Prove It, Priceline!

The online travel service that used to infuriate some penny-pinching potential vacationers is now making Wall Street nod in agreement. Now that Priceline.com (NASDAQ:PCLN) has embraced a more traditional portal approach to go along with its travel bidding service, the company is appealing to both the no-nonsense traveler and the one looking to jump through hoops for a discounted rate.

The success is evident in the company's March quarter result, with gross bookings up 47% over last year's showing. Priceline is also raising its 2006 profit guidance. Backing out stock-based compensation, depreciation, and amortization charges, Priceline is expecting to earn between $1.60 to $1.70 per share this year. On that basis, the dozen Wall Street analysts tracking the company figured that it would be good for only $1.58 per share in profitability.

Was salvation really as easy as a renovated website? Not exactly. The dynamics of the new Priceline are apparent as you work your way down the income statement. Merchant revenue was lower, but agency revenue more than doubled. Online advertising costs also more than doubled, as the company made an aggressive attempt to stand out in the crowded field of mainstream portals like Sabre's (NYSE:TSG) Travelocity, Expedia (NASDAQ:EXPE), and Cendant's (NYSE:CD) Orbitz.

I'm still a bit of a skeptic here. Wash away the "pro forma" cosmetology and you have a company that still produced an operating loss for the period. I'm also not entirely convinced that the new Priceline is a winning concept. It's becoming more like its peers at a time when consumers are turning to comparison-rate aggregators like SideStep to get a cross section of available rates and fares -- and then often booking directly with the provider.

Standing out is important. I was impressed with Travelzoo's (NASDAQ:TZOO) report last month, in part because no one else has been able to duplicate the wild success of the company's Top 20 promotional mailing.

I'm hoping that the new and supposedly improved Priceline proves me wrong. All it would take would be a healthy quarter or two to send my cynicism packing elsewhere. I'm cheap that way. It's why I still have a soft spot for the original model that is now shrinking in prominence.

Prove me wrong, Priceline. I'd hate to reject you the way you used to reject me when I was bidding peanuts for top-notch hotels.

Priceline is aMotley Fool Stock Advisorrecommendation. Cendant is aMotley Fool Inside Valuepick. Check out our entire suite of newsletters by clicking here.

Longtime Fool contributor Rick Munarriz still relies on portals to get basic travel info, but then he runs off to see whether booking with the provider is cheaper. He does not own shares in any of the companies in this story.The Fool has a disclosure policy. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.