to diners.] |

| • | Maintaining multiple, independently managed brands. We employ a strategy of operating multiple, independently managed brands, which we believe allows us the opportunity to offer our reservation services in ways that appeal to different consumers while maintaining an entrepreneurial, competitive spirit among our brands. We intend to invest resources to support organic growth by all of our brands, whether through increased advertising, geographic expansion, technology innovation or increased access to accommodations, rental cars, restaurants or other services. We also believe that by operating independently managed brands, we encourage innovation and experimentation by our brands, which allows us to more quickly discern and adapt to changing consumer behaviors and market dynamics. Although our brands are independently operated, we intend to continue to share best practices, access to services and customers across our brands. We believe that by promoting our brands worldwide, sharing accommodation reservation [removed: supply] [added: availability] and customer flow, and applying our industry experiences [removed: in Europe] [added: across brands] and [removed: the United States to other regions,] [added: markets,] we can [removed: further] [added: more effectively] expand our reservation services globally and maintain and grow our position as a leading provider of worldwide online travel and [removed: travel related] [added: restaurant] reservation [added: and related] services. |

| • | Investing in profitable and sustainable growth. Our strategy is to ensure that we offer online services that meet the needs and expectations of both consumers and travel service providers and restaurants and that we believe are or will be likely to result in long-term profitability and growth. We intend to accomplish this through continuous investment and innovation in growing our businesses in new and current markets, expanding our services and ensuring that we provide an appealing, intuitive and easy-to-use consumer experience through our websites and mobile applications. We also may pursue strategic transactions. For example, in 2013 we entered the meta-search business when we acquired KAYAK and in 2014 we entered the online restaurant reservation market when we acquired OpenTable. We regularly evaluate, and may pursue and consummate, other potential strategic acquisitions, partnerships, joint ventures or investments, whether to expand our businesses into complementary areas, expand our current businesses, acquire innovative technology or for other reasons. [added: For example, in 2014 and 2015 we strengthened our commercial partnership with, and made significant financial investments in, Ctrip, a leading OTC operating primarily in China.] |

Through our [removed: OTA services,] [added: online travel companies ("OTCs"),] we connect consumers wishing to make travel reservations with providers of travel services around the world.

Booking.com is the world's leading brand for booking online accommodation [removed: reservations] [added: reservations, based on room nights booked,] with operations worldwide and headquarters in the Netherlands.

As of February [removed: 13, 2015,] [added: 15, 2016,] Booking.com offered accommodation reservation services for [removed: more than 600,000] [added: over 850,000] properties in over [removed: 200] [added: 220] countries and territories on its various websites and in 42 languages, which includes [removed: over 245,000] [added: approximately 390,000] vacation rental properties (updated property counts are available on the Booking.com website).

Accommodation providers participate in Booking.com, which operates [added: primarily] under an agency model, by filing rates and information about the property in Booking.com's proprietary extranet.

In addition, Booking.com [removed: has begun to offer] [added: offers] website and other marketing services [added: and business analytics] to accommodation providers as part of its BookingSuite initiative.

Through priceline.com, we offer consumers hotel, rental car and airline ticket [removed: reservations] [added: reservation] services, as well as vacation packages and cruises.

Priceline.com is a leader in the "opaque" travel reservation business through its pioneering Name Your Own Price® and Express Deals® [added: discount] hotel, rental car and airline reservation services.

We describe our Name Your Own Price® and Express Deals® [added: discount] travel services as "opaque" because certain elements of the service, including the identity of the travel service provider, are not disclosed to the consumer prior to making a reservation.

Rentalcars.com offers a primarily merchant, online retail and opaque rental car reservation service allowing consumers to make rental car reservations in [removed: more than 28,000] [added: approximately 46,000] locations throughout the world, with customer support provided in 40 languages.

[removed: Customers] [added: Consumers] using rentalcars.com can book a full range of vehicles online through rentalcars.com's website or mobile app, or they can reserve their cars by phone.

KAYAK derives revenues from advertising placements on its websites and mobile apps and from sending referrals to travel service providers and [removed: OTAs.][added: OTCs.]

[removed: As a result, both] [added: Both] our online [added: advertising expense] and offline advertising expense [removed: has] [added: have] increased significantly in recent years, a trend we expect to continue.

We help people experience the world by providing consumers, travel service providers and restaurants with leading travel and restaurant reservation and related services.

We provide restaurants with reservation management services and consumers with the ability to make restaurant reservations at participating restaurants through OpenTable, a leading provider of online restaurant reservations.

We have aggregated our operating segments into one reportable segment.

See Note 2 to our Consolidated Financial Statements.

| • | Damage excess waiver fees, travel insurance fees and global distribution system ("GDS") reservation booking fees, in each case related to certain of our travel services. |

We aim to achieve our mission to help people experience the world through global leadership in online travel and restaurant reservation and related services.

We focus on relentless innovation and a commitment to serve both consumers and travel service provider and restaurant partners with unmatched service and best-in-class digital technology.

approximately 390,000 vacation rental properties (updated property counts are available on the Booking.com website).

Further, we endeavor to provide excellent customer service in a variety of ways, including through our call centers and websites, so that consumers can be confident that booking reservations through us will lead to a positive experience.

We offer consumers a broad array of accommodation reservations (including hotels, bed and breakfasts, hostels, apartments, vacation rentals and other properties) through our Booking.com, priceline.com and agoda.com brands.

We provide restaurants with reservation management services and consumers with the ability to make restaurant reservations at participating restaurants through OpenTable.

KAYAK.

KAYAK offers its services in approximately 40 countries, with the United States being its largest market.

We also invested approximately $215 million in offline advertising during that period.

We expense the substantial majority of our advertising activities as the expense is incurred, which is typically in the quarter in which reservations are

| | |

| --- | --- |

| • | companies offering new rental car business models or car- or ride-sharing services that affect demand for rental cars, some of which have developed innovative technologies to improve efficiency of point-to-point transportation and extensively utilize mobile platforms, such as Uber, Lyft, Gett, Zipcar (which is owned by Avis), BlaBlaCar, Didi Kuaidi and Ola. |

TripAdvisor has begun

To the extent OTCs or travel service providers do not provide such information to KAYAK, KAYAK's business and results of operations could be harmed.

Instant Booking now includes participation from six out of the top 10 global hotel brands, including Marriott International, Hyatt Hotels and Best Western International.

We recently agreed to participate in "Instant Booking," and we do not yet know how this participation will affect our business.

For example, while we expect to benefit from incremental business generated through "Instant Booking," participation could cannibalize business that would otherwise come to us through other ad offerings on TripAdvisor, directly (including after a consumer first visits TripAdvisor) or through other channels, some of which may be more profitable to us than reservations generated through "Instant Booking." Other meta-search providers may also offer direct booking services with travel service providers, which may lead to more consumers booking directly with a travel service provider rather than an OTC.

For example, Google recently announced the discontinuation of its Hotel Finder meta-search service in favor of integrating hotels directly into search results and encouraging users to book hotel reservations directly through Google's "Book on Google" service, which it is now expanding from mobile phones to both desktops and tablets.

Airbnb may also seek to compete directly with us by offering hotel and other accommodations through their online and mobile platforms.

Companies offering new rental car business models and car- and ride-sharing services such as Uber, Lyft, Gett, BlaBlaCar and Zipcar (which is owned by Avis) provide alternative options for consumers considering renting a car.

These companies extensively utilize mobile platforms and new technologies to drive demand for their services.

If any of these services are successful in attracting consumers who would otherwise use priceline.com's or rentalcars.com's rental car reservation services, our business and results of operations could be harmed.

Further, consolidation among travel service providers, such as Marriott International's acquisition of Starwood

Hotels & Resorts in November 2015, could result in lower rates of commission paid to OTCs, increased discounting, and greater incentives for consumers to join closed user groups as such groups expand their offerings.

If Expedia or others are successful in growing their opaque reservation services, we may have less consumer demand for our opaque reservation services over time, and we would face more competition for access to the limited supply of discounted reservation rates.

In addition, high hotel occupancy levels in the United States have had an adverse impact on our access to hotel rooms for our opaque hotel reservation services.

Further, growth in discounted closed user group retail prices for hotel rooms lessens the price difference for members of the closed user group between a retail hotel reservation and an opaque hotel reservation, which we believe has led to fewer consumers using our opaque hotel reservation services.

During 2015, Expedia acquired Travelocity, Orbitz and HomeAway.

To the extent these acquisitions enhance Expedia's ability to compete with us, in particular in the United States, which is Expedia's, Travelocity's, Orbitz's and HomeAway's largest market, our market share, business and results of operations could be adversely affected.

Similarly to 2013, in 2016 Easter will fall in the first quarter instead of the second quarter, and will therefore likely have a positive effect on our first quarter 2016 year-over-year growth rates and a negative effect on our second quarter 2016 year-over-year growth rates as compared to the same periods in 2015 when Easter fell in the second quarter.

Although we have works councils or employee representatives in certain countries, our U.S. employees are not represented by a labor union and are not covered by a collective bargaining agreement.

Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC.

We believe that the online restaurant reservation business is complementary to our online travel businesses, and that both OpenTable and our travel businesses will benefit from adding OpenTable to The Priceline Group.

| • | Global distribution system ("GDS") reservation booking fees related to our Name Your Own Price® hotel, rental car and airline ticket reservation services and our price-disclosed airline ticket and rental car reservation services. |

Our strategy is to continue to participate broadly in online travel growth by expanding our service offerings and markets.

Through OpenTable, we offer restaurant reservation services to consumers and reservation management services to restaurants.

Reservations made through priceline.com's opaque services are subject to various restrictions, depending on the type of reservation, such as being nonrefundable, not being eligible for frequent flyer or award program points and, in the case of airline tickets, requiring flexibility with respect to travel times and stops.

KAYAK currently does business primarily in the United States, though it intends to continue to invest in expanding its international offerings.

In July 2014 we acquired OpenTable, a leading brand for booking online restaurant reservations.

We also invested $231 million in offline advertising.

Online advertising efficiency, expressed as online advertising as a percentage of gross profit, is impacted by a number of factors that are subject to variability and that are, in some cases, outside of our control, including average daily rates ("ADRs"), costs per click, cancellation rates, foreign exchange rates, our ability to convert paid traffic to booking customers and the extent to which consumers come directly to our websites or mobile apps for bookings.

From 2011 to 2013 our online advertising grew faster than our gross profit due to (1) year-over-year declines in online advertising returns on investment ("ROIs") and (2) brand mix within The Priceline Group as our international brands grew faster than our U.S. brands and spent a higher percentage of gross profit on online advertising.

In 2014, these trends continued, but were more than offset by the inclusion of KAYAK and OpenTable because they spend a lower percentage of gross profit on online advertising than our other

brands.

Also, our consolidated results exclude intercompany advertising by our brands on KAYAK since our acquisition of KAYAK in May 2013.

We compete with both online and traditional travel reservation services.

Google offers "Hotel Finder", a meta-search service that Google has at times placed at or near the top of its hotel-related search results.

increase our advertising and other customer acquisition costs.

We currently do not participate in "Instant Booking" and therefore risk losing share of reservations sourced through TripAdvisor.

Other meta-search providers may also offer direct booking services with travel service providers, which may lead to more consumers booking directly with a travel service provider rather than an OTA.

search results.

Companies such as HotelTonight, Tingo and Hipmunk have developed new and differentiated offerings that endeavor to provide savings on accommodation reservations to consumers and that compete directly with us.

Effective trademark,

We consider our relations with our employees to be good.

We are in ongoing discussions with [removed: the relevant regulatory authorities] [added: various NCAs in other countries] regarding their concerns.

Under the [removed: terms of the proposed] commitments, Booking.com [removed: would replace] [added: replaced] its existing price parity agreements with accommodation providers [removed: - sometimes also referred to as "most favored nation" or "MFN" provisions -] with "narrow" price parity agreements.

Under [removed: the] [added: a] "narrow" price parity agreement, [added: subject to certain exceptions,] an accommodation provider [removed: would] [added: is] still [removed: be] required to offer the same or better rates on Booking.com as it [removed: offered] [added: offers] to a consumer [removed: directly,] [added: directly online,] but it [removed: would] [added: is] no longer [removed: be] required to offer the same or better rates on Booking.com as it [removed: offered] [added: offers] to other [removed: on-line travel companies.][added: OTCs.]

[removed: Additional] [added: However, we have been involved in this type of litigation for many years, and] state and local jurisdictions [removed: are likely to] [added: where these issues have not been resolved could] assert that we are subject to travel transaction taxes and could seek to collect such taxes, retroactively and/or prospectively.

[removed: With respect to the principal claims in these matters, we] [added: We] believe that the laws at issue [added: generally] do not apply to the services we provide, namely the facilitation of travel reservations, and, therefore, that we do not owe the taxes that are claimed to be owed.

An unfavorable outcome or settlement of pending litigation may encourage the commencement of additional litigation, audit proceedings or other regulatory inquiries and also could result in substantial liabilities for past and/or future bookings, including, among other things, interest, penalties, punitive damages and/or [removed: attorney] [added: attorneys'] fees and costs.

An adverse outcome in one or more of these unresolved proceedings could have [removed: a material] [added: an] adverse effect on our [removed: business and could be material to our] results of operations or cash flow in any given operating period.

However, we believe that even if we were to suffer adverse determinations in the near term in more of the pending proceedings than currently anticipated, given results to date it would not have a material impact on our liquidity [removed: because of our available cash.][added: or financial condition.]

As a result of this litigation and other attempts by jurisdictions to levy similar taxes, we have established an accrual (including estimated interest and penalties) for the potential resolution of issues related to travel transaction taxes in the amount of approximately [removed: $52] [added: $27] million at December 31, [removed: 2014] [added: 2015] compared to approximately [removed: $55] [added: $52] million at December 31, [removed: 2013.][added: 2014.]

On February 9, 2015, International Business Machines Corporation ("IBM") filed a complaint in the U.S. District Court for the District of Delaware against [removed: us] [added: The Priceline Group Inc.] and [removed: our] [added: its] subsidiaries KAYAK Software Corporation, OpenTable, Inc. and priceline.com LLC (the "Subject Companies").

[removed: We] [added: The Subject Companies] believe the claims to be without merit and intend to contest [removed: them vigorously.][added: them.]

We [removed: have accrued] [added: accrue] for certain legal contingencies where it is probable that a loss has been incurred and the amount can be reasonably estimated.

[removed: Except as disclosed, such amounts] [added: Such] accrued [added: amounts] are not material to our consolidated balance sheets and provisions recorded have not been material to our consolidated results of operations or cash flows.

From time to time, we have been, and expect to continue to be, subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of [removed: third party] [added: third-party] intellectual property rights.

Certain business practices common to the online travel industry have become the subject of investigations by various national competition authorities ("NCAs"), particularly in Europe.

Investigations related to Booking.com's contractual parity arrangements with accommodation providers, sometimes also referred to as "most favored nation" or "MFN" provisions, were initiated by NCAs in France, Germany, Italy, Austria, Sweden, Ireland and Switzerland, and a number of other NCAs are also looking, or have looked, at these issues.

The investigations primarily relate to whether Booking.com's price parity provisions are anti-competitive because they require accommodation providers to provide Booking.com with room rates that are at least as low as those offered to other online travel companies ("OTCs") or through the accommodation provider's website.

On April 21, 2015, the French, Italian and Swedish NCAs, working in close cooperation with the European Commission, announced that they had accepted "commitments" offered by Booking.com to resolve and close the investigations in France, Italy and Sweden.

The commitments also allow an accommodation provider to, among other things, offer different terms and conditions (e.g., free WiFi) and availability to consumers that book with on-line travel companies that offer lower rates of commission or other benefits, offer lower rates to consumers that book through off-line channels and continue to discount through, among other things, accommodation loyalty programs, as long as those rates are not published or marketed online.

The commitments apply to accommodations in France, Italy and Sweden and were effective on July 1, 2015.

The foregoing description is a summary only and is qualified in its entirety by reference to the commitments published by the NCAs on April 21, 2015.

On July 1, 2015, Booking.com voluntarily implemented the commitments given to the French, Italian and Swedish NCAs throughout the European Economic Area and Switzerland and is working with certain other European NCAs towards closing their investigations or inquiries.

In October 2015, the Irish NCA closed its investigation on the basis of commitments by Booking.com identical to those given to the French, Italian and Swedish NCAs.

In November 2015, the Swiss NCA closed its investigation, prohibiting any reintroduction of Booking.com's old "wide" parity agreements but permitting Booking.com to retain its existing "narrow" parity agreements with accommodations in Switzerland.

A number of additional NCAs in the European Economic Area have now closed their investigations following Booking.com's implementation of the commitments in their jurisdictions.

However, we are currently unable to predict the impact the implementation of these commitments throughout the European Economic Area and Switzerland will have on Booking.com's business or on the on-going investigations in other European countries, or on industry practice more generally.

On December 23, 2015, the German NCA issued a final decision prohibiting Booking.com's "narrow" price parity agreements with accommodations in Germany.

The German NCA did not issue a fine, but has reserved its position regarding an order for disgorgement of profits.

Booking.com intends to appeal the German NCA's decision.

An Italian hotel association has appealed the Italian NCA's decision to accept the commitments by Booking.com.

We are unable to predict how these appeals and the remaining investigations in other countries will ultimately be resolved.

In August 2015, French legislation known as the "Macron Law" became effective.

Among other things, the Macron Law makes price parity agreements illegal, including the "narrow" price parity agreements agreed to by the French NCA in April 2015.

The law also requires that agreements between OTCs and hotels comply with a French agency contract form.

Similar legislation prohibiting "narrow" price parity agreements has been proposed in Italy and currently is awaiting action by the Italian Senate.

It is not yet clear whether the Macron Law or the proposed Italian legislation may affect our business in the long term in France and Italy, respectively.

See Note 15 to our Consolidated Financial Statements.

French and Italian Tax Matters

French tax authorities recently concluded an audit that started in 2013 of the years 2003 through 2012.

The French authorities are asserting that Booking.com has a permanent establishment in France and are seeking to recover what they claim are unpaid income taxes and value-added taxes ("VAT").

In December 2015, the French tax authorities issued an assessment for approximately 356 million Euros, the majority of which would represent penalties and interest.

We believe that Booking.com has been, and continues to be, in compliance with French tax law, and we intend to contest the assessment.

If we are unable to resolve the matter with the French authorities, we would expect to challenge the assessment in the French courts.

In order to contest the assessment in court, we may be required to pay, upfront, the full amount or a significant part of any such assessment, though any such payment would not constitute an admission by us that we owe the tax.

French authorities may decide to also audit subsequent tax years, which could result in additional assessments.

Similarly, Italian tax authorities have initiated a process to determine whether we should be subject to additional tax obligations in Italy.

While we believe that we comply with Italian tax law, Italian tax authorities may determine that we owe additional taxes, and they may also assess penalties and interest.

We believe that we have been, and continue to be, in compliance with Italian tax law.

An estimate for a reasonably possible loss or range of loss in excess of the amount accrued cannot be reasonably made.

In July 2012, the Office of Fair Trading (the "OFT"), the predecessor competition authority in the United Kingdom to the Competition and Markets Authority ("CMA"), issued a "Statement of Objections" ("SO") to Booking.com, which set out the OFT's preliminary views on why it believed Booking.com and others in the online hotel reservation industry were allegedly in breach of E.U. and U.K. competition law.

The SO alleged, among other things, that there were agreements or concerted practices between hotels and Booking.com and between hotels and at least one other OTC that restricted Booking.com's (and the other OTC's) ability to discount hotel room reservations, which the OFT alleged was a form of resale price maintenance.

We dispute the allegations in the SO.

On January 31, 2014, the OFT announced that it had accepted commitments offered by Booking.com, as well as Expedia and Intercontinental Hotel Group, (the "Commitments") to close the investigation on the basis that they address the OFT's competition concerns.

The OFT closed its investigation with no finding of infringement or admission of wrongdoing and no imposition of a fine.

The Commitments provide, among other things, that hotels will continue to be able to set retail prices for hotel room reservations on all OTC websites, such as Booking.com.

Under the Commitments, OTCs, such as Booking.com, have the flexibility to discount a hotel's retail price, but only to members of closed groups, a concept that is defined in the Commitments, who have previously made a reservation through the OTC.

The discount may be up to Booking.com's commission.

In addition, the Commitments provide that Booking.com will not require rate parity from hotels in relation to discounted rates that are provided by other OTCs or hotels to members of their closed groups, provided the discounted rate is not made public.

The Commitments apply to bookings by European Economic Area residents at U.K. hotels.

On March 31, 2014, Skyscanner, a meta-search site based in the United Kingdom, filed an appeal in the Competition Appeal Tribunal ("CAT") against the OFT's decision to accept the Commitments.

Booking.com intervened in support of the CMA in the CAT.

In its decision dated September 26, 2014, the CAT found that the CMA was wrong to reject Skyscanner's arguments about the negative impact of the Commitments on its business and price transparency generally without properly exploring these arguments.

The CAT's decision vacates the CMA's Commitments decision and remits the matter to the CMA for reconsideration in accordance with the CAT's ruling.

The CMA did not appeal the CAT's decision.

It is uncertain what action the CMA will take in response to the CAT's ruling, which could involve re-opening, closing or suspending the investigation.

Investigations have also been opened by the national competition authorities in the Czech Republic, France, Germany, Italy, Austria, Hungary, Sweden, Ireland, Denmark and Switzerland that focus on Booking.com's rate parity clause in its contracts with accommodation providers in those jurisdictions.

Competition related inquiries have also been received from the competition authority in China.

We are currently unable to predict the outcome of these investigations or how our business may be affected.

On December 15, 2014, the French, Italian and Swedish national competition authorities, working in close cooperation with the European Commission, announced their intention to seek public feedback on commitments offered by Booking.com in connection with investigations of Booking.com's rate parity provisions in its contractual arrangements with accommodation providers.

If the proposed commitments are accepted by the French, Italian and Swedish competition authorities, the investigations in those countries will be closed with no finding of infringement or admission of wrongdoing and no imposition of a fine.

If the commitments are accepted by the French, Italian and Swedish competition authorities after they have been market tested, Booking.com will implement the commitments within six months of their being accepted.

We are currently unable to predict the outcome of the market test of the proposed commitments offered in France, Italy and Sweden or the impact the proposed commitments in France, Italy and Sweden will have on the on-going investigations in other European countries or how our business may be affected by the proposed commitments if accepted.

We note that the German competition authority has required Hotel Reservation Service to remove its rate parity clause from its contracts with hotels, and Hotel Reservation Service's initial appeal was denied.

To the extent that

regulatory authorities require changes to our business practices or to those currently common to the industry, our business, competitive position and results of operations could be materially and adversely affected.

Negative publicity regarding any such investigations could adversely affect our brands and therefore our market share and results of operations.

Lawsuits Alleging Antitrust Violations

On August 20, 2012, one complaint was filed on behalf of a putative class of persons who purchased hotel room reservations from certain hotels (the "Hotel Defendants") through certain OTC defendants, including us.

The initial complaint, Turik v.

Expedia, Inc., Case No. 12-cv-4365, filed in the U.S. District Court for the Northern District of California, alleged that the Hotel Defendants and the OTC defendants violated U.S. federal and state laws by entering into a conspiracy to enforce a minimum resale price maintenance scheme pursuant to which putative class members paid inflated prices for hotel room reservations that they purchased through the OTC defendants.

Thirty-one other complaints containing similar allegations were filed in a number of federal jurisdictions across the country.

Plaintiffs in these actions sought treble damages and injunctive relief.

The Judicial Panel on Multidistrict Litigation ("JPML") consolidated all of the pending cases under 28 U.S.C. §1407 before Judge Boyle in the U.S. District Court for the Northern District of Texas.

On May 1, 2013, an amended consolidated complaint was filed.

On February 18, 2014, Judge Boyle dismissed the amended consolidated complaint without prejudice.

On October 27, 2014 the court denied plaintiffs' motion for leave to file a proposed Second Consolidated Amended Complaint, and on October 28, 2014 the court issued a final judgment dismissing the case with prejudice.

The time to appeal the court's October 27, 2014 decision has expired and the matter is closed.

Our subsidiaries priceline.com LLC, Lowestfare.com LLC and Travelweb LLC are named in some but not all of these cases.

The complaints typically seek compensatory damages, disgorgement, penalties available by law, attorneys' fees and other relief.

10-K 1 [removed: pcln-20141231_10k.htm] [added: pcln-20151231_10k.htm] 10-K

For the fiscal year ended: December 31, [removed: 2014][added: 2015]

Commission File No.: [removed: 0-25581][added: 1-36691]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [added: o]

The aggregate market value of common stock held by non-affiliates of The Priceline Group Inc. as of June 30, [removed: 2014] [added: 2015] was approximately [removed: $62.8] [added: $58.6] billion based upon the closing price reported for such date on the NASDAQ Global Select Market.

For purposes of this disclosure, shares of common stock held by executive officers and directors of The Priceline Group Inc. on June 30, [removed: 2014] [added: 2015] have been excluded because such persons may be deemed to be affiliates of The Priceline Group Inc. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of outstanding shares of The Priceline Group Inc.’s common stock was [removed: 51,939,191] [added: 49,616,595] as of February [removed: 11, 2015.][added: 9, 2016.]

The information required by Part III of this Annual Report on Form 10-K, to the extent not set forth in this Form 10-K, is incorporated herein by reference from The Priceline Group Inc.'s definitive proxy statement relating to the annual meeting of stockholders to be held on June [removed: 4, 2015,] [added: 2, 2016,] to be filed with the Securities and Exchange Commission within 120 days after the end of The Priceline Group Inc.'s fiscal year ended December 31, [removed: 2014.][added: 2015.]

The Priceline Group Inc. Annual Report on Form 10-K for the Year Ended December 31, [removed: 2014] [added: 2015] Index

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| [Consolidated Financial [removed: Statements](#sDC11641E0EC364B70A5C3CAE66F2ED22)] [added: Statements](#s47137B2549514E73F05A1C3B1AF13144)] | | [removed: [77](#sDC11641E0EC364B70A5C3CAE66F2ED22)] [added: [77](#s47137B2549514E73F05A1C3B1AF13144)] |

| 2.150% Senior Notes Due 2022 | | New York Stock Exchange |

| 1.800% Senior Notes Due 2027 | | New York Stock Exchange |

| [PART I](#s6542ED99B0D2F69358851C3B16943B7A) | | [1](#s6542ED99B0D2F69358851C3B16943B7A) |

| [PART II](#s18BFB5D0A2F5D0A4D7FF1C3B17AF22E7) | | [35](#s18BFB5D0A2F5D0A4D7FF1C3B17AF22E7) |

| [PART IV](#s0721502111C23F0A07CF1C3B1A7C7AEE) | | [72](#s0721502111C23F0A07CF1C3B1A7C7AEE) |

| [Signatures](#s46DBF082AB3EE0FF10431C3B1ACF1006) | | [75](#s46DBF082AB3EE0FF10431C3B1ACF1006) |

| [PART I](#sF1E542E57C8C3787DCBE3CAE62959B1E) | | [1](#sF1E542E57C8C3787DCBE3CAE62959B1E) |

| [PART II](#s62DD681EE66FA14F974E3CAE63B04617) | | [36](#s62DD681EE66FA14F974E3CAE63B04617) |

| [PART IV](#s3F18EB7F9061632239F23CAE667DBD3D) | | [72](#s3F18EB7F9061632239F23CAE667DBD3D) |

| [Signatures](#s6825D2769849616F89633CAE66D03B0B) | | [75](#s6825D2769849616F89633CAE66D03B0B) |

Our corporate headquarters and the headquarters of our priceline.com business are located in Norwalk, Connecticut, United States of America, where we lease approximately [removed: 70,000] [added: 102,000] square feet of office space.

Our Booking.com business is headquartered in Amsterdam, Netherlands, where we lease approximately [removed: 202,000] [added: 258,000] square feet of office space; our agoda.com business has significant support operations in Bangkok, Thailand, where we lease approximately [removed: 118,000] [added: 95,000] square feet of office space; our KAYAK business is headquartered in Stamford, Connecticut, United States of America, where we lease approximately 18,000 square feet of office space; our OpenTable business is headquartered in San Francisco, California, United States of America, where we lease approximately 51,000 square feet of office space; and our rentalcars.com business is headquartered in Manchester, England, where we lease approximately [removed: 63,000] [added: 45,000] square feet of office space.

We lease additional office space to support our operations in various locations around the world, including hosting and data center facilities in the United States, the United Kingdom, Switzerland, the [removed: Netherlands] [added: Netherlands, Germany, Singapore] and Hong Kong and sales and support facilities in numerous locations.

We do not own any real estate as of December 31, [removed: 2014.][added: 2015.]

| [removed: 2013] [added: 2015] | | High | | | | Low | | |

As of February [removed: 11, 2015,] [added: 10, 2016,] there were approximately [removed: 239] [added: 213] stockholders of record of The Priceline Group Inc.'s common stock.

The following graph shows the total stockholder return through December 31, [removed: 2014] [added: 2015] of an investment of $100 in cash on December 31, [removed: 2009] [added: 2010] for The Priceline Group Inc. common stock and an investment of $100 in cash on December 31, [removed: 2009] [added: 2010] for (i) the NASDAQ Composite Index, (ii) the Standard and Poor's 500 Index and (iii) the Research Data Group ("RDG") Internet Composite Index.

[removed: ][added: ]

| Measurement Point December 31 | | The Priceline Group Inc. | | | [removed: |] NASDAQ Composite Index | | | [removed: |] S&P 500 Index | | | [removed: |] RDG Internet Composite | | [removed: |]

The following table sets forth information relating to repurchases of our equity securities during the three months ended December 31, [removed: 2014:][added: 2015:]

| (1) | Pursuant to a stock repurchase program announced on [removed: March 4, 2010,] [added: February 19, 2015,] whereby the Company was authorized to repurchase up to [removed: $500,000,000] [added: $3,000,000,000] of its common stock. |

| [removed: (3)] [added: (2)] | Pursuant to a general authorization, not publicly announced, whereby the Company is authorized to repurchase shares of its common stock to satisfy employee withholding tax obligations related to stock-based compensation. |

| First Quarter | | $ | 1,264.00 | | | $ | 990.69 | |

| Second Quarter | | 1,280.97 | | | | 1,103.45 | | |

| Third Quarter | | 1,395.00 | | | | 1,115.77 | | |

| Fourth Quarter | | 1,476.52 | | | | 1,212.00 | | |

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | |

| | | | | | | | | | | | | |

| 2010 | | 100.00 | | | 100.00 | | | 100.00 | | | 100.00 | |

| 2011 | | 117.06 | | | 100.53 | | | 102.11 | | | 102.11 | |

| 2012 | | 155.27 | | | 116.92 | | | 118.45 | | | 122.23 | |

| 2013 | | 290.93 | | | 166.19 | | | 156.82 | | | 199.42 | |

| 2014 | | 285.37 | | | 188.78 | | | 178.29 | | | 195.42 | |

| 2015 | | 319.10 | | | 199.95 | | | 180.75 | | | 267.25 | |

| October 1, 2015 — | | 397,038 | | (1) | $ | 1,308.60 | | | 397,038 | | | $ | 229,261,810 | | | (1) |

| October 31, 2015 | | 335 | | (2) | $ | 1,352.60 | | | N/A | | | N/A | | | | |

| November 1, 2015 — | | 179,588 | | (1) | $ | 1,276.37 | | | 179,588 | | | $ | 41,029 | | | (1) |

| November 30, 2015 | | 1,863 | | (2) | $ | 1,325.08 | | | N/A | | | N/A | | | | |

| December 1, 2015 — | | — | | (1) | $ | — | | | — | | | $ | 41,029 | | | (1) |

| December 31, 2015 | | 1,188 | | (2) | $ | 1,289.16 | | | N/A | | | N/A | | | | |

| Total | | 580,012 | | | $ | 1,298.66 | | | 576,626 | | | $ | 41,029 | | | |

| First Quarter | | $ | 728.70 | | | $ | 627.67 | |

| Second Quarter | | 847.33 | | | | 677.72 | | |

| Third Quarter | | 1,019.95 | | | | 831.11 | | |

| Fourth Quarter | | 1,198.75 | | | | 972.40 | | |

We currently intend to retain future earnings, if any, to finance the expansion of our business.

| | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| 2009 | | $ | 100.00 | | | $ | 100.00 | | | $ | 100.00 | | | $ | 100.00 | |

| 2010 | | 182.94 | | | | 117.61 | | | | 115.06 | | | | 117.87 | | |

| 2011 | | 214.14 | | | | 118.70 | | | | 117.49 | | | | 119.73 | | |

| 2012 | | 284.05 | | | | 139.00 | | | | 136.30 | | | | 143.58 | | |

| 2013 | | 532.21 | | | | 196.83 | | | | 180.44 | | | | 234.21 | | |

| 2014 | | 522.05 | | | | 223.74 | | | | 205.14 | | | | 229.15 | | |

Sales of Unregistered Securities

Between October 1, 2014 and December 31, 2014, we issued 599 shares of our common stock in connection with the conversion of $250,000 principal amount of our 1.25% Convertible Senior Notes due 2015.

The conversions were effected in accordance with the indenture, which provides that the principal amount of converted notes be paid in cash and the conversion premium be paid in cash and/or shares of common stock at our election.

The issuances of the shares were not registered under the Securities Act of 1933, as amended (the "Act") pursuant to Section 3(a)(9) of the Act.

| October 1, 2014 — | | — | | | — | | | | — | | | $ | 382 | | | (1) |

| October 31, 2014 | | — | | | — | | | | — | | | $ | 507,236,207 | | | (2) |

| | | 646 | | (3) | $ | 1,155.13 | | | N/A | | | N/A | | | | (3) |

| November 1, 2014 — | | — | | (1) | — | | | | — | | | $ | — | | | (1) |

| November 30, 2014 | | 7,514 | | (2) | 1,149.61 | | | | 7,514 | | | $ | 498,598,401 | | | (2) |

| | | 3,574 | | (3) | $ | 1,154.81 | | | N/A | | | N/A | | | | (3) |

| December 1, 2014 — | | — | | | — | | | | — | | | $ | — | | | |

| December 31, 2014 | | 431,383 | | (2) | 1,139.04 | | | | 431,383 | | | $ | 7,237,309 | | | (2) |

| | | — | | | — | | | | N/A | | | N/A | | | | (3) |

| Total | | 443,117 | | | $ | 1,139.37 | | | 438,897 | | | $ | 7,237,309 | | | |

_____________________________

| | |

| --- | --- |

| (2) | Pursuant to a stock repurchase program announced on May 29, 2013, whereby the Company was authorized to repurchase up to $1,000,000,000 of its common stock. |

Selected financial data reflects data related to [removed: rentalcars.com from its acquisition date of May 2010,] KAYAK from its acquisition date of May [added: 21,] 2013 and OpenTable from its acquisition date of July [added: 24,] 2014.

| | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014(3)(4)] | | | | [removed: 2012] [added: 2013(3)(4)] | | | | [removed: 2011] [added: 2012(3)(4)] | | | | [removed: 2010] [added: 2011(3)(4)] | | |

| Total revenues | $ | [removed: 8,441,971] [added: 9,223,987] | | | $ | [removed: 6,793,306] [added: 8,441,971] | | | $ | [removed: 5,260,956] [added: 6,793,306] | | | $ | [removed: 4,355,610] [added: 5,260,956] | | | $ | [removed: 3,084,905] [added: 4,355,610] | |

| Cost of revenues | [removed: 857,841] [added: 632,180] | | | | [removed: 1,077,420] [added: 857,841] | | | | [removed: 1,177,275] [added: 1,077,420] | | | | [removed: 1,275,730] [added: 1,177,275] | | | | [removed: 1,175,934] [added: 1,275,730] | | |

| Gross profit | [removed: 7,584,130] [added: 8,591,807] | | | | [removed: 5,715,886] [added: 7,584,130] | | | | [removed: 4,083,681] [added: 5,715,886] | | | | [removed: 3,079,880] [added: 4,083,681] | | | | [removed: 1,908,971] [added: 3,079,880] | | |

| Total operating expenses | [removed: 4,510,818] [added: 5,332,900] | | | | [removed: 3,303,472] [added: 4,510,818] | | | | [removed: 2,253,888] [added: 3,303,472] | | | | [removed: 1,680,958] [added: 2,253,888] | | | | [removed: 1,122,174] [added: 1,680,958] | | |

| Operating income | [removed: 3,073,312] [added: 3,258,907] | | | | [removed: 2,412,414] [added: 3,073,312] | | | | [removed: 1,829,793] [added: 2,412,414] | | | | [removed: 1,398,922] [added: 1,829,793] | | | | [removed: 786,797] [added: 1,398,922] | | |

| Total other expense | [removed: 83,864] [added: 130,587] | | | | [removed: 115,877] [added: 83,864] | | | | [removed: 67,924] [added: 115,877] | | | | [removed: 31,128] [added: 67,924] | | | | [removed: 40,514] [added: 31,128] | | |

| Income tax expense | [removed: 567,695] [added: 576,960] | | | | [removed: 403,739] [added: 567,695] | | | | [removed: 337,832] [added: 403,739] | | | | [removed: 308,663] [added: 337,832] | | | | [removed: 218,141] [added: 308,663] | | |

| Net income | [removed: 2,421,753] [added: 2,551,360] | | | | [removed: 1,892,798] [added: 2,421,753] | | | | [removed: 1,424,037] [added: 1,892,798] | | | | [removed: 1,059,131] [added: 1,424,037] | | | | [removed: 528,142] [added: 1,059,131] | | |

| Net income attributable to noncontrolling interests(1) | — | | | | [removed: 135] [added: —] | | | | [removed: 4,471] [added: 135] | | | | [removed: 2,760] [added: 4,471] | | | | [removed: 601] [added: 2,760] | | |

| Net income applicable to common stockholders | [removed: 2,421,753] [added: 2,551,360] | | | | [removed: 1,892,663] [added: 2,421,753] | | | | [removed: 1,419,566] [added: 1,892,663] | | | | [removed: 1,056,371] [added: 1,419,566] | | | | [removed: 527,541] [added: 1,056,371] | | |

| Net income applicable to common stockholders per basic common share | [removed: 46.30] [added: 50.09] | | | | [removed: 37.17] [added: 46.30] | | | | [removed: 28.48] [added: 37.17] | | | | [removed: 21.27] [added: 28.48] | | | | [removed: 11.00] [added: 21.27] | | |

| Net income applicable to common stockholders per diluted share | [removed: 45.67] [added: 49.45] | | | | [removed: 36.11] [added: 45.67] | | | | [removed: 27.66] [added: 36.11] | | | | [removed: 20.63] [added: 27.66] | | | | [removed: 10.35] [added: 20.63] | | |

| Total stockholders' equity | [removed: 8,566,694] [added: 8,795,469] | | | | [removed: 6,909,729] [added: 8,566,694] | | | | [removed: 3,896,975] [added: 6,909,729] | | | | [removed: 2,574,295] [added: 3,896,975] | | | | [removed: 1,813,336] [added: 2,574,295] | | |

| (1) | Redeemable noncontrolling interests [removed: beginning in 2010] relates to the Company's purchase of rentalcars.com in May 2010. In April 2011, in connection with the exercise of certain call and put options in March 2011, the redeemable noncontrolling interests in rentalcars.com were reduced from 24.4% to 19.0%. In April 2012, in connection with the exercise of certain call and put options in March 2012, the redeemable noncontrolling interests in rentalcars.com were reduced from 19.0% to 12.7%. In April 2013, in connection with the exercise of certain call and put options in March 2013, the Company purchased the remaining outstanding shares underlying the redeemable noncontrolling interests. |

| (2) | Includes convertible debt which is classified as a current [removed: liability.] [added: liability from 2011 through 2014.] |

See Note 2 to the Consolidated Financial Statements for further information on the adjustments resulting from the adoption of new accounting standards in the fourth quarter of 2015.

| Total assets(3)(4) | 17,420,575 | | | | 14,770,977 | | | | 10,428,543 | | | | 6,547,771 | | | | 3,964,165 | | |

| Long-term obligations, redeemable noncontrolling interests(2)(3)(4) | 7,185,796 | | | | 4,862,730 | | | | 2,289,039 | | | | 1,710,194 | | | | 784,417 | | |

| Total liabilities(3)(4) | 8,625,106 | | | | 6,203,954 | | | | 3,510,281 | | | | 2,435,854 | | | | 1,185,465 | | |

| | |

| --- | --- |

| (3) | Includes adjustments to current and noncurrent deferred taxes as a result of the early adoption of the accounting update issued by the Financial Accounting Standards Board (“FASB”) in November 2015, which requires companies to classify all deferred tax assets and liabilities as noncurrent on the balance sheet. The adoption of this accounting update in the fourth quarter of 2015 resulted in decreases of $143.7 million, $1.5 million and $1.2 million at December 31, 2014, 2013 and 2012, respectively, and an increase of $0.6 million at December 31, 2011, in both total assets and total liabilities. |

The impact of these adjustments to long-term obligations resulted in decreases of $142.4 million, $1.4 million, $0.4 million at December 31, 2014, 2013 and 2012, respectively, and an increase of $3.3 million at December 31, 2011.

See Note 2 to the Consolidated Financial Statements for further information on this new accounting update.

| | |

| --- | --- |

| (4) | Includes reclassifications related to unamortized debt issuance costs as a result of the early adoption of the accounting update issued by FASB in April 2015, which requires debt issuance costs to be presented in the balance sheets as a direct deduction from the related debt liability rather than as an asset. The adoption of this accounting update in the fourth quarter of 2015 resulted in decreases of $25.9 million, $14.5 million, $20.8 million and $7.1 million at December 31, 2014, 2013, 2012 and 2011, respectively, in total assets, long-term obligations and total liabilities. See Note 2 to the Consolidated Financial Statements for further information on this new accounting update. |

| Total assets | 14,940,563 | | | | 10,444,460 | | | | 6,569,742 | | | | 3,970,671 | | | | 2,905,953 | | |

| Long-term obligations, redeemable noncontrolling interests(2) | 5,031,073 | | | | 2,304,917 | | | | 1,731,385 | | | | 788,218 | | | | 621,624 | | |

| Total liabilities | 6,373,540 | | | | 3,526,198 | | | | 2,457,825 | | | | 1,191,971 | | | | 1,046,828 | | |

_____________________________

The following Consolidated Financial Statements of the Company and the report of our independent registered public accounting firm are filed as part of this Annual Report on Form 10-K (See Part IV Item 15 Exhibits and Financial Statement [removed: Schedules).][added: Schedules): Consolidated Balance Sheets as of December 31, 2015 and 2014; Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income, Consolidated Statements of Changes in Stockholders' Equity and Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013; Notes to the Consolidated Financial Statements; and Report of Independent Registered Public Accounting Firm.]

Consolidated Balance Sheets as of December 31, 2014 and 2013; Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income, Consolidated Statements of Changes in Stockholders' Equity and Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012; Notes to Consolidated Financial Statements and Report of Independent Registered Public Accounting Firm.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we include a report of our management's assessment of the design and effectiveness of our internal controls over financial reporting for the year ended December 31, [removed: 2014.][added: 2015.]

Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, [removed: 2014.][added: 2015.]

Our independent registered public accounting firm also attested to, and reported [removed: on, our management's assessment of] [added: on] the effectiveness of internal control over financial reporting.

No change in our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) occurred during the three months ended December 31, [removed: 2014] [added: 2015] that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We have audited the internal control over financial reporting of The Priceline Group Inc. [removed: (formerly known as priceline.com Incorporated)] and subsidiaries (the "Company") as of December 31, [removed: 2014,] [added: 2015,] based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2014,] [added: 2015,] based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, [removed: 2014] [added: 2015] of the Company and our report dated February [removed: 18, 2015] [added: 16, 2016] expressed an unqualified opinion on those financial statements.

February 16, 2016

February 18, 2015

Under Section 13(r) of the Securities Exchange Act of 1934, as amended, an issuer is required to disclose in its annual or quarterly reports whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings related to the Government of Iran or with individuals or entities designated pursuant to certain Executive Orders, even if such activities, transactions or dealings were in compliance with U.S. law.

As part of its efforts to assess and understand the Iranian hotel market, in December 2015, representatives (who are not U.S. persons) of Booking.com, a subsidiary of the Company organized under the laws of The Netherlands, held exploratory, introductory meetings with a number of hotels in Iran, two of which identified themselves during the meetings as owned or controlled by the Government of Iran.

These meetings, including the meetings with the two hotels owned or controlled by the Government of Iran, were conducted in compliance with U.S. law.

There were no gross revenues or net profits associated with these activities for the fiscal year ended December 31, 2015.

Booking.com, through non-U.S. person representatives, intends to continue these business activities and may enter into transactions with hotels in Iran as authorized under U.S. law.

None.

Information required by Part III Item 10 will be included in our Proxy Statement relating to our [removed: 2015] [added: 2016] annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of our fiscal year ended December 31, [removed: 2014,] [added: 2015,] and is incorporated herein by reference.

Information required by Part III Item 11 will be included in our Proxy Statement relating to our [removed: 2015] [added: 2016] annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of our fiscal year ended December 31, [removed: 2014,] [added: 2015,] and is incorporated herein by reference.

Information required by Part III Item 12 will be included in our Proxy Statement relating to our [removed: 2015] [added: 2016] annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of our fiscal year ended December 31, [removed: 2014,] [added: 2015,] and is incorporated herein by reference.

Information required by Part III Item 13 will be included in our Proxy Statement relating to our [removed: 2015] [added: 2016] annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of our fiscal year ended December 31, [removed: 2014,] [added: 2015,] and is incorporated herein by reference.

Information required by Part III Item 14 will be included in our Proxy Statement relating to our [removed: 2015] [added: 2016] annual meeting of stockholders to be filed with the Securities and Exchange Commission within 120 days after the end of our fiscal year ended December 31, [removed: 2014] [added: 2015] and is incorporated herein by reference.

The following Consolidated Financial Statements of the Company and the report of our independent registered public accounting firm are filed as part of this Annual Report on Form [removed: 10-K.][added: 10-K: Consolidated Balance Sheets as of December 31, 2015 and 2014; Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income, Consolidated Statements of Changes in Stockholders' Equity and Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013; Notes to the Consolidated Financial Statements; and Report of Independent Registered Public Accounting Firm.]

[removed: Consolidated Balance Sheets as of] [added: | 101 | The following financial statements from the Company's Annual Report on Form 10‑K for the year ended] December 31, [removed: 2014 and 2013; and the related] [added: 2015 formatted in XBRL: (i)] Consolidated [added: Balance Sheets, (ii) Consolidated] Statements of Operations, [added: (iii)] Consolidated Statements of Comprehensive Income, [added: (iv)] Consolidated Statements of Changes in Stockholders' [removed: Equity and] [added: Equity, (v)] Consolidated Statements of Cash [removed: Flows for the years ended December 31, 2014, 2013] [added: Flows,] and [removed: 2012;] [added: (v)] Notes to Consolidated Financial [removed: Statements; and Report of Independent Registered Public Accounting Firm.][added: Statements. |]

| 2.1(a) | Agreement and Plan of Merger, dated as of [removed: November 8, 2012,] [added: June 12, 2014,] by and among [removed: KAYAK Software Corporation,] [added: OpenTable, Inc.,] the Registrant and [removed: Produce Merger Sub,] [added: Rhombus,] Inc. |

| [removed: 2.2(b)] [added: 2.1(a)] | Agreement and Plan of Merger, dated as of June 12, 2014, by and among OpenTable, Inc., the Registrant and Rhombus, Inc. |

| [removed: 3.1(c)] [added: 3.1(b)] | Restated Certificate of Incorporation of the Registrant. |

| [removed: 3.2(d)] [added: 3.2(c)] | Amended and Restated By-Laws of the Registrant. |

| [removed: 4.2(e)] [added: 4.2(d)] | Specimen Certificate for Registrant's Common Stock. |

| [removed: 4.3(f)] [added: 4.3(e)] | Indenture, dated as of March [removed: 10, 2010,] [added: 12, 2012,] between the Registrant and American Stock Transfer & Trust Company, LLC as Trustee. |

| [removed: 4.4(g)] [added: 4.3(e)] | Indenture, dated as of March 12, 2012, between the Registrant and American Stock Transfer & Trust Company, LLC as Trustee. |

| [removed: 4.5(h)] [added: 4.4(f)] | Indenture, dated as of June 4, 2013, between the Registrant and American Stock Transfer & Trust Company, LLC as Trustee. |

| [removed: 4.6(i)] [added: 4.5(g)] | Indenture, dated as of August 20, 2014, between the Registrant and American Stock Transfer & Trust Company, LLC as Trustee. |

| [removed: 4.7(j)] [added: 4.6(h)] | [removed: Form of] Indenture for the 2.375% Senior Notes due 2024, [added: 1.800% Senior Notes due 2027, 3.650% Senior Notes due 2025 and 2.15% Senior Notes due 2022,] between the Registrant and Deutsche Bank Trust Company [removed: Americas] [added: Americas,] as Trustee. |

| [removed: 4.8(k)] [added: 4.7(i)] | Form of 2.375% Senior Note due 2024. |

| [removed: 4.9(l)] [added: 4.8(j)] | Officers' Certificate, dated September 23, 2014, for the 2.375% Senior Notes due 2024. |

| [removed: 10.1(m)+] [added: 10.1(o)+] | [removed: The Priceline Group Inc.] [added: priceline.com Incorporated] 1999 Omnibus Plan (As Amended and Restated Effective June 6, 2013). |

| [removed: 10.2(n)+] [added: 10.2(p)+] | Form of [added: Restricted] Stock [removed: Option Grant] [added: Unit Award] Agreement [added: for Employees in the Netherlands] under the 1999 Omnibus Plan. |

| [removed: 10.3(o)+] [added: 10.2(p)+] | Form of Restricted Stock Unit Award Agreement for Employees in the Netherlands under the 1999 Omnibus Plan. |

| [removed: 10.4(p)+] [added: 10.3(q)+] | Form of Restricted Stock Unit Agreement for awards under the 1999 Omnibus Plan to non-employee directors. |

| [removed: 10.5(q)+] [added: 10.5(s)+] | [removed: 2012] [added: 2014] Form of Performance Share Unit Agreement under the 1999 Omnibus Plan. |

| [removed: 10.6(r)+] [added: 10.6(t)+] | [removed: 2013] [added: 2015] Form of Performance Share Unit Agreement under the 1999 Omnibus Plan. |

| [removed: 10.7(s)+] [added: 10.5(s)+] | 2014 Form of Performance Share Unit Agreement under the 1999 Omnibus Plan. |

| [removed: 10.8+] [added: 10.7(u)+] | Amended and Restated KAYAK Software Corporation 2012 Equity Incentive Plan. |

| [removed: 10.9(t)+] [added: 10.8(v)+] | OpenTable, Inc. Amended and Restated 2009 Equity Incentive Award Plan. |

| [removed: 10.10(u)+] [added: 10.9(w)+] | Buuteeq, Inc. Amended and Restated 2010 Stock Plan. |

| [removed: 10.11(v)+] [added: 10.11+] | The Priceline Group Inc. [added: Amended and Restated] Annual Bonus [removed: Plan, adopted on February 20, 2007.] [added: Plan.] |

| [removed: 10.13(w)+] [added: 10.13(x)+] | Transition Agreement dated November 7, 2013 by and between the Registrant and Jeffery H. Boyd. |

| [removed: 10.14(w)+] [added: 10.15(t)+] | [added: Second] Amended and Restated Employment Agreement dated [removed: November 7, 2013] [added: March 5, 2015] by and between the Registrant, Booking.com Holding B.V. and Darren R. Huston. |

| [removed: 10.15(w)+] [added: 10.16(x)+] | Amended and Restated Non-Competition and Non-Solicitation Agreement dated November 7, 2013 by and between the Registrant and Darren R. Huston. |

| [removed: 10.16(x)+] [added: 10.17(y)+] | Indemnification Agreement, dated September 12, [removed: 2011,] [added: 2011] by and between the Registrant and Darren R. Huston. |

| [removed: 10.17(y)+] [added: 10.18(z)+] | Letter agreement, dated October 19, 2005 by and between the Registrant and Daniel J. Finnegan. |

| [removed: 10.18(z)+] [added: 10.19(aa)+] | Letter amendment, dated December 16, 2008, to letter agreement, dated October 19, 2005 by and between the Registrant and Daniel J. Finnegan. |

| [removed: 10.19(z)+] [added: 10.20(bb)+] | [added: Second] Amended and Restated Employment Agreement, dated [removed: December 18, 2008,] [added: April 21, 2015,] by and between the Registrant and Peter J. Millones. |

| [removed: 10.20(z)+] [added: 10.20(bb)+] | [added: Second] Amended and Restated Employment Agreement, dated [removed: December 18, 2008,] [added: April 21, 2015,] by and between the Registrant and [removed: Chris Soder.] [added: Peter J. Millones.] |

| [removed: 10.21(x)] [added: 10.22(dd)] | Credit Agreement, dated as of [removed: October 28, 2011,] [added: June 19, 2015,] among the Registrant, the lenders from time to time party thereto, [removed: RBS Citizens, N.A., as Documentation Agent,] [added: and] Bank of America, N.A. [removed: and Wells Fargo Bank, National Association,] as [removed: Co‑Syndication Agents and JPMorgan Chase Bank, N.A., as] Administrative Agent. |

| [removed: 32.1(aa)] [added: 32.1(ee)] | Certification of Darren R. Huston, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code). |

| [removed: 32.2(aa)] [added: 32.2(ee)] | Certification of Daniel J. Finnegan, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code). |

| 101 | The following financial statements from the Company's Annual Report on Form 10‑K for the year ended December 31, [removed: 2014] [added: 2015] formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Stockholders' Equity, (v) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements. |

| [removed: (a)] [added: (e)] | Previously filed as an exhibit to the Current Report on Form [removed: 8‑K] [added: 8-K] filed on [removed: November 9,] [added: March 12,] 2012 (File No. 0-25581). |

| [removed: (b)] [added: (a)] | Previously filed as an exhibit to the Current Report on Form 8-K filed on June 13, 2014 (File No. 0-25581). |

| [removed: (c)] [added: (b)] | Previously filed as an exhibit to the Current Report on Form 8-K filed on July 18, 2014 [removed: (file] [added: (File] No. 0-25581). |

| 4.9(k) | Form of 1.800% Senior Note due 2027. |

| 4.10(l) | Officers' Certificate, dated March 3, 2015, for the 1.800% Senior Notes due 2027. |

| 4.11(m) | Form of 3.650% Senior Note due 2025. |

| 4.12(n) | Officers' Certificate, dated March 13, 2015, for the 3.650% Senior Notes due 2025. |

| 4.13(h) | Form of 2.15% Senior Note due 2022. |

| 4.14(h) | Officers' Certificate, dated November 25, 2015, for the 2.15% Senior Notes due 2022. |

| 10.4(r)+ | 2013 Form of Performance Share Unit Agreement under the 1999 Omnibus Plan. |

| 10.10+ | Amended and Restated Rocket Travel, Inc. 2012 Stock Incentive Plan. |

| 10.14(t)+ | Transition Agreement dated March 5, 2015 by and between priceline.com LLC and Chris Soder. |

| 10.21(cc)+ | Employment contract, dated February 19, 2015, by and between Booking.com Holding B.V. and Gillian Tans. |

| (c) | Previously filed as an exhibit to the Current Report on Form 8-K filed on November 9, 2015 (File No. 1-36691). |

| (h) | Previously filed as an exhibit to the Current Report on Form 8-K filed on November 25, 2015 (File No. 1-36691). |

| (l) | Previously filed as an exhibit to the Current Report on Form 8-K filed on March 4, 2015 (File No. 1-36691). |

| (m) | Previously filed as an exhibit to the Current Report on Form 8-K filed on March 12, 2015 (File No. 1-36691). |

| (n) | Previously filed as an exhibit to the Current Report on Form 8-K filed on March 13, 2015 (File No. 1-36691). |

| (t) | Previously filed as an exhibit to the Current Report on Form 8-K filed on March 6, 2015 (File No. 1-36691). |

| (u) | Previously filed as an exhibit to the Annual Report on Form 10-K filed for the year ended December 31, 2014 (File No. 1-36691). |

| (bb) | Previously filed as an exhibit to our Current Report on Form 8-K filed on April 24, 2015 (File No. 1-36691). |

| (cc) | Previously filed as an exhibit to the Quarterly Report on Form 10-Q filed for the quarter ended March 31, 2015 (File No. 1-36691). |

| (dd) | Previously filed as an exhibit to our Current Report on Form 8-K filed on June 24, 2015 (File No. 1-36691). |

| /s/ Charles H. Noski | | Director | | February 17, 2016 |

| Charles H. Noski | | | | |

| | | Director | | |

| Lynn M. Vojvodich | | | | |

February 16, 2016

| | | 2015 | | | | 2014 See Note 2 | | |

| Cash and cash equivalents | | $ | 1,477,265 | | | $ | 3,148,651 | |

| Total current assets | | 3,553,237 | | | | 5,113,620 | | |

| Goodwill | | 3,375,000 | | | | 3,326,474 | | |

| Other assets | | 118,656 | | | | 41,516 | | |

| Total assets | | $ | 17,420,575 | | | $ | 14,770,977 | |

| Accrued expenses and other current liabilities | | 681,587 | | | | 599,515 | | |

| Convertible debt | | — | | | | 37,150 | | |

| Total current liabilities | | 1,439,310 | | | | 1,378,703 | | |

| Deferred income taxes | | 892,576 | | | | 897,848 | | |

| Long-term debt | | 6,158,443 | | | | 3,823,870 | | |

| Total liabilities | | 8,625,106 | | | | 6,203,954 | | |

| Total liabilities and stockholders' equity | | $ | 17,420,575 | | | $ | 14,770,977 | |

| Foreign currency translation adjustment, net of tax of $60,418 | — | | | — | | | | — | | | — | | | | — | | | | — | | | | (114,505 | | ) | | (114,505 | | ) |

| Repurchase of common stock | — | | | — | | | | (2,540 | ) | | (3,089,055 | | ) | | — | | | | — | | | | — | | | | (3,089,055 | | ) |

| | |

| --- | --- |

| 10.22(h) | Purchase Agreement, dated May 29, 2013, between the Registrant and Goldman, Sachs & Co. |

| 10.23(i) | Purchase Agreement, dated August 14, 2014, between The Priceline Group Inc. and Wells Fargo Securities, LLC and Citigroup Global Markets Inc., as the Initial Purchasers. |

| 10.24(k) | Underwriting Agreement, dated September 16, 2014, among the Registrant, Deutsche Bank AG, London Branch, The Royal Bank of Scotland plc, Wells Fargo Securities, LLC, Citigroup Global Markets Limited and Goldman, Sachs & Co. |

February 18, 2015

| Total assets | | $ | 14,940,563 | | | $ | 10,444,460 | |

| Total liabilities | | 6,373,540 | | | | 3,526,198 | | |

| Total liabilities and stockholders' equity | | $ | 14,940,563 | | | $ | 10,444,460 | |

| | | | | | | | | | | | | |

| Balance, December 31, 2011 | 57,579 | | | $ | 446 | | | (7,780 | ) | | $ | (803,586 | ) | | $ | 2,431,279 | | | $ | 1,033,738 | | | $ | (87,582 | ) | | $ | 2,574,295 | |

| Repurchase of common stock | — | | | — | | | | (405 | ) | | (257,021 | | ) | | — | | | | — | | | | — | | | | (257,021 | | ) |

| Excess tax benefit from stock-based compensation | — | | | — | | | | — | | | — | | | | 5,189 | | | | — | | | | — | | | | 5,189 | | |

| Currency translation adjustments, net of tax benefit of $55,001 | — | | | — | | | | — | | | — | | | | — | | | | — | | | | 108,384 | | | | 108,384 | | |

| Issuance of senior convertible notes | — | | | — | | | | — | | | — | | | | 93,402 | | | | — | | | | — | | | | 93,402 | | |

| Payment of debt issuance costs | (17,464 | | ) | | (1,018 | | ) | | (20,916 | | ) |

| Cash and cash equivalents, beginning of period | 1,289,994 | | | | 1,536,349 | | | | 632,836 | | |

| Non-cash fair value increase for redeemable noncontrolling interests | $ | — | | | $ | 42,522 | | | $ | 84,693 | |

On April 1, 2014, the Company changed its name from priceline.com Incorporated to The Priceline Group Inc. The Priceline Group Inc. ("The Priceline Group" or the "Company") is a leading provider of online travel and travel related reservation and search services.

The Company acquired OpenTable, a leading provider of online restaurant reservations in July 2014.

In 2012, the Company launched Express Deals® as a merchant semi-opaque hotel reservation service at priceline.com.

The Company has since expanded the Express Deals®service to include rental car and air reservation services.

Revenues are recorded net of redeemable dining points issued to diners during each period presented.

The Company manages its business as one unit.

Hedge ineffectiveness is assessed and measured based on changes in forward exchange rates.

Early adoption is not permitted under U.S. GAAP and retrospective application is permitted but not required.

In July 2013, the FASB issued an accounting update which provides guidance on financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward or a tax credit carryforward exists in the same taxing jurisdiction.

Per this guidance, an entity must present the unrecognized tax benefit as a reduction to a deferred tax asset, except when the carryforward is not available as of the reporting date under the governing tax law to settle taxes or the entity does not intend to use the deferred tax asset for this purpose.

This amendment does not impact the recognition or measurement of uncertain tax positions or the disclosure reconciliation of gross unrecognized tax benefits.

In February 2013, the FASB issued accounting guidance which requires entities to provide additional information about items reclassified out of accumulated other comprehensive income ("AOCI") to net income.

Changes in AOCI balances by component, both before tax and after tax, must be disclosed and significant items reclassified out of AOCI by component must be reported either on the face of the income statement or in a separate footnote to the financial statements.

There were no reclassifications out of AOCI to net income for the years ended December 31, 2014, 2013 and 2012.

On January 1, 2012, the Company adopted the amended accounting guidance issued by the Financial Accounting Standards Board ("FASB") concerning the presentation of comprehensive income.

The new guidance requires comprehensive income to be reported in either a single statement or in two consecutive statements reporting net income and other comprehensive income.

The Company selected to present two consecutive statements.

This amended guidance did not change the items that constitute net income or other comprehensive income, the timing of when other comprehensive income is reclassified to net income, or the earnings per share computation.

In September 2011, the FASB issued an accounting update, which amended the guidance on testing goodwill for impairment.

Under the revised guidance, entities testing goodwill for impairment have the option of performing a qualitative assessment before calculating the fair value of the reporting unit.

If, based on the qualitative factors, it is more-likely-than not that the fair value of the reporting unit is less than its carrying value, then the unchanged two-step approach previously used would be required.

The new accounting guidance did not change how goodwill is calculated, how goodwill is assigned to the