# UNITED	STATES

# SECURITIES	AND	EXCHANGE	COMMISSION

# ANNUAL	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES	EXCHANGE	ACT	OF	1934

# For	the	fiscal	year	ended:	December	31,	2016

# The	Priceline	Group	Inc.

(Exact	name	of	Registrant	as	specified	in	its	charter)

# Delaware

(State	or	other	Jurisdiction	of	Incorporation	or

Organization)

800	Connecticut	Avenue Norwalk,	Connecticut

(Address	of	Principal	Executive	Offices)

(I.R.S.	Employer	Identification	No.)

(Zip	Code)

Registrant's	telephone	number,	including	area	code:	(203)	299-8000

Securities	Registered	Pursuant	to	Section	12(b)	of	the	Act:

New	York	Stock	Exchange

Securities	Registered	Pursuant	to	Section	12(g)	of	the	Act:	None.

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.		Yes		ý		No		o

Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	Section	15(d)	of	the	Act.		Yes		o		No		ý

Indicate	by	check	mark	whether	the	registrant	(1)	has	filed	all	reports	required	to	be	filed	by	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934	during	the	preceding	12 months	(or	for	such	shorter	period	that	the	registrant	was	required	to	file	such	reports),	and	(2)	has	been	subject	to	such	filing	requirements	for	the	past	90	days.		Yes		ý		No		o

Indicate	by	check	mark	whether	the	registrant	has	submitted	electronically	and	posted	on	its	corporate	Web	site,	if	any,	every	Interactive	Data	File	required	to	be	submitted	and posted	pursuant	to	Rule	405	of	Regulation	S-T	(§	232.405	of	this	chapter)	during	the	preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was	required	to	submit	and post	such	files).		Yes		ý		No		o

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.		ý

Indicate	by	check	mark	whether	the	registrant	is	a	large	accelerated	filer,	an	accelerated	filer,	a	non-accelerated	filer	or	a	smaller	reporting	company.		See	the	definitions	of	"large accelerated	filer,"	"accelerated	filer"	and	"smaller	reporting	company"	in	Rule	12b-2	of	the	Exchange	Act	(Check	one):

Large	accelerated	filer		x

Non-accelerated	filer		o

Accelerated	filer		o

Smaller	reporting	company		o

Indicate	by	check	mark	whether	the	registrant	is	a	shell	company	(as	defined	in	Rule	12b-2	of	the	Act).		Yes		o		No		ý

The	aggregate	market	value	of	common	stock	held	by	non-affiliates	of	The	Priceline	Group	Inc.	as	of	June	30,	2016	was	approximately	$61.6	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,	2016	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	49,170,417	as	of	February	21,	2017.

# DOCUMENTS	INCORPORATED	BY	REFERENCE

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	8,	2017,	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,	2016.

The	Priceline	Group	Inc.	Annual	Report	on	Form	10-K	for	the	Year	Ended	December	31,	2016	Index

| Special	Note	Regarding	Forward	Looking	Statements | Special	Note	Regarding	Forward	Looking	Statements | 1 |
| :--- | :--- | :--- |
| PART\tI |  | 1 |
| Item\t1. | Business | 1 |
| Item\t1A. | Risk\tFactors | 9 |
| Item\t1B. | Unresolved\tStaff\tComments | 29 |
| Item\t2. | Properties | 29 |
| Item\t3. | Legal\tProceedings | 29 |
| Item\t4. | Mine\tSafety\tDisclosures | 29 |
| PART\tII |  | 30 |
| Item\t5. | Market\tfor\tRegistrant's\tCommon\tEquity,\tRelated\tStockholder\tMatters\tand\tIssuer\tPurchases\tof\tEquity\tSecurities | 30 |
| Item\t6. | Selected\tFinancial\tData | 33 |
| Item\t7. | Management's\tDiscussion\tand\tAnalysis\tof\tFinancial\tCondition\tand\tResults\tof\tOperations | 34 |
| Item\t7A. | Quantitative\tand\tQualitative\tDisclosures\tAbout\tMarket\tRisk | 58 |
| Item\t8. | Financial\tStatements\tand\tSupplementary\tData | 59 |
| Item\t9. | Changes\tin\tand\tDisagreements\twith\tAccountants\ton\tAccounting\tand\tFinancial\tDisclosure | 59 |
| Item\t9A. | Controls\tand\tProcedures | 59 |
| Item\t9B. | Other\tInformation | 62 |
| PART\tIII |  | 62 |
| Item\t10. | Directors,\tExecutive\tOfficers\tand\tCorporate\tGovernance | 62 |
| Item\t11. | Executive\tCompensation | 62 |
| Item\t12. | Security\tOwnership\tof\tCertain\tBeneficial\tOwners\tand\tManagement\tand\tRelated\tStockholder\tMatters | 62 |
| Item\t13. | Certain\tRelationships\tand\tRelated\tTransactions,\tand\tDirector\tIndependence | 62 |
| Item\t14. | Principal\tAccountant\tFees\tand\tServices | 62 |
| PART\tIV |  | 62 |
| Item\t15. | Exhibits\tand\tFinancial\tStatement\tSchedules | 62 |
| Signatures |  | 66 |
| Consolidated\tFinancial\tStatements | Consolidated\tFinancial\tStatements | 68 |

# Special	Note	Regarding	Forward-Looking	Statements

This	Annual	Report	on	Form	10-K	and	the	documents	incorporated	herein	by	reference	contain	forward-looking	statements.		These	forward-looking	statements reflect	our	views	regarding	current	expectations	and	projections	about	future	events	and	conditions	and	are	based	on	currently	available	information.	These	forward- looking	statements	are	not	guarantees	of	future	performance	and	are	subject	to	risks,	uncertainties	and	assumptions	that	are	difficult	to	predict,	including	the	Risk Factors	identified	in	Part	I,	Item	1A	of	this	Annual	Report;	therefore,	our	actual	results	could	differ	materially	from	those	expressed,	implied	or	forecast	in	any	such forward-looking	statements.	Expressions	of	future	goals	and	expectations	and	similar	expressions,	including	"may,"	"will,"	"should,"	"could,"	"expects,"	"plans," "anticipates,"	"intends,"	"believes,"	"estimates,"	"predicts,"	"potential,"	"targets,"	and	"continue,"	reflecting	something	other	than	historical	fact	are	intended	to	identify forward-looking	statements.	Unless	required	by	law,	we	undertake	no	obligation	to	update	publicly	any	forward-looking	statements,	whether	as	a	result	of	new information,	future	events	or	otherwise.	However,	readers	should	carefully	review	the	reports	and	documents	we	file	or	furnish	from	time	to	time	with	the	Securities	and Exchange	Commission	(the	"SEC"	or	the	"Commission"),	particularly	our	quarterly	reports	on	Form	10-Q	and	current	reports	on	Form	8-K.

# PART	I

# Item	1.		Business

Our	mission	is	to	help	people	experience	the	world.	We	seek	to	achieve	our	mission	by	providing	consumers,	travel	service	providers	and	restaurants	with worldwide	leadership	in	online	reservation	and	related	services.	We	operate	six	primary,	independently	managed	brands:

•Booking.com	-	the	world's	leading	brand	for	booking	online	accommodation	reservations,	based	on	room	nights

booked.

•priceline.com	-	a	leading	hotel,	rental	car,	airline	ticket	and	vacation	package	reservation	service	in	the	United

States.

•KAYAK	-	a	leading	meta-search	service	allowing	consumers	to	easily	search	and	compare	travel	itineraries	and	prices,	including	airline	ticket,

accommodation	and	rental	car	reservation	information.

•agoda.com	-	a	leading	accommodation	reservation	service	catering	primarily	to	consumers	in	the	Asia-Pacific

region.

•Rentalcars.com	-	a	leading	worldwide	rental	car	reservation

service.

•OpenTable	-	a	leading	provider	of	restaurant	reservation	and	information	services	to	consumers	and	restaurant	reservation	management	services	to restaurants.

Our	business	is	driven	primarily	by	international	results,	which	consist	of	the	results	of	Booking.com,	agoda.com	and	Rentalcars.com	and	the	international businesses	of	KAYAK	and	OpenTable	(in	each	case	regardless	of	where	the	consumer	resides,	where	the	consumer	is	physically	located	while	using	our	services	or	the location	of	the	travel	service	provider	or	restaurant).	During	the	year	ended	December	31,	2016,	our	international	business	(the	substantial	majority	of	which	is	generated by	Booking.com)	represented	approximately	88%	of	our	consolidated	gross	profit.	A	significant	majority	of	our	gross	profit	is	earned	in	connection	with	facilitating accommodation	reservations.	See	Note	16	to	the	Consolidated	Financial	Statements	for	more	geographic	information.

The	Priceline	Group	Inc.	was	formed	as	a	Delaware	limited	liability	company	in	1997	and	was	converted	into	a	Delaware	corporation	in	July	1998.		On	April	1, 2014,	the	Company	changed	its	name	from	priceline.com	Incorporated	to	The	Priceline	Group	Inc.	Our	common	stock	is	listed	on	the	NASDAQ	Global	Select	Market under	the	symbol	"PCLN."		Our	principal	executive	offices	are	located	at	800	Connecticut	Avenue,	Norwalk,	Connecticut	06854.	We	refer	to	our	company	and	all	of our	subsidiaries	and	brands	collectively	as	"The	Priceline	Group,"	the	"Company,"	"we,"	"our"	or	"us."

# The	Priceline	Group	Business	Model

We	derive	substantially	all	of	our	revenues	and	gross	profit	from	the	following	sources:

•Commissions	earned	from	facilitating	reservations	of	accommodations,	rental	cars,	cruises	and	other	travel	services	on	an	agency basis;

•Transaction	gross	profit	on	a	merchant	basis	and	customer	processing	fees	from	our	accommodation,	rental	car,	airline	ticket	and	vacation	package reservation	services;

•Advertising	revenues	primarily	earned	by	KAYAK	from	sending	referrals	to	online	travel	companies	("OTCs")	and	travel	service	providers,	as	well	as from	advertising	placements	on	KAYAK's	websites	and	mobile	apps;

•Beginning	on	July	24,	2014,	reservation	revenues	paid	by	restaurants	for	diners	seated	through	OpenTable's	online	reservation	service,	subscription	fees for	restaurant	reservation	management	services	provided	by	OpenTable	and	other	OpenTable	revenues;	and

•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	priceline.com	brand	offers	merchant	Name	Your	Own	Price®	opaque	travel	services,	which	are	recorded	in	revenue	on	a	"gross"	basis	and	have	associated cost	of	revenue.	All	of	our	other	services	are	recorded	in	revenue	on	a	"net"	basis	and	have	no	associated	cost	of	revenue.	Therefore,	revenue	increases	and	decreases	are impacted	by	changes	in	the	mix	of	our	revenues	between	Name	Your	Own	Price®	travel	services	and	other	services.	Gross	profit	reflects	the	commission	or	net	margin earned	for	all	of	our	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	reservation	services	and	our	other	services.

For	the	year	ended	December	31,	2016,	we	had	gross	profit	of	approximately	$10.3	billion	comprised	of	"agency"	gross	profit,	"merchant"	gross	profit,	and "advertising	and	other"	gross	profit.		Agency	gross	profit	is	derived	from	travel-related	transactions	where	we	do	not	facilitate	payments	for	the	travel	services	provided. Agency	gross	profit,	which	represented	the	majority	of	our	total	gross	profit	in	2016,	consists	primarily	of:	(1)	travel	reservation	commissions;	(2)	certain	GDS reservation	booking	fees	and	(3)	travel	insurance	fees.	Merchant	gross	profit	is	derived	from	services	where	we	facilitate	payments	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	providers,	and	travel	reservation commissions	in	connection	with	our	merchant	retail	and	Express	Deals®	travel	reservation	services;	(2)	transaction	revenues	representing	the	price	of	Name	Your	Own Price®	reservations	charged	to	a	customer	(with	a	corresponding	travel	service	provider	cost	recorded	in	cost	of	revenues);	(3)	ancillary	fees,	including	damage	excess waiver	and	travel	insurance	fees	and	certain	GDS	reservation	booking	fees	and	(4)	customer	processing	fees.	Advertising	and	other	revenues	are	derived	primarily	from (1)	revenues	earned	by	KAYAK	for	(a)	sending	referrals	to	OTCs	and	travel	service	providers	and	(b)	advertising	placements	on	KAYAK's	websites	and	mobile	apps; (2)	revenues	earned	by	OpenTable	for	(a)	reservation	fees	paid	by	restaurants	for	diners	seated	through	OpenTable's	online	reservation	service	and	(b)	subscription	fees earned	by	OpenTable	for	restaurant	reservation	management	services;	(3)	revenues	earned	by	priceline.com	for	advertising	on	its	websites;	and	(4)	revenues	generated by	Booking.com's	BookingSuite	branded	accommodation	marketing	and	business	analytics	services.	See	Note	2	to	our	Consolidated	Financial	Statements	for	more information.

# The	Priceline	Group	Strategy

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	our	travel	service	provider	and	restaurant	partners	with	unmatched	service	and	best-in- class	digital	technology.	The	online	travel	and	dining	categories	continue	to	grow	as	consumer	purchasing	shifts	from	traditional	offline	channels	to	interactive	online channels,	including	mobile	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	restaurant	reservation	and	related	services	by	(a)	providing	consumers	with	the	best	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	with:	(a)	a	variety	of	intuitive,	easy-to-use	online	travel	and	restaurant	reservation	and	search	services; (b)	a	continually	increasing	number,	location	and	variety	of	accommodations	and	restaurants	available	through	our	services:	(c)	informative	and	useful content,	such	as	pictures,	accommodation	and	restaurant	details	and	reviews;	and	(d)	excellent	customer	service.	For	example,	Booking.com	increasingly provides	reservation	services	for	accommodations	other	than	hotels,	such	as	vacation	rentals.	Booking.com	included	over	1,115,000	properties	on	its website	as	of	December	31,	2016,	which	included	over	568,000	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	are	constantly	innovating	in	order	to	provide	a best-in-class	user	experience	with	intuitive,	easy-to-use	websites	and	mobile	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	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	services,	or	to	engage	in	sophisticated	online	marketing	techniques.	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	marketing	and	business	analytics	tools	to	help	them attract	customers	and	more	effectively	manage	their	properties.	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.	For	example,	we	spend	significant	and increasing	amounts	on	performance	and	brand	advertising	to	acquire	customers	and	establish	and	strengthen	our	brands.	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	efforts	to	share	best	practices, access	to	travel	service	provider	offerings	and	customers	across	our	brands.	We	believe	that	by	promoting	our	brands	worldwide,	sharing	accommodation reservation	availability	and	customer	demand,	and	applying	our	industry	experiences	across	brands	and	markets,	we	can	more	effectively	expand	our reservation	services	globally	and	maintain	and	grow	our	position	as	a	leading	provider	of	worldwide	online	travel	and	restaurant	reservation	and	related services.

•Investing	in	profitable	and	sustainable	growth.	We	seek	to	offer	online	services	that	meet	the	needs	and	the	expectations	of	consumers,	travel	service providers	and	restaurants	and	that	we	believe	will	result	in	long-term	profitability	and	growth.	We	intend	to	accomplish	this	through	continuous	investment and	innovation,	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	apps.	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.	For	example,	we	have	a commercial	relationship	with,	and	have	made	significant	financial	investments	in,	Ctrip,	a	leading	OTC	operating	primarily	in	China.

# Service	Offerings

Through	our	online	travel	reservation	services,	we	connect	consumers	wishing	to	make	travel	reservations	with	providers	of	travel	services	around	the	world. 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.	Our	priceline.com	brand	also	offers	consumers	reservations	for	rental	cars,	airline	tickets,	vacation packages	and	cruises.	We	offer	rental	car	reservations	worldwide	through	Rentalcars.com.	We	also	allow	consumers	to	easily	compare	travel	reservation	information, such	as	airline	ticket,	hotel	reservation	and	rental	car	reservation	information,	from	hundreds	of	travel	websites	at	once	through	KAYAK.	We	provide	restaurants	with reservation	management	services	and	consumers	with	the	ability	to	make	restaurant	reservations	at	participating	restaurants	through	OpenTable.

Booking.com.		Booking.com	is	the	world's	leading	brand	for	booking	online	accommodation	reservations,	based	on	room	nights	booked,	with	operations worldwide	and	headquarters	in	the	Netherlands.	As	of	December	31,	2016,	Booking.com	offered	accommodation	reservation	services	for	over	1,115,000	properties	in over	220	countries	and	territories	on	its	various	websites	and	in	over	40	languages,	which	includes	over	568,000	vacation	rental	properties	(updated	property	counts	are

available	on	the	Booking.com	website).	Vacation	rentals	generally	consist	of,	among	others,	properties	categorized	as	single-unit	and	multi-unit	villas,	apartments, "aparthotels"	(which	are	apartments	with	a	front	desk	and	cleaning	service)	and	chalets	and	are	generally	self-catered	(i.e.,	include	a	kitchen),	directly	bookable properties.	Accommodation	providers	participate	in	Booking.com,	which	operates	primarily	under	an	agency	model,	by	filing	rates	and	information	about	the	property	in Booking.com's	proprietary	extranet.	In	addition,	Booking.com	offers	website	and	other	marketing	services	and	business	analytics	to	accommodation	providers	as	part	of its	BookingSuite	initiative.

Priceline.com.	Priceline.com	offers	online	travel	reservation	services	primarily	in	the	United	States	and	is	headquartered	in	Norwalk,	Connecticut.	Through priceline.com,	we	offer	consumers	hotel,	rental	car	and	airline	ticket	reservation	services,	as	well	as	vacation	packages	and	cruises.	Priceline.com	is	a	leader	in	the discount	travel	reservation	business,	including	through	its	pioneering	Name	Your	Own	Price®	and	Express	Deals®	"opaque"	offerings	where	certain	elements	of	the service,	including	the	identity	of	the	travel	service	provider,	are	not	disclosed	to	the	consumer	prior	to	making	a	reservation.	We	believe	that	the	combination	of priceline.com's	retail	and	opaque	models	allows	it	to	provide	a	broad	array	of	options	to	value-conscious	consumers.	Priceline.com	operates	under	both	a	merchant	and agency	model.

KAYAK.	KAYAK,	headquartered	in	Stamford,	Connecticut,	provides	an	online	price	comparison	service	(often	referred	to	as	"meta-search")	that	allows consumers	to	easily	search	and	compare	travel	itineraries	and	prices,	including	airline	ticket,	accommodation	reservation	and	rental	car	reservation	information,	from hundreds	of	travel	websites	at	once.	KAYAK	derives	revenues	from	sending	referrals	to	OTCs	and	travel	service	providers	and	from	advertising	placements	on	its websites	and	mobile	apps.	KAYAK	offers	its	services	in	approximately	40	countries,	with	the	United	States	being	its	largest	market.

Agoda.com.	Agoda.com	is	a	leading	online	accommodation	reservation	service	catering	primarily	to	consumers	in	the	Asia-Pacific	region,	with	headquarters	in Singapore	and	operations	in	Bangkok,	Thailand	and	throughout	the	region.	Accommodation	providers	participate	in	agoda.com,	which	operates	primarily	under	a merchant	model,	by	filing	rates	and	information	about	the	property	in	agoda.com's	proprietary	extranet.

Rentalcars.com.		Rentalcars.com	is	a	leading	worldwide	online	rental	car	reservation	service	and	is	headquartered	in	Manchester,	England.	Rentalcars.com, which	operates	primarily	under	a	merchant	model,	offers	online	rental	car	reservation	services	allowing	consumers	to	make	rental	car	reservations	in	approximately 49,000	locations	throughout	the	world,	with	customer	support	provided	in	40	languages.		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.

OpenTable.	In	July	2014,	we	acquired	OpenTable,	a	leading	brand	for	booking	online	restaurant	reservations.	Headquartered	in	San	Francisco,	California, OpenTable	provides	online	restaurant	reservation	services	to	consumers	and	reservation	management	services	to	restaurants.	OpenTable	does	business	primarily	in	the United	States,	though	it	intends	to	continue	to	invest	in	expanding	its	international	offerings.

# Marketing	and	Brand	Awareness

Booking.com,	priceline.com,	KAYAK,	agoda.com,	Rentalcars.com	and	OpenTable	have	established	widely	used	and	recognized	e-commerce	brands	through marketing	and	promotional	campaigns.	Both	our	performance	advertising	expense	and	brand	advertising	expense	have	increased	significantly	in	recent	years,	a	trend	we expect	to	continue.	During	2016,	our	total	performance	advertising	expense	was	approximately	$3.5	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	$296	million	in brand	advertising	during	2016.	We	intend	to	continue	a	strategy	of	promoting	brand	awareness	through	both	online	and	offline	advertising	efforts,	including	by expanding	brand	campaigns	into	additional	markets.	We	expense	the	substantial	majority	of	our	advertising	activities	as	the	expense	is	incurred,	which	is	typically	in	the quarter	in	which	reservations	are	booked,	but	recognize	most	of	our	gross	profit	when	the	consumer's	travel	or	dining	experience	is	completed.	As	a	result,	performance advertising	expense	may	not	be	recognized	in	the	same	period	as	the	associated	gross	profit.

# Competition

We	compete	globally	with	both	online	and	traditional	travel	and	restaurant	reservation	and	related	services.	The	markets	for	the	services	we	offer	are	intensely competitive,	a	trend	we	expect	to	continue,	and	current	and	new	competitors	can	launch	new	services	at	a	relatively	low	cost.	Some	of	our	current	and	potential competitors,	such	as	Google,	Apple,	Alibaba,	Tencent,	Amazon	and	Facebook,	have	access	to	significantly	greater	and	more	diversified	resources	than	we	do,	and	they may	be	able	to	leverage	other	aspects	of	their	businesses	(e.g.,	search	or	mobile	device	businesses)	to	enable	them	to	compete	more	effectively	with	us.	For	example, Google	has	entered	various	aspects	of	the	online	travel	market,	including	by	establishing	a

flight	meta-search	product	("Google	Flights")	and	a	hotel	meta-search	business	("Hotel	Ads")	that	are	growing	rapidly,	as	well	as	its	"Book	on	Google"	reservation functionality.

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

•online	travel	reservation	services	such	as	Expedia,	Hotels.com,	Hotwire,	Orbitz,	Travelocity,	Wotif,	Cheaptickets,	ebookers,	HotelClub,	RatesToGo	and CarRentals.com,	which	are	owned	by	Expedia;	Hotel	Reservation	Service	(HRS)	and	hotel.de,	which	are	owned	by	Hotel	Reservation	Service;	and AutoEurope,	CarTrawler,	Ctrip	(in	which	we	hold	a	minority	interest),	eLong	(in	which	Ctrip	has	acquired	a	significant	minority	ownership	interest),	Meituan, ezTravel,	MakeMyTrip,	OYO	Rooms,	Yatra,	Cleartrip,	Traveloka,	Webjet,	Rakuten,	Jalan	(which	is	owned	by	Recruit),	ViajaNet,	Submarino	Viagens, Despegar/Decolar	(in	which	Expedia	holds	a	minority	ownership	interest),	Fliggy	(operated	by	Alibaba),	17u.com,	HotelTonight,	CheapOair,	Mr.	and	Mrs. Smith	and	eDreams	ODIGEO;

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

•large	online	companies,	including	search,	social	networking	and	marketplace	companies	such	as	Google,	Facebook,	Alibaba,	Tencent,	Amazon,	Baidu	and Groupon;

•traditional	travel	agencies,	travel	management	companies,	wholesalers	and	tour	operators,	many	of	which	combine	physical	locations,	telephone	services	and online	services,	such	as	Carlson	Wagonlit,	American	Express,	BCD	Travel,	Concur,	Thomas	Cook,	TUI,	Hotelbeds	and	Tourico	(which	have	agreed	to	merge) and	Kuoni	as	well	as	thousands	of	individual	travel	agencies	around	the	world;

•travel	service	providers	such	as	accommodation	providers,	rental	car	companies	and	airlines,	many	of	which	have	their	own	branded	websites	to	which	they drive	business,	including	large	hotel	chains	such	as	Marriott	International,	Hilton	and	Hyatt	Hotels,	as	well	as	joint	efforts	by	travel	service	providers	such	as Room	Key,	an	online	hotel	reservation	service	owned	by	several	major	hotel	companies;

•online	travel	search	and	price	comparison	services	(generally	referred	to	as	"meta-search"	services),	such	as	TripAdvisor,	trivago	(in	which	Expedia	holds	a majority	ownership	interest),	Qunar	(which	is	controlled	by	Ctrip),	Skyscanner	(in	which	Ctrip	holds	a	majority	ownership	interest),	Google	Flights,	Google Hotel	Ads	and	HotelsCombined;

•online	restaurant	reservation	services,	such	as	TripAdvisor's	LaFourchette,	Yelp's	SeatMe,	Zomato,	Bookatable	(which	is	owned	by	Michelin),	Quandoo	(which is	owned	by	Recruit)	and	Resy	(in	which	Airbnb	holds	a	minority	investment);	and

•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	Chuxing	and	Ola.

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	search,	meta-search	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),	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	OTCs	or	other	travel	websites,	which	could	lead	to	travel	service	providers	or	others	gaining	a	larger	share	of	search	traffic.	TripAdvisor	and	trivago, two	leading	meta-search	companies,	support	their	meta-search	services	with	significant	brand	and	performance	advertising.	Through	our	KAYAK	meta-search	service, we	compete	directly	with	other	meta-search	services.

Further,	meta-search	services	may	evolve	into	more	traditional	OTCs	by	offering	consumers	the	ability	to	make	travel	reservations	directly	through	their websites.	For	example,	TripAdvisor	allows	consumers	to	make	a	reservation	at	some	accommodations	while	staying	on	TripAdvisor	through	its	"Instant	Booking" offering,	which	includes	participation	by	many	of	the	leading	global	hotel	chains,	and	facilitates	hotel	reservations	on	its	transaction	websites	Tingo	and	Jetsetter.

There	has	been	a	proliferation	of	new	channels	through	which	accommodation	providers	can	offer	reservations.		For	example,	companies	such	as	Airbnb	and HomeAway	(which	is	owned	by	Expedia)	offer	services	providing	vacation	rental	property	owners,	particularly	individuals,	an	online	place	to	list	their	accommodations where	travelers	can	search	and	book	such	properties	and	compete	directly	with	our	vacation	rental	accommodation	services.	Airbnb	may	also	seek	to	further	compete with	us	by	offering	hotel	and	other	non-vacation	rental	accommodations	through	their	online	and	mobile	platforms.

Travel	service	providers,	including	hotel	chains,	rental	car	companies	and	airlines	with	which	we	conduct	business,	compete	with	us	in	online	channels	to	drive consumers	to	their	own	websites	in	lieu	of	third-party	distributors	such	as	us.	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	customers	with	registered	accounts),	any	of	which could	make	their	offerings	more	attractive	to	consumers	than	our	services.	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.

Google's	Android	operating	system	is	the	leading	smartphone	operating	system	in	the	world.	As	a	result,	Google	could	leverage	its	Android	operating	system	to give	its	travel	services	a	competitive	advantage,	either	technically	or	with	prominence	on	its	Google	Play	app	store	or	within	its	mobile	search	results.	Further,	Google	is the	leading	Internet	search	service	and	has	leveraged	its	search	popularity	to	promote	its	travel	meta-search	services.	Similarly,	Apple,	the	producer	of,	among	other things,	the	iPhone	and	iPad,	obtained	a	patent	for	"iTravel,"	a	mobile	app	that	would	allow	a	traveler	to	check	in	for	a	travel	reservation.	In	addition,	Apple's	iPhone operating	system	includes	"Wallet"	(formerly	known	as	"Passbook"),	a	virtual	wallet	app	that	holds	tickets,	boarding	passes,	coupons	and	gift	cards,	and,	along	with iTravel,	may	be	indicative	of	Apple's	intent	to	enter	the	travel	reservations	business	in	some	capacity.	Apple	has	substantial	market	share	in	the	smartphone	category	and controls	integration	of	offerings,	including	travel	services,	into	its	mobile	operating	system.	Apple	also	has	more	experience	producing	and	developing	mobile	apps	and has	access	to	greater	resources	than	we	have.	Apple	may	use	or	expand	iTravel,	Wallet,	Siri	(Apple's	voice	recognition	"concierge"	service),	Apple	Pay	(Apple's	mobile payment	system)	or	another	mobile	app	or	functionality	as	a	means	of	entering	the	travel	reservations	marketplace.	To	the	extent	Apple	or	Google	use	their	mobile operating	systems,	app	distribution	channels	or,	in	the	case	of	Google,	search	services,	to	favor	their	own	travel	service	offerings,	our	business	and	results	of	operations could	be	harmed.

# Operations	and	Technology

Our	business	is	supported	by	multiple	systems	platforms,	which	were	designed	with	an	emphasis	on	scalability,	performance	and	reliability.		The	platforms	are largely	independent	among	Booking.com,	priceline.com,	KAYAK,	agoda.com,	Rentalcars.com	and	OpenTable.		The	software	platforms	and	architecture	use	a	variety	of tools	within	each	corporate	implementation,	including	server-side	Java,	C++,	ASP,	.Net,	Perl,	PHP,	JavaScript	and	SQL	scripts	integrated	with	Oracle,	MySQL, MongoDB,	Cassandra	and	Microsoft	SQL-server	database	systems.		These	internal	platforms	were	designed	to	include	open	application	protocol	interfaces	that	can provide	connectivity	to	vendors	in	the	industries	in	which	we	operate.		These	include	large	global	systems,	such	as	accommodation,	airline	ticket	and	rental	car reservation	systems	and	financial	service	providers,	as	well	as	individual	accommodation	service	providers,	such	as	individual	hotels.		Our	applications	utilize	digital certificates	to	help	us	conduct	secure	communications	and	transactions,	as	appropriate.

The	systems	infrastructure	and	web	and	database	servers	of	our	worldwide	operations	are	primarily	hosted	in	the	United	Kingdom,	Switzerland,	the Netherlands,	Germany,	Singapore,	Hong	Kong	and	four	locations	in	the	United	States,	each	of	which	provides	network	connectivity,	networking	infrastructure,	UPS conditioned	power	and	24-hour	monitoring	and	engineering	support	typical	of	hosted	data	centers.		All	data	center	facilities	have	a	continuous	power	supply	system, generators,	redundant	servers	and	multiple	back-up	systems.		Although	we	take	steps	to	mitigate	the	effects	of	any	loss	or	reduction	in	service	at	one	of	our	hosting facilities,	if	a	hosting	facility	were	inaccessible	or	otherwise	experienced	a	disruption	in	service	for	any	reason,	we	could	experience	a	disruption	to	our	services,	loss	of transactions	and	revenue	and	consumer	complaints.

We	provide	customer	service	through	a	mix	of	in-house	call	centers	and	outsourced	third	party	services.

# Intellectual	Property

Over	time	and	through	acquisitions,	we	have	assembled	a	portfolio	of	patents,	trademarks,	service	marks,	copyrights,	domain	names,	and	trade	secrets	covering our	services.	We	regard	the	protection	of	our	intellectual	property	as	critical	to	our	success.	We	protect	our	intellectual	property	rights	by	relying	on	national,	federal, state	and	common	law	rights	in	the	United

States	and	internationally,	as	well	as	a	variety	of	administrative	procedures,	regulations,	conventions	and	treaties.	We	also	rely	on	contractual	restrictions	to	protect	our proprietary	rights	in	our	services.	We	enter	into	confidentiality	and	invention	assignment	agreements	with	employees	and	contractors	and	nondisclosure	agreements	with parties	with	whom	we	conduct	business	in	order	to	limit	access	to	and	disclosure	of	our	proprietary	information.

As	we	deem	appropriate,	we	pursue	the	registration	of	our	intellectual	property,	such	as	domain	names,	trademarks	and	service	marks,	in	the	United	States	and internationally.	We	currently	hold	various	issued	U.S.	and	international	patents	and	pending	U.S.	and	international	patent	applications.		We	file	additional	patent applications	on	new	inventions,	as	we	deem	appropriate.	Effective	trademark,	copyright,	patent,	domain	name,	trade	dress	and	trade	secret	protection	is	expensive	to maintain	and	may	require	litigation.	As	we	continue	to	expand	internationally,	protecting	our	intellectual	property	rights	and	other	proprietary	rights	involves	an increasing	number	of	jurisdictions,	a	process	that	is	expensive	and	time-consuming	and	may	not	be	successful	in	every	location.	See	Part	I	Item	1A	Risk	Factors	-	"We face	risks	related	to	our	intellectual	property."

# Seasonality

A	meaningful	amount	of	our	gross	bookings	are	generated	early	in	the	year,	as	customers	plan	and	reserve	their	spring	and	summer	vacations	in	Europe	and North	America.	However,	we	generally	do	not	recognize	revenue	from	these	bookings	until	the	travel	occurs,	which	can	be	in	a	quarter	other	than	when	the	reservation is	booked.	In	contrast,	we	expense	the	substantial	majority	of	our	advertising	activities	as	the	expense	is	incurred,	which,	in	the	case	of	performance	advertising	in particular,	is	typically	in	the	quarter	in	which	associated	reservations	are	booked.	As	a	result	of	this	potential	timing	difference	between	when	we	record	advertising expense	and	when	we	recognize	associated	revenue,	we	have	historically	experienced	our	highest	levels	of	profitability	in	the	second	and	third	quarters	of	the	year, which	is	when	we	experience	the	highest	levels	of	accommodation	checkouts	for	the	year	for	our	European	and	North	American	businesses.	The	first	quarter	of	the	year is	typically	our	lowest	level	of	profitability	and	may	experience	volatility	in	earnings	growth	rates	due	to	these	seasonal	timing	factors.	For	our	Asia-Pacific	business,	we experience	the	highest	levels	of	accommodation	bookings	in	the	third	and	fourth	quarters	of	the	year,	and	the	highest	levels	of	travel	consumption	in	the	fourth	quarter. As	the	relative	growth	rates	for	these	businesses	fluctuate,	the	quarterly	distribution	of	our	operating	results	may	vary.

In	addition,	the	date	on	which	certain	holidays	fall	can	have	an	impact	on	our	quarterly	results.	For	example,	in	2016,	our	first	quarter	year-over-year	growth rates	in	revenue,	gross	profit,	operating	income	and	operating	margins	were	positively	impacted	by	Easter	falling	in	the	first	quarter	instead	of	the	second	quarter,	as	it did	in	2015.	Conversely,	our	second	quarter	2016	year-over-year	growth	rates	in	revenue,	gross	profit,	operating	income	and	operating	margins	were	adversely	impacted by	Easter	falling	in	the	first	quarter	instead	of	the	second	quarter,	as	it	did	in	2015.	Similarly	to	2015,	in	2017	Easter	will	fall	in	the	second	quarter	instead	of	the	first quarter,	and	will	therefore	have	a	negative	effect	on	our	first	quarter	2017	year-over-year	growth	rates	and	a	positive	effect	on	our	second	quarter	2017	year-over-year growth	rates	as	compared	to	the	same	periods	in	2016	when	Easter	fell	in	the	first	quarter.	The	timing	of	other	holidays	such	as	Chinese	New	Year,	Carnival	and Ramadan	can	also	impact	our	quarterly	year-over-year	growth	rates.

The	impact	of	seasonality	can	be	exaggerated	in	the	short	term	by	the	gross	bookings	growth	rate	of	the	business.	For	example,	in	periods	where	our	gross bookings	growth	rate	substantially	decelerates,	our	operating	margins	typically	benefit	from	relatively	less	variable	advertising	expense.	In	addition,	gross	profit	growth is	typically	less	impacted	by	decelerating	gross	bookings	growth	in	the	near	term	due	to	the	benefit	of	revenue	related	to	reservations	booked	in	previous	quarters. Conversely,	in	periods	where	our	gross	bookings	growth	rate	accelerates,	our	operating	margins	are	typically	negatively	impacted	by	relatively	more	variable	advertising expense.	In	addition,	gross	profit	growth	is	typically	less	impacted	by	accelerating	gross	bookings	growth	in	the	near	term	as	a	portion	of	the	revenue	recognized	from such	gross	bookings	will	occur	in	future	quarters.

# Employees

As	of	December	31,	2016,	we	employed	approximately	18,500	employees,	of	which	approximately	3,600	were	based	in	the	United	States	and	approximately 14,900	were	based	outside	the	United	States.	We	also	retain	independent	contractors	to	support	our	customer	service,	website	content	translation	and	system	support functions.

We	have	never	had	a	work	stoppage	and	we	consider	our	relations	with	our	employees	to	be	good.	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.	Our	future success	will	depend,	in	part,	on	our	ability	to	continue	to	attract,	integrate,	retain	and	motivate	highly	qualified	technical	and	managerial	personnel,	for	whom competition	is	intense.

See	Part	I	Item	1A	Risk	Factors	-"We	rely	on	the	performance	of	highly	skilled	personnel;	and,	if	we	are	unable	to	retain	or	motivate	key	personnel	or	hire,	retain	and motivate	qualified	personnel,	our	business	would	be	harmed."

# The	Priceline	Group	Websites

We	maintain	websites	with	the	addresses	www.pricelinegroup.com,	www.booking.com,	www.priceline.com,	www.kayak.com,	www.agoda.com, www.rentalcars.com	and	www.opentable.com,	among	others.		We	are	not	including	the	information	contained	on	our	websites	as	a	part	of,	or	incorporating	it	by reference	into,	this	Annual	Report	on	Form	10-K.		We	make	available	free	of	charge	through	the	www.pricelinegroup.com	website	our	Annual	Reports	on	Form	10-K, Quarterly	Reports	on	Form	10-Q	and	Current	Reports	on	Form	8-K,	and	amendments	to	these	reports	filed	or	furnished	pursuant	to	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.	These	reports	and	other	information	are	also	available,	free	of	charge,	at	www.sec.gov.		Alternatively,	the	public	may	read	and	copy	any	materials we	file	with	the	SEC	at	the	SEC's	Public	Reference	Room	at	100	F	Street,	N.E.,	Washington,	D.C.	20549.		Information	on	the	operation	of	the	Public	Reference Room	may	be	obtained	by	calling	the	SEC	at	1-800-SEC-0330.		In	addition,	the	Company's	Code	of	Conduct	is	available	through	the	www.pricelinegroup.com	website and	any	amendments	to	or	waivers	of	the	Code	of	Conduct	will	be	disclosed	on	that	website.

# Item	1A.		Risk	Factors

The	following	risk	factors	and	other	information	included	in	this	Annual	Report	should	be	carefully	considered.	The	risks	and	uncertainties	described below	are	not	the	only	ones	we	face.	Additional	risks	and	uncertainties	not	presently	known	to	us	or	that	we	currently	believe	are	immaterial	may	also	impair	our business,	results	of	operations	or	financial	condition.	If	any	of	the	following	risks	occur,	our	business,	financial	condition,	operating	results	and	cash	flows	could be	materially	adversely	affected.

# Declines	or	disruptions	in	the	travel	industry	could	adversely	affect	our	business	and	financial	performance.

Our	financial	results	and	prospects	are	almost	entirely	dependent	upon	the	sale	of	travel	services.	Travel,	including	accommodation	(including	hotels,	bed	and breakfasts,	hostels,	apartments,	vacation	rentals	and	other	properties),	rental	car	and	airline	ticket	reservations,	is	significantly	dependent	on	discretionary	spending levels.	As	a	result,	sales	of	travel	services	tend	to	decline	during	general	economic	downturns	and	recessions	when	consumers	engage	in	less	discretionary	spending,	are concerned	about	unemployment	or	inflation,	have	reduced	access	to	credit	or	experience	other	concerns	or	effects	that	reduce	their	ability	or	willingness	to	travel.	For example,	the	worldwide	recession	that	began	in	2007	led	to	a	weakening	in	the	fundamental	demand	for	our	travel	reservation	services	and	an	increase	in	the	number	of consumers	who	canceled	existing	travel	reservations	with	us.	Also	during	the	recession,	the	accommodation	industry	experienced	a	significant	decrease	in	occupancy rates	and	average	daily	rates	("ADRs").	While	lower	occupancy	rates	have	historically	resulted	in	accommodation	providers	increasing	their	distribution	of accommodation	reservations	through	third-party	intermediaries	such	as	us,	our	remuneration	for	accommodation	reservation	transactions	changes	proportionately	with price,	and	therefore,	lower	ADRs	generally	have	a	negative	effect	on	our	accommodation	reservation	business	and	a	negative	effect	on	our	gross	profit.

Concerns	persist	about	the	outlook	for	the	global	economy	in	general,	including	uncertainty	in	the	European	Union	and	China.	Perceived	or	actual	adverse economic	conditions,	including	slow,	slowing	or	negative	economic	growth,	unemployment	rates	and	weakening	currencies	and	concerns	over	government	responses such	as	higher	taxes	and	reduced	government	spending,	could	impair	consumer	spending	and	adversely	affect	travel	demand.	Further,	uncertainty	regarding	the	future	of the	European	Union	following	the	United	Kingdom's	vote	to	leave	("Brexit")	and	concerns	regarding	certain	E.U.	members	with	sovereign	debt	default	risks	could	also negatively	affect	consumer	spending	and	adversely	affect	travel	demand.	At	times,	we	have	experienced	volatility	in	transaction	growth	rates,	increased	cancellation rates	and	weaker	trends	in	hotel	ADRs	across	many	regions	of	the	world,	particularly	in	those	countries	that	appear	to	be	most	affected	by	economic	uncertainties, which	we	believe	are	due	at	least	in	part	to	macro-economic	conditions	and	concerns.	Disruptions	in	the	economies	of	such	countries	could	cause,	contribute	to	or	be indicative	of	deteriorating	macro-economic	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.

These	and	other	macro-economic	uncertainties,	such	as	sovereign	default	risk	becoming	more	widespread,	declining	oil	prices,	geopolitical	tensions	and differing	central	bank	monetary	policies,	have	led	to	significant	volatility	in	the	exchange	rates	between	the	U.S.	Dollar	and	the	Euro,	the	British	Pound	Sterling	and other	currencies.	Significant	fluctuations	in	currency	exchange	rates,	stock	markets	and	oil	prices	can	also	impact	consumer	travel	behavior.	For	example,	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.

Since	the	United	Kingdom's	Brexit	vote,	global	markets	and	foreign	exchange	rates	have	experienced	increased	volatility,	including	a	sharp	decline	in	the	value of	the	British	Pound	Sterling	as	compared	to	the	U.S.	Dollar.	Upon	leaving	the	European	Union,	among	other	things,	the	United	Kingdom	could	lose	access	to	the	single European	Union	market	and	travel	between	the	United	Kingdom	and	European	Union	countries	could	be	restricted.	We	could	face	new	regulatory	costs	and	challenges if	U.K.	regulations	and	policies	diverge	from	those	of	the	European	Union.	Since	the	timing	and	terms	of	the	United	Kingdom's	exit	from	the	European	Union	are unknown,	we	are	unable	to	predict	the	effect	Brexit	will	have	on	our	business	and	results	of	operations.	The	United	Kingdom's	decision	to	leave	the	European	Union could	result	in	other	member	countries	also	determining	to	leave,	which	could	lead	to	added	economic	and	political	uncertainty	and	further	devaluation	or	eventual abandonment	of	the	Euro	common	currency,	any	of	which	could	have	a	negative	impact	on	travel	and	therefore	our	business	and	results	of	operations.	For	the	twelve months	ended	June	30,	2016,	U.K.	destination	gross	profit	and	U.K.	source	market	gross	bookings	were	10%	or	less	as	a	share	of	our	business.

The	uncertainty	of	macro-economic	factors	and	their	impact	on	consumer	behavior,	which	may	differ	across	regions,	makes	it	more	difficult	to	forecast industry	and	consumer	trends	and	the	timing	and	degree	of	their	impact	on	our	markets	and	business,	which	in	turn	could	adversely	affect	our	ability	to	effectively manage	our	business	and	adversely	affect	our	results	of

operations.	For	example,	we	have	experienced	an	increase	in	cancellation	rates,	which	we	expect	to	continue	and	which	we	believe	is	due	in	part	to	these	macro- economic	factors	and	a	resulting	lack	of	consumer	confidence.	Increased	cancellation	rates	negatively	affect	our	advertising	efficiency	and	our	results	of	operations.

In	addition,	other	unforeseen	events	beyond	our	control,	such	as	worldwide	recession,	oil	prices,	terrorist	attacks,	unusual	or	extreme	weather	or	natural disasters	such	as	earthquakes,	hurricanes,	tsunamis,	floods,	droughts	and	volcanic	eruptions,	travel-related	health	concerns	including	pandemics	and	epidemics	such	as Ebola,	Zika,	Influenza	H1N1,	avian	bird	flu,	SARS	and	MERS,	political	instability,	regional	hostilities,	imposition	of	taxes	or	surcharges	by	regulatory	authorities, changes	in	trade	or	immigration	policies	or	travel-related	accidents,	can	disrupt	travel	or	otherwise	result	in	declines	in	travel	demand.	Because	these	events	or	concerns are	largely	unpredictable,	they	can	dramatically	and	suddenly	affect	travel	behavior	by	consumers,	and	therefore	demand	for	our	services,	which	can	adversely	affect	our business	and	results	of	operations.	For	example,	our	business	and	operations	were	negatively	impacted	by	the	terrorist	attacks	in	Paris	in	November	2015,	Brussels	in March	2016,	Orlando	in	June	2016,	Nice	in	July	2016,	and	Istanbul	in	July	2016	and	January	2017;	the	coup	attempt	in	Turkey	in	July	2016;	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	2014.	In	addition,	MERS	had	an	adverse	impact	on	our	business	in	northeast	Asia	in	2015.	Also,	since	2015, regional	hostilities	in	the	Middle	East	have	spurred	an	unprecedented	flow	of	migrants	from	that	region	to	Europe	and	other	areas.	As	countries	respond	to	the	migrant crisis,	travel	between	countries	within	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.	In	the	United	States,	the	Trump administration	has	proposed	or	is	considering	various	actions	that	could	affect	U.S.	trade	policy	or	practices,	which	in	turn	could	adversely	affect	travel	to	or	from	the United	States.	Future	terrorist	attacks,	natural	disasters,	health	concerns,	civil	or	political	unrest	or	other	events	out	of	our	control	such	as	the	ones	described	above	could disrupt	our	business	and	operations	and	adversely	affect	our	results	of	operations.

# Intense	competition	could	reduce	our	market	share	and	harm	our	financial	performance.

We	compete	globally	with	both	online	and	traditional	travel	and	restaurant	reservation	and	related	services.	The	markets	for	the	services	we	offer	are	intensely competitive,	and	current	and	new	competitors	can	launch	new	services	at	a	relatively	low	cost.	Some	of	our	current	and	potential	competitors,	such	as	Google,	Apple, Alibaba,	Tencent,	Amazon	and	Facebook,	have	access	to	significantly	greater	and	more	diversified	resources	than	we	do,	and	they	may	be	able	to	leverage	other	aspects of	their	businesses	(e.g.,	search	or	mobile	device	businesses)	to	enable	them	to	compete	more	effectively	with	us.	For	example,	Google	has	entered	various	aspects	of	the online	travel	market,	including	by	establishing	a	flight	meta-search	product	("Google	Flights")	and	a	hotel	meta-search	business	("Hotel	Ads")	that	are	growing	rapidly, as	well	as	its	"Book	on	Google"	reservation	functionality.

•online	travel	reservation	services	such	as	Expedia,	Hotels.com,	Hotwire,	Orbitz,	Travelocity,	Wotif,	Cheaptickets,	ebookers,	HotelClub,	RatesToGo	and CarRentals.com,	which	are	owned	by	Expedia;	Hotel	Reservation	Service	(HRS)	and	hotel.de,	which	are	owned	by	Hotel	Reservation	Service;	and AutoEurope,	Car	Trawler,	Ctrip	(in	which	we	hold	a	minority	interest),	eLong	(in	which	Ctrip	has	acquired	a	significant	minority	ownership	interest),	Meituan, ezTravel,	MakeMyTrip,	OYO	Rooms,	Yatra,	Cleartrip,	Traveloka,	Webjet,	Rakuten,	Jalan	(which	is	owned	by	Recruit),	ViajaNet,	Submarino	Viagens, Despegar/Decolar	(in	which	Expedia	holds	a	minority	interest),	Fliggy	(operated	by	Alibaba),	17u.com,	HotelTonight,	CheapOair,	Mr.	and	Mrs.	Smith	and eDreams	ODIGEO;

•online	travel	search	and	price	comparison	services	(generally	referred	to	as	"meta-search"	services),	such	as	TripAdvisor,	trivago	(in	which	Expedia	holds	a majority	ownership	interest),	Qunar	(which	is	controlled	by	Ctrip),	Skyscanner	(in	which	Ctrip	holds	a	majority	interest),	Google	Flights,	Google	Hotel	Ads and	HotelsCombined;

•online	restaurant	reservation	services,	such	as	TripAdvisor's	LaFourchette,	Yelp's	SeatMe,	Zomato,	Bookatable	(which	is	owned	by	Michelin),	Quandoo	(which is	owned	by	Recruit)	and	Resy	(in	which	Airbnb	holds	a	minority	interest);	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	search,	meta-search	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	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	OTCs	or	other	travel	websites,	which	could	lead	to	travel	service	providers	or	others	gaining	a	larger	share	of	search	traffic. TripAdvisor	and	trivago,	two	leading	meta-search	companies,	support	their	meta-search	services	with	significant	brand	and	performance	advertising.	Through	our KAYAK	meta-search	service,	we	compete	directly	with	other	meta-search	services.	KAYAK	depends	on	access	to	information	related	to	travel	service	pricing, schedules,	availability	and	other	related	information	from	OTCs	and	travel	service	providers.	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.

Consumers	may	favor	travel	services	offered	by	meta-search	websites	or	search	companies	over	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	travel	service	reservation	brands.	Further,	meta-search	services	may	evolve	into	more	traditional OTCs	by	offering	consumers	the	ability	to	make	travel	reservations	directly	through	their	websites.	For	example,	TripAdvisor	allows	consumers	to	make	a	reservation	at some	accommodations	while	staying	on	TripAdvisor	through	its	"Instant	Booking"	offering,	which	includes	participation	by	many	of	the	leading	global	hotel	chains,	and facilitates	hotel	reservations	on	its	transaction	websites	Tingo	and	Jetsetter.		We	have	been	participating	in	Instant	Booking	since	2015,	however	such	participation	may not	result	in	substantial	incremental	bookings	and	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."	To	the	extent	consumers	book	travel	services	through	a	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	OTC	like	us,	or	if	meta-search	services	limit	our participation	within	their	search	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	business	and	results	of	operations	could	be	adversely	affected.

There	has	been	a	proliferation	of	new	channels	through	which	accommodation	providers	can	offer	reservations.		For	example,	companies	such	as	Airbnb	and HomeAway	(which	is	owned	by	Expedia)	offer	services	providing	vacation	rental	property	owners,	particularly	individuals,	an	online	place	to	list	their	accommodations where	travelers	can	search	and	book	such	properties	and	compete	directly	with	our	vacation	rental	accommodation	services.	Airbnb	may	also	seek	to	further	compete with	us	by	offering	hotel	and	other	accommodations	through	their	online	and	mobile	platforms.	Further,	meta-search	services	may	lower	the	cost	for	new	companies	to enter	the	market	by	providing	a	distribution	channel	without	the	cost	of	promoting	the	new	entrant's	brand	to	drive	consumers	directly	to	its	website.		If	any	of	these services	are	successful	in	attracting	consumers	who	would	otherwise	use	our	services,	our	business	and	results	of	operations	would	be	harmed.

Travel	service	providers,	including	hotel	chains,	rental	car	companies	and	airlines	with	which	we	conduct	business,	compete	with	us	in	online	channels	to	drive consumers	to	their	own	websites	in	lieu	of	third-party	distributors	such	as	us.	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	consumers	with	registered	accounts),	any	of	which could	make	their	offerings	more	attractive	to	consumers	than	our	services.	For	example,	Marriott	International,	Hilton,	Hyatt	Hotels,	Intercontinental	Hotel	Group	and Choice	Hotels	International	have	announced	additional	initiatives	to	encourage	consumers	to	book	accommodations	directly	through	their	websites,	with	increased discounting	and	incentives.	Discounting	may	increase	as	competition	authorities	seek	to	allow	increased	pricing	flexibility	among	providers	of	travel	service reservations.	We	may	need	to	offer	similar	advantages	to	maintain	or	grow	our	reservation	bookings,	which	could	adversely	impact	our	profitability.	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	(including	hotel	chains)	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.

# We	are	exposed	to	fluctuations	in	currency	exchange	rates.

We	conduct	a	substantial	majority	of	our	business	outside	the	United	States	but	we	report	our	results	in	U.S.	Dollars.	As	a	result,	we	face	exposure	to	adverse movements	in	currency	exchange	rates	as	the	financial	results	of	our	international	businesses	are	translated	from	local	currency	(principally	Euros	and	British	Pounds Sterling)	into	U.S.	Dollars.	Throughout	2015,	the	U.S.	Dollar	strengthened	significantly	year-over-year	relative	to	substantially	all	currencies	in	which	we	transact,	most notably	the	Euro,	Brazilian	Real,	British	Pound	Sterling,	Russian	Ruble	and	Australian	Dollar.	In	2016,	the	U.S.	Dollar	continued	to	be	stronger	year-over-year	relative to	the	British	Pound	Sterling,	Russian	Ruble	and	many	other	major	currencies	in	which	we	transact.	Since	the	"Brexit"	referendum	in	the	United	Kingdom	in	June	2016, the	U.S.	Dollar	has	strengthened	significantly	against	the	British	Pound	Sterling.	Potential	tax	law	changes,	such	as	a	U.S.	border	adjustment	tax	on	imported	goods, could,	if	implemented,	lead	to	additional	foreign	exchange	rate	volatility	and	potentially	additional	strengthening	of	the	U.S.	dollar.	As	a	result	of	these	currency exchange	rate	changes,	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,	although	to	a	much	lesser	extent	in	2016	than	in	2015.	For	example,	gross	profit	from	our	international	operations	grew	22.3%	for	the	year ended	December	31,	2016	compared	to	the	year	ended	December	31,	2015,	but,	without	the	negative	impact	of	changes	in	currency	exchange	rates,	grew	year-over-year on	a	constant-currency	basis	by	approximately	25%.	If	the	U.S.	dollar	strengthens	further,	our	foreign	currency	denominated	net	assets,	gross	bookings,	gross	profit, operating	expenses	and	net	income	when	expressed	in	U.S.	dollars	would	be	adversely	affected.

Recent	macro-economic	conditions,	such	as	sovereign	default	risk	of	certain	European	Union	countries	with	high	levels	of	sovereign	debt,	concern	around devaluation	or	abandonment	of	the	Euro	common	currency,	declining	oil	prices,	Brexit,	geopolitical	tensions	and	differing	central	bank	monetary	policies,	have	led	to significant	volatility	in	the	exchange	rate	between	the	Euro,	the	British	Pound	Sterling,	the	U.S.	Dollar	and	other	currencies.	Significant	fluctuations	in	currency exchange	rates	can	affect	consumer	travel	behavior.	For	example,	the	strengthening	of	the	U.S.	Dollar	relative	to	the	Euro	in	2015	made	it	more	expensive	for	Europeans to	travel	to	the	United	States,	and	dramatic	depreciation	of	the	Russian	Ruble	in	2014	and	2015	made	it	more	expensive	for	Russians	to	travel	to	Europe	and	most	other non-Ruble	destinations.	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	plans	or	choose	to	travel	domestically	rather	than	internationally,	any	of	which	could	adversely	affect	our	gross	bookings, revenues	and	results	of	operations,	in	particular	when	expressed	in	U.S.	Dollars.

Additionally,	foreign	exchange	rate	fluctuations	on	transactions	denominated	in	currencies	other	than	the	functional	currency	result	in	gains	and	losses	that	are reflected	in	our	financial	results.

Volatility	in	foreign	exchange	rates	and	its	impact	on	consumer	behavior,	which	may	differ	across	regions,	make	it	more	difficult	to	forecast	industry	and consumer	trends	and	the	timing	and	degree	of	their	impact	on	our	markets	and	business,	which	in	turn	could	adversely	affect	our	ability	to	effectively	manage	our business	and	adversely	affect	our	results	of	operations.

# We	face	risks	related	to	the	growth	rate	and	the	global	expansion	of	our	business.

We	derive	a	substantial	portion	of	our	revenues,	and	have	significant	operations,	outside	the	United	States.	Our	international	operations	include	the Netherlands-based	accommodation	reservation	service	Booking.com,	the	Asia-based

accommodation	reservation	service	agoda.com,	the	U.K.-based	rental	car	reservation	service	Rentalcars.com	and,	to	a	lesser	extent,	KAYAK's	international	meta-search services	and	OpenTable's	international	restaurant	reservation	business.	Our	international	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	booked	by	our	customers, net	of	cancellations).	This	growth	rate,	which	has	contributed	significantly	to	our	growth	in	consolidated	revenue,	gross	profit	and	earnings,	has	declined,	a	trend	we expect	to	continue	as	the	absolute	level	of	our	gross	bookings	increases.	Other	factors	may	also	slow	the	growth	rates	of	our	international	businesses,	including,	for example,	worldwide	or	regional	economic	conditions,	any	strengthening	of	the	U.S.	Dollar	versus	the	Euro,	the	British	Pound	Sterling	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	consolidated	revenue,	gross	profit	and	earnings	growth	rates	and,	as	a	consequence,	our	stock	price.

Our	strategy	involves	continued	expansion	in	regions	throughout	the	world.	Many	of	these	regions	have	different	economic	conditions,	customs,	languages, currencies,	consumer	expectations,	levels	of	consumer	acceptance	and	use	of	the	Internet	for	commerce,	legislation,	regulatory	environments	(including	labor	laws	and customs),	tax	laws	and	levels	of	political	stability,	and	we	are	subject	to	associated	risks	typical	of	international	businesses.	International	markets	may	have	strong	local competitors	with	an	established	brand	and	travel	service	provider	or	restaurant	relationships	that	may	make	expansion	in	that	market	difficult	and	costly	and	take	more time	than	anticipated.	In	addition,	compliance	with	legal,	regulatory	or	tax	requirements	in	multiple	jurisdictions	places	demands	on	our	time	and	resources,	and	we	may nonetheless	experience	unforeseen	and	potentially	adverse	legal,	regulatory	or	tax	consequences.	In	some	markets	such	as	China,	legal	and	other	regulatory requirements	may	prohibit	or	limit	participation	by	foreign	businesses,	such	as	by	making	foreign	ownership	or	management	of	Internet	or	travel-related	businesses illegal	or	difficult,	or	may	make	direct	participation	in	those	markets	uneconomic,	which	could	make	our	entry	into	and	expansion	in	those	markets	difficult	or impossible,	require	that	we	work	with	a	local	partner	or	result	in	higher	operating	costs.	If	we	are	unsuccessful	in	rapidly	expanding	in	new	and	existing	markets	and effectively	managing	that	expansion,	our	business,	results	of	operations	and	financial	condition	could	be	adversely	affected.

Certain	markets	in	which	we	operate	that	are	in	earlier	stages	of	development	have	lower	operating	margins	compared	to	more	mature	markets,	which	could have	a	negative	impact	on	our	overall	margins	as	these	markets	increase	in	size	over	time.	Also,	we	intend	to	continue	to	invest	in	adding	accommodations	available	for reservation	on	our	websites,	including	hotels,	bed	and	breakfasts,	hostels	and	vacation	rentals.	Vacation	rentals	generally	consist	of,	among	others,	properties	categorized as	single-unit	and	multi-unit	villas,	apartments,	"aparthotels"	(which	are	apartments	with	a	front	desk	and	cleaning	service)	and	chalets	and	are	generally	self-catered (i.e.,	include	a	kitchen),	directly	bookable	properties.	Many	of	the	newer	accommodations	we	add	to	our	travel	reservation	services,	especially	in	highly	penetrated markets,	may	have	fewer	rooms	or	higher	credit	risk	and	may	appeal	to	a	smaller	subset	of	consumers	(e.g.,	hostels	and	bed	and	breakfasts).	Because	a	vacation	rental	is typically	either	a	single	unit	or	a	small	collection	of	independent	units,	vacation	rental	properties	represent	more	limited	booking	opportunities	than	non-vacation	rental properties,	which	generally	have	more	units	to	rent	per	property.	Our	vacation	rental	accommodations	in	general	may	be	subject	to	increased	seasonality	due	to	local tourism	seasons,	weather	or	other	factors.	Our	vacation	rental	accommodation	business	may	also	experience	lower	profit	margins	due	to	certain	additional	costs	related to	offering	these	accommodations	on	our	websites.	As	we	increase	our	vacation	rental	accommodation	business,	these	different	characteristics	could	negatively	impact our	profit	margins;	and,	to	the	extent	these	properties	represent	an	increasing	percentage	of	the	properties	added	to	our	websites,	we	expect	that	our	gross	bookings growth	rate	and	property	growth	rate	will	continue	to	diverge	over	time	(since	each	such	property	has	fewer	booking	opportunities).	As	a	result	of	the	foregoing,	as	the percentage	of	vacation	rental	properties	increases,	the	number	of	reservations	per	property	will	likely	continue	to	decrease.

In	addition,	as	our	vacation	rental	reservation	business	grows,	we	may	incur	increasing	numbers	of	complaints	related	to	non-existent	properties	or	properties that	are	significantly	different	than	as	described	in	the	listing,	as	well	as	claims	of	liability	based	on	events	occurring	at	such	properties	such	as	robbery,	injury,	death	and other	similar	events.	Such	complaints	or	claims	could	result	in	negative	publicity	and	increased	costs,	which	could	adversely	affect	our	business	and	results	of	operations. Further,	the	regulatory	environment	related	to	vacation	rentals	is	evolving	and	laws,	regulations	or	property	association	rules	could	impose	restrictions	or	burdens	on vacation	rental	property	owners	that	limit	or	negatively	affect	their	ability	to	rent	their	properties.	Some	jurisdictions	have	adopted	or	are	considering	statutes	or ordinances	that	prohibit	owners	and	managers	from	renting	certain	properties	for	fewer	than	a	stated	number	of	consecutive	days	or	for	more	than	an	aggregate	total number	of	days	per	year.	Such	regulations	could	negatively	impact	the	growth	of	our	vacation	rental	reservation	business.

We	believe	that	the	increase	in	the	number	of	accommodation	providers	that	participate	on	our	websites,	and	the	corresponding	access	to	accommodation	room nights,	has	been	a	key	driver	of	the	growth	of	our	accommodation	reservation	business.	The	growth	in	our	accommodation	bookings	typically	makes	us	an	attractive source	of	consumer	demand	for	our	accommodation	providers.	However,	accommodation	providers	may	wish	to	limit	the	amount	of	business	that	flows	through	a

single	distribution	channel.	As	a	result,	we	may	experience	constraints	on	the	number	of	accommodation	room	nights	available	to	us,	which	could	negatively	impact	our growth	rate	and	results	of	operations.

The	number	of	our	employees	worldwide	has	grown	from	less	than	700	in	the	first	quarter	of	2007	to	approximately	18,500	as	of	December	31,	2016,	which growth	is	mostly	comprised	of	hires	by	our	international	operations.	We	may	not	be	able	to	hire,	train,	retain,	motivate	and	manage	required	personnel,	which	may	limit our	growth,	damage	our	reputation,	negatively	affect	our	financial	performance,	and	otherwise	harm	our	business.	In	addition,	expansion	increases	the	complexity	of	our business	and	places	additional	strain	on	our	management,	operations,	technical	performance,	financial	resources	and	internal	financial	control	and	reporting	functions. Our	current	and	planned	personnel,	systems,	procedures	and	controls	may	not	be	adequate	to	support	and	effectively	manage	this	growth	and	our	future	operations, especially	as	we	employ	personnel	in	multiple	geographic	locations	around	the	world.

We	rely	on	performance	and	brand	advertising	channels	to	generate	a	significant	amount	of	traffic	to	our	websites	and	grow	our	business.

We	believe	that	maintaining	and	strengthening	our	brands	are	important	aspects	of	our	efforts	to	attract	and	retain	customers.	We	have	invested	considerable money	and	resources	in	the	establishment	and	maintenance	of	our	brands,	and	we	will	continue	to	invest	resources	in	brand	advertising,	marketing	and	other	brand building	efforts	to	preserve	and	enhance	consumer	awareness	of	our	brands.	In	addition,	effective	performance	advertising	has	been	an	important	factor	in	our	growth, and	we	believe	it	will	continue	to	be	important	to	our	future	success.	As	our	competitors	spend	increasingly	more	on	advertising,	we	are	required	to	spend	more	in	order to	maintain	our	brand	recognition	and,	in	the	case	of	performance	advertising,	to	maintain	and	grow	traffic	to	our	websites.	We	may	not	be	able	to	successfully	maintain or	enhance	consumer	awareness	and	acceptance	of	our	brands,	and,	even	if	we	are	successful	in	our	branding	efforts,	such	efforts	may	not	be	cost-effective.	If	we	are unable	to	maintain	or	enhance	consumer	awareness	and	acceptance	of	our	brands	in	a	cost-effective	manner,	our	business,	market	share	and	results	of	operations	would be	materially	adversely	affected.

Our	online	performance	advertising	efficiency,	expressed	as	performance	advertising	expense	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	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.	For	example, competition	for	desired	rankings	in	search	results	and/or	a	decline	in	ad	clicks	by	consumers	could	increase	our	costs-per-click	and	reduce	our	performance	advertising efficiency.	We	use	third-party	websites,	including	online	search	engines	(primarily	Google),	meta-search	and	travel	research	services	and	affiliate	marketing	as	primary means	of	generating	traffic	to	our	websites.	Our	performance	advertising	expense	has	increased	significantly	and	our	performance	advertising	efficiency	has	declined	in recent	years,	a	trend	we	expect	to	continue.	In	2016,	performance	advertising	efficiency	declined	compared	to	the	prior	year,	mainly	due	to	growth	of	paid	traffic channels,	lower	ROIs	and	timing	of	booking	versus	travel	resulting	from	accelerating	gross	bookings	growth	during	the	year.	Any	reduction	in	our	performance advertising	efficiency	could	have	an	adverse	effect	on	our	business	and	results	of	operations,	whether	through	reduced	gross	profit	or	gross	profit	growth	or	through advertising	expenses	increasing	faster	than	gross	profit	and	thereby	reducing	margins	and	earnings	growth.

We	believe	that	a	number	of	factors	could	cause	consumers	to	increase	their	shopping	activity	before	making	a	travel	purchase.	Increased	shopping	activity reduces	our	performance	advertising	efficiency	and	effectiveness	because	traffic	becomes	less	likely	to	result	in	a	purchase	on	our	website,	and	such	traffic	is	more likely	to	be	obtained	through	paid	performance	advertising	channels	than	through	free	direct	channels.	Further,	consumers	may	favor	travel	services	offered	by	search	or meta-search	companies	over	OTCs,	which	could	reduce	traffic	to	our	travel	reservation	websites,	increase	consumer	awareness	of	our	competitors'	brands	and	websites, increase	our	advertising	and	other	customer	acquisition	costs	and	adversely	affect	our	business,	margins	and	results	of	operations.	To	the	extent	any	such	increased shopping	behavior	leads	to	growth	in	our	KAYAK	meta-search	business,	such	growth	may	not	result	in	sufficient	increases	in	revenues	from	our	KAYAK	meta-search business	to	offset	any	related	decrease	in	gross	profit	or	increase	in	advertising	and	other	customer	acquisition	costs	experienced	by	our	OTC	brands.

Our	business	could	be	negatively	affected	by	changes	in	Internet	search	engine	algorithms	and	dynamics	or	traffic-generating	arrangements.

We	use	Google	to	generate	a	significant	portion	of	the	traffic	to	our	websites,	and,	to	a	lesser	extent,	we	use	other	search	engines	and	meta-search	websites	to generate	traffic	to	our	websites,	principally	through	pay-per-click	advertising	campaigns.	The	pricing	and	operating	dynamics	on	these	search	engines	can	experience rapid	change	commercially,	technically	and	competitively.	For	example,	Google	frequently	updates	and	changes	the	logic	which	determines	the	placement	and	display of	results	of	a	consumer's	search,	such	that	the	placement	of	links	to	our	websites	can	be	negatively	affected	and	our	costs	to	improve	or	maintain	our	placement	in search	results	can	increase.	Changes	by	Google	in	how	it	presents	travel

search	results,including	its	promotion	of	its	travel	meta-search	services,	or	the	manner	in	which	it	conducts	the	auction	for	placement	among	search	results	may	be competitively	disadvantageous	to	us	and	may	impact	our	ability	to	efficiently	generate	traffic	to	our	websites,	which	in	turn	would	have	an	adverse	effect	on	our business,	market	share	and	results	of	operations.

In	addition,	we	purchase	website	traffic	from	a	number	of	other	sources,	including	some	operated	by	our	competitors,	in	the	form	of	pay-per-click	arrangements that	can	be	terminated	with	little	or	no	notice.	If	one	or	more	of	such	arrangements	is	terminated,	our	business,	market	share	and	results	of	operations	could	be	adversely affected.	Lastly,	we	rely	on	various	third-party	distribution	channels	(i.e.,	marketing	affiliates)	to	distribute	accommodation,	rental	car	and	airline	ticket	reservations. Should	one	or	more	of	such	third	parties	cease	distribution	of	reservations	made	through	us,	or	suffer	deterioration	in	its	search	engine	ranking,	due	to	changes	in	search engine	algorithms	or	otherwise,	our	business,	market	share	and	results	of	operations	could	be	negatively	affected.

Consumer	adoption	and	use	of	mobile	devices	creates	new	challenges	and	may	enable	device	companies	such	as	Apple	to	compete	directly	with	us.

Widespread	adoption	of	mobile	devices,	such	as	the	iPhone,	Android-enabled	smartphones	and	tablets	such	as	the	iPad,	coupled	with	the	web	browsing functionality	and	development	of	thousands	of	useful	apps	available	on	these	devices,	is	driving	substantial	online	traffic	and	commerce	to	mobile	platforms.	We	have experienced	a	significant	shift	of	business,	both	direct	and	indirect,	to	mobile	platforms	and	our	advertising	partners	are	also	seeing	a	rapid	shift	of	traffic	to	mobile platforms.	Our	major	competitors	and	certain	new	market	entrants	are	offering	mobile	apps	for	travel	products	and	other	functionality,	including	proprietary	last-minute discounts	for	accommodation	reservations.	Advertising	and	distribution	opportunities	may	be	more	limited	on	mobile	devices	given	their	smaller	screen	sizes.	The	gross profit	earned	on	a	mobile	transaction	may	be	less	than	a	typical	desktop	transaction	due	to	different	consumer	purchasing	patterns.	For	example,	accommodation reservations	made	on	a	mobile	device	typically	are	for	shorter	lengths	of	stay	and	are	not	made	as	far	in	advance.	Further,	given	the	device	sizes	and	technical	limitations of	tablets	and	smartphones,	mobile	consumers	may	not	be	willing	to	download	multiple	apps	from	multiple	companies	providing	a	similar	service	and	instead	prefer	to use	one	or	a	limited	number	of	apps	for	their	mobile	travel	and	restaurant	research	and	reservation	activity.	As	a	result,	the	consumer	experience	with	mobile	apps	as	well as	brand	recognition	and	loyalty	are	likely	to	become	increasingly	important.	Our	mobile	offerings	have	received	generally	strong	reviews	and	are	driving	a	material	and increasing	share	of	our	business.	We	believe	that	mobile	bookings	present	an	opportunity	for	growth	and	are	necessary	to	maintain	and	grow	our	business	as	consumers increasingly	turn	to	mobile	devices	instead	of	a	personal	computer.	As	a	result,	it	is	increasingly	important	for	us	to	develop	and	maintain	effective	mobile	apps	and websites	optimized	for	mobile	devices	to	provide	consumers	with	an	appealing,	easy-to-use	mobile	experience.	If	we	are	unable	to	continue	to	rapidly	innovate	and create	new,	user-friendly	and	differentiated	mobile	offerings	and	efficiently	and	effectively	advertise	and	distribute	on	these	platforms,	or	if	our	mobile	offerings	are	not used	by	consumers,	we	could	lose	market	share	to	existing	competitors	or	new	entrants	and	our	business,	future	growth	and	results	of	operations	could	be	adversely affected.

# We	may	not	be	able	to	keep	up	with	rapid	technological	changes.

The	markets	in	which	we	compete	are	characterized	by	rapidly	changing	technology,	evolving	industry	standards,	consolidation,	frequent	new	service announcements,	introductions	and	enhancements	and	changing	consumer	demands.	We	may	not	be	able	to	keep	up	with	these	rapid	changes.	In	addition,	these	market characteristics	are	heightened	by	the	progress	of	technology	adoption	in	various	markets,	including	the	continuing	adoption	of	the	Internet	and	online	commerce	in certain	geographies	and	the	emergence	and	growth	of	the	use	of	smartphones	and	tablets	for	mobile	e-commerce	transactions,	including	through	the	increasing	use	of mobile	apps.	As	a	result,	our	future	success	will	depend	on	our	ability	to	adapt	to

rapidly	changing	technologies,	to	adapt	our	services	to	evolving	industry	standards	and	to	continually	innovate	and	improve	the	performance,	features	and	reliability	of our	services	in	response	to	competitive	service	offerings	and	the	evolving	demands	of	the	marketplace.	In	particular,	we	believe	that	it	is	increasingly	important	for	us	to effectively	offer	our	services	through	mobile	apps	and	mobile-optimized	websites	on	smartphones	and	tablets.	Any	failure	by	us	to	successfully	develop	and	achieve customer	adoption	of	our	mobile	apps	and	mobile-optimized	websites	would	likely	have	a	material	and	adverse	effect	on	our	growth,	market	share,	business	and	results of	operations.	Further,	to	the	extent	mobile	devices	enable	users	to	block	advertising	content	on	their	devices,	our	advertising	revenue	and	our	ability	to	market	our brands	and	acquire	new	customers	may	be	negatively	affected.	We	believe	that	ease-of-use,	comprehensive	functionality	and	the	look	and	feel	of	our	mobile	apps	and mobile-optimized	websites	increasingly	will	be	competitively	critical	as	consumers	obtain	more	of	their	travel	and	restaurant	services	through	mobile	devices.	As	a result,	we	intend	to	continue	to	spend	significant	resources	maintaining,	developing	and	enhancing	our	websites	and	mobile	platforms,	including	our	mobile-optimized websites	and	mobile	apps,	and	other	technologies.

In	addition,	the	widespread	adoption	of	new	Internet,	networking	or	telecommunications	technologies	or	other	technological	changes	(including	new	devices and	services,	such	as	Amazon's	Echo	and	Alexa	and	Google	Home,	and	developing	technologies,	such	as	artificial	intelligence	and	chatbot	technologies)	could	require us	to	incur	substantial	expenditures	to	modify	or	adapt	our	services	or	infrastructure	to	those	new	technologies,	which	could	adversely	affect	our	results	of	operations	or financial	condition.	For	example,	KAYAK	generates	revenues,	in	part,	by	allowing	consumers	to	compare	search	results	that	appear	in	additional	"pop-under"	windows. Changes	in	browser	functionality,	such	as	changes	that	either	block	or	otherwise	limit	the	use	of	"pop-under"	windows,	at	times	have	had	a	negative	impact	on	our revenues.	Any	failure	to	implement	or	adapt	to	new	technologies	in	a	timely	manner	or	at	all	could	adversely	affect	our	ability	to	compete,	increase	our	customer acquisition	costs	or	otherwise	adversely	affect	our	business,	and	therefore	adversely	affect	our	brand,	market	share	and	results	of	operations.

Our	processing,	storage,	use	and	disclosure	of	personal	data	exposes	us	to	risks	of	internal	or	external	security	breaches	and	could	give	rise	to	liabilities.

The	security	of	data	when	engaging	in	electronic	commerce	is	essential	to	maintaining	consumer	and	travel	service	provider	confidence	in	our	services.	Any security	breach	whether	instigated	internally	or	externally	on	our	systems	or	other	Internet-based	systems	could	significantly	harm	our	reputation	and	therefore	our business,	brand,	market	share	and	results	of	operations.	We	currently	require	consumers	who	use	certain	of	our	services	to	guarantee	their	offers	with	their	credit	card. We	require	user	names	and	passwords	in	order	to	access	our	information	technology	systems.	We	also	use	encryption	and	authentication	technologies	to	secure	the transmission	and	storage	of	data	and	prevent	unauthorized	access	to	our	data	or	accounts.	It	is	possible	that	computer	circumvention	capabilities,	new	discoveries	or advances	or	other	developments,	including	our	own	acts	or	omissions,	could	result	in	a	compromise	or	breach	of	consumer	data.	For	example,	third	parties	may	attempt to	fraudulently	induce	employees	or	customers	to	disclose	user	names,	passwords	or	other	sensitive	information	("phishing"),	which	may	in	turn	be	used	to	access	our information	technology	systems	or	to	defraud	our	customers.	We	have	experienced	targeted	and	organized	phishing	attacks	and	may	experience	more	in	the	future.	Our efforts	to	protect	information	from	unauthorized	access	may	be	unsuccessful	or	may	result	in	the	rejection	of	legitimate	attempts	to	book	reservations	through	our services,	any	of	which	could	result	in	lost	business	and	materially	adversely	affect	our	business,	reputation	and	results	of	operations.

Our	existing	security	measures	may	not	be	successful	in	preventing	security	breaches.	A	party	(whether	internal,	external,	an	affiliate	or	unrelated	third	party) that	is	able	to	circumvent	our	security	systems	could	steal	consumer	information	or	transaction	data	or	other	proprietary	information.	In	the	last	few	years,	several	major companies,	including	Yahoo!,	Sony,	Home	Depot,	JPMorgan,	Target,	Zappos,	Apple,	AOL,	LinkedIn	and	Google	experienced	high-profile	security	breaches	that exposed	their	customers'	and/or	employees'	personal	information.	We	expend	significant	resources	to	protect	against	security	breaches,	and	we	may	need	to	increase	our security-related	expenditures	to	maintain	or	increase	our	systems'	security	or	to	address	problems	caused	and	liabilities	incurred	by	breaches.	These	issues	are	likely	to become	more	difficult	to	manage	as	we	expand	the	number	of	places	where	we	operate	and	as	the	tools	and	techniques	used	in	such	attacks	become	more	advanced.	As experienced	by	Sony,	security	breaches	could	result	in	severe	damage	to	our	information	technology	infrastructure,	including	damage	that	could	impair	our	ability	to offer	our	services	or	the	ability	of	consumers	to	make	reservations	or	conduct	searches	through	our	services,	as	well	as	loss	of	customer,	financial	or	other	data	that	could materially	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.	Security	breaches	could	also	result	in	negative	publicity,	damage	our	reputation,	expose	us	to	risk	of	loss	or	litigation	and	possible	liability,	subject	us	to	regulatory penalties	and	sanctions,	or	cause	consumers	to	lose	confidence	in	our	security	and	choose	to	use	the	services	of	our	competitors,	any	of	which	would	have	a	negative effect	on	the	value	of	our	brand,	our	market	share	and	our	results	of	operations.	Our	insurance	policies	carry	low	coverage	limits,	and	would	likely	not	be	adequate	to reimburse	us	for	all	losses	caused	by	security	breaches.

We	also	face	risks	associated	with	security	breaches	affecting	third	parties	conducting	business	over	the	Internet.	Consumers	generally	are	concerned	with security	and	privacy	on	the	Internet,	and	any	publicized	security	problems	could	negatively	affect	consumers'	willingness	to	provide	private	information	or	effect commercial	transactions	on	the	Internet	generally,	including	through	our	services.	Some	of	our	business	is	conducted	with	third-party	marketing	affiliates,	which	may generate	travel	reservations	through	our	infrastructure	or	through	other	systems.	Additionally,	consumers	using	our	services	could	be	affected	by	security	breaches	at third	parties	such	as	travel	service	providers,	payroll	providers,	health	plan	providers,	payment	processors	or	global	distribution	systems	("GDSs")	upon	which	we	rely. A	security	breach	at	any	such	third-party	marketing	affiliate,	travel	service	provider,	GDS	or	other	third	party	on	which	we	rely	could	be	perceived	by	consumers	as	a security	breach	of	our	systems	and	in	any	event	could	result	in	negative	publicity,	damage	our	reputation,	expose	us	to	risk	of	loss	or	litigation	and	possible	liability	and subject	us	to	regulatory	penalties	and	sanctions.	In	addition,	such	third	parties	may	not	comply	with	applicable	disclosure	requirements,	which	could	expose	us	to liability.

In	our	processing	of	travel	transactions,	we	receive	and	store	a	large	volume	of	personally	identifiable	data.	This	data	is	increasingly	subject	to	legislation	and regulations	in	numerous	jurisdictions	around	the	world,	such	as	the	European	Union's	Data	Protection	Directive	and	variations	and	implementations	of	that	directive	in the	member	states	of	the	European	Union.	In	addition,	in	April	2016	the	European	Union	adopted	a	new	General	Data	Protection	Regulation	designed	to	unify	data protection	within	the	European	Union	under	a	single	law,	which	may	result	in	significantly	greater	compliance	burdens	and	costs	for	companies	with	users	and operations	in	the	European	Union.		Under	the	General	Data	Protection	Regulation,	fines	of	up	to	20	million	Euros	or	up	to	4%	of	the	annual	global	turnover	of	the infringer,	whichever	is	greater,	could	be	imposed.	This	government	action	is	typically	intended	to	protect	the	privacy	of	personal	data	that	is	collected,	processed	and transmitted	in	or	from	the	governing	jurisdiction.	In	many	cases,	these	laws	apply	not	only	to	third-party	transactions,	but	also	to	transfers	of	information	between	us	and our	subsidiaries,	including	employee	information.	The	new	General	Data	Protection	Regulation	is	not	expected	to	apply	to	us	until	May	2018.	In	February	2016,	E.U. and	U.S.	authorities	announced	that	they	had	reached	agreement	on	a	new	data	transfer	framework,	called	the	E.U.-U.S.	Privacy	Shield,	which	was	formally	adopted	by the	European	Commission	on	July	12,	2016.	The	European	Union	and	the	United	States	are	implementing	the	new	framework,	but	it	is	expected	to	be	subject	to	legal challenge.	These	laws	and	their	interpretations	continue	to	develop	and	may	be	inconsistent	from	jurisdiction	to	jurisdiction.	Non-compliance	with	these	laws	could result	in	penalties	or	significant	legal	liability.	We	could	be	adversely	affected	if	legislation	or	regulations	are	expanded	to	require	changes	in	our	business	practices	or	if governing	jurisdictions	interpret	or	implement	their	legislation	or	regulations	in	ways	that	negatively	affect	our	business,	results	of	operations	or	financial	condition.

We	are	also	subject	to	payment	card	association	rules	and	obligations	under	our	contracts	with	payment	card	processors.	Under	these	rules	and	obligations,	if information	is	compromised,	we	could	be	liable	to	payment	card	issuers	for	associated	expenses	and	penalties.	In	addition,	if	we	fail	to	follow	payment	card	industry security	standards,	even	if	no	customer	information	is	compromised,	we	could	incur	significant	fines	or	experience	a	significant	increase	in	payment	card	transaction costs.

# System	capacity	constraints,	system	failures	or	"denial-of-service"	or	other	attacks	could	harm	our	business.

We	have	experienced	rapid	growth	in	consumer	traffic	to	our	websites	and	through	our	mobile	apps,	the	number	of	accommodations	on	our	extranets	and	the geographic	breadth	of	our	operations.	If	our	systems	cannot	be	expanded	to	cope	with	increased	demand	or	fail	to	perform,	we	could	experience	unanticipated disruptions	in	service,	slower	response	times,	decreased	customer	service	and	customer	satisfaction	and	delays	in	the	introduction	of	new	services,	any	of	which	could impair	our	reputation,	damage	our	brands	and	materially	and	adversely	affect	our	results	of	operations.	Further,	as	an	online	business,	we	are	dependent	on	the	Internet and	maintaining	connectivity	between	ourselves	and	consumers,	sources	of	Internet	traffic,	such	as	Google,	and	our	travel	service	providers.	As	consumers	increasingly turn	to	mobile	devices,	we	also	become	dependent	on	consumers'	access	to	the	Internet	through	mobile	carriers	and	their	systems.	Disruptions	in	Internet	access,	such	as the	denial	of	service	attack	against	Dyn	in	October	2016	that	resulted	in	a	service	outage	for	a	number	of	major	Internet	companies,	whether	generally,	in	a	specific market	or	otherwise,	especially	if	widespread	or	prolonged,	could	materially	adversely	affect	our	business	and	results	of	operations.	While	we	do	maintain	redundant systems	and	hosting	services,	it	is	possible	that	we	could	experience	an	interruption	in	our	business,	and	we	do	not	carry	business	interruption	insurance	sufficient	to compensate	us	for	all	losses	that	may	occur.

Our	computer	hardware	for	operating	our	services	is	currently	located	at	hosting	facilities	around	the	world.	These	systems	and	operations	are	vulnerable	to damage	or	interruption	from	human	error,	floods,	fires,	power	loss,	telecommunication	failures	and	similar	events.	They	are	also	subject	to	break-ins,	sabotage, intentional	acts	of	vandalism,	terrorism	and	similar	misconduct.	Despite	any	precautions	we	may	take,	the	occurrence	of	any	disruption	of	service	due	to	any	such misconduct,	natural	disaster	or	other	unanticipated	problems	at	such	facilities,	or	the	failure	by	such	facilities	to	provide	our	required	data	communications	capacity could	result	in	lengthy	interruptions	or	delays	in	our	services.	Any	system	failure

that	causes	an	interruption	or	delay	in	service	could	impair	our	reputation,	damage	our	brands	or	result	in	consumers	choosing	to	use	a	competitive	service,	any	of	which could	have	a	material	adverse	effect	on	our	business	and	results	of	operations.

Our	existing	security	measures	may	not	be	successful	in	preventing	attacks	on	our	systems,	and	any	such	attack	could	cause	significant	interruptions	in	our operations.	For	instance,	from	time	to	time,	we	have	experienced	"denial-of-service"	type	attacks	on	our	systems	that	have	made	portions	of	our	websites	slow	or unavailable	for	periods	of	time.	There	are	numerous	other	potential	forms	of	attack,	such	as	"phishing"	(where	a	third	party	attempts	to	infiltrate	our	systems	or	acquire information	by	posing	as	a	legitimate	inquiry	or	electronic	communication),	SQL	injection	(where	a	third	party	attempts	to	insert	malicious	code	into	our	software through	data	entry	fields	in	our	websites	in	order	to	gain	control	of	the	system)	and	attempting	to	use	our	websites	as	a	platform	to	launch	a	"denial-of-service"	attack	on another	party,	each	of	which	could	cause	significant	interruptions	in	our	operations	and	potentially	adversely	affect	our	brand,	operations	and	results	of	operations	or involve	us	in	legal	or	regulatory	proceedings.	We	expend	significant	resources	in	an	attempt	to	prepare	for	and	mitigate	the	effects	of	any	such	attacks.	Reductions	in website	availability	and	response	time	could	cause	loss	of	substantial	business	volumes	during	the	occurrence	of	any	such	attack	on	our	systems,	and	measures	we	may take	to	divert	suspect	traffic	in	the	event	of	such	an	attack	could	result	in	the	diversion	of	bona	fide	customers.	These	issues	are	likely	to	become	more	difficult	to manage	as	we	expand	the	number	of	places	where	we	operate	and	as	the	tools	and	techniques	used	in	such	attacks	become	more	advanced.	Successful	attacks	could result	in	negative	publicity,	damage	our	reputation	and	prevent	consumers	from	booking	travel	services,	researching	travel	services	or	making	restaurant	reservations through	us	during	the	attack,	any	of	which	could	cause	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.

We	rely	on	certain	third-party	computer	systems	and	third-party	service	providers,	including	GDSs	and	computerized	central	reservation	systems	of	the accommodation,	rental	car	and	airline	industries	in	connection	with	providing	some	of	our	services.	Any	interruption	in	these	third-party	services	and	systems	or deterioration	in	their	performance	could	prevent	us	from	booking	related	accommodation,	rental	car	and	airline	reservations	and	have	a	material	adverse	effect	on	our business,	brands	and	results	of	operations.	Our	agreements	with	some	third-party	service	providers	are	terminable	upon	short	notice	and	often	do	not	provide	recourse	for service	interruptions.	In	the	event	our	arrangement	with	any	such	third	party	is	terminated,	we	may	not	be	able	to	find	an	alternative	source	of	systems	support	on	a timely	basis	or	on	commercially	reasonable	terms	and,	as	a	result,	it	could	have	a	material	adverse	effect	on	our	business	and	results	of	operations.

We	depend	upon	various	third	parties	to	process	payments,	including	credit	cards,	for	our	merchant	transactions	around	the	world.	In	addition,	we	rely	on	third parties	to	provide	credit	card	numbers	which	we	use	as	a	payment	mechanism	for	merchant	transactions.	If	any	such	third	party	were	wholly	or	partially	compromised, our	cash	flows	could	be	disrupted	or	we	may	not	be	able	to	generate	merchant	transactions	(and	related	revenues)	until	such	a	time	as	a	replacement	process	could	be	put in	place	with	a	different	vendor.

We	do	not	have	a	completely	formalized	or	comprehensive	disaster	recovery	plan	in	every	geographic	region	in	which	we	conduct	business.	In	the	event	of certain	system	failures,	we	may	not	be	able	to	switch	to	back-up	systems	immediately	and	the	time	to	full	recovery	could	be	prolonged.	Like	many	online	businesses,	we have	experienced	system	failures	from	time	to	time.	In	addition	to	placing	increased	burdens	on	our	engineering	staff,	these	outages	create	a	significant	amount	of consumer	questions	and	complaints	that	need	to	be	addressed	by	our	customer	support	personnel.	Any	unscheduled	interruption	in	our	service	could	result	in	an immediate	loss	of	revenues	that	could	be	substantial,	increase	customer	service	costs,	harm	our	reputation	and	result	in	some	consumers	switching	to	our	competitors.	If we	experience	frequent	or	persistent	system	failures,	our	reputation	and	brand	could	be	permanently	and	significantly	harmed.	We	have	taken	and	continue	to	take	steps to	increase	the	reliability	and	redundancy	of	our	systems.	These	steps	are	expensive,	may	reduce	our	margins	and	may	not	be	successful	in	reducing	the	frequency	or duration	of	unscheduled	downtime.

We	use	both	internally	developed	systems	and	third-party	systems	to	operate	our	services,	including	transaction	processing,	order	management	and	financial systems.	If	the	number	of	consumers	using	our	services	increases	substantially,	or	if	critical	third-party	systems	stop	operating	as	designed,	we	will	need	to	significantly expand	and	upgrade	our	technology,	transaction	processing	systems,	financial	and	accounting	systems	and	other	infrastructure.	We	may	not	be	able	to	upgrade	our systems	and	infrastructure	to	accommodate	such	conditions	in	a	timely	manner,	and,	depending	on	the	third-party	systems	affected,	our	transactional,	financial	and accounting	systems	could	be	impacted	for	a	meaningful	amount	of	time	before	upgrade,	expansion	or	repair.

# We	may	have	exposure	to	additional	tax	liabilities.

As	an	international	business	providing	reservation	and	advertising	services	around	the	world,	we	are	subject	to	income	taxes	and	non-income-based	taxes	in	the United	States	and	various	international	jurisdictions.	Due	to	economic	and	political	conditions,	tax	rates	and	tax	regimes	in	various	jurisdictions	may	be	subject	to significant	change.	Our	future	effective	tax	rates

could	be	affected	by	changes	in	the	mix	of	earnings	in	countries	with	differing	statutory	tax	rates,	changes	in	the	valuation	of	deferred	tax	assets	or	changes	in	tax	laws	or their	interpretation.	If	our	effective	tax	rates	were	to	increase,	our	results	of	operations,	financial	condition	and	cash	flows	would	be	adversely	affected.

Although	we	believe	that	our	tax	filing	positions	are	reasonable	and	comply	with	applicable	law,	the	final	determination	of	tax	audits	or	tax	disputes	may	be different	from	what	is	reflected	in	our	historical	income	tax	provisions	and	accruals.	To	date,	we	have	been	audited	in	many	taxing	jurisdictions	with	no	significant impact	on	our	results	of	operations,	financial	condition	or	cash	flows.	If	future	audits	find	that	additional	taxes	are	due,	we	may	be	subject	to	incremental	tax	liabilities, possibly	including	interest	and	penalties,	which	could	have	a	material	adverse	effect	on	our	results	of	operations,	financial	condition	and	cash	flows.

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.	In	December 2015,	the	French	tax	authorities	issued	assessments	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	assessments.	If	we	are	unable	to	resolve	the	matter	with	the French	authorities,	we	would	expect	to	challenge	the	assessments	in	the	French	courts.	We	may	be	required	to	pay,	upfront,	the	full	amount	or	a	significant	part	of	any such	assessments,	though	any	such	payment	would	not	constitute	an	admission	by	us	that	we	owe	the	taxes.	At	the	end	of	2016,	the	French	authorities	announced	their intent	to	also	audit	the	tax	years	2013	to	2015,	which	could	result	in	additional	assessments.

Italian	tax	authorities	have	initiated	a	process	to	determine	whether	we	should	be	subject	to	additional	tax	obligations	in	Italy.	Italian	tax	authorities	may determine	that	we	owe	additional	taxes,	and	may	also	assess	penalties	and	interest.	We	believe	that	we	have	been,	and	continue	to	be,	in	compliance	with	Italian	tax	law. In	general,	governments	in	the	United	States	and	Europe	are	increasingly	focused	on	ways	to	increase	tax	revenues,	which	has	contributed	to	an	increase	in	audit	activity and	harsher	stances	taken	by	tax	authorities.		Any	such	additional	taxes	or	other	assessments	may	be	in	excess	of	our	current	tax	provisions	or	may	require	us	to	modify our	business	practices	in	order	to	reduce	our	exposure	to	additional	taxes	going	forward,	any	of	which	could	have	a	material	adverse	effect	on	our	business,	results	of operations	and	financial	condition.

As	of	December	31,	2016,	we	held	approximately	$12.6	billion	of	cash,	cash	equivalents,	short-term	investments	and	long-term	investments	outside	of	the United	States.	We	currently	intend	to	use	our	cash	held	outside	the	United	States	to	reinvest	in	our	international	operations.	If	that	intention	changes	and	we	decide	to repatriate	that	cash	to	the	United	States,	whether	due	to	cash	needs	in	the	United	States	or	otherwise,	we	would	incur	related	U.S.	income	tax	expense,	and	we	would only	make	income	tax	payments	when	we	repatriate	the	cash.	We	would	pay	only	U.S.	federal	alternative	minimum	tax	and	certain	U.S.	state	income	taxes	as	long	as	we have	net	operating	loss	carryforwards	available	to	offset	our	U.S.	taxable	income.	If	our	foreign	earnings	were	repatriated,	this	could	result	in	us	being	subject	to	a	cash income	tax	liability	on	the	earnings	of	our	U.S.	businesses	sooner	than	would	otherwise	have	been	the	case.	After	our	net	operating	loss	carryforwards	have	been	fully utilized,	foreign	tax	credits	associated	with	the	repatriation	of	international	cash	may	be	used	to	reduce	U.S.	federal	taxes	on	the	repatriation.

Various	proposals	have	been	put	forward	to	reform	U.S.	corporate	income	tax	law,	including	proposals	that	would	significantly	impact	how	and	at	what	rates U.S.	multinationals	are	taxed	on	international	earnings.	These	proposals	range	from	changing	the	U.S.	worldwide	tax	system	to	a	territorial	tax	system	on	the	one	hand	to eliminating	the	current	tax	deferral	system	altogether	on	the	other,	introducing	a	border-adjustment	tax	that	exempts	exports	but	taxes	imports,	and	permitting	the expensing	of	the	full	cost	of	certain	tangible	and	intangible	property	in	the	year	of	investment,	but	limiting	interest	deductions	to	interest	income	with	any	excess deduction	being	carried	forward	to	the	following	year.	Other	tax	reform	proposals	advanced	include	limiting	interest	deductions	in	thin	capitalization	circumstances	or eliminating	all	interest	deductions,	eliminating	all	business	tax	expenditures	including	deductions,	exemptions	and	most	credits	(excluding	R&D	credits),	changing	the rules	on	the	use	of	net	operating	losses,	potential	reduction	of	U.S.	corporate	tax	rates	and	allowing	international	earnings	accumulated	under	the	current	system	to	be repatriated	to	the	U.S.	at	a	favorable	tax	rate.	We	cannot	determine	whether	some	or	all	of	these	or	other	proposals	will	be	enacted	into	law	or	what,	if	any,	changes	may be	made	to	such	proposals	prior	to	being	enacted	into	law.		If	U.S.	tax	laws	change	in	a	manner	that	increases	our	tax	obligations,	our	financial	position	and	results	of operations	could	be	adversely	impacted.

Additionally,	in	October	2015,	the	Organisation	for	Economic	Co-operation	and	Development	("OECD")	issued	"final	reports"	in	connection	with	its	"base erosion	and	profit	shifting"	("BEPS")	project.	The	OECD,	with	the	support	of	the	G20,	initiated	this	project	in	2013	in	response	to	concerns	that	international	tax standards	have	not	kept	pace	with	changes	in	global	business	practices	and	that	changes	are	needed	to	international	tax	laws	to	address	situations	where	multinational businesses	may	pay	little	or	no	tax	in	certain	jurisdictions	by	shifting	profits	away	from	jurisdictions	where	the	activities	creating	those

profits	may	take	place.	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	have resulted	in	the	development	of	a	multilateral	instrument	to	incorporate	and	facilitate	changes	to	tax	treaties.	On	January	28,	2016,	the	European	Commission	unveiled	a new	package	of	proposals	aimed	at	providing	a	framework	for	fairer	taxation	and	to	provide	a	coordinated	European	Union	response	to	combating	corporate	tax avoidance.	Following	agreement	among	the	European	Union	member	states	on	the	final	content	of	the	package,	the	European	Council	formally	adopted	an	Anti-Tax Avoidance	Directive	on	July	12,	2016.	The	Directive	is	aimed	at	preventing	aggressive	tax	planning,	increasing	tax	transparency	and	creating	a	fairer	tax	environment for	all	businesses	in	the	European	Union.	We	expect	many	countries	to	change	their	tax	laws	in	response	to	these	developments,	and	several	countries	have	already changed	or	proposed	changes	to	their	tax	laws	in	response	to	the	final	BEPS	reports	and/or	the	developments	in	the	European	Union.	Any	changes	to	international	tax laws,	including	new	definitions	of	permanent	establishment	or	changes	affecting	the	benefits	of	preferential	tax	regimes	such	as	the	Dutch	"Innovation	Box	Tax" (discussed	below),	could	impact	the	tax	treatment	of	our	foreign	earnings	and	adversely	impact	our	effective	tax	rate.	Further,	changes	to	tax	laws	and	additional reporting	requirements	could	increase	the	complexity,	burden	and	cost	of	compliance.	Due	to	the	large	and	expanding	scale	of	our	international	business	activities,	any changes	in	U.S.	or	international	taxation	of	our	activities	may	increase	our	worldwide	effective	tax	rate,	increase	the	complexity	and	costs	associated	with	tax compliance	(especially	if	changes	are	implemented	or	interpreted	inconsistently	across	tax	jurisdictions)	and	adversely	affect	our	financial	position	and	results	of operations.

We	are	also	subject	to	non-income-based	taxes,	such	as	value-added,	payroll,	sales,	use,	net	worth,	property	and	goods	and	services	taxes,	in	the	United	States and	various	international	jurisdictions,	as	well	as	the	potential	for	travel	transaction	taxes	in	the	United	States	as	discussed	below	and	in	Note	14	to	our	Consolidated Financial	Statements.	From	time	to	time,	we	are	under	audit	by	tax	authorities	with	respect	to	these	non-income-based	taxes	and	may	have	exposure	to	additional	non- income-based	tax	liabilities.

# We	may	not	be	able	to	maintain	our	"Innovation	Box	Tax"	benefit.

The	Netherlands	corporate	income	tax	law	provides	that	income	generated	from	qualifying	innovative	activities	is	taxed	at	the	rate	of	5%	("Innovation	Box Tax")	rather	than	the	Dutch	statutory	rate	of	25%.	A	portion	of	Booking.com's	earnings	currently	qualifies	for	Innovation	Box	Tax	treatment.	In	the	year	ended December	31,	2016,	the	Innovation	Box	Tax	benefit	reduced	our	consolidated	income	tax	expense	by	approximately	$324.6	million.

In	order	to	be	eligible	for	Innovation	Box	Tax	treatment,	Booking.com	must,	among	other	things,	apply	for	and	obtain	a	research	and	development	("R&D") certificate	from	a	Dutch	governmental	agency	every	six	months	confirming	that	the	activities	that	Booking.com	intends	to	be	engaged	in	over	the	subsequent	six-month period	are	"innovative."	The	R&D	certificate	is	current	but	should	Booking.com	fail	to	secure	such	a	certificate	in	any	future	period	-	for	example,	because	the governmental	agency	does	not	view	Booking.com's	new	or	anticipated	activities	as	innovative	-	or	should	this	agency	determine	that	the	activities	contemplated	to	be performed	in	a	prior	period	were	not	performed	as	contemplated	or	did	not	comply	with	the	agency's	requirements,	Booking.com	may	lose	its	certificate	and,	as	a	result, the	Innovation	Box	Tax	benefit	may	be	reduced	or	eliminated.	Booking.com	intends	to	apply	for	continued	Innovation	Box	Tax	treatment	for	future	periods.	However, Booking.com's	application	may	not	be	accepted,	or,	if	accepted,	the	amount	of	qualifying	earnings	may	be	reduced.

In	addition,	tax	laws	may	change	resulting	in	a	reduction	or	elimination	of	the	tax	benefit.	As	discussed	above,	the	OECD's	action	plan	involves,	in	part, evaluation	of	preferential	tax	regimes	such	as	the	Innovation	Box	Tax.	The	European	Union	Council	of	Economics	and	Finance	Ministers	("ECOFIN")	has	endorsed changes	to	limit	member	states'	existing	innovation	and	patent	box	tax	regimes	providing	benefits	related	to	profits	derived	from	intangible	assets	such	as	intellectual property.	The	OECD's	October	2015	final	reports	recommend	that	intellectual	property	qualifying	for	such	tax	regimes	generally	be	limited	to	patents	and	other intellectual	property	assets	that	are	functionally	equivalent	to	patents	(such	as	copyrighted	software)	if	those	other	assets	are	both	legally	protected	and	subject	to	similar approval	and	registration	processes	as	apply	to	patents.	ECOFIN	has	endorsed	the	OECD's	modified	nexus	approach	and	the	European	Union	Code	of	Conduct	Group will	monitor	legislative	processes	in	2016	necessary	for	European	Union	member	states	to	change	their	existing	"IP	box"	regimes	to	conform	to	the	modified	nexus approach,	which	requires	full	implementation	in	member	states	no	later	than	July	2021.	On	May	19,	2016,	the	Dutch	government	launched	a	public	Internet	consultation process	on	proposed	legislative	changes	to	the	Dutch	Innovation	Box	Tax	regime	based	on	the	above-mentioned	recommendations	made	in	the	OECD's	final	BEPS report	and	recent	evaluations	on	the	working	of	the	Dutch	Innovation	Box	Tax.	The	proposed	legislative	changes	were

introduced	in	the	Dutch	Parliament	in	September	2016	and	approved	in	December	2016.	The	new	innovation	tax	rules	took	effect	on	January	1,	2017,	but	also	include transition	rules.	We	do	not	expect	the	new	legislation	to	have	a	significant	impact	on	Booking.com's	eligibility	for	the	Innovation	Box	Tax.

The	loss	of	the	Innovation	Box	Tax	benefit	(or	any	material	portion	thereof),	whether	due	to	a	change	in	tax	law	or	a	determination	by	the	Dutch	government that	Booking.com's	activities	are	not	"innovative"	or	for	any	other	reason,	would	substantially	increase	our	effective	tax	rate	and	adversely	impact	our	results	of operations.

# Adverse	application	of	U.S.	state	and	local	tax	laws	could	have	an	adverse	effect	on	our	business	and	results	of	operations.

A	number	of	jurisdictions	in	the	United	States	have	initiated	lawsuits	against	online	travel	companies,	including	us,	related	to,	among	other	things,	the	payment of	travel	transaction	taxes	(e.g.,	hotel	occupancy	taxes,	excise	taxes,	sales	taxes,	etc.).	In	addition,	a	number	of	U.S.	states,	counties	and	municipalities	have	initiated audit	proceedings,	issued	proposed	tax	assessments	or	started	inquiries	relating	to	the	payment	of	travel	transaction	taxes.	Additional	state	and	local	jurisdictions	may assert	that	we	are	subject	to,	among	other	things,	travel	transaction	taxes	and	could	seek	to	collect	such	taxes,	either	retroactively	or	prospectively,	or	both.

In	many	of	the	judicial	and	other	proceedings	initiated	to	date,	the	taxing	jurisdictions	seek	not	only	historical	taxes	that	are	claimed	to	be	owed	on	our	gross profit,	but	also,	among	other	things,	interest,	penalties,	punitive	damages	and/or	attorneys'	fees	and	costs.		To	date,	many	of	the	taxing	jurisdictions	in	which	we	facilitate travel	reservations	have	not	asserted	that	taxes	are	due	and	payable	on	our	travel	services.		With	respect	to	taxing	jurisdictions	that	have	not	initiated	proceedings	to	date, it	is	possible	that	they	will	do	so	in	the	future	or	that	they	will	seek	to	amend	their	tax	statutes	and	seek	to	collect	taxes	from	us	only	on	a	prospective	basis.

In	connection	with	some	travel	transaction	tax	audits	and	assessments,	we	may	be	required	to	pay	any	assessed	taxes,	which	amounts	may	be	substantial,	prior to	being	allowed	to	contest	the	assessments	and	the	applicability	of	the	laws	in	judicial	proceedings.	Payment	of	these	amounts,	if	any,	is	not	an	admission	that	we believe	that	we	are	subject	to	such	taxes	and,	even	if	we	make	such	payments,	we	intend	to	continue	to	assert	our	position	that	we	should	not	be	subject	to	such	taxes.

Litigation	is	subject	to	uncertainty	and	there	could	be	adverse	developments	in	these	pending	or	future	cases	and	proceedings.	Adverse	tax	decisions	could	have a	material	adverse	effect	on	our	business,	margins	and	results	of	operations.	An	unfavorable	outcome	or	settlement	of	pending	litigation	may	encourage	the commencement	of	additional	litigation,	audit	proceedings	or	other	regulatory	inquiries.	In	addition,	an	unfavorable	outcome	or	settlement	of	these	actions	or	proceedings could	result	in	substantial	liabilities	for	past	and/or	future	bookings,	including,	among	other	things,	interest,	penalties,	punitive	damages	and/or	attorneys'	fees	and	costs.

# We	are	dependent	on	providers	of	accommodations,	rental	cars	and	airline	tickets	and	on	restaurants.

We	rely	on	providers	of	accommodations,	rental	cars	and	airline	tickets	and	on	restaurants	to	make	their	services	available	to	consumers	through	us.	Our arrangements	with	travel	service	providers	generally	do	not	require	them	to	make	available	any	specific	quantity	of	accommodation	reservations,	rental	cars	or	airline tickets,	or	to	make	accommodation	reservations,	rental	cars	or	airline	tickets	available	in	any	geographic	area,	for	any	particular	route	or	at	any	particular	price.	Similarly, our	arrangements	with	restaurants	generally	do	not	require	them	to	provide	all	of	their	available	tables	and	reservations	to	customers	through	us.	During	the	course	of	our business,	we	are	in	continuous	dialogue	with	our	major	travel	service	providers	about	the	nature	and	extent	of	their	participation	in	our	services.	A	significant	reduction on	the	part	of	any	of	our	major	travel	service	providers	or	providers	that	are	particularly	popular	with	consumers	in	their	participation	in	our	services	for	a	sustained period	of	time	or	their	complete	withdrawal	could	have	a	material	adverse	effect	on	our	business,	market	share	and	results	of	operations.	To	the	extent	any	of	those major	or	popular	travel	service	providers	ceased	to	participate	in	our	services	in	favor	of	one	of	our	competitors'	systems	or	decided	to	require	consumers	to	purchase services	directly	from	them,	our	business,	market	share	and	results	of	operations	could	be	harmed.	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	Deals®	services.	Further,	as	consolidation	among	travel	service	providers	increases,	the	potential	adverse	effect	of	a decision	by	any	particular	significant	travel	service	provider	(such	as	a	large	hotel	chain,	airline	or	rental	car	company)	to	withdraw	from	or	reduce	its	participation	in our	services	also	increases.	To	the	extent	restaurants	limit	the	availability	of	reservations	through	OpenTable,	consumers	may	not	continue	to	use	our	services	and/or	our revenues	could	be	adversely	affected,	especially	if	reservations	during	highly	desirable	times	on	high	volume	days	are	not	made	available	through	us.

Further,	KAYAK,	a	meta-search	service,	depends	on	access	to	information	related	to	travel	service	pricing,	schedules,	availability	and	other	related	information from	OTCs	and	travel	service	providers	to	attract	consumers.	To	obtain	this	information,	KAYAK	maintains	relationships	with	travel	service	providers	and	OTCs.	Many of	KAYAK's	agreements	with	travel	service	providers	and	OTCs	are	short-term	agreements	that	may	be	terminated	on	30	days'	notice.	To	the	extent	OTCs	or	travel service	providers	no	longer	provide	such	information	to	KAYAK,	KAYAK's	ability	to	provide	comprehensive	travel	service	information	to	consumers	could	be diminished	and	its	brand,	business	and	results	of	operations	could	be	harmed.	To	the	extent	consumers	do	not	view	KAYAK	as	a	reliable	source	of	comprehensive	travel service	information,	fewer	consumers	would	likely	visit	its	websites,	which	would	also	likely	have	a	negative	impact	on	KAYAK's	advertising	revenue	and	results	of operations.	In	addition,	if	travel	service	providers	or	OTCs	choose	not	to	advertise	with	KAYAK	or	choose	to	reduce	or	eliminate	the	fees	paid	to	KAYAK	for	referrals from	query	results,	KAYAK's	business	and	results	of	operations	could	be	adversely	affected.

We	rely	on	the	performance	of	highly	skilled	personnel;	and,	if	we	are	unable	to	retain	or	motivate	key	personnel	or	hire,	retain	and	motivate	qualified personnel,	our	business	would	be	harmed.

Our	performance	is	largely	dependent	on	the	talents	and	efforts	of	highly	skilled	individuals.	Our	future	success	depends	on	our	continuing	ability	to	identify, hire,	develop,	motivate	and	retain	highly	skilled	personnel	for	all	areas	of	our	organization.	In	particular,	the	contributions	of	key	senior	management	in	the	United States,	Europe	and	Asia	are	critical	to	the	overall	management	of	our	business.	We	may	not	be	able	to	retain	the	services	of	any	members	of	our	senior	management	or other	key	employees,	the	loss	of	whom	could	harm	our	business	and	competitive	position.

In	addition,	competition	for	well-qualified	employees	in	all	aspects	of	our	business,	including	software	engineers,	mobile	communication	talent	and	other technology	professionals,	is	intense	both	in	the	United	States	and	abroad.	Our	international	success	in	particular	has	led	to	increased	efforts	by	our	competitors	and others	to	hire	our	international	employees.	Our	continued	ability	to	compete	effectively	depends	on	our	ability	to	attract	new	employees	and	to	retain	and	motivate existing	employees.	If	we	do	not	succeed	in	attracting	well-qualified	employees	or	retaining	and	motivating	existing	employees,	our	business,	competitive	position	and results	of	operations	would	be	adversely	affected.	We	do	not	maintain	any	key	person	life	insurance	policies.

As	the	size	of	our	business	grows,	we	may	become	increasingly	subject	to	the	scrutiny	of	anti-trust	and	competition	regulators.

The	online	travel	industry	has	become	the	subject	of	investigations	by	various	national	competition	authorities	("NCAs"),	particularly	in	Europe.	We	are	or have	been	involved	in	investigations	predominately	related	to	whether	Booking.com's	contractual	parity	arrangements	with	accommodation	providers,	sometimes	also referred	to	as	"most	favored	nation"	or	"MFN"	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	OTCs	or	through	the	accommodation	provider's	website.

Investigations	into	Booking.com's	parity	provisions	were	initiated	in	2013	and	2014	by	NCAs	in	France,	Germany,	Italy,	Austria,	Sweden,	Ireland	and Switzerland.	A	number	of	other	NCAs	have	also	looked	at	these	issues.	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.	Under	the	commitments,	Booking.com	replaced	its	existing	price	parity	agreements	with	accommodation	providers	with	"narrow"	price	parity	agreements. Under	a	"narrow"	price	parity	agreement,	subject	to	certain	exceptions,	an	accommodation	provider	is	still	required	to	offer	the	same	or	better	rates	on	Booking.com	as it	offers	to	a	consumer	directly	online,	but	it	is	no	longer	required	to	offer	the	same	or	better	rates	on	Booking.com	as	it	offers	to	other	OTCs.	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	online	travel companies	that	offer	lower	rates	of	commission	or	other	benefits,	offer	lower	rates	to	consumers	that	book	through	offline	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.	Nearly	all	NCAs	in	the	European	Economic	Area	have	now	closed	their	investigations	following	Booking.com's	implementation	of	the commitments	in	their	jurisdictions.	Booking.com	has	also	recently	resolved	the	concerns	of	the	NCAs	in	Australia,	New	Zealand	and	Georgia	by	agreeing	to	implement the	"narrow"	price	parity	clause	in	these	countries.	The	Turkish	NCA	recently	imposed	fines	on	Booking.com	following	an	investigation	into	Booking.com's	"wide" parity	clauses.	We	are	in	ongoing	discussions	with	various	NCAs	in	other	countries

regarding	their	concerns.	We	are	currently	unable	to	predict	the	long-term	impact	the	implementation	of	these	commitments	will	have	on	Booking.com's	business,	on investigations	by	other	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	is	appealing	the	German NCA's	decision.	An	Italian	hotel	association	has	appealed	the	Italian	NCA's	decision	to	accept	the	commitments	by	Booking.com.

A	working	group	of	10	European	NCAs	(France,	Germany,	Belgium,	Hungary,	Ireland,	Italy,	the	Netherlands,	Czech	Republic,	the	United	Kingdom	and Sweden)	was	established	by	the	European	Commission	in	December	2015	to	monitor	the	effects	of	the	narrow	price	parity	clause	in	Europe.	This	working	group	(the "ECN	Working	Group")	issued	questionnaires	during	2016	to	online	travel	agencies,	including	Booking.com	and	Expedia,	meta-search	sites	and	hotels	about	the	narrow price	parity	clause.	On	February	17,	2017	the	ECN	Working	Group	issued	a	statement	that	it	would	publish	its	report	soon	and	that	it	had	decided	to	keep	the	sector under	review	and	re-assess	the	competitive	situation	in	due	course.	Separately,	the	French	NCA,	which	is	conducting	its	own	review	of	the	effects	of	the	narrow	price parity	clause,	issued	a	report	on	February	9,	2017,	stating	that	it	has	not	ruled	out	the	possibility	of	issuing	an	opinion	at	its	own	initiative	if	a	change	in	competition requires	it,	and	that	it	would	continue	to	contribute	actively	to	the	ECN	Working	Group	process.

We	are	unable	to	predict	how	these	appeals	and	the	remaining	investigations	in	other	countries	will	ultimately	be	resolved,	or	whether	further	action	in	Europe will	be	taken	as	a	result	of	the	working	group's	findings.	Possible	outcomes	include	requiring	Booking.com	to	amend	or	remove	its	rate	parity	clause	from	its	contracts with	accommodation	providers	in	those	jurisdictions	and/or	the	imposition	of	fines.

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.	Legislation	in	Austria	prohibiting	"narrow"	price	parity	agreements (including	the	narrow	parity	clause)	became	effective	on	December	31,	2016.	Similar	legislation	was	approved	by	the	Italian	Senate	in	June	2016	but	not	ultimately passed,	and	could	be	introduced	again	in	2017.	A	motion	to	prohibit	the	narrow	price	parity	clause	has	also	been	proposed	in	Switzerland.	It	is	not	yet	clear	how	the Macron	Law	and	the	Austrian	legislation	or	the	proposed	Italian	and	Swiss	legislation	may	affect	our	business	in	the	long	term	in	France,	Austria,	Italy	and	Switzerland, respectively.

Further,	the	European	Commission	published	a	communication	on	online	platforms	and	the	digital	single	market	in	May	2016	in	which	it	stated	that	it	will engage	in	targeted	fact-finding	to	investigate	concerns	raised	in	a	recent	public	consultation	regarding	potential	unfair	terms	imposed	by	online	platforms,	including	price parity	clauses.	The	European	Commission	plans	to	report	on	its	findings	in	the	spring	of	2017.	We	are	unable	to	predict	what,	if	any,	effect	this	inquiry	will	have	on	our business,	industry	practices	or	online	commerce	more	generally.

To	the	extent	that	regulatory	authorities	impose	fines	on	us	or	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	competition	investigations	could adversely	affect	our	brands	and	therefore	our	market	share	and	results	of	operations.	Further,	the	Macron	Law,	the	Italian	and	Austrian	laws	and	any	similar	legislation enacted	by	other	countries,	and	the	decision	by	the	German	NCA	to	prohibit	"narrow"	price	parity	agreements,	could	have	a	material	adverse	effect	on	our	business	and our	results	of	operations,	in	particular	if	consumers	use	our	services	to	shop	for	accommodation	reservations	but	make	their	reservations	directly	with	an	accommodation provider.

Competition-related	investigations,	legislation	or	issues	could	also	give	rise	to	private	litigation.	For	example,	Booking.com	is	involved	in	private	litigation	in Sweden	related	to	its	"narrow"	price	parity	provisions.	We	are	unable	to	predict	how	this	litigation	will	be	resolved,	or	whether	it	will	impact	Booking.com's	business	in Sweden.

In	addition,	as	our	business	grows,	we	may	increasingly	become	the	target	of	competition	investigations	or	be	limited	by	anti-trust	or	competition	laws.	For example,	our	size	and	market	share	may	negatively	affect	our	ability	to	obtain	regulatory	approval	of	proposed	acquisitions,	our	ability	to	expand	into	complementary businesses	or	our	latitude	in	dealing	with	travel	service	providers	(such	as	by	limiting	our	ability	to	provide	discounts,	rebates	or	incentives	or	to	exercise	contractual rights),	any	of	which	could	adversely	affect	our	business,	results	of	operations	or	ability	to	grow	and	compete.

# Regulatory	and	legal	requirements	and	uncertainties	could	harm	our	business.

The	services	we	offer	are	subject	to	legal	regulations	(including	laws,	ordinances,	rules	and	other	requirements	and	regulations)	of	national	and	local governments	and	regulatory	authorities	around	the	world,	many	of	which	are	evolving	and	subject	to	the	possibility	of	new	or	revised	interpretations.	Our	ability	to provide	our	services	is	and	will	continue	to	be	affected	by	such	regulations.	For	example,	laws	and	proposed	legislation	relating	to	data	localization	in	some	countries could	adversely	affect	our	ability	to	conduct	business	in	those	countries.	The	implementation	of	unfavorable	regulations	or	unfavorable	interpretations	of	existing regulations	by	judicial	or	regulatory	bodies	could	require	us	to	incur	significant	compliance	costs,	cause	the	development	of	the	affected	markets	to	become	impractical and	otherwise	have	a	material	adverse	effect	on	our	business	and	results	of	operations.

Compliance	with	the	laws	and	regulations	of	multiple	jurisdictions	increases	our	cost	of	doing	business.	These	laws	and	regulations,	which	vary	and	sometimes conflict,	include	the	U.S.	Foreign	Corrupt	Practices	Act,	the	U.K.	Bribery	Act	and	local	laws	which	also	prohibit	corrupt	payments	to	governmental	officials	or	third parties,	data	privacy	requirements,	labor	relations	laws,	tax	laws,	anti-trust	or	competition	laws,	U.S.,	E.U.	or	U.N.	sanctioned	country	or	sanctioned	persons	mandates, and	consumer	protection	laws.	Violations	of	these	laws	and	regulations	could	result	in	fines	and/or	criminal	sanctions	against	us,	our	officers	or	our	employees	and/or prohibitions	on	the	conduct	of	our	business.	Any	such	violations	could	result	in	prohibitions	on	our	ability	to	offer	our	services	in	one	or	more	countries,	could	delay	or prevent	potential	acquisitions,	and	could	also	materially	damage	our	reputation,	our	brands,	our	international	expansion	efforts,	our	ability	to	attract	and	retain employees,	our	business	and	our	operating	results.	Even	if	we	comply	with	these	laws	and	regulations,	doing	business	in	certain	jurisdictions	could	harm	our	reputation and	brands,	which	could	adversely	affect	our	results	of	operations	or	stock	price.	In	addition,	these	restrictions	may	provide	a	competitive	advantage	to	our	competitors unless	they	are	also	subject	to	comparable	restrictions.	Our	success	depends,	in	part,	on	our	ability	to	anticipate	these	risks	and	manage	these	difficulties.	We	are	also subject	to	a	variety	of	other	regulatory	and	legal	risks	and	challenges	in	managing	an	organization	operating	in	various	countries,	including	those	related	to:

# •regulatory	changes	or	other	government

actions;

•additional	complexity	to	comply	with	regulations	in	multiple	jurisdictions,	as	well	as	overlapping	or	inconsistent	legal	regimes,	in	particular	with	respect	to	tax, labor,	consumer	protection,	digital	content,	advertising,	promotions,	privacy	and	anti-trust	laws;

•our	ability	to	repatriate	funds	held	by	our	international	subsidiaries	to	the	United	States	at	favorable	tax

rates;

•difficulties	in	transferring	funds	from	or	converting	currencies	in	certain	countries;

•reduced	protection	for	intellectual	property	rights	in	some

countries.

Our	business	has	grown	substantially	over	the	last	several	years	and	continues	to	expand	into	new	geographic	locations.	In	addition,	we	have	made	efforts	and expect	to	make	further	efforts	to	integrate	access	to	travel	services	across	our	various	brands.	These	changes	add	complexity	to	legal	and	tax	compliance,	and	our increased	size	and	operating	history	may	increase	the	likelihood	that	we	will	be	subject	to	audits	by	tax	authorities	in	various	jurisdictions.

# We	face	increased	risks	as	the	level	of	our	debt	increases.

We	have	a	substantial	amount	of	outstanding	indebtedness	and	we	may	incur	substantial	additional	indebtedness	in	the	future,	including	through	public	or private	offerings	of	debt	securities.	Our	outstanding	indebtedness	and	any	additional	indebtedness	we	incur	may	have	significant	consequences,	which	could	include:

•requiring	the	dedication	of	a	portion	of	our	cash	flow	from	operations	to	service	our	indebtedness,	thereby	reducing	the	amount	of	cash	flow	available	for	other purposes,	including	capital	expenditures,	share	repurchases	and	acquisitions;

•increased	vulnerability	to	downturns	in	our	business,	to	competitive	pressures	and	to	adverse	changes	in	general	economic	and	industry conditions;

•decreased,	or	loss	of,	the	ability	to	obtain	additional	financing	on	terms	acceptable	to	us	for	working	capital,	capital	expenditures,	acquisitions,	share repurchases	or	other	general	corporate	purposes;	and

•decreased	flexibility	when	planning	for	or	reacting	to	changes	in	our	business	and

industry.

Our	ability	to	make	payments	of	principal	of	and	interest	on	our	indebtedness	depends	upon	our	future	performance,	which	will	be	subject	to	general	economic conditions,	industry	cycles	and	financial,	business	and	other	factors	affecting	our	consolidated	results	of	operations	and	financial	condition,	many	of	which	are	beyond our	control.	Further,	we	may	not	have	access	to	equity	or	debt	markets	or	other	sources	of	financing,	or	such	financing	may	not	be	available	to	us	on	commercially reasonable	terms,	to	repay	or	refinance	our	debt	as	it	comes	due	or,	in	the	case	of	our	convertible	notes,	upon	conversion.	If	we	are	unable	to	generate	sufficient	cash flow	from	our	U.S.	operations	in	the	future	to	service	our	debt,	we	may	be	required	to,	among	other	things,	repatriate	funds	to	the	United	States	at	substantial	tax	cost.

# Our	stock	price	is	highly	volatile.

The	market	price	of	our	common	stock	is	highly	volatile	and	is	likely	to	continue	to	be	subject	to	wide	fluctuations	in	response	to	factors	such	as	the	following, some	of	which	are	beyond	our	control:

•operating	results	that	vary	from	the	expectations	of	securities	analysts	and investors;

•quarterly	variations	in	our	operating results;

•changes	in	expectations	as	to	our	future	financial	performance,	including	financial	estimates	by	securities	analysts	and investors;

•worldwide	economic	conditions	in	general	and	in	Europe	in particular;

•fluctuations	in	currency	exchange	rates,	particularly	between	the	U.S.	Dollar	and	the Euro;

•announcements	of	technological	innovations	or	new	services	by	us	or	our competitors;

•changes	in	our	capital structure;

•changes	in	market	valuations	of	other	Internet	or	online	service companies;

•announcements	by	us	or	our	competitors	of	price	reductions,	promotions,	significant	contracts,	acquisitions,	strategic	partnerships,	joint	ventures	or	capital commitments;

•loss	of	a	major	travel	service	provider	participant,	such	as	a	hotel	chain,	rental	car	company	or	airline,	from	our services;

•changes	in	the	status	of	our	intellectual	property rights;

•lack	of	success	in	the	expansion	of	our	business	models geographically;

•announcements	by	third	parties	of	significant	claims	or	initiation	of	litigation	proceedings	against	us	or	adverse	developments	in	pending proceedings;

•occurrences	of	a	significant	security	breach;

•additions	or	departures	of	key	personnel;	and

# •trading	volume	fluctuations.

Sales	of	a	substantial	number	of	shares	of	our	common	stock,	including	through	the	conversion	of	our	convertible	notes,	could	adversely	affect	the	market	price of	our	common	stock	by	introducing	a	large	number	of	sellers	to	the	market.	Given	the	volatility	that	exists	for	our	shares,	such	sales	could	cause	the	market	price	of	our common	stock	to	decline	significantly.	In	addition,	fluctuations	in	our	stock	price	and	our	price-to-earnings	multiple	may	have	made	our	stock	attractive	to	momentum, hedge	or	day-trading	investors	who	often	shift	funds	into	and	out	of	stocks	rapidly,	exacerbating	price	fluctuations	in	either	direction,	particularly	when	viewed	on	a quarterly	basis.

The	trading	prices	of	Internet	company	stocks	in	general,	including	ours,	have	experienced	extreme	price	and	volume	fluctuations.	To	the	extent	that	the public's	perception	of	the	prospects	of	Internet	or	e-commerce	companies	is	negative,	our

stock	price	could	decline,	regardless	of	our	results.	Other	broad	market	and	industry	factors	may	decrease	the	market	price	of	our	common	stock,	regardless	of	our operating	performance.	Market	fluctuations,	as	well	as	general	political	and	economic	conditions,	such	as	a	recession,	interest	rate	or	currency	rate	fluctuations,	political instability	(e.g.,	"Brexit"	or	the	recent	coup	attempt	in	Turkey)	or	a	natural	disaster	or	terrorist	attack	affecting	a	significant	market	for	our	business,	such	as	Europe	or the	United	States,	could	cause	our	stock	price	to	decline.	Negative	market	conditions	could	adversely	affect	our	ability	to	raise	additional	capital	or	the	value	of	our	stock for	purposes	of	acquiring	other	companies	or	businesses.

We	have,	in	the	past,	been	a	defendant	in	securities	class	action	litigation.	Securities	class	action	litigation	has	often	been	brought	against	a	company	following periods	of	volatility	in	the	market	price	of	its	securities.	To	the	extent	our	stock	price	declines	or	is	volatile,	we	may	in	the	future	be	the	target	of	additional	litigation. This	additional	litigation	could	result	in	substantial	costs	and	divert	management's	attention	and	resources,	either	of	which	could	adversely	affect	our	business,	financial condition	and	results	of	operations.

# "Cookie"	laws	could	negatively	impact	the	way	we	do	business.

A	"cookie"	is	a	text	file	that	is	stored	on	a	user's	web	browser	by	a	website.	Cookies	are	common	tools	used	by	thousands	of	websites,	including	ours,	to, among	other	things,	store	or	gather	information	(e.g.,	remember	log-on	details	so	a	user	does	not	have	to	re-enter	them	when	revisiting	a	website),	market	to	consumers and	enhance	the	user	experience	on	a	website.	Cookies	are	valuable	tools	for	websites	like	ours	to	improve	the	customer	experience	and	increase	conversion	on	their websites.

The	European	Union's	ePrivacy	Directive	requires	member	countries	to	adopt	regulations	governing	the	use	of	"cookies"	by	websites	servicing	consumers	in the	European	Union.	For	example,	a	June	2012	amendment	to	the	Dutch	Telecommunications	Act	requires	websites,	including	Booking.com,	to	provide	Dutch	users with	clear	and	comprehensive	information	about	the	storage	and	use	of	certain	cookies	and	obtain	prior	consent	from	the	user	before	placing	certain	cookies	on	a	user's web	browser.	To	the	extent	any	such	regulations	require	"opt-in"	consent	before	certain	cookies	can	be	placed	on	a	user's	web	browser,	our	ability,	in	particular Booking.com's	ability,	to	serve	certain	customers	in	the	manner	we	currently	do	might	be	adversely	affected	and	our	ability	to	continue	to	improve	and	optimize performance	on	our	websites	might	be	impaired,	either	of	which	could	negatively	affect	a	consumer's	experience	using	our	services	and	our	business,	market	share	and results	of	operations.

# We	face	risks	related	to	our	intellectual	property.

We	regard	our	intellectual	property	as	critical	to	our	success,	and	we	rely	on	domain	name,	trademark,	copyright	and	patent	law,	trade	secret	protection	and confidentiality	and/or	license	agreements	with	our	employees,	travel	service	providers,	partners	and	others	to	protect	our	proprietary	rights.	We	have	filed	various applications	for	protection	of	certain	aspects	of	our	intellectual	property	in	the	United	States	and	other	jurisdictions,	and	we	currently	hold	a	number	of	issued	patents	in several	jurisdictions.	Further,	in	the	future	we	may	acquire	additional	patents	or	patent	portfolios,	which	could	require	significant	cash	expenditures.	However,	we	may choose	not	to	patent	or	otherwise	register	some	of	our	intellectual	property	and	instead	rely	on	trade	secret	or	other	means	of	protecting	our	intellectual	property.	We have	licensed	in	the	past,	and	may	license	in	the	future,	certain	of	our	proprietary	rights,	such	as	trademarks	or	copyrighted	material,	to	third	parties,	and	these	licensees may	take	actions	that	diminish	the	value	of	our	proprietary	rights	or	harm	our	reputation.	In	addition,	effective	intellectual	property	protection	may	not	be	available	in every	country	in	which	our	services	are	made	available	online.	We	may	be	required	to	expend	significant	time	and	resources	to	prevent	infringement	or	to	enforce	our intellectual	property	rights.

We	believe	that	our	intellectual	property	rights,	including	our	issued	patents	and	pending	patent	applications,	help	to	protect	our	business.	However,	we	may not	be	able	to	successfully	defend	our	intellectual	property	rights	or	they	may	not	be	sufficient	to	effectively	protect	our	business.

If	we	are	not	successful	in	protecting	our	intellectual	property	or	if	our	intellectual	property	is	ineffective	in	protecting	our	business,	our	business,	brands	and results	of	operations	could	be	materially	adversely	affected.

From	time	to	time,	in	the	ordinary	course	of	our	business,	we	have	been	subject	to,	and	are	currently	subject	to,	legal	proceedings	and	claims	relating	to	the intellectual	property	rights	of	others,	and	we	expect	that	third	parties	will	continue	to	assert	intellectual	property	claims,	in	particular	patent	claims,	against	us, particularly	as	we	expand	the	complexity	and	scope	of	our	business.	For	example,	in	February	2015,	IBM	sued	us	and	certain	of	our	subsidiaries	asserting	that	we infringed	certain	IBM	patents	and	claiming	damages	and	injunctive	relief.	While	we	believe	the	suit	to	be	without	merit	and	are	contesting	it,	litigation	is	uncertain	and we	may	not	be	successful.	We	endeavor	to	defend	our	intellectual	property	rights	diligently,	but	intellectual	property	litigation	is	extremely	expensive	and	time- consuming,	and	may	divert	managerial	attention	and	resources	from	our	business	objectives.	Successful	infringement	claims	against	us	could	result	in	a	significant monetary	liability	or

prevent	us	from	operating	our	business,	or	portions	of	our	business.	In	addition,	resolution	of	claims	may	require	us	to	obtain	licenses	to	use	intellectual	property	rights belonging	to	third	parties,	which	may	be	expensive	to	procure,	or	possibly	to	cease	using	those	rights	altogether.	Any	of	these	events	could	have	a	material	adverse	effect on	our	business,	results	of	operations	and	financial	condition.

# The	success	of	our	acquisition	of	OpenTable	is	subject	to	numerous	risks	and	uncertainties.

On	July	24,	2014,	we	acquired	OpenTable,	a	leading	brand	for	booking	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	the	addition	of	OpenTable	to	The Priceline	Group.	As	a	result	of	our	acquisition	of	OpenTable,	we	are	subject	to	risks	associated	with	OpenTable's	business,	many	of	which	are	the	same	risks	that	our other	businesses	face.	Other	risks	include:	OpenTable's	ability	to	increase	the	number	of	restaurants	and	diners	using	its	products	and	services	and	retain	existing restaurants	and	diners;	OpenTable's	ability	to	expand	internationally;	competition	both	to	provide	reservation	management	services	to	restaurants	and	to	attract	diners	to make	reservations	through	OpenTable's	websites	and	apps;	OpenTable's	ability	to	effectively	and	efficiently	market	to	new	restaurants	and	diners;	and	any	risks	that cause	people	to	refrain	from	dining	at	restaurants,	such	as	economic	downturns,	severe	weather,	outbreaks	of	pandemic	or	contagious	diseases,	or	threats	of	terrorist attacks.

OpenTable's	post-acquisition	strategy	was	premised	on	significant	and	rapid	investment	in	international	expansion	and	various	other	growth	initiatives, resulting	in	near-term	reduced	earnings	and	profit	margins	but	with	the	goal	of	achieving	significantly	increased	revenues	and	profitability	in	the	long	term.	As	this strategy	was	achieving	limited	progress,	in	the	third	quarter	of	2016	OpenTable	modified	its	strategy.	As	a	result,	while	OpenTable	intends	to	continue	to	pursue	and invest	in	international	expansion	and	its	other	growth	initiatives,	it	intends	to	do	so	in	a	more	measured	and	deliberate	manner.	This	change	in	strategy	resulted	in OpenTable	updating	its	forecasted	financial	results	to	reflect	(a)	a	material	reduction	in	forecasted	long-term	financial	results	from	these	initiatives,	partially	offset	by (b)	improved	earnings	and	profit	margins	in	the	near	term	as	a	result	of	the	reduced	investments.	As	previously	disclosed,	based	on	the	updated	forecast,	we	estimated	a significant	reduction	in	the	fair	value	of	the	OpenTable	business	and,	for	the	quarter	ended	September	30,	2016,	recognized	a	non-deductible	goodwill	impairment	charge of	$940.7	million.

Future	events	and	changing	market	conditions	may	lead	us	to	again	re-evaluate	the	assumptions	reflected	in	the	updated	forecast,	including	key	assumptions regarding	OpenTable's	expected	growth	rates	and	operating	margins	and	the	success	and	timing	of	its	international	expansion	and	other	growth	initiatives,	as	well	as other	key	assumptions	with	respect	to	matters	outside	of	our	control,	such	as	discount	rates,	currency	exchange	rates,	market	EBITDA	comparables,	and	changes	in accounting	policies	or	practices,	including	proposed	changes	affecting	measurement	of	goodwill	and/or	impairment	testing	methodology.	If	OpenTable	does	not	achieve the	results	currently	expected,	if	its	investments,	in	particular	its	investments	in	its	international	expansion	efforts	and	other	growth	initiatives,	are	not	successful,	or	if any	of	the	assumptions	underlying	our	estimate	of	the	value	of	the	OpenTable	business,	including	those	mentioned	above,	prove	to	be	incorrect,	we	may	further	refine our	forecast	for	the	OpenTable	business	and	recognize	an	additional	goodwill	impairment	and	an	impairment	of	intangible	assets,	which	could	have	a	material	adverse effect	on	our	results	of	operations.

The	value	of	our	investments	could	decline,	which	could	adversely	affect	our	financial	condition	and	results	of	operations.

We	maintain	an	investment	portfolio	of	various	holdings,	types	and	maturities.	These	securities	are	predominantly	classified	as	available-for-sale	and, consequently,	are	recorded	in	our	Consolidated	Balance	Sheets	at	fair	value	with	unrealized	gains	or	losses	reported	as	a	component	of	accumulated	other comprehensive	income,	net	of	tax.	Our	portfolio	includes	fixed-income	securities	and	equity	securities	of	publicly	traded	companies,	the	values	of	which	are	subject	to market	price	volatility.	If	such	investments	suffer	market	price	declines,	we	may	recognize	in	earnings	the	decline	in	the	fair	value	of	our	investments	below	their	cost basis	when	the	decline	is	judged	to	be	other	than	temporary.	We	have	invested	a	significant	amount	in	Ctrip	convertible	notes	and	ADSs.	See	Note	4	to	our Consolidated	Balance	Sheets	for	more	information	regarding	our	investments	in	Ctrip	securities.	The	value	of	these	securities	is	subject	to	the	risks	associated	with Ctrip's	business,	as	well	as	any	changes	by	the	Chinese	government	in	foreign	investment	laws	or	elevated	scrutiny	or	regulation	of	foreign	investments	in	Chinese companies.	For	example,	because	of	foreign	ownership	restrictions	applicable	to	its	business,	Ctrip	is	a	Cayman	Islands	company	operating	in	China	through	what	is commonly	referred	to	as	a	variable	interest	entity,	or	VIE,	structure	where	it	conducts	part	of	its	business	through	contractual	relationships	with	affiliated	Chinese entities.	Although	VIE	structures	are	commonly	used	by	Chinese	Internet	and	e-commerce	companies,	there	are	substantial	uncertainties	regarding	the	interpretation	and application	of	PRC	laws	and	regulations	to	VIE	structures,	and	it	is	possible	that	the	PRC	government	may	view	the	VIE	structure	as	in	violation	of	PRC	law.	VIE contractual	relationships	are	not	as	effective	in	providing	control	over	the	affiliated	Chinese	companies	as	direct	ownership,	and	Ctrip	would	have	to	rely	on	the	PRC legal	system	to	enforce	those	contracts	in	the	event	of	a	breach	by	one	of	these	entities.	Further,	conflicts	of	interest	could	arise	to	the	extent	Ctrip's	officers	or	directors are

also	shareholders,	officers	or	directors	of	the	affiliated	Chinese	entities.	Any	of	these	risks	could	materially	and	adversely	affect	Ctrip's	business	and	therefore	the	value of	our	investment	in	Ctrip.

We	also	invest	from	time	to	time	in	private	companies	and	these	investments	are	generally	accounted	for	under	the	cost	method.	Such	investments	are inherently	risky	in	that	such	companies	are	typically	at	an	early	stage	of	development,	may	have	no	or	limited	revenues,	may	not	be	or	ever	become	profitable,	may	not be	able	to	secure	additional	funding	or	their	technologies,	services	or	products	may	not	be	successfully	developed	or	introduced	to	the	market.	Further,	our	ability	to liquidate	any	such	investments	is	typically	dependent	on	a	liquidity	event,	such	as	a	public	offering	or	acquisition,	as	no	public	market	exists	for	such	securities. Valuations	of	privately-held	companies	are	inherently	complex	and	uncertain	due	to	the	lack	of	a	liquid	market	for	the	company's	securities.	If	we	determine	that	any	of our	investments	in	such	companies	have	experienced	a	decline	in	value,	we	may	be	required	to	record	an	other-than-temporary	impairment.	For	example,	during	the	first quarter	of	2016,	we	recognized	an	other-than-temporary	impairment	of	approximately	$50	million	related	to	our	cost-method	investment	in	Hotel	Urbano,	and	in	the second	quarter	of	2016,	after	discussions	with	Hotel	Urbano's	management,	we	recognized	a	further	impairment	of	approximately	$10	million	to	write-off	the	remainder of	our	investment	in	Hotel	Urbano.	In	addition,	during	the	second	quarter	of	2016	we	recognized	an	impairment	of	approximately	$3	million	for	an	investment	in	another private	company.	See	Note	4	to	the	Consolidated	Financial	Statements.

We	could	lose	the	full	amount	of	any	of	our	investments,	and	any	impairment	of	our	investments	could	have	a	material	adverse	effect	on	our	financial	condition and	results	of	operations.

Investment	in	new	business	strategies	and	acquisitions	could	disrupt	our	ongoing	business	and	present	risks	not	originally	contemplated.

We	have	invested,	and	in	the	future	may	invest,	in	new	business	strategies	and	acquisitions.	Such	endeavors	may	involve	significant	risks	and	uncertainties, including	distraction	of	management	from	current	operations,	greater	than	expected	liabilities	and	expenses,	inadequate	return	on	capital,	and	unidentified	issues	not discovered	in	our	investigations	and	evaluations	of	those	strategies	and	acquisitions.	We	may	decide	to	make	minority	investments,	including	through	joint	ventures,	in which	we	have	limited	or	no	management	or	operational	control.	The	controlling	person	in	such	a	case	may	have	business	interests,	strategies	or	goals	that	are inconsistent	with	ours,	and	decisions	of	the	company	or	venture	in	which	we	invested	may	result	in	harm	to	our	reputation	or	adversely	affect	the	value	of	our investment.	A	substantial	portion	of	our	goodwill	and	intangible	assets	were	acquired	in	acquisitions.	If	we	determine	that	any	of	the	goodwill	and	intangible	assets,	or any	goodwill	or	intangible	assets	acquired	in	future	transactions,	experiences	a	decline	in	value,	we	may	be	required	to	record	an	other-than-temporary	impairment, which	could	materially	adversely	affect	our	results	of	operations.	Further,	we	may	issue	shares	of	our	common	stock	in	these	transactions,	which	could	result	in	dilution to	our	stockholders.

Our	use	of	"open	source"	software	could	adversely	affect	our	ability	to	protect	our	proprietary	software	and	subject	us	to	possible	litigation.

We	use	open	source	software	in	connection	with	our	software	development.	From	time	to	time,	companies	that	use	open	source	software	have	faced	claims challenging	the	use	of	open	source	software	and/or	compliance	with	open	source	license	terms.	We	could	be	subject	to	suits	by	parties	claiming	ownership	of	what	we believe	to	be	open	source	software,	or	claiming	non-compliance	with	open	source	licensing	terms.	Some	open	source	licenses	require	users	who	distribute	software containing	open	source	to	make	available	all	or	part	of	such	software,	which	in	some	circumstances	could	include	valuable	proprietary	code	of	the	user.	While	we monitor	our	use	of	open	source	software	and	try	to	ensure	that	none	is	used	in	a	manner	that	would	require	us	to	disclose	our	proprietary	source	code	or	that	would otherwise	breach	the	terms	of	an	open	source	agreement,	such	use	could	inadvertently	occur,	in	part	because	open	source	license	terms	are	often	ambiguous.	Any requirement	to	disclose	our	proprietary	source	code	or	pay	damages	for	breach	of	contract	could	be	harmful	to	our	business,	results	of	operations	or	financial	condition, and	could	help	our	competitors	develop	services	that	are	similar	to	or	better	than	ours.

# Our	business	is	exposed	to	risks	associated	with	processing	credit	card	transactions.

Our	results	have	been	negatively	impacted	by	purchases	made	using	fraudulent	credit	cards.	Because	we	facilitate	the	processing	of	customer	credit	cards	in many	of	our	transactions,	including	a	majority	of	our	priceline.com,	agoda.com	and	Rentalcars.com	transactions,	we	may	be	held	liable	for	accepting	fraudulent	credit cards	on	our	websites	as	well	as	other	payment	disputes	with	our	customers.	Additionally,	we	may	be	held	liable	for	accepting	fraudulent	credit	cards	in	certain transactions	when	we	do	not	facilitate	the	processing	of	customer	credit	cards.	Accordingly,	we	calculate	and	record	an	allowance	for	the	resulting	customer chargebacks.	If	we	are	unable	to	combat	the	use	of	fraudulent	credit	cards	on	our	websites,	our	business,	results	of	operations	and	financial	condition	could	be	materially adversely	affected.

In	addition,	in	the	event	that	one	of	our	major	travel	service	providers	voluntarily	or	involuntarily	declares	bankruptcy,	we	could	experience	an	increase	in chargebacks	from	customers	with	travel	reservations	with	such	travel	service	provider.	For	example,	airlines	that	participate	in	our	services	and	declare	bankruptcy	or cease	operations	may	be	unable	or	unwilling	to	honor	tickets	sold	for	their	flights.	Our	policy	in	such	event	is	to	direct	customers	seeking	a	refund	or	exchange	to	the airline,	and	not	to	provide	a	remedy	ourselves.	Because	we	process	sales	of	Express	Deals®	airline	tickets	on	a	merchant	basis,	we	could	experience	a	significant	increase in	demands	for	refunds	or	credit	card	chargebacks	from	customers,	which	could	materially	adversely	affect	our	results	of	operations	and	financial	condition.	We	have	in the	past	experienced	an	increase	in	chargebacks	from	customers	with	tickets	on	airlines	that	ceased	operations.	We	process	credit	card	transactions	and	operate	in numerous	currencies.	Credit	card	and	other	payment	processing	costs	are	typically	higher	for	foreign	currency	transactions	and	in	instances	where	cancellations	occur.

# Item	1B.		Unresolved	Staff	Comments

None.

# Item	2.		Properties

Our	corporate	headquarters	and	the	headquarters	of	our	priceline.com	business	are	located	in	Norwalk,	Connecticut,	United	States	of	America,	where	we	lease approximately	90,000	square	feet	of	office	space.	We	lease	approximately	258,000	square	feet	of	office	space	in	Amsterdam,	Netherlands	for	the	headquarters	of	our Booking.com	business;	our	agoda.com	business	has	significant	support	operations	in	Bangkok,	Thailand,	where	we	lease	approximately	140,000	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	60,000	square	feet	of	office	space;	and	our Rentalcars.com	business	is	headquartered	in	Manchester,	England,	where	we	lease	approximately	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 Netherlands,	Germany,	Singapore,	Hong	Kong	and	China	and	sales	and	support	facilities	in	numerous	locations.	Other	than	the	office	building	in	the	Netherlands	that	is currently	under	construction	(see	the	section	"Building	Construction"	within	Note	14	to	our	Consolidated	Financial	Statements	for	more	details,	which	is	incorporated into	this	Item	2	by	reference	thereto),	we	do	not	own	any	real	estate	as	of	December	31,	2016.

We	believe	that	our	existing	facilities	are	adequate	to	meet	our	current	requirements,	and	that	suitable	additional	or	substitute	space	will	be	available	as	needed to	accommodate	any	further	expansion	of	corporate	operations.

# Item	3.		Legal	Proceedings

A	description	of	material	legal	proceedings	to	which	we	are	a	party,	and	updates	thereto,	is	included	in	Note	14	to	our	Consolidated	Financial	Statements included	in	Annual	Report	on	Form	10-K	for	the	year	Ended	December	31,	2016,	and	is	incorporated	into	this	Item	3	by	reference	thereto.

# Item	4.		Mine	Safety	Disclosures

Not	applicable.

# PART	II

# Item	5.		Market	for	Registrant's	Common	Equity,	Related	Stockholder	Matters	and	Issuer	Purchases	of	Equity	Securities

# Price	Range	of	Common	Stock

Our	common	stock	is	quoted	on	the	NASDAQ	Global	Select	Market	under	the	symbol	"PCLN."		The	following	table	sets	forth,	for	the	periods	indicated,	the high	and	low	sales	prices	per	share	of	our	common	stock	as	reported	on	the	NASDAQ	Global	Select	Market:

| 2016 | High | Low |
| :--- | :--- | :--- |
| First\tQuarter | $1,361.63 | $954.02 |
| Second\tQuarter | 1,394.00 | 1,148.06 |
| Third\tQuarter | 1,481.78 | 1,245.51 |
| Fourth\tQuarter | 1,600.93 | 1,422.19 |

| 2015 | High | Low |
| :--- | :--- | :--- |
| First\tQuarter | $1,264.00 | $990.69 |
| Second\tQuarter | 1,280.97 | 1,103.45 |
| Third\tQuarter | 1,395.00 | 1,115.77 |
| Fourth\tQuarter | 1,476.52 | 1,212.00 |

# Holders

As	of	February	21,	2017,	there	were	approximately	203	stockholders	of	record	of	The	Priceline	Group	Inc.'s	common	stock.

# Dividend	Policy

We	have	not	declared	or	paid	any	cash	dividends	on	our	capital	stock	since	our	inception	and	do	not	expect	to	pay	any	cash	dividends	for	the	foreseeable future.

# Performance	Measurement	Comparison

The	following	graph	shows	the	total	stockholder	return	through	December	31,	2016	of	an	investment	of	$100	in	cash	on	December	31,	2011	for	The	Priceline Group	Inc.	common	stock	and	an	investment	of	$100	in	cash	on	December	31,	2011	for	(i)	the	NASDAQ	Composite	Index,	(ii)	the	Standard	and	Poor's	500	Index	and (iii)	the	Research	Data	Group	("RDG")	Internet	Composite	Index.	The	RDG	Internet	Composite	Index	is	an	index	of	stocks	representing	the	Internet	industry,	including Internet	software	and	service	companies	and	e-commerce	companies.	Historic	stock	performance	is	not	necessarily	indicative	of	future	stock	price	performance.		All values	assume	reinvestment	of	the	full	amount	of	all	dividends	and	are	calculated	as	of	the	last	day	of	each	month:

# pcln2016graph.gif

| Measurement	Point<br>December	31 | The	Priceline	Group<br>Inc. | NASDAQ<br>Composite	Index | S&amp;P	500<br>Index | RDG	Internet<br>Composite |
| :--- | :--- | :--- | :--- | :--- |
| 2011 | 100.00 | 100.00 | 100.00 | 100.00 |
| 2012 | 132.64 | 116.41 | 116.00 | 119.34 |
| 2013 | 248.53 | 165.47 | 153.58 | 195.83 |
| 2014 | 243.79 | 188.69 | 174.60 | 192.42 |
| 2015 | 272.59 | 200.32 | 177.01 | 264.96 |
| 2016 | 313.45 | 216.54 | 198.18 | 277.56 |

# Issuer	Purchases	of	Equity	Securities

The	following	table	sets	forth	information	relating	to	repurchases	of	our	equity	securities	during	the	three	months	ended	December	31,	2016:

| Period | (a)	Total	Number<br>of	Shares	(or<br>Units)	Purchased |  | (b)	Average<br>Price	Paid	per<br>Share	(or	Unit) | (c)	Total	Number	of<br>Shares	(or	Units)<br>Purchased	as	Part	of<br>Publicly	Announced<br>Plans	or	Programs | (d)	Maximum<br>Number	(or<br>Approximate	Dollar	Value)<br>of	Shares	(or	Units)<br>that	May<br>Yet	Be	Purchased<br>Under	the<br>Plans	or	Programs |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| October\t1,\t2016\t— | 8,964 | (1) | $1,441.09 | 8,964 | $2,389,097,571 | (1) |
| October\t31,\t2016 | 342 | (2) | $1,474.99 | N/A | N/A |  |
|  | — |  |  |  |  |  |
| November\t1,\t2016\t— | 39,030 | (1) | $1,500.69 | 39,030 | $2,330,525,514 | (1) |
| November\t30,\t2016 | 2,237 | (2) | $1,545.39 | N/A | N/A |  |
| December\t1,\t2016\t— | 128,189 | (1) | $1,498.12 | 128,189 | $2,138,483,581 | (1) |
| December\t31,\t2016 | 2,394 | (2) | $1,484.35 | N/A | N/A |  |
| Total | 181,156 |  | $1,496.21 | 176,183 | $2,138,483,581 |  |

(1) 	Pursuant	to	a	stock	repurchase	program	announced	on	February	17,	2016,	whereby	the	Company	was	authorized	to	repurchase	up	to	$3,000,000,000	of	its common	stock.

(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.

# Item	6.		Selected	Financial	Data

# SELECTED	FINANCIAL	DATA

The	selected	consolidated	financial	data	presented	below	is	derived	from	the	Consolidated	Financial	Statements	and	related	Notes	of	the	Company,	and	should be	read	in	connection	with	those	statements,	some	of	which	are	included	herein.		Selected	financial	data	reflects	data	related	to	KAYAK	from	its	acquisition	date	of	May 21,	2013	and	OpenTable	from	its	acquisition	date	of	July	24,	2014.	The	information	set	forth	below	is	not	necessarily	indicative	of	future	results	and	should	be	read	in conjunction	with	Part	II	Item	7	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations.

| Total	revenues | $10,743,006 | $9,223,987 | $8,441,971 | $6,793,306 | $5,260,956 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Cost\tof\trevenues | 428,314 | 632,180 | 857,841 | 1,077,420 | 1,177,275 |
| Gross\tprofit | 10,314,692 | 8,591,807 | 7,584,130 | 5,715,886 | 4,083,681 |
| Total\toperating\texpenses(1) | 7,408,379 | 5,332,900 | 4,510,818 | 3,303,472 | 2,253,888 |
| Operating\tincome(1) | 2,906,313 | 3,258,907 | 3,073,312 | 2,412,414 | 1,829,793 |
| Total\tother\texpense | 193,075 | 130,587 | 83,864 | 115,877 | 67,924 |
| Income\ttax\texpense | 578,251 | 576,960 | 567,695 | 403,739 | 337,832 |
| Net\tincome(1) | 2,134,987 | 2,551,360 | 2,421,753 | 1,892,798 | 1,424,037 |
| Net\tincome\tattributable\tto\tnoncontrolling\tinterests(2) | — | — | — | 135 | 4,471 |
| Net\tincome\tapplicable\tto\tcommon\tstockholders(1) | 2,134,987 | 2,551,360 | 2,421,753 | 1,892,663 | 1,419,566 |
| Net\tincome\tapplicable\tto\tcommon\tstockholders\tper\tbasic\ncommon\tshare\t(1) | 43.14 | 50.09 | 46.30 | 37.17 | 28.48 |
| Net\tincome\tapplicable\tto\tcommon\tstockholders\tper\tdiluted\ncommon\tshare\t(1) | 42.65 | 49.45 | 45.67 | 36.11 | 27.66 |
| Total\tassets | 19,838,973 | 17,420,575 | 14,770,977 | 10,428,543 | 6,547,771 |
| Long-term\tobligations,\tredeemable\tnoncontrolling\ninterests(3) | 8,127,895 | 7,185,796 | 4,862,730 | 2,289,039 | 1,710,194 |
| Total\tliabilities | 9,990,293 | 8,625,106 | 6,203,954 | 3,510,281 | 2,435,854 |
| Total\tstockholders'\tequity | 9,820,142 | 8,795,469 | 8,566,694 | 6,909,729 | 3,896,975 |

(1) tIncludes	a	non-cash	charge	related	to	an	impairment	of	OpenTable	goodwill	of	$940.7	million,	which	is	not	tax	deductible,	for	the	year	ended	December	31, 2016	(see	Note	9	to	the	Consolidated	Financial	Statements).	The	goodwill	impairment	charge	reduced	the	2016	basic	and	diluted	net	income	per	share	by $19.01	and	$18.79,	respectively.

(2) Redeemable	noncontrolling	interests	relates	to	the	Company's	purchase	of	Rentalcars.com	in	May	2010.		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.

(3) Includes	convertible	debt	which	is	classified	as	a	current	liability	from	2011	through	2014	and 2016.

# Item	7.	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations

The	following	discussion	should	be	read	in	conjunction	with	our	Consolidated	Financial	Statements,	including	the	notes	to	those	statements,	included elsewhere	in	this	Annual	Report	on	Form	10-K,	and	the	Section	entitled	"Special	Note	Regarding	Forward-Looking	Statements"	in	this	Annual	Report	on Form	10-K.		As	discussed	in	more	detail	in	the	Section	entitled	"Special	Note	Regarding	Forward-Looking	Statements,"	this	discussion	contains	forward-looking statements	which	involve	risks	and	uncertainties.		Our	actual	results	may	differ	materially	from	the	results	discussed	in	the	forward-looking	statements.		Factors that	might	cause	those	differences	include	those	discussed	in	"Risk	Factors"	and	elsewhere	in	this	Annual	Report	on	Form	10-K.

We	evaluate	certain	operating	and	financial	measures	on	both	an	as-reported	and	constant-currency	basis.	We	calculate	constant	currency	by	converting our	current-year	period	financial	results	for	transactions	recorded	in	currencies	other	than	U.S.	Dollars	using	the	corresponding	prior-year	period	monthly	average exchange	rates	rather	than	the	current-year	period	monthly	average	exchange	rates.

# Overview

We	refer	to	our	company	and	all	of	our	subsidiaries	and	brands	collectively	as	"The	Priceline	Group,"	the	"Company,"	"we,"	"our"	or	"us."

We	derive	substantially	all	of	our	gross	profit	from	the	following	sources:

•Commissions	earned	from	facilitating	reservations	of	accommodations,	rental	cars,	cruises	and	other	travel	services	on	an	agency

basis;

•Advertising	revenues	primarily	earned	by	KAYAK	from	sending	referrals	to	OTCs	and	travel	service	providers,	as	well	as	from	advertising	placements	on KAYAK's	websites	and	mobile	apps;

•Beginning	on	July	24,	2014,	reservation	revenues	paid	by	restaurants	for	diners	seated	through	OpenTable's	online	reservation	services,	subscription	fees for	restaurant	reservation	management	services	provided	by	OpenTable	and	other	OpenTable	revenues;	and

# Trends

Over	the	last	several	years	we	have	experienced	strong	growth	in	our	accommodation	reservation	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	consumer	experience	on	our	websites	and	mobile	apps.	These	year-over-year	growth	rates	have	generally	decelerated.	Given	the	size	of	our accommodation	reservation	business,	we	expect	that	our	year-over-year	growth	rates	will	generally	continue	to	decelerate,	though	the	rate	of	deceleration	may	fluctuate and	there	may	be	periods	of	acceleration	from	time	to	time.	For	example,	for	the	year	ended	December	31,	2016,	our	accommodation	room	night	reservation	growth	was 29%,	as	compared	to	25%	in	2015,	28%	in	2014,	37%	in	2013	and	40%	in	2012.

Our	international	business	represents	the	substantial	majority	of	our	financial	results,	and	we	expect	our	operating	results	and	other	financial	metrics	to	continue to	be	largely	driven	by	international	performance.	The	size	of	the	travel	market	outside	of	the	United	States	is	substantially	greater	than	that	within	the	United	States. Historically,	Internet	use	and	e-commerce	activity	of	international	consumers	have	trailed	that	of	consumers	in	the	United	States.	However,	international	consumers	are increasingly	moving	to	online	means	for	purchasing	travel.	Accordingly,	recent	international	online	travel	growth	rates	have	substantially	exceeded,	and	are	expected	to continue	to	exceed,	the	growth	rates	within	the	United	States.	We	expect	that	over	the	long	term,	international	online	travel	growth	rates	will	follow	a	similar	trend	to that	experienced	in	the	United	States.	In	addition,	the	base	of	hotel	properties	in	Europe	and	Asia	is	particularly	fragmented	compared	to	that	in	the	United	States,	where the	hotel	market	is	dominated	by	large	hotel	chains.	We	believe	online	reservation	systems	like	ours	may	be	more	appealing	to	small	chains	and	independent	hotels	more commonly	found	outside	of	the	United	States.	We	believe	these	trends	and	factors	have	enabled	us	to	become	the	leading	online	accommodation	reservation	service provider	in	the	world	as	measured	by	room	nights	booked.	We	believe	that	the	opportunity	to	continue	to	grow	our	business	exists	for	the	markets	in	which	we	operate.

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	1,115,000 properties	on	its	website	as	of	December	31,	2016,	which	included	over	568,000	vacation	rental	properties	(updated	property	counts	are	available	on	the	Booking.com website),	and	compares	to	over	852,000	properties	(including	over	390,000	vacation	rental	properties)	as	of	December	31,	2015.

We	intend	to	continue	to	invest	in	adding	accommodations	available	for	reservation	on	our	websites,	including	hotels,	bed	and	breakfasts,	hostels	and	vacation rentals.	Vacation	rentals	generally	consist	of,	among	others,	properties	categorized	as	single-unit	and	multi-unit	villas,	apartments,	"aparthotels"	(which	are	apartments with	a	front	desk	and	cleaning	service)	and	chalets	and	are	generally	self-catered	(i.e.,	include	a	kitchen),	directly	bookable	properties.	Many	of	the	newer accommodations	we	add	to	our	travel	reservation	services,	especially	in	highly	penetrated	markets,	may	have	fewer	rooms	or	higher	credit	risk	and	may	appeal	to	a smaller	subset	of	consumers	(e.g.,	hostels	and	bed	and	breakfasts).	Because	a	vacation	rental	is	typically	either	a	single	unit	or	a	small	collection	of	independent	units, vacation	rental	accommodations	represent	more	limited	booking	opportunities	than	non-vacation	rental	properties,	which	generally	have	more	units	to	rent	per	property. Our	vacation	rental	accommodations	in	general	may	be	subject	to	increased	seasonality	due	to	local	tourism	seasons,	weather	or	other	factors.	Our	vacation	rental accommodation	business	may	also	experience	lower	profit	margins	due	to	certain	additional	costs	related	to	offering	these	accommodations	on	our	websites.	As	we increase	our	vacation	rental	accommodation	business,	these	different	characteristics	could	negatively	impact	our	profit	margins;	and,	to	the	extent	these	properties represent	an	increasing	percentage	of	the	properties	added	to	our	websites,	we	expect	that	our	gross	bookings	growth	rate	and	property	growth	rate	will	continue	to diverge	over	time	(since	each	such	property	has	fewer	booking	opportunities).	As	a	result	of	the	foregoing,	as	the	percentage	of	vacation	rental	properties	increases,	we expect	that	the	number	of	reservations	per	property	will	likely	continue	to	decrease.	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.

As	part	of	our	strategy	to	increase	the	number	and	variety	of	accommodations	available	on	Booking.com,	Booking.com	is	increasingly	processing	transactions on	a	merchant	basis	where	it	facilitates	payments	on	behalf	of	customers.	This	allows	Booking.com	to	process	transactions	for	properties	that	do	not	accept	credit	cards and	to	increase	its	ability	to	offer	flexible	transaction	terms	to	consumers,	such	as	the	form	and	timing	of	payment.	Although	we	will	incur	additional	payment	processing costs	and	chargebacks	related	to	these	transactions,	which	are	recorded	as	sales	and	marketing	expenses	in	our	statement	of	operations	and	which	will	negatively	impact our	operating	margins,	we	believe	that	adding	these	types	of	properties	and	service	offerings	will	benefit	our	customers	and	our	gross	bookings,	room	night	and	earnings growth	rates.

Concerns	persist	about	the	outlook	for	the	global	economy	in	general,	including	uncertainty	in	the	European	Union	and	China.	Perceived	or	actual	adverse economic	conditions,	including	slow,	slowing	or	negative	economic	growth,	unemployment	rates	and	weakening	currencies	and	concerns	over	government	responses such	as	higher	taxes	and	reduced	government	spending,	could	impair	consumer	spending	and	adversely	affect	travel	demand.	Further,	uncertainty	regarding	the	future	of the	European	Union	following	the	United	Kingdom's	vote	to	leave	("Brexit")	and	concerns	regarding	certain	E.U.	members	with	sovereign	debt	default	risks	could	also negatively	affect	consumer	spending	and	adversely	affect	travel	demand.	At	times,	we	have	experienced	volatility	in	transaction	growth	rates,	increased	cancellation rates	and	weaker	trends	in	hotel	ADRs	across	many	regions	of	the	world,	particularly	in	those	countries	that	appear	to	be	most	affected	by	economic	uncertainties, which	we	believe	are	due	at	least	in	part	to	macro-economic	conditions	and	concerns.	For	more	detail,	see	Part	I	Item	1A	Risk	Factors	-	"Declines	or	disruptions	in	the travel	industry	could	adversely	affect	our	business	and	financial	performance."

These	and	other	macro-economic	uncertainties,	such	as	sovereign	default	risk	becoming	more	widespread,	declining	oil	prices,	geopolitical	tensions	and differing	central	bank	monetary	policies,	have	led	to	significant	volatility	in	the	exchange	rates	between	the	U.S.	Dollar	and	the	Euro,	the	British	Pound	Sterling	and other	currencies.	Significant	fluctuations	in	currency	exchange	rates,	stock	markets	and	oil	prices	can	also	impact	consumer	travel	behavior.

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 Euros	and	British	Pounds	Sterling)	into	U.S.	Dollars.	Throughout	2015,	the	U.S.	Dollar	strengthened	significantly	year-over-year	relative	to	substantially	all	currencies in	which	we	transact,	most	notably	the	Euro,	Brazilian	Real,	British	Pound	Sterling,	Russian	Ruble	and	Australian	Dollar.	In	2016,	the	U.S.	Dollar	continued	to	be stronger	year-over-year	relative	to	the	British	Pound	Sterling,	Russian	Ruble	and	many	other	major	currencies	in	which	we	transact.	Since	the	"Brexit"	referendum	in	the United	Kingdom	in	June	2016,	the	U.S.	Dollar	has	strengthened	significantly	against	the	British	Pound	Sterling.	As	a	result	of	these	currency	exchange	rate	changes,	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, although	to	a	much	lesser	extent	in	2016	than	in	2015.	For	example,	gross	profit	from	our	international	operations	grew	22.3%	for	the	year	ended	December	31,	2016 compared	to	the	year	ended	December	31,	2015,	but,	without	the	negative	impact	of	changes	in	currency	exchange	rates,	grew	year-over-year	on	a	constant-currency basis	by	approximately	25%.	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	more	information,	see	Part	I	Item	1A	Risk	Factors	-	"We are	exposed	to	fluctuations	in	currency	exchange	rates."

We	generally	enter	into	derivative	instruments	to	minimize	the	impact	of	short-term	currency	fluctuations	on	the	translation	of	our	consolidated	operating results	into	U.S.	Dollars.	However,	such	derivative	instruments	are	short	term	in	nature	and	not	designed	to	hedge	against	currency	fluctuations	that	could	impact	growth rates	for	our	gross	bookings,	revenues	or	gross	profit	(see	Note	5	to	the	Consolidated	Financial	Statements	for	additional	information	on	our	derivative	contracts).

We	compete	globally	with	both	online	and	traditional	providers	of	travel	and	restaurant	reservation	and	related	services.	The	markets	for	the	services	we	offer are	intensely	competitive	and	current	and	new	competitors	can	launch	new	services	at	a	relatively	low	cost.	Some	of	our	current	and	potential	competitors,	such	as Google,	Apple,	Alibaba,	Amazon	and	Facebook,	have	access	to	significantly	greater	and	more	diversified	resources	than	we	do,	and	they	may	be	able	to	leverage	other aspects	of	their	businesses	(e.g.,	search	or	mobile	device	businesses)	to	enable	them	to	compete	more	effectively	with	us.	For	example,	Google	has	entered	various aspects	of	the	online	travel	market,	including	by	establishing	a	flight	meta-search	product	("Google	Flights")	and	a	hotel	meta-search	business	("Hotel	Ads")	that	are growing	rapidly,	as	well	as	its	"Book	on	Google"	reservation	functionality.	Our	markets	are	also	subject	to	rapidly	changing	conditions,	including	technological developments,	consumer	behavior	changes,	regulatory	changes	and	travel	service	provider	consolidation.	We	expect	these	trends	to	continue.	For	example,	we	have experienced	a	significant	shift	of	both	direct	and	indirect	business	to	mobile	platforms	and	our	advertising	partners	are	also	seeing	a	rapid	shift	of	traffic	to	mobile platforms.	Advertising	and	distribution

opportunities	may	be	more	limited	on	mobile	devices	given	their	smaller	screen	sizes.	In	addition,	the	gross	profit	earned	on	a	mobile	transaction	may	be	less	than	a typical	desktop	transaction	due	to	different	consumer	purchasing	patterns.	For	example,	accommodation	reservations	made	on	a	mobile	device	typically	are	for	shorter lengths	of	stay	and	are	not	made	as	far	in	advance.	For	more	detail	regarding	the	competitive	trends	and	risks	we	face,	see	Part	I	Item	1	Business	-	"Competition",	Part	I Item	1A	Risk	Factors	-	"Intense	competition	could	reduce	our	market	share	and	harm	our	financial	performance."	and	"Consumer	adoption	and	use	of	mobile	devices creates	new	challenges	and	may	enable	device	companies	such	as	Apple	to	compete	directly	with	us."	and	"We	may	not	be	able	to	keep	up	with	rapid	technological changes."

We	have	observed	an	increase	in	promotional	pricing	to	closed	user	groups	(such	as	loyalty	program	participants	or	consumers	with	registered	accounts), including	through	mobile	apps.	For	example,	Marriott	International,	Hilton,	Hyatt	Hotels,	InterContinental	Hotel	Group	and	Choice	Hotels	International	have	launched additional	initiatives	to	encourage	consumers	to	book	accommodations	directly	through	their	websites,	with	increased	discounting	and	incentives.

In	addition	to	providing	retail	travel	reservation	services,	our	priceline.com	brand	is	a	leading	provider	of	discounted	opaque	travel	reservation	services	in	the United	States	through	its	Name	Your	Own	Price®	and	Express	Deals®	offerings.	These	discounted	services	are	referred	to	as	"opaque"	because	certain	elements	of	the reservation,	including	the	name	of	the	travel	service	provider,	are	not	made	known	to	the	traveler	until	after	the	reservation	is	made.	In	general,	we	expect	that	over	time our	opaque	services	will	continue	to	decrease	in	relative	importance	to	our	overall	business	due,	we	believe,	to	a	variety	of	factors,	including	the	growth	rates	of	our	retail businesses,	competition,	relative	complexity,	travel	restrictions	often	required	by	the	travel	service	provider,	difficulty	in	offering	these	services	on	mobile	devices, increased	discounts	available	to	consumers	through	closed	user	groups,	and	limited	availability	of	discounted	travel	reservations	from	travel	service	providers, particularly	during	periods	of	high	consumer	demand.

We	have	established	widely	used	and	recognized	e-commerce	brands	through	marketing	and	promotional	campaigns.	Both	our	performance	and	brand advertising	expenses	have	increased	significantly	in	recent	years,	a	trend	we	expect	to	continue.	For	the	years	ended	December	31,	2016,	2015	and	2014,	our	total performance	advertising	expense	was	approximately	$3.5	billion,	$2.7	billion	and	$2.3	billion,	respectively,	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	$296	million, $274	million	and	$257	million	in	brand	advertising	during	2016,	2015	and	2014,	respectively,	primarily	related	to	costs	associated	with	producing	and	airing	television advertising,	online	video	advertising	(for	example,	on	YouTube	and	Facebook)	and	online	display	advertising.	We	intend	to	continue	a	strategy	of	promoting	brand awareness	through	both	online	and	offline	advertising	efforts,	including	by	expanding	brand	campaigns	into	additional	markets.	We	have	observed	increased	brand advertising	by	OTCs,	meta-search	services	and	travel	service	providers,	particularly	in	North	America	and	Europe,	which	may	make	our	brand	advertising	efforts	more expensive	and	less	effective.

Performance	advertising	efficiency,	expressed	as	performance	advertising	expense	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	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.	For	example,	competition	for	desired rankings	in	search	results	and/or	a	decline	in	ad	clicks	by	consumers	could	increase	our	costs-per-click	and	reduce	our	performance	advertising	efficiency.	We	have	also experienced	increasing	cancellation	rates,	which	we	expect	to	continue	and	which	negatively	affects	our	advertising	efficiency	and	results	of	operations.	Changes	by Google	in	how	it	presents	travel	search	results,	including	by	placing	its	own	offerings	at	or	near	the	top	of	search	results,	or	the	manner	in	which	it	conducts	the	auction for	placement	among	search	results	may	be	competitively	disadvantageous	to	us	and	may	impact	our	ability	to	efficiently	generate	traffic	to	our	websites.	We	have observed	a	long-term	trend	of	decreasing	performance	advertising	returns	on	investment	("ROIs"),	a	trend	we	expect	to	continue,	though	the	rate	of	decrease	may fluctuate	and	there	may	be	periods	of	stable	or	increasing	ROIs	from	time	to	time.	See	Part	I	Item	1A	Risk	Factors	-	"We	rely	on	performance	and	brand	advertising channels	to	generate	a	significant	amount	of	traffic	to	our	websites	and	grow	our	business."	and	"Our	business	could	be	negatively	affected	by	changes	in	Internet search	engine	algorithms	and	dynamics	or	traffic-generating	arrangements."

The	national	competition	authorities	("NCAs")	of	many	governments	have	conducted	or	are	conducting	investigations	into	competitive	practices	within	the online	travel	industry,	and	we	may	be	involved	or	affected	by	such	investigations	and	their	results.	Some	countries	have	adopted	or	proposed	legislation	that	could	also affect	business	practices	within	the	online	travel	industry.	For	example,	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,	and	similar	legislation	may	be	enacted	in	other	counties.	For	more	information	on	these investigations	and	their	potential	effects	on	our	business,	see	Note	14	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."

# Other	Factors

We	believe	that	our	future	success	depends	in	large	part	on	our	ability	to	continue	to	profitably	grow	our	brands	worldwide,	and,	over	time,	to	offer	other	travel and	travel-related	services.	Factors	beyond	our	control,	such	as	worldwide	recession,	oil	prices,	terrorist	attacks,	unusual	or	extreme	weather	or	natural	disasters	such	as earthquakes,	hurricanes,	tsunamis,	floods,	droughts	and	volcanic	eruptions,	travel-related	health	concerns	including	pandemics	and	epidemics	such	as	Ebola,	Zika, Influenza	H1N1,	avian	bird	flu,	SARS	and	MERS,	political	instability,	regional	hostilities,	imposition	of	taxes	or	surcharges	by	regulatory	authorities	or	travel-related accidents,	can	disrupt	travel	or	otherwise	result	in	declines	in	travel	demand.	Because	these	events	or	concerns	are	largely	unpredictable,	they	can	dramatically	and suddenly	affect	travel	behavior	by	consumers,	and	therefore	demand	for	our	services,	which	can	adversely	affect	our	business	and	results	of	operations.	See	Part	I	Item 1A	Risk	Factors	-	"Declines	or	disruptions	in	the	travel	industry	could	adversely	affect	our	business	and	financial	performance."

We	intend	to	continue	to	invest	in	marketing	and	promotion,	technology	and	personnel	within	parameters	consistent	with	attempts	to	improve	long-term operating	results,	even	if	those	expenditures	create	pressure	on	operating	margins.	We	have	experienced	pressure	on	operating	margins	as	we	prioritize	initiatives	that drive	growth.	We	also	intend	to	broaden	the	scope	of	our	business,	and	to	that	end,	we	explore	strategic	alternatives	from	time	to	time	in	the	form	of,	among	other	things, mergers	and	acquisitions.	Our	goal	is	to	grow	gross	profit	and	achieve	healthy	operating	margins	in	an	effort	to	maintain	profitability.	The	uncertain	and	highly competitive	environment	in	which	we	operate	makes	the	prediction	of	future	results	of	operations	difficult,	and	accordingly,	we	may	not	be	able	to	sustain	gross	profit growth	and	profitability.

# Critical	Accounting	Policies	and	Estimates

Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	is	based	upon	our	Consolidated	Financial	Statements,	which	have been	prepared	in	accordance	with	accounting	principles	generally	accepted	in	the	United	States.	Our	significant	accounting	policies	and	estimates	are	more	fully described	in	Note	2	to	the	Consolidated

Financial	Statements.	Certain	of	our	accounting	estimates	are	particularly	important	to	our	financial	position	and	results	of	operations	and	require	us	to	make	difficult and	subjective	judgments,	often	as	a	result	of	the	need	to	make	estimates	of	matters	that	are	inherently	uncertain.	Our	management	uses	its	judgment	to	determine	the appropriate	assumptions	to	be	used	in	the	determination	of	certain	estimates.	We	evaluate	our	estimates	on	an	ongoing	basis.	Estimates	are	based	on,	among	other things,	historical	experience,	terms	of	existing	contracts,	our	observance	of	trends	in	the	travel	industry	and	on	various	other	assumptions	that	we	believe	to	be reasonable	under	the	circumstances.	Our	actual	results	may	differ	from	these	estimates	under	different	assumptions	or	conditions.	Our	critical	accounting	policies	that involve	significant	estimates	and	judgments	of	management	include	the	following:

•Stock-Based	Compensation.	We	record	stock-based	compensation	expense	for	equity-based	awards	over	the	recipient's	service	period	based	upon	the grant	date	fair	value	of	the	award.	A	number	of	our	equity	awards	have	performance	targets	(a	performance	"contingency")	which,	if	satisfied,	can increase	the	number	of	shares	issued	to	the	recipients	at	the	end	of	the	performance	period	or,	in	certain	instances,	if	not	satisfied,	reduce	the	number of	shares	issued	to	the	recipients,	sometimes	to	zero,	at	the	end	of	the	performance	period.	The	performance	periods	for	our	performance	based	equity awards	are	typically	three	years.	We	record	stock-based	compensation	expense	for	these	performance-based	awards	based	upon	our	estimate	of	the probable	outcome	at	the	end	of	the	performance	period	(i.e.,	the	estimated	performance	against	the	performance	targets).	We	periodically	adjust	the cumulative	stock-based	compensation	expense	recorded	when	the	probable	outcome	for	these	performance-based	awards	is	updated	based	upon changes	in	actual	and	forecasted	operating	results.	Stock-based	compensation	expense	for	the	years	ended	December	31,	2016,	2015	and	2014	includes charges	amounting	to	$20.7	million,	$22.6	million	and	$20.6	million,	respectively,	representing	the	impact	of	adjusting	the	estimated	probable outcome	of	unvested	performance	share	units.	Our	actual	performance	against	the	performance	targets	could	differ	materially	from	our	estimates.

We	record	stock-based	compensation	expense	net	of	estimated	forfeitures.	In	determining	the	estimated	forfeiture	rates,	we	periodically	review	actual forfeitures	and	update	our	estimates	for	future	forfeitures,	if	necessary.	To	the	extent	that	actual	forfeiture	rates	differ	from	current	estimates,	a cumulative	expense	adjustment	is	recorded	in	the	period	in	which	the	estimate	is	revised	(see	"Recent	Accounting	Pronouncements"	described	in	Note 2	to	the	Consolidated	Financial	Statements	for	accounting	changes	that	are	effective	January	1,	2017).

•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.	A	substantial	portion	of	our	intangibles	and	goodwill	relates	to	the	acquisitions	of	OpenTable	in	July	2014	and	KAYAK	in	May	2013.	As of	September	30,	2016,	we	performed	our	annual	goodwill	impairment	testing.	Other	than	OpenTable,	the	fair	values	of	our	reporting	units substantially	exceeded	their	respective	carrying	values.	For	OpenTable,	we	recognized	a	non-cash	impairment	charge	for	goodwill	of	$940.7	million, which	is	not	tax	deductible,	resulting	in	an	adjusted	carrying	value	of	OpenTable	goodwill	of	$580.1	million	as	of	September	30,	2016.	The	goodwill impairment	charge	was	included	in	operating	expenses	in	the	Consolidated	Statement	of	Operations	for	the	year	ended	December	31,	2016.

OpenTable's	estimated	fair	value	was	determined	using	a	combination	of	standard	valuation	techniques,	including	an	income	approach	(discounted cash	flows)	and	market	approaches	(EBITDA	multiples	of	comparable	publicly-traded	companies	and	precedent	transactions).	Since	the	annual impairment	test	as	of	September	30,	2016,	there	have	been	no	further	events	or	changes	in	circumstances	to	indicate	a	potential	impairment.

The	goodwill	impairment	is	primarily	the	result	of	a	change	in	OpenTable's	business	strategy	that	occurred	during	the	third	quarter	of	2016. OpenTable's	post-acquisition	strategy	was	premised	on	significant	and	rapid	investment	in	international	expansion	and	various	other	growth initiatives,	resulting	in	near-term	reduced	earnings	and	profit	margins	but	with	the	goal	of	achieving	significantly	increased	revenues	and	profitability

in	the	long	term.	This	strategy	has	resulted	in	limited	progress	to	date.	As	a	result,	while	OpenTable	intends	to	continue	to	pursue	and	invest	in international	expansion	and	its	other	growth	initiatives,	it	intends	to	do	so	in	a	more	measured	and	deliberate	manner.	This	change	in	strategy	resulted in	OpenTable	updating	its	forecasted	financial	results	to	reflect	(a)	a	material	reduction	in	forecasted	long-term	financial	results	from	these	initiatives, partially	offset	by	(b)	improved	earnings	and	profit	margins	in	the	near	term	as	a	result	of	the	reduced	investments.	Based	on	the	updated	forecast,	we estimated	a	significant	reduction	in	the	fair	value	of	the	OpenTable	business	and	recorded	the	goodwill	impairment	discussed	above.

Future	events	and	changing	market	conditions	may	lead	us	to	again	re-evaluate	the	assumptions	reflected	in	the	updated	forecast,	including	key assumptions	regarding	OpenTable's	expected	growth	rates	and	operating	margins	and	the	success	and	timing	of	its	international	expansion	and	other growth	initiatives,	as	well	as	other	key	assumptions	with	respect	to	matters	outside	of	our	control,	such	as	discount	rates,	currency	exchange	rates, market	EBITDA	comparables,	and	changes	in	accounting	policies	or	practices,	including	the	January	2017	accounting	update	that	changes	the goodwill	impairment	testing	methodology	(see	Note	2	to	the	Consolidated	Financial	Statements).	If	OpenTable	does	not	achieve	the	results	currently expected,	its	investments,	in	particular	its	investments	in	its	international	expansion	efforts	and	other	growth	initiatives,	are	not	successful,	or	any	of the	assumptions	underlying	our	estimate	of	the	value	of	the	OpenTable	business,	including	those	mentioned	above,	prove	to	be	incorrect,	we	may further	refine	our	forecast	for	the	OpenTable	business	and	recognize	an	additional	goodwill	impairment,	which	could	have	a	material	adverse	effect	on our	results	of	operations.

Additionally,	we	evaluate	whether	events	or	circumstances	have	occurred	which	indicate	that	the	carrying	amounts	of	long-lived	assets	and intangibles	may	not	be	recoverable.	The	significant	factors	that	are	considered	that	could	trigger	an	impairment	review	include	changes	in	business strategies,	market	conditions,	or	the	manner	of	use	of	an	asset;	under	performance	relative	to	historical	or	expected	future	operating	results;	and negative	industry	or	economic	trends.	In	evaluating	an	asset	for	possible	impairment,	management	estimates	that	asset's	future	undiscounted	cash flows	to	measure	whether	the	carrying	value	of	the	asset	is	recoverable.	If	it	is	determined	that	the	asset	is	not	recoverable,	we	measure	the	impairment based	upon	the	fair	value	of	the	asset	compared	to	its	carrying	value.	The	fair	value	represents	the	projected	discounted	cash	flows	of	the	asset	over	its remaining	life.	We	tested	the	recoverability	of	OpenTable's	other	long-lived	assets	and	concluded	there	was	no	impairment	as	of	September	30,	2016.

•Income	Taxes.	We	determine	our	tax	expense	based	on	our	income	and	statutory	tax	rates	applicable	in	the	various	jurisdictions	in	which	we	operate. Due	to	the	complex	nature	of	tax	legislation	and	frequent	changes	with	such	associated	legislation,	significant	judgment	is	required	in	computing	our tax	expense	and	determining	our	tax	positions.	We	regularly	review	our	deferred	tax	assets	for	recoverability	considering	historical	profitability, projected	future	taxable	income,	the	expected	timing	of	the	reversals	of	temporary	differences	and	tax	planning	strategies	and	record	valuation allowances	as	required.

We	are	subject	to	ongoing	tax	examinations	and	assessments	in	various	jurisdictions.	To	date,	we	have	been	audited	in	several	taxing	jurisdictions with	no	significant	impact	on	our	financial	condition,	results	of	operations	or	cash	flows.	Although	we	believe	that	our	tax	filing	positions	are reasonable,	the	final	determination	of	tax	audits	or	tax	disputes	may	be	different	from	what	is	reflected	in	our	historical	income	tax	provisions	and accruals.	Accordingly,	we	may	incur	additional	tax	expense	based	upon	our	assessment	of	the	more	likely	than	not	outcomes	or	we	may	adjust previously	recorded	tax	expense	to	reflect	examination	results.

We	intend	to	indefinitely	reinvest	the	unremitted	earnings	of	our	international	subsidiaries	outside	of	the	United	States.	At	December	31,	2016	and 2015,	we	had	approximately	$13.0	billion	and	$9.9	billion,	respectively,	of	cumulative	unremitted	international	earnings.	We	estimate	that	the deferred	tax	liability	we	would	record	if	such	earnings	were	not	indefinitely	reinvested	internationally	is	approximately	$2.3	billion	as	of December	31,	2016.

Recent	Accounting	Pronouncements	-	See	Note	2	to	the	Consolidated	Financial	Statements	for	details,	which	is	incorporated	into	this	Item	7	by	reference thereto.

# Results	of	Operations

# Operating	and	Statistical	Metrics

Our	financial	results	are	driven	by	certain	operating	metrics	that	encompass	the	booking	and	other	business	activity	generated	by	our	travel	and	travel-related services.		Specifically,	reservations	of	accommodation	room	nights,	rental	car	days	and	airline	tickets	capture	the	volume	of	units	booked	through	our	OTC	brands	by our	travel	reservation	services	customers.		Gross	bookings	is	an	operating	and	statistical	metric	that	captures	the	total	dollar	value,	generally	inclusive	of	taxes	and	fees, of	all	travel	services	booked	through	our	OTC	brands	by	our	customers,	net	of	cancellations,	and	is	widely	used	in	the	travel	business.	Our	non-OTC	brands	(KAYAK and	OpenTable)	have	different	business	metrics	from	those	of	our	OTC	brands	and	therefore	search	queries	through	KAYAK	and	restaurant	reservations	through OpenTable	do	not	contribute	to	our	gross	bookings.

Gross	bookings	resulting	from	reservations	of	accommodation	room	nights,	rental	car	days	and	airline	tickets	made	through	our	agency	and	merchant	models for	the	years	ended	December	31,	2016	and	2015	were	as	follows	(numbers	may	not	total	due	to	rounding):

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | (in\tmillions) | (in\tmillions) |  |
|  | 2016 | 2015 | Change |
| Agency | $58,638 | $47,969 | 22.2% |
| Merchant | 9,449 | 7,559 | 25.0% |
| Total | $68,087 | $55,528 | 22.6% |

Gross	bookings	increased	by	22.6%	for	the	year	ended	December	31,	2016,	compared	to	the	year	ended	December	31,	2015	(growth	on	a	constant-currency basis	was	approximately	25%),	principally	due	to	growth	of	28.7%	in	accommodation	room	night	reservations	and	growth	of	11.2%	in	rental	car	day	reservations, partially	offset	by	the	impact	of	foreign	exchange	rate	fluctuations,	a	slight	decrease	in	accommodation	ADRs	(the	decline	on	a	constant-currency	basis	was	less	than 1%)	and	decreases	in	airfares	and	airline	ticket	reservations.	We	believe	that	unit	growth	rates	and	total	gross	bookings	and	gross	profit	growth	on	a	constant-currency basis,	each	of	which	exclude	the	impact	of	foreign	exchange	rate	fluctuations,	are	important	measures	to	understand	the	fundamental	performance	of	the	business.

Agency	gross	bookings	are	derived	from	travel-related	transactions	where	we	do	not	facilitate	payments	for	the	travel	services	provided.	Agency	gross bookings	increased	by	22.2%	for	the	year	ended	December	31,	2016,	compared	to	the	year	ended	December	31,	2015,	primarily	due	to	growth	in	gross	bookings	from Booking.com	agency	retail	accommodation	room	night	reservations.

Merchant	gross	bookings	are	derived	from	services	where	we	facilitate	payments	for	the	travel	services	provided.	Merchant	gross	bookings	increased	by	25.0% for	the	year	ended	December	31,	2016,	compared	to	the	year	ended	December	31,	2015,	primarily	due	to	growth	in	gross	bookings	from	the	merchant	accommodation reservation	services	for	Booking.com	and	agoda.com,	the	merchant	rental	car	reservation	service	for	Rentalcars.com	and	the	merchant	airline	ticket	reservation	service for	priceline.com.

Accommodation	room	nights,	rental	car	days	and	airline	tickets	reserved	through	our	services	for	the	years	ended	December	31,	2016	and	2015	were	as follows:

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | (in\tmillions) | (in\tmillions) |  |
|  | 2016 | 2015 | Change |
| Room\tNights | 556.6 | 432.3 | 28.7\t% |
| Rental\tCar\tDays | 66.6 | 59.9 | 11.2\t% |
| Airline\tTickets | 7.3 | 7.7 | (5.2)% |

Accommodation	room	night	reservations	increased	by	28.7%	for	the	year	ended	December	31,	2016,	compared	to	the	year	ended	December	31,	2015,	primarily due	to	strong	execution	by	our	brand	teams	to	add	accommodations	to	our	websites,

advertise	our	brands	to	consumers	and	provide	a	continuously	improving	experience	for	customers	on	our	desktop	and	mobile	platforms.

Rental	car	day	reservations	increased	by	11.2%	for	the	year	ended	December	31,	2016,	compared	to	the	year	ended	December	31,	2015,	due	to	an	increase	in rental	car	day	reservations	for	Rentalcars.com.

Airline	ticket	reservations	decreased	by	5.2%	for	the	year	ended	December	31,	2016,	compared	to	the	year	ended	December	31,	2015,	due	to	a	decline	in priceline.com's	retail	airline	ticket	reservations	and	the	discontinuation	on	September	1,	2016	of	priceline.com's	Name	Your	Own	Price®	airline	ticket	reservation offering,	partially	offset	by	an	increase	in	priceline.com's	Express	Deals®	airline	ticket	reservations.

# Revenues

We	classify	our	revenue	into	three	categories:

•Agency	revenues	are	derived	from	travel-related	transactions	where	we	do	not	facilitate	payments	for	the	travel	services	provided.	Agency	revenues	consist primarily	of	travel	reservation	commissions,	as	well	as	certain	GDS	reservation	booking	fees	and	travel	insurance	fees,	and	are	reported	at	the	net	amounts received,	without	any	associated	cost	of	revenue.	Substantially	all	of	the	revenue	for	Booking.com	is	agency	revenue	comprised	of	accommodation reservation	commissions.

•Merchant	revenues	are	derived	from	services	where	we	facilitate	payments	for	the	travel	services	provided.	Merchant	revenues	include	(1)	transaction	net revenues	(i.e.,	the	amount	charged	to	a	customer,	less	the	amount	charged	to	us	by	travel	service	providers)	and	travel	reservation	commissions	in connection	with	(a)	the	accommodation	reservations	provided	through	our	merchant	retail	accommodation	reservation	services	at	agoda.com,

Booking.com	and	priceline.com	and	(b)	the	reservations	provided	through	our	merchant	rental	car	service	at	Rentalcars.com	and	priceline.com's	Express Deals®	reservation	services;	(2)	transaction	revenues	representing	the	price	of	Name	Your	Own	Price®	reservations	charged	to	a	customer	(with	a corresponding	travel	service	provider	cost	recorded	in	cost	of	revenues);	(3)	ancillary	fees,	including	damage	excess	waiver	and	travel	insurance	fees	and certain	GDS	reservation	booking	fees;	and	(4)	customer	processing	fees	charged	in	connection	with	(a)	priceline.com's	opaque	reservation	services	and	(b) the	merchant	retail	accommodation	reservation	services	at	priceline.com	and	agoda.com.

•Advertising	and	other	revenues	are	derived	primarily	from	(1)	revenues	earned	by	KAYAK	for	(a)	sending	referrals	to	OTCs	and	travel	service	providers and	(b)	advertising	placements	on	KAYAK's	websites	and	mobile	apps;	(2)	revenues	earned	by	OpenTable	for	(a)	reservation	fees	(fees	paid	by	restaurants for	diners	seated	through	OpenTable's	online	reservation	service)	and	(b)	subscription	fees	earned	by	OpenTable	for	restaurant	reservation	management services;	(3)	revenues	earned	by	priceline.com	for	advertising	on	its	websites;	and	(4)	revenues	generated	by	Booking.com's	BookingSuite	branded accommodation	marketing	and	business	analytics	services.

# Year	Ended	December	31,

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) | (in\tthousands) |  |
|  | 2016 | 2015 | Change |
| Agency\tRevenues | $7,982,116 | $6,527,898 | 22.3\t% |
| Merchant\tRevenues | 2,048,005 | 2,082,973 | (1.7)% |
| Advertising\tand\tOther\tRevenues | 712,885 | 613,116 | 16.3\t% |
| Total\tRevenues | $10,743,006 | $9,223,987 | 16.5\t% |

# Agency	Revenues

Agency	revenues	increased	by	22.3%	for	the	year	ended	December	31,	2016,	compared	to	the	year	ended	December	31,	2015,	primarily	as	a	result	of	growth	in agency	accommodation	room	night	reservations	at	Booking.com.

# Merchant	Revenues

Merchant	revenues	decreased	by	1.7%	for	the	year	ended	December	31,	2016,	compared	to	the	year	ended	December	31,	2015,	primarily	due	to	decreases	in revenues	from	priceline.com's	Name	Your	Own	Price®	reservation	services,

partially	offset	by	increases	in	our	merchant	price-disclosed	accommodation	reservation	services,	particularly	at	Booking.com,	as	well	as	our	merchant	price-disclosed rental	car	and	airline	ticket	reservation	services.	On	September	1,	2016,	priceline.com's	Name	Your	Own	Price®	airline	ticket	reservation	offering	was	discontinued.	Our priceline.com	Name	Your	Own	Price®	reservation	services,	which	declined	year-over-year,	are	recorded	"gross"	with	a	corresponding	travel	service	provider	cost recorded	in	cost	of	revenues.	Our	other	merchant	revenues,	which	in	total	grew	year-over-year,	are	recorded	in	revenue	"net"	of	travel	service	provider	costs.	As	a	result, changes	in	Name	Your	Own	Price®	reservation	revenue	disproportionately	affect	merchant	revenues	as	compared	to	our	other	merchant	revenues.

# Advertising	and	Other	Revenues

Advertising	and	other	revenues	during	the	year	ended	December	31,	2016	consisted	primarily	of	advertising	revenues,	restaurant	reservation	revenues	and subscription	revenues	for	restaurant	reservation	management	services.		Advertising	and	other	revenues	increased	by	16.3%	for	the	year	ended	December	31,	2016, compared	to	the	year	ended	December	31,	2015,	primarily	due	to	growth	in	our	KAYAK	business,	reservation	fees	at	OpenTable,	advertising	revenue	at	priceline.com and	subscription	revenue	at	OpenTable.

# Cost	of	Revenues

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) | (in\tthousands) |  |
|  | 2016 | 2015 | Change |
| Cost\tof\tRevenues | $428,314 | $632,180 | (32.2)% |

For	the	year	ended	December	31,	2016,	cost	of	revenues	consisted	primarily	of:	(1)	the	cost	paid	to	travel	service	providers	for	priceline.com's	Name	Your	Own Price®	and	vacation	package	reservation	services,	net	of	applicable	taxes	and	charges;	and	(2)	fees	paid	to	third	parties	by	KAYAK	and	priceline.com	to	return	travel itinerary	information	for	consumer	search	queries.	Cost	of	revenues	decreased	by	32.2%	for	the	year	ended	December	31,	2016,	compared	to	the	year	ended December	31,	2015,	primarily	due	to	a	decrease	in	priceline.com's	Name	Your	Own	Price®	reservation	services.	Cost	of	revenues	for	the	year	ended	December	31,	2016 was	positively	impacted	by	a	reduction	of	travel	transaction	taxes	of	$5.1	million	recorded	in	the	third	quarter	of	2016	related	to	a	cash	refund	from	the	State	of	Hawaii based	on	a	favorable	ruling	in	the	first	quarter	of	2015.	Cost	of	revenues	for	the	year	ended	December	31,	2015	was	positively	impacted	by	a	reversal	of	previously accrued	travel	transaction	taxes	of	$16.4	million	(including	estimated	interest	and	penalties)	recorded	in	the	first	quarter	of	2015	and	a	reduction	of	travel	transaction taxes	of	$13.7	million	(including	estimated	interest	and	penalties)	recorded	in	the	third	quarter	of	2015,	principally	related	to	a	cash	refund	from	the	State	of	Hawaii,	in both	cases	based	on	the	aforementioned	favorable	ruling.

Agency	revenues	have	no	cost	of	revenue.

# Gross	Profit

|  | Year	Ended	December	31, |  |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) |  |  |
|  | 2016 | 2015 | Change |
| Gross\tProfit | $10,314,692 | $8,591,807 | 20.1% |
| Gross\tMargin | 96.0% | 93.1% |  |

Total	gross	profit	increased	by	20.1%	for	the	year	ended	December	31,	2016,	compared	to	the	year	ended	December	31,	2015	(growth	on	a	constant-currency basis	was	approximately	23%),	primarily	as	a	result	of	the	increased	revenue	discussed	above.		Total	gross	margin	(gross	profit	as	a	percentage	of	total	revenue) increased	during	the	year	ended	December	31,	2016,	compared	to	the	year	ended	December	31,	2015,	because	our	revenues	are	disproportionately	affected	by priceline.com's	Name	Your	Own	Price®	reservation	services.	Name	Your	Own	Price®	revenues	are	recorded	"gross"	with	a	corresponding	travel	service	provider	cost recorded	in	cost	of	revenues,	and	in	the	year	ended	December	31,	2016	these	revenues	represented	a	smaller	percentage	of	total	revenues	than	in	the	year	ended December	31,	2015.	Our	price-disclosed	reservation	services,	which	are	recorded	in	revenue	"net"	of	travel	service	provider	costs,	have	been	growing	and priceline.com's	Name	Your	Own	Price®	reservation	services	have	been	declining.	As	a	result,	we	believe	that	gross	profit	is	an	important	measure	for	evaluating	growth in	our	business.

Gross	profit	for	the	year	ended	December	31,	2016	was	positively	impacted	by	a	reduction	of	travel	transaction	taxes	of	$5.1	million	recorded	in	the	third quarter	of	2016	related	to	a	cash	refund	from	the	State	of	Hawaii	based	on	a	favorable	ruling	in	the	first	quarter	of	2015.	Gross	profit	for	the	year	ended	December	31, 2015	was	positively	impacted	by	a	reversal	of	previously	accrued	travel	transaction	taxes	of	$16.4	million	(including	estimated	interest	and	penalties)	recorded	in	the first	quarter	of	2015	and	a	reduction	of	travel	transaction	taxes	of	$13.7	million	(including	estimated	interest	and	penalties)	recorded	in	the	third	quarter	of	2015, principally	related	to	a	cash	refund	from	the	State	of	Hawaii,	in	both	cases	based	on	the	aforementioned	favorable	ruling.

Gross	profit	as	a	percentage	of	gross	bookings	was	15.1%	for	the	year	ended	December	31,	2016,	as	compared	to	15.5%	for	the	year	ended	December	31, 2015.	The	decrease	is	due	in	part	to	the	timing	of	booking	versus	travel	resulting	from	the	impact	of	accelerating	gross	bookings	growth	in	the	year	ended	December	31, 2016	and	an	expanding	booking	window	(a	lengthening	of	the	average	time	between	the	making	of	a	travel	reservation	and	the	travel).	Other	contributing	factors	to	the variance	are	business	mix	impacts	and	the	use	of	discounted	closed	user	group	rates.

Our	international	operations	accounted	for	approximately	$9.1	billion	of	our	gross	profit	for	the	year	ended	December	31,	2016,	compared	to	$7.4	billion	for	the year	ended	December	31,	2015.	Gross	profit	attributable	to	our	international	operations	increased	by	22.3%	for	the	year	ended	December	31,	2016	compared	to	the	year ended	December	31,	2015	(growth	on	a	constant-currency	basis	was	approximately	25%).	Gross	profit	attributable	to	our	U.S.	businesses	increased	by	5.7%	for	the	year ended	December	31,	2016,	compared	to	the	year	ended	December	31,	2015	due	to	growth	in	gross	profit	for	the	U.S.	businesses	of	KAYAK	and	OpenTable,	partially offset	by	a	decrease	in	gross	profit	for	priceline.com	resulting	from	higher	favorable	travel	transaction	tax	adjustments	recorded	in	2015	as	compared	to	2016.

# Operating	Expenses

|  | Year	Ended	December	31, |  |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) |  |  |
|  | 2016 | 2015 | Change |
| Performance\tAdvertising | $3,479,287 | $2,738,218 | 27.1% |
| %\tof\tTotal\tGross\tProfit | 33.7% | 31.9% |  |
| Brand\tAdvertising | $295,698 | $273,704 | 8.0% |
| %\tof\tTotal\tGross\tProfit | 2.9% | 3.2% |  |

Performance	advertising	expenses	consist	primarily	of	the	costs	of	(1)	search	engine	keyword	purchases;	(2)	referrals	from	meta-search	and	travel	research websites;	(3)	affiliate	programs;	and	(4)	other	performance-based	advertisements.	For	the	year	ended	December	31,	2016,	performance	advertising	expenses	increased compared	to	the	year	ended	December	31,	2015,	primarily	to	generate	increased	gross	bookings	and	gross	profit.	Performance	advertising	as	a	percentage	of	gross	profit for	the	year	ended	December	31,	2016	increased	compared	to	the	year	ended	December	31,	2015	due	to	growth	of	paid	traffic	channels,	a	year-over-year	decline	in advertising	ROIs	and	timing	of	booking	versus	travel	resulting	from	acceleration	in	gross	bookings	growth	during	the	year.

Brand	advertising	expenses	are	primarily	related	to	our	Booking.com,	KAYAK,	priceline.com	and	agoda.com	businesses	and	consist	mainly	of	television advertising,	online	video	advertising	(including	the	airing	of	our	television	advertising	online)	and	online	display	advertising.	For	the	year	ended	December	31,	2016, brand	advertising	expenses	increased	compared	to	the	year	ended	December	31,	2015,	primarily	due	to	increased	online	video	and	television	advertising,	including associated	production	costs,	at	Booking.com,	partially	offset	by	lower	television	advertising	at	KAYAK	and	priceline.com.

In	January	2016,	we	changed	the	presentation	of	advertising	expenses	in	the	Consolidated	Statements	of	Operations	(see	Note	2	to	the	Consolidated	Financial Statements).

# Sales	and	Marketing

|  | Year	Ended	December	31, |  |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) |  |  |
|  | 2016 | 2015 | Change |
| Sales\tand\tMarketing | $435,225 | $353,221 | 23.2% |
| %\tof\tTotal\tGross\tProfit | 4.2% | 4.1% |  |

Sales	and	marketing	expenses	consist	primarily	of	(1)	credit	card	and	other	payment	processing	fees	associated	with	merchant	transactions;	(2)	fees	paid	to third	parties	that	provide	call	center,	website	content	translations	and	other	services;	(3)	customer	relations	costs;	(4)	provisions	for	customer	chargebacks	associated with	merchant	transactions;	(5)	provisions	for	bad	debt,	primarily	related	to	agency	accommodation	commission	receivables;	and	(6)	promotional	and	trade	show	costs. For	the	year	ended	December	31,	2016,	sales	and	marketing	expenses,	which	are	substantially	variable	in	nature,	increased	compared	to	the	year	ended	December	31, 2015	due	primarily	to	increased	transaction	volumes	and	a	higher	provision	for	customer	chargebacks	associated	with	merchant	transactions.

# Personnel

|  | Year	Ended	December	31, |  |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) |  |  |
|  | 2016 | 2015 | Change |
| Personnel | $1,350,032 | $1,166,226 | 15.8% |
| %\tof\tTotal\tGross\tProfit | 13.1% | 13.6% |  |

Personnel	expenses	consist	of	compensation	to	our	personnel,	including	salaries,	stock-based	compensation,	bonuses,	payroll	taxes,	and	employee	health	and other	benefits.	Personnel	expenses	increased	during	the	year	ended	December	31,	2016,	compared	to	the	year	ended	December	31,	2015,	due	primarily	to	increased headcount	to	support	the	growth	of	our	businesses.

# General	and	Administrative

|  | Year	Ended	December	31, |  |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) |  |  |
|  | 2016 | 2015 | Change |
| General\tand\tAdministrative | $455,909 | $415,420 | 9.7% |
| %\tof\tTotal\tGross\tProfit | 4.4% | 4.8% |  |

General	and	administrative	expenses	consist	primarily	of:	(1)	occupancy	and	office	expenses;	(2)	personnel-related	expenses	such	as	travel,	recruiting	and training	expenses;	and	(3)	fees	for	outside	professionals,	including	litigation	expenses.	General	and	administrative	expenses	increased	during	the	year	ended December	31,	2016,	compared	to	the	year	ended	December	31,	2015,	due	primarily	to	higher	occupancy	and	office	expenses	related	to	the	expansion	of	our	international businesses,	higher	fees	for	outside	professionals	and	higher	personnel-related	expenses	related	to	increased	headcount	in	our	businesses.	These	increases	were	partially offset	by	$7.7	million	of	expense	recognized	in	2015	for	a	fair	value	adjustment	to	the	contingent	liability	related	to	an	acquisition.

# Information	Technology

|  | Year	Ended	December	31, |  |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) |  |  |
|  | 2016 | 2015 | Change |
| Information\tTechnology | $142,393 | $113,617 | 25.3% |
| %\tof\tTotal\tGross\tProfit | 1.4% | 1.3% |  |

Information	technology	expenses	consist	primarily	of:	(1)	software	license	and	system	maintenance	fees;	(2)	data	communications	and	other	expenses associated	with	operating	our	services;	(3)	outsourced	data	center	costs;	and	(4)	payments	to	outside	consultants.	Information	technology	expenses	increased	during	the year	ended	December	31,	2016,	compared	to	the	year	ended	December	31,	2015,	due	primarily	to	growth	in	our	worldwide	operations.

# Depreciation	and	Amortization

|  | Year	Ended	December	31, |  |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) |  |  |
|  | 2016 | 2015 | Change |
| Depreciation\tand\tAmortization | $309,135 | $272,494 | 13.4% |
| %\tof\tTotal\tGross\tProfit | 3.0% | 3.2% |  |

Depreciation	and	amortization	expenses	consist	of:	(1)	amortization	of	intangible	assets	with	determinable	lives;	(2)	depreciation	on	computer	equipment;	(3) depreciation	of	internally	developed	and	purchased	software;	and	(4)	depreciation	of	leasehold	improvements,	furniture	and	fixtures	and	office	equipment.	Depreciation and	amortization	expenses	increased	during	the	year	ended	December	31,	2016,	compared	to	the	year	ended	December	31,	2015,	primarily	as	a	result	of	increased depreciation	expenses	due	to	capital	expenditures	for	additional	data	center	capacity	and	office	build-outs	to	support	growth	and	geographic	expansion,	as	well	as increased	capitalized	software	development	costs.

#         Impairment	of	Goodwill

During	the	year	ended	December	31,	2016,	we	recognized	a	non-cash	impairment	charge	for	goodwill	related	to	OpenTable,	which	is	not	tax	deductible,	of $940.7	million	(see	Note	9	to	the	Consolidated	Financial	Statements	and	Critical	Accounting	Policies	and	Estimates	included	in	this	Management's	Discussion	and Analysis	of	Financial	Condition	and	Results	of	Operations).

# Other	Income	(Expense)

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) | (in\tthousands) |  |
|  | 2016 | 2015 | Change |
| Interest\tIncome | $94,946 | $55,729 | 70.4\t% |
| Interest\tExpense | (207,900) | (160,229) | 29.8\t% |
| Foreign\tCurrency\tTransactions\tand\tOther | (16,913) | (26,087) | (35.2)% |
| Impairment\tof\tCost-method\tInvestments | (63,208) | — | N/A |
| Total | $(193,075) | $(130,587) | 47.9\t% |

For	the	year	ended	December	31,	2016,	interest	income	on	cash	and	marketable	securities	increased	compared	to	the	year	ended	December	31,	2015,	primarily due	to	an	increase	in	the	average	invested	balance	and	higher	yields.	Interest

expense	increased	for	the	year	ended	December	31,	2016,	compared	to	the	year	ended	December	31,	2015,	primarily	due	to	interest	expense	attributable	to	our	Senior Notes	issued	in	March	2015,	November	2015	and	May	2016,	partially	offset	by	the	maturity	of	our	1.25%	Convertible	Senior	Notes	in	March	2015.	See	Note	10	to	our Consolidated	Financial	Statements.

"Foreign	currency	transactions	and	other"	includes	foreign	exchange	gains	or	losses	on	derivative	contracts,	foreign	exchange	transaction	gains	or	losses, including	costs	related	to	foreign	exchange	transactions,	and	net	realized	gains	or	losses	on	investments.

Derivative	contracts	that	hedge	our	exposure	to	the	impact	of	currency	fluctuations	on	the	translation	of	our	international	operating	results	into	U.S.	Dollars upon	consolidation	resulted	in	foreign	exchange	gains	of	$3.4	million	for	the	year	ended	December	31,	2016,	compared	to	foreign	exchange	losses	of	$6.6	million	for	the year	ended	December	31,	2015.

Foreign	exchange	transaction	losses,	including	costs	related	to	foreign	exchange	transactions,	resulted	in	foreign	exchange	losses	of	$19.6	million	and	$21.0 million	for	the	years	ended	December	31,	2016	and	2015,	respectively.	Foreign	exchange	losses	for	the	year	ended	December	31,	2015	included	approximately	$5.7 million	of	hedging	cost	and	a	foreign	exchange	loss	related	to	the	devaluation	of	the	Argentine	Peso.

For	the	year	ended	December	31,	2016	and	2015,	we	recognized	$1.1	million	and	$2.2	million,	respectively,	of	net	realized	gains	related	to	investments.

During	the	year	ended	December	31,	2016,	we	recognized	impairments	of	$63.2	million,	most	of	which	was	not	tax	deductible,	related	to	cost-method investments	(see	Note	4	to	the	Consolidated	Financial	Statements).

# Income	Taxes

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) | (in\tthousands) |  |
|  | 2016 | 2015 | Change |
| Income\tTax\tExpense | $578,251 | $576,960 | 0.2% |

Our	effective	tax	rates	for	the	years	ended	December	31,	2016	and	2015	were	21.3%	and	18.4%,	respectively.	Our	2016	effective	tax	rate	differs	from	the	U.S. federal	statutory	tax	rate	of	35%,	due	to	lower	international	tax	rates,	partially	offset	by	the	non-deductible	impairment	charge	for	goodwill	of	$940.7	million	related	to OpenTable	recognized	in	2016	(see	Note	9	to	the	Consolidated	Financial	Statements)	and	the	non-deductible	impairment	of	our	cost-method	investment	in	Hotel	Urbano recognized	in	2016	(see	Note	4	to	the	Consolidated	Financial	Statements).	Our	2015	effective	tax	rate	differed	from	the	U.S.	federal	statutory	rate	as	a	result	of	lower international	tax	rates,	partially	offset	by	U.S.	state	income	taxes.

The	non-deductible	impairment	charges	referred	to	above	have	caused	our	effective	tax	rate	to	be	higher	for	the	year	ended	December	31,	2016	compared	to	the year	ended	December	31,	2015.	The	increase	has	been	partially	offset	by	the	favorable	impact	of	an	increased	proportion	of	our	income	being	taxed	at	lower international	tax	rates	due	to	the	growth	of	our	international	businesses	and	the	tax	benefits	recorded	in	2016	arising	from	U.S.	state	tax	law	changes	resulting	in	a	net decrease	to	deferred	tax	liabilities,	mostly	associated	with	acquired	intangible	assets.

A	portion	of	Booking.com's	earnings	during	the	years	ended	December	31,	2016	and	2015	qualified	for	Innovation	Box	Tax	treatment,	which	had	a	significant beneficial	impact	on	the	Company's	effective	tax	rate	for	those	periods.	While	we	expect	Booking.com	to	continue	to	qualify	for	Innovation	Box	Tax	treatment	with respect	to	a	portion	of	its	earnings	for	the	foreseeable	future,	the	loss	of	the	Innovation	Box	Tax	benefit,	whether	due	to	a	change	in	tax	law	or	a	determination	by	the Dutch	government	that	Booking.com's	activities	are	not	"innovative"	or	for	any	other	reason,	would	substantially	increase	our	effective	tax	rate	and	adversely	impact our	results	of	operations.	See	Part	I	Item	1A	Risk	Factors	-	"We	may	not	be	able	to	maintain	our	'Innovation	Box	Tax'	benefit."

Until	our	U.S.	net	operating	loss	carryforwards	are	utilized	or	expire,	most	of	our	U.S.	income	will	not	be	subject	to	a	cash	tax	liability,	other	than	U.S.	federal alternative	minimum	tax	and	state	income	taxes.	However,	we	expect	to	pay	foreign	taxes	on	our	international	income	except	in	countries	where	we	have	net	operating loss	carryforwards.	We	expect	that	our	international	operations	will	grow	their	pretax	income	faster	than	our	U.S.	businesses	over	the	long	term	and,	therefore,	it	is	our expectation	that	our	cash	tax	payments	will	increase	as	our	international	businesses	generate	an	increasing	share	of	our	pretax	income	and	as	our	U.S.	net	operating	loss carryforwards	are	utilized	or	expire.

As	of	December	31,	2016,	we	held	approximately	$12.6	billion	of	cash,	cash	equivalents,	short-term	investments	and	long-term	investments	outside	of	the United	States.	We	intend	to	indefinitely	reinvest	the	earnings	of	our	international	subsidiaries	outside	of	the	United	States.	If	that	intention	changes	and	we	decide	to repatriate	that	cash	to	the	United	States,	whether	due	to	cash	needs	in	the	United	States	or	otherwise,	we	would	incur	related	U.S.	income	tax	expense,	but	we	would	only make	income	tax	payments	when	we	repatriate	the	cash.	We	would	pay	only	U.S.	federal	alternative	minimum	tax	and	U.S.	state	income	taxes	as	long	as	we	have	net operating	loss	carryforwards	available	to	offset	our	U.S.	taxable	income.	As	of	December	31,	2016,	we	had	net	operating	loss	carryforwards	of	$727.8	million	and $583.9	million	for	U.S.	federal	and	state	tax	purposes,	respectively.	If	our	foreign	earnings	were	repatriated,	we	could	be	subject	to	a	cash	income	tax	liability	on	the earnings	of	our	U.S.	businesses	sooner	than	would	otherwise	have	been	the	case.	After	our	net	operating	loss	carryforwards	have	been	fully	utilized	or	expire,	foreign tax	credits	associated	with	the	repatriation	of	international	cash	may	be	used	to	reduce	U.S.	federal	taxes	on	the	repatriation.

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | (in\tmillions) | (in\tmillions) |  |
|  | 2015 | 2014 | Change |
| Agency | $47,969 | $42,892 | 11.8% |
| Merchant | 7,559 | 7,409 | 2.0% |
| Total | $55,528 | $50,300 | 10.4% |

Gross	bookings	increased	by	10.4%	for	the	year	ended	December	31,	2015,	compared	to	the	year	ended	December	31,	2014	(growth	on	a	constant-currency basis	was	approximately	25%),	principally	due	to	growth	of	24.9%	in	accommodation	room	night	reservations,	2%	growth	on	a	constant-currency	basis	in	ADRs	and growth	of	15.6%	in	rental	car	day	reservations,	partially	offset	by	the	impact	foreign	exchange	rate	fluctuations.	We	believe	that	unit	growth	rates	and	total	gross bookings	and	gross	profit	growth	on	a	constant-currency	basis,	each	of	which	exclude	the	impact	of	foreign	exchange	rate	fluctuations,	are	important	measures	to understand	the	fundamental	performance	of	the	business.

Agency	gross	bookings	are	derived	from	travel-related	transactions	where	we	do	not	facilitate	payments	for	the	travel	services	provided.	Agency	gross bookings	increased	11.8%	for	the	year	ended	December	31,	2015,	compared	to	the	year	ended	December	31,	2014,	primarily	due	to	growth	in	gross	bookings	from Booking.com	agency	accommodation	room	night	reservations,	as	well	as	growth	in	gross	bookings	by	priceline.com	and	Rentalcars.com	agency	retail	rental	car reservation	services,	and	priceline.com	and	agoda.com	agency	retail	hotel	reservation	services,	partially	offset	by	lower	retail	airfares.

Merchant	gross	bookings	are	derived	from	services	where	we	facilitate	payments	for	the	travel	services	provided.	Merchant	gross	bookings	increased	2.0%	for the	year	ended	December	31,	2015,	compared	to	the	year	ended	December	31,	2014,	primarily	due	to	increases	in	gross	bookings	by	merchant	retail	hotel	reservation services	for	Booking.com	and	priceline.com,	Rentalcars.com's	rental	car	reservation	service,	and	priceline.com's	Express	Deals®	hotel	reservation	service	as	well	as	the inclusion	of	our	Rocketmiles	hotel	reservation	service	since	its	acquisition	in	February	2015.	These	increases	were	partially	offset	by	declines	in	gross	bookings	by priceline.com's	Name	Your	Own	Price®	reservation	services	and	the	impact	of	the	stronger	U.S.	Dollar	on	agoda.com's	merchant	retail	hotel	reservation	service.	The	U.S. Dollar	was	significantly	stronger	against	the	Euro	and	many	other	currencies	throughout	2015	compared	to	2014,	which	significantly	adversely	affected	the	growth	of our	agency	and	merchant	gross	bookings,	expressed	in	U.S.	Dollars.

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | (in\tmillions) | (in\tmillions) |  |
|  | 2015 | 2014 | Change |
| Room\tNights | 432.3 | 346.0 | 24.9\t% |
| Rental\tCar\tDays | 59.9 | 51.8 | 15.6\t% |
| Airline\tTickets | 7.7 | 7.8 | (1.6)% |

Accommodation	room	night	reservations	increased	by	24.9%	for	the	year	ended	December	31,	2015,	compared	to	the	year	ended	December	31,	2014,	due	to	an increase	in	Booking.com,	agoda.com	and	priceline.com	accommodation	room	night	reservations	and	the	inclusion	of	Rocketmiles	accommodation	room	night reservations	since	its	acquisition	in	February	2015.	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),	compared	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.

Rental	car	day	reservations	increased	by	15.6%	for	the	year	ended	December	31,	2015,	compared	to	the	year	ended	December	31,	2014,	due	to	an	increase	in price-disclosed	rental	car	day	reservations	for	Rentalcars.com	and	priceline.com,	partially	offset	by	a	decline	in	priceline.com's	Name	Your	Own	Price®	rental	car	day reservations.

Airline	ticket	reservations	decreased	by	1.6%	for	the	year	ended	December	31,	2015,	compared	to	the	year	ended	December	31,	2014,	due	to	a	decline	in priceline.com's	Name	Your	Own	Price®	airline	ticket	reservations.

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) | (in\tthousands) |  |
|  | 2015 | 2014 | Change |
| Agency\tRevenues | $6,527,898 | $5,845,802 | 11.7\t% |
| Merchant\tRevenues | 2,082,973 | 2,186,054 | (4.7)% |
| Advertising\tand\tOther\tRevenues | 613,116 | 410,115 | 49.5\t% |
| Total\tRevenues | $9,223,987 | $8,441,971 | 9.3\t% |

Agency	revenues	for	the	year	ended	December	31,	2015	increased	11.7%	compared	to	the	year	ended	December	31,	2014,	primarily	as	a	result	of	growth	in	the business	of	Booking.com,	the	agency	rental	car	businesses	of	Rentalcars.com	and	priceline.com	and	the	agency	hotel	businesses	of	priceline.com	and	agoda.com.	The U.S.	Dollar	was	significantly	stronger	against	the	Euro	and	many	other	currencies	throughout	2015	compared	to	2014,	which	significantly	adversely	affected	the	growth of	our	agency	revenues,	expressed	in	U.S.	Dollars.

Merchant	revenues	for	the	year	ended	December	31,	2015	decreased	4.7%	compared	to	the	year	ended	December	31,	2014,	primarily	due	to	decreases	in revenues	from	priceline.com's	Name	Your	Own	Price®	hotel,	airline	ticket	and	rental	car	reservation	services,	partially	offset	by	increases	in	our	merchant	price- disclosed	hotel	and	rental	car	businesses.	Our	priceline.com	Name	Your	Own	Price®	reservation	services,	which	declined	year-over-year,	are	recorded	"gross"	with	a corresponding	travel	service	provider	cost	recorded	in	cost	of	revenues.	Our	other	merchant	revenues,	which	in	total	grew	year-over-year,	are	recorded	in	revenue	"net" of	travel	service	provider	costs.	As	a	result,	changes	in	Name	Your	Own	Price®	reservation	revenue	disproportionately	affect	merchant	revenues	as	compared	to	our	other merchant	revenues.	The	U.S.	Dollar	was	significantly	stronger	against	the	Euro	and	many	other	currencies	throughout	2015	compared	to	2014,	which	significantly adversely	affected	the	growth	of	our	merchant	revenues,	expressed	in	U.S.	Dollars.

Advertising	and	other	revenues	during	the	year	ended	December	31,	2015	consisted	primarily	of	advertising	revenues,	restaurant	reservation	revenues	and subscription	revenues	for	restaurant	reservation	management	services.		Advertising	and	other	revenues	for	the	year	ended	December	31,	2015	increased	49.5%	compared to	the	year	ended	December	31,	2014,	primarily	as	a	result	of	the	inclusion	of	a	full	year	of	OpenTable	revenues	in	2015	compared	to	only	a	partial	year's	results	in	2014, as	well	as	growth	in	our	KAYAK	business.

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) | (in\tthousands) |  |
|  | 2015 | 2014 | Change |
| Cost\tof\tRevenues | $632,180 | $857,841 | (26.3)% |

For	the	year	ended	December	31,	2015,	cost	of	revenues	consisted	primarily	of:	(1)	the	cost	paid	to	travel	service	providers	for	priceline.com's	Name	Your	Own Price®	and	vacation	package	reservation	services,	net	of	applicable	taxes	and	charges;	and	(2)	fees	paid	to	third	parties	by	KAYAK	and	priceline.com	to	return	travel itinerary	information	for	consumer	search	queries.	Cost	of	revenues	for	the	year	ended	December	31,	2015	decreased	by	26.3%,	compared	to	the	year	ended December	31,	2014,	primarily	due	to	a	decrease	in	priceline.com's	Name	Your	Own	Price®	reservation	services.	For	the	year	ended	December	31,	2015,	cost	of	revenue benefited	from	a	reversal	of	previously	accrued	travel	transaction	taxes	of	$16.4	million	(including	estimated	interest	and	penalties)	recorded	in	the	first	quarter	of	2015 related	to	a	favorable	ruling	in	the	State	of	Hawaii.	In	addition,	for	the	year	ended	December	31,	2015,	we	recognized	a	net	reduction	in	cost	of	revenue	in	the	third quarter	of	2015	of	$13.7	million	related	to	travel	transaction	taxes,	principally	due	to	a	cash	refund	from	the	State	of	Hawaii	for	the	aforementioned	favorable	ruling.

|  | Year	Ended	December	31, |  |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) |  |  |
|  | 2015 | 2014 | Change |
| Gross\tProfit | $8,591,807 | $7,584,130 | 13.3% |
| Gross\tMargin | 93.1% | 89.8% |  |

Total	gross	profit	for	the	year	ended	December	31,	2015	increased	by	13.3%	compared	to	the	year	ended	December	31,	2014	(growth	on	a	constant-currency basis	was	approximately	27%),	primarily	as	a	result	of	the	increased	revenue	discussed	above.		Total	gross	margin	(gross	profit	as	a	percentage	of	total	revenue) increased	during	the	year	ended	December	31,	2015,	compared	to	the	year	ended	December	31,	2014,	because	our	revenues	are	disproportionately	affected	by priceline.com's	Name	Your	Own	Price®	reservation	services.	Name	Your	Own	Price®	revenues	are	recorded	"gross"	with	a	corresponding	travel	service	provider	cost recorded	in	cost	of	revenues,	and	in	the	year	ended	December	31,	2015	these	revenues	represented	a	smaller	percentage	of	total	revenues	than	in	the	year	ended December	31,	2014.	Our	price-disclosed	reservation	services,	which	are	recorded	in	revenue	"net"	of	travel	service	provider	costs,	have	been	growing	faster	than priceline.com's	Name	Your	Own	Price®	reservation	services.	As	a	result,	we	believe	that	gross	profit	is	an	important	measure	for	evaluating	growth	in	our	business.

Our	international	operations	accounted	for	approximately	$7.4	billion	of	our	gross	profit	for	the	year	ended	December	31,	2015,	compared	to	$6.6	billion	for	the year	ended	December	31,	2014.	Gross	profit	attributable	to	our	international	operations	increased	by	11.6%	for	the	year	ended	December	31,	2015	compared	to	the	year ended	December	31,	2014	(growth	on	a	constant-currency	basis	was	approximately	28%).	Gross	profit	attributable	to	our	U.S.	businesses	increased	by	25.0%	for	the	year ended	December	31,	2015,	compared	to	the	year	ended	December	31,	2014.	Gross	profit	for	the	year	ended	December	31,	2015	was	positively	impacted	by	the	inclusion of	OpenTable,	which	benefited	year-over-year	comparisons	through	the	anniversary	of	the	acquisition	on	July	24,	2015.	In	addition,	gross	profit	for	the	year	ended December	31,	2015	was	positively	impacted	by	a	reversal	of	previously	accrued	travel	transaction	taxes	of	$16.4	million	(including	estimated	interest	and	penalties) recorded	in	the	first	quarter	of	2015	related	to	a	favorable	ruling	in	the	State	of	Hawaii.	Gross	profit	for	the	year	ended	December	31,	2015	was	also	positively	impacted by	a	net	reduction	in	cost	of	revenue	in	the	third	quarter	of	2015	of	$13.7	million	related	to	travel	transaction	taxes,	principally	due	to	a	cash	refund	from	the	State	of Hawaii	for	the	aforementioned	favorable	ruling.

The	U.S.	Dollar	was	significantly	stronger	against	the	Euro	and	many	other	currencies	throughout	2015	compared	to	2014.	At	these	exchange	rates,	the	growth of	our	total	and	international	gross	bookings,	expressed	in	U.S.	Dollars,	was	significantly	adversely	impacted	in	2015.

# Advertising

|  | Year	Ended	December	31, |  |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) |  |  |
|  | 2015 | 2014 | Change |
| Performance\tAdvertising | $2,738,218 | $2,334,453 | 17.3% |
| %\tof\tTotal\tGross\tProfit | 31.9% | 30.8% |  |
| Brand\tAdvertising | $273,704 | $257,077 | 6.5% |
| %\tof\tTotal\tGross\tProfit | 3.2% | 3.4% |  |

Performance	advertising	expenses	consist	primarily	of	the	costs	of	(1)	search	engine	keyword	purchases;	(2)	referrals	from	meta-search	and	travel	research websites;	(3)	affiliate	programs;	and	(4)	banner,	pop-up	and	other	Internet	and	mobile	advertisements.	For	the	year	ended	December	31,	2015,	performance	advertising expenses	increased	17.3%,	compared	to	the	year	ended	December	31,	2014,	primarily	due	to	increased	spending	on	online	performance	marketing	to	generate	increased gross	bookings.	Performance	advertising	as	a	percentage	of	gross	profit	for	the	year	ended	December	31,	2015	benefited	from	the	inclusion	of	OpenTable	because OpenTable	spends	a	lower	percentage	of	gross	profit	on	performance	advertising	relative	to	our	other	brands.	In	addition,	the	share	of	our	business	coming	directly	to our	websites	with	no	associated	performance	advertising	expense	increased	during	the	year	ended	December	31,	2015	compared	to	the	year	ended	December	31,	2014. These	favorable	impacts	were	more	than	offset	for	the	year	ended	December	31,	2015	by	a	year-over-year	decline	in	advertising	ROIs.

Brand	advertising	expenses	are	primarily	related	to	our	Booking.com,	KAYAK	and	priceline.com	businesses	and	primarily	consist	of	television	advertising. For	the	year	ended	December	31,	2015,	brand	advertising	increased	6.5%	compared	to	the	year	ended	December	31,	2014,	primarily	due	to	increased	online	video	and television	advertising,	including	associated	production	costs,	at	Booking.com,	partially	offset	by	lower	television	advertising	at	KAYAK	and,	to	a	lesser	extent, priceline.com.

|  | Year	Ended	December	31, |  |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) |  |  |
|  | 2015 | 2014 | Change |
| Sales\tand\tMarketing | $353,221 | $310,910 | 13.6% |
| %\tof\tTotal\tGross\tProfit | 4.1% | 4.1% |  |

Sales	and	marketing	expenses	consist	primarily	of	(1)	credit	card	and	other	payment	processing	fees	associated	with	merchant	transactions;	(2)	fees	paid	to third	parties	that	provide	call	center,	website	content	translations	and	other	services;	(3)	customer	relations	costs;	(4)	public	relations	costs;	(5)	provisions	for	bad	debt, primarily	related	to	agency	accommodation	commission	receivables;	and	(6)	provisions	for	customer	chargebacks.	For	the	year	ended	December	31,	2015,	sales	and marketing	expenses,	which	are	substantially	variable	in	nature,	increased	compared	to	the	year	ended	December	31,	2014	due	primarily	to	increased	gross	booking volumes,	customer	relations	costs	and	the	inclusion	of	a	full	year	of	OpenTable's	results	as	compared	to	only	a	partial	year's	results	in	2014.

|  | Year	Ended	December	31, |  |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) |  |  |
|  | 2015 | 2014 | Change |
| Personnel | $1,166,226 | $950,191 | 22.7% |
| %\tof\tTotal\tGross\tProfit | 13.6% | 12.5% |  |

Personnel	expenses	consist	of	compensation	to	our	personnel,	including	salaries,	stock-based	compensation,	bonuses,	payroll	taxes	and	employee	health benefits.	Personnel	expenses	increased	during	the	year	ended	December	31,	2015,	compared	to	the	year	ended	December	31,	2014,	due	primarily	to	increased	headcount to	support	the	growth	of	our	businesses.	Additionally,	the	inclusion	of	a	full	year	of	OpenTable's	results	in	our	2015	consolidated	results	as	compared	to	only	a	partial year's	results	in	2014	contributed	to	the	increase	in	personnel	expenses	for	the	year	ended	December	31,	2015	compared	to	the	year	ended	December	31,	2014.

|  | Year	Ended	December	31, |  |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) |  |  |
|  | 2015 | 2014 | Change |
| General\tand\tAdministrative | $415,420 | $352,869 | 17.7% |
| %\tof\tTotal\tGross\tProfit | 4.8% | 4.7% |  |

General	and	administrative	expenses	consist	primarily	of:	(1)	occupancy	and	office	expenses;	(2)	personnel-related	expenses	such	as	travel,	recruiting	and training	expenses;	and	(3)	fees	for	outside	professionals,	including	litigation	expenses.	General	and	administrative	expenses	increased	during	the	year	ended December	31,	2015,	compared	to	the	year	ended	December	31,	2014,	due	to	higher	occupancy	and	office	expenses	related	to	the	expansion	of	our	international businesses	and	higher	personnel-related	expenses	related	to	increased	headcount	in	all	of	our	businesses.	Additionally,	the	inclusion	of	a	full	year	of	OpenTable's	results in	our	2015	consolidated	results	as	compared	to	only	a	partial	year's	results	in	2014	contributed	to	the	increase	in	general	and	administrative	expenses	for	the	year	ended December	31,	2015	compared	to	the	year	ended	December	31,	2014.

Information	technology	expenses	consist	primarily	of:	(1)	software	license	and	system	maintenance	fees;	(2)	data	communications	and	other	expenses associated	with	operating	our	services;	(3)	outsourced	data	center	costs;	and	(4)	payments	to	outside	consultants.	Information	technology	expense	increased	during	the year	ended	December	31,	2015,	compared	to	the	year	ended	December	31,	2014,	due	primarily	to	growth	in	our	worldwide	operations.	Additionally,	the	inclusion	of	a full	year	of	OpenTable's	results	in	our	2015	consolidated	results	as	compared	to	only	a	partial	year's	results	in	2014	contributed	to	the	increase	in	information	technology expenses	for	the	year	ended	December	31,	2015	compared	to	the	year	ended	December	31,	2014.

|  | Year	Ended	December	31, |  |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) |  |  |
|  | 2015 | 2014 | Change |
| Depreciation\tand\tAmortization | $272,494 | $207,820 | 31.1% |
| %\tof\tTotal\tGross\tProfit | 3.2% | 2.7% |  |

Depreciation	and	amortization	expenses	consist	of:	(1)	amortization	of	intangible	assets	with	determinable	lives;	(2)	depreciation	on	computer	equipment;	(3) depreciation	of	internally	developed	and	purchased	software;	and	(4)	depreciation	of	leasehold	improvements,	furniture	and	fixtures	and	office	equipment.	For	the	year ended	December	31,	2015,	depreciation	and	amortization	expense	increased,	compared	to	the	year	ended	December	31,	2014,	due	primarily	to	increased	intangible amortization	from	the	OpenTable	acquisition	and	increased	depreciation	expense	due	to	capital	expenditures	for	additional	data	center	capacity	and	office	build-outs	to support	growth	and	geographic	expansion,	principally	related	to	our	Booking.com

business.	Additionally,	the	inclusion	of	OpenTable	in	our	consolidated	results	since	its	acquisition	on	July	24,	2014	contributed	to	the	increase	in	depreciation	expense for	the	year	ended	December	31,	2015	compared	to	the	year	ended	December	31,	2014.

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) | (in\tthousands) |  |
|  | 2015 | 2014 | Change |
| Interest\tIncome | $55,729 | $13,933 | 300.0% |
| Interest\tExpense | (160,229) | (88,353) | 81.4% |
| Foreign\tCurrency\tTransactions\tand\tOther | (26,087) | (9,444) | 176.2% |
| Total | $(130,587) | $(83,864) | 55.7% |

For	the	year	ended	December	31,	2015,	interest	income	on	cash	and	marketable	securities	increased	compared	to	the	year	ended	December	31,	2014,	primarily due	to	an	increase	in	the	average	invested	balance	and	higher	yields.	Interest	expense	increased	for	the	year	ended	December	31,	2015,	compared	to	the	year	ended December	31,	2014,	primarily	due	to	interest	expense	attributable	to	our	Senior	Notes	issued	in	August	2014,	September	2014,	March	2015	and	November	2015, partially	offset	by	the	maturity	of	our	1.25%	Convertible	Senior	Notes	in	March	2015.	See	Note	10	to	our	Consolidated	Financial	Statements.

Derivative	contracts	that	hedge	our	exposure	to	the	impact	of	currency	fluctuations	on	the	translation	of	our	international	operating	results	into	U.S.	Dollars upon	consolidation	resulted	in	foreign	exchange	losses	of	$6.6	million	for	the	year	ended	December	31,	2015	compared	to	foreign	exchange	gains	of	$13.7	million	for the	year	ended	December	31,	2014,	and	are	recorded	in	"Foreign	currency	transactions	and	other"	in	the	Consolidated	Statements	of	Operations.

Foreign	exchange	transaction	losses,	including	costs	related	to	foreign	exchange	transactions,	resulted	in	losses	of	$21.0	million	for	the	year	ended December	31,	2015,	which	includes	approximately	$5.7	million	of	hedging	cost	and	a	foreign	exchange	loss	recorded	in	the	fourth	quarter	of	2015	related	to	the devaluation	of	the	Argentine	Peso,	compared	to	foreign	exchange	losses	of	$17.6	million	for	the	year	ended	December	31,	2014,	and	are	recorded	in	"Foreign	currency transactions	and	other"	in	the	Consolidated	Statements	of	Operations.

For	the	year	ended	December	31,	2015,	we	recognized	$2.2	million	of	net	realized	gains	related	to	investments,	which	are	recorded	in	"Foreign	currency transactions	and	other"	in	the	Consolidated	Statement	of	Operations.

The	conversion	of	our	convertible	debt	prior	to	maturity	in	the	year	ended	December	31,	2014	resulted	in	non-cash	losses	of	$6.3	million,	which	are	recorded	in "Foreign	currency	transactions	and	other"	in	the	Consolidated	Statement	of	Operations.

|  | Year	Ended	December	31, | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | (in\tthousands) | (in\tthousands) |  |
|  | 2015 | 2014 | Change |
| Income\tTax\tExpense | $576,960 | $567,695 | 1.6% |

Our	effective	tax	rates	for	the	years	ended	December	31,	2015	and	2014	were	18.4%	and	19.0%,	respectively.	Our	effective	tax	rate	differs	from	the	U.S. federal	statutory	tax	rate	of	35%,	due	to	lower	tax	rates	outside	the	United	States,	partially	offset	by	U.S.	state	income	taxes	and	certain	non-deductible	expenses.	Our effective	tax	rate	was	lower	for	the	year	ended	December	31,	2015,	compared	to	the	year	ended	December	31,	2014,	due	to	an	increased	proportion	of	our	income	being taxed	at	lower	international	tax	rates.	A	portion	of	Booking.com's	earnings	during	the	year	ended	December	31,	2015	and	2014	qualified	for	Innovation	Box	Tax treatment,	which	had	a	significant	beneficial	impact	on	the	Company's	effective	tax	rate	for	those	periods.

# Liquidity	and	Capital	Resources

As	of	December	31,	2016,	we	had	$13.9	billion	in	cash,	cash	equivalents,	short-term	investments	and	long-term	investments.	Approximately	$12.6	billion	is held	by	our	international	subsidiaries	and	is	denominated	primarily	in	U.S.	Dollars,	Euros	and,	to	a	lesser	extent,	British	Pounds	Sterling	and	other	currencies.	Cash equivalents,	short-term	investments	and	long-term	investments	are	comprised	of	U.S.	and	international	corporate	bonds,	U.S.	and	international	government	securities, high-grade	commercial	paper,	U.S.	government	agency	securities,	convertible	debt	securities	and	equity	securities	of	Ctrip,	money	market	funds	and	time	deposits	(see Note	5	to	the	Consolidated	Financial	Statements).

We	intend	to	indefinitely	reinvest	the	unremitted	earnings	of	our	international	subsidiaries	outside	of	the	United	States.	At	December	31,	2016,	we	had approximately	$13.0	billion	cumulative	unremitted	international	earnings.	We	estimate	that	the	deferred	tax	liability	we	would	record	if	such	earnings	were	not indefinitely	reinvested	internationally	is	approximately	$2.3	billion	as	of	December	31,	2016.	If	we	repatriate	cash	to	the	United	States,	we	would	utilize	our	net operating	loss	carryforwards	and	beyond	that	amount	incur	additional	tax	payments	in	the	United	States.

In	May	2016,	we	issued	Senior	Notes	due	June	1,	2026,	with	an	interest	rate	of	3.6%	(the	"2026	Notes")	for	an	aggregate	principal	amount	of	$1.0	billion. Interest	on	the	2026	Notes	is	payable	semi-annually	on	June	1	and	December	1,	beginning	December	1,	2016.	The	net	proceeds	of	these	notes	may	be	used	for	general corporate	purposes,	which	may	include	share	repurchases,	repayment	of	debt	and	acquisitions.	See	Note	10	to	the	Consolidated	Financial	Statements	for	further	details on	the	2026	Notes.

In	June	2015,	we	entered	into	a	$2.0	billion	five-year	unsecured	revolving	credit	facility	with	a	group	of	lenders.	Borrowings	under	the	revolving	credit	facility will	bear	interest,	at	our	option,	at	a	rate	per	annum	equal	to	either	(i)	the	adjusted	LIBOR	for	the	interest	period	in	effect	for	such	borrowing	plus	an	applicable	margin ranging	from	0.875%	to	1.50%;	or	the	greatest	of	(a)	Bank	of	America,	N.A.'s	prime	lending	rate,	(b)	the	federal	funds	rate	plus	0.5%,	and	(c)	an	adjusted	LIBOR	for	an interest	period	of	one	month	plus	1.00%,	plus	an	applicable	margin	ranging	from	0.00%	to	0.50%.	Undrawn	balances	available	under	the	revolving	credit	facility	are subject	to	commitment	fees	at	the	applicable	rate	ranging	from	0.085%	to	0.20%.	The	revolving	credit	facility	provides	for	the	issuance	of	up	to	$70.0	million	of	letters of	credit	as	well	as	borrowings	of	up	to	$50.0	million	on	same-day	notice,	referred	to	as	swingline	loans.	Borrowings	under	the	revolving	credit	facility	may	be	made	in U.S.	Dollars,	Euros,	British	Pounds	Sterling	and	any	other	foreign	currency	agreed	to	by	the	lenders.	The	proceeds	of	loans	made	under	the	facility	will	be	used	for working	capital	and	general	corporate	purposes.	As	of	December	31,	2016,	there	were	no	borrowings	outstanding	and	approximately	$3.8	million	of	letters	of	credit issued	under	the	facility.

Our	Convertible	Senior	Notes	due	March	15,	2018,	with	an	interest	rate	of	1.0%	(the	"2018	Notes"),	are	convertible	at	the	option	of	the	holders	as	of December	31,	2016,	and,	accordingly,	we	reported	the	carrying	value	of	the	2018	Notes	as	a	current	liability	in	our	Consolidated	Balance	Sheet	as	of	December	31, 2016.	We	have	received	a	notice	for	conversion	of	$3	thousand	aggregate	principal	amount	for	the	2018	Notes	through	February	24,	2017.	If	note	holders	exercise	their option	to	convert,	we	would	be	required	to	repay	the	principal	amount	of	the	2018	Notes	in	cash	and	may	deliver	shares	of	common	stock	or	cash,	at	our	option,	to satisfy	the	conversion	value	in	excess	of	the	principal	amount.		We	may	borrow	under	the	revolving	credit	facility	to	satisfy	our	obligation.

In	September	2016,	we	invested	$25	million	in	a	Ctrip	six-year	senior	convertible	note	issued	at	par	value	and	$25	million	in	Ctrip	ordinary	shares.

In	September	2016,	we	signed	a	turnkey	agreement	to	construct	an	office	building	in	the	Netherlands	for	the	future	headquarters	of	Booking.com	for approximately	270	million	Euros.	Upon	signing	the	agreement,	we	paid	approximately	48	million	Euros	to	the	developer,	principally	related	to	acquired	land	use	rights, and	we	expect	to	pay	approximately	34	million	Euros	related	to	building	construction	during	2017,	with	the	remainder	of	payments	being	paid	periodically	beginning	in 2018	until	the	expected	completion	of	the	building	in	late	2020.	We	will	also	incur	capital	expenditures	to	fit	out	and	furnish	the	office	space.	We	utilized	international cash	for	the	September	2016	payment	and	we	expect	all	future	payments	to	be	made	from	international	cash.	See	Note	14	to	the	Consolidated	Financial	Statements.

During	the	year	ended	December	31,	2016,	we	repurchased	762,984	shares	of	our	common	stock	for	an	aggregate	cost	of	$1.0	billion,	which	includes	stock repurchases	in	December	2016	of	10,215	shares	for	an	aggregate	cost	of	$15.0	million	that	were	settled	in	January	2017.	As	of	December	31,	2016,	the	Company	had	a remaining	authorization	of	$2.1	billion	to	purchase	its	common	stock.	In	the	first	quarter	of	2017,	the	Board	of	Directors	authorized	a	program	to	repurchase	up	to	$2.0 billion	of	our	common	stock,	in	addition	to	amounts	previously	authorized.	We	may	from	time	to	time	make	additional	repurchases	of	our	common	stock,	depending	on prevailing	market	conditions,	alternate	uses	of	capital	and	other	factors.	We

may	use	cash-on-hand	and	cash	generated	by	our	operations	in	the	United	States	to	fund	our	share	repurchases.	We	may	also	utilize	our	revolving	credit	facility	or	raise funds	through	the	debt	capital	markets	to	fund	share	repurchases.

On	February	7,	2017,	we	signed	a	definitive	agreement	to	acquire	the	Momondo	Group.	We	will	use	approximately	$550	million	of	our	international	cash	to fund	this	acquisition.	The	deal	is	expected	to	close	later	in	the	year,	subject	to	regulatory	approval.

Our	merchant	transactions	are	structured	such	that	we	collect	cash	up	front	from	consumers	and	then	we	pay	most	of	our	travel	service	providers	at	a subsequent	date.	We	therefore	tend	to	experience	significant	swings	in	accounts	receivable,	deferred	merchant	bookings	and	travel	service	provider	payables	seasonally depending	on	the	absolute	level	of	our	merchant	transactions	during	the	last	few	weeks	of	every	quarter.

Net	cash	provided	by	operating	activities	for	the	year	ended	December	31,	2016,	was	$3.9	billion,	resulting	from	net	income	of	$2.1	billion,	a	favorable	impact of	$1.6	billion	for	non-cash	items	not	affecting	cash	flows	and	net	favorable	changes	in	working	capital	and	other	assets	and	liabilities	of	$215.9	million.	The	changes	in working	capital	for	the	year	ended	December	31,	2016,	were	primarily	related	to	a	$516.4	million	increase	in	accounts	payable,	accrued	expenses	and	other	current liabilities,	offset	by	a	$284.2	million	increase	in	accounts	receivable.	The	increase	in	these	working	capital	balances	was	primarily	related	to	increases	in	business volumes.	Non-cash	items	were	principally	associated	with	impairment	of	goodwill,	stock-based	compensation	expense,	depreciation	and	amortization,	impairment	of cost-method	investments,	amortization	of	debt	discount	on	our	convertible	notes	and	deferred	income	taxes.

Net	cash	provided	by	operating	activities	for	the	year	ended	December	31,	2015,	was	$3.1	billion,	resulting	from	net	income	of	$2.6	billion	and	a	favorable impact	of	$558.9	million	for	non-cash	items	not	affecting	cash	flows,	partially	offset	by	net	unfavorable	changes	in	working	capital	and	other	assets	and	liabilities	of $8.0	million.	The	changes	in	working	capital	for	the	year	ended	December	31,	2015,	were	primarily	related	to	a	$166.2	million	increase	in	accounts	payable,	accrued expenses	and	other	current	liabilities,	offset	by	a	$68.7	million	increase	in	accounts	receivable	and	$81.6	million	increase	in	prepaid	expenses	and	other	current	assets. The	increase	in	these	working	capital	balances	was	primarily	related	to	increases	in	business	volumes.	Non-cash	items	were	primarily	associated	with	stock-based compensation	expense,	depreciation	and	amortization,	amortization	of	debt	discount	and	deferred	income	taxes.

Net	cash	provided	by	operating	activities	for	the	year	ended	December	31,	2014,	was	$2.9	billion,	resulting	from	net	income	of	$2.4	billion	and	a	favorable impact	of	non-cash	items	not	affecting	cash	flows	of	$518.0	million,	slightly	offset	by	net	unfavorable	changes	in	working	capital	and	other	assets	and	liabilities	of	$25.4 million.	The	changes	in	working	capital	for	the	year	ended	December	31,	2014,	were	primarily	related	to	a	$203.9	million	increase	in	accounts	payable,	accrued expenses	and	other	current	liabilities,	offset	by	a	$182.2	million	increase	in	accounts	receivable	and	$48.9	million	increase	in	prepaid	expenses	and	other	current	assets. The	increase	in	these	working	capital	balances	was	primarily	related	to	increases	in	business	volumes.	Non-cash	items	were	primarily	associated	with	stock-based compensation	expense,	depreciation	and	amortization,	amortization	of	debt	discount	and	deferred	income	taxes.

Net	cash	used	in	investing	activities	was	$3.3	billion	for	the	year	ended	December	31,	2016.	Investing	activities	for	the	year	ended	December	31,	2016	were principally	affected	by	net	purchases	of	investments	of	$3.1	billion	and	$48.5	million	for	the	acquisition	of	land	use	rights.	Net	cash	used	in	investing	activities	was	$3.9 billion	for	the	year	ended	December	31,	2015.	Investing	activities	for	the	year	ended	December	31,	2015	were	affected	by	net	purchases	of	investments	of	$3.6	billion, $140.3	million	used	for	acquisitions,	net	of	cash	acquired,	partially	offset	by	net	proceeds	of	$5.2	million	for	the	settlement	of	foreign	currency	contracts.	Net	cash	used in	investing	activities	was	$2.4	billion	for	the	year	ended	December	31,	2014.	Investing	activities	for	the	year	ended	December	31,	2014	were	affected	by	payments	of $2.5	billion	for	acquisitions,	net	of	cash	acquired,	and	net	cash	payments	of	$80.3	million	for	the	settlement	of	foreign	currency	contracts	slightly	offset	by	net	sales	of investments	of	$350.3	million.	Cash	invested	in	the	purchase	of	property	and	equipment	was	$219.9	million,	$173.9	and	$131.5	million	in	the	years	ended	December	31, 2016,	2015	and	2014,	respectively.	The	increases	for	the	years	ended	December	31,	2016	and	2015	were	related	to	additional	data	center	capacity	and	new	offices	to support	growth	and	geographic	expansion,	principally	related	to	our	Booking.com	and	agoda.com	brands	in	2016	and	principally	related	to	our	Booking.com	brand	in 2015.

Net	cash	provided	by	financing	activities	was	$57.7	million	for	the	year	ended	December	31,	2016.	Cash	provided	by	financing	activities	for	the	year	ended December	31,	2016	primarily	consisted	of	net	proceeds	of	$994.7	million	from	the	issuance	of	Senior	Notes,	excess	tax	benefits	on	stock-based	awards	and	other	equity deductions	of	$61.0	million	and	the	exercise	of	employee	stock	options	of	$15.6	million,	partially	offset	by	treasury	stock	purchases	of	$1.0	billion.	Net	cash	used	in financing	activities	was	$730.0	million	for	the	year	ended	December	31,	2015.	Cash	used	in	financing	activities	for	the	year	ended	December	31,	2015	primarily consisted	of	treasury	stock	purchases	of	$3.1	billion,	payments	of	$147.6	million	related	to

the	conversion	of	Senior	Notes	and	payment	of	$10.7	million	related	to	the	settlement	of	the	acquisition-date	estimated	contingent	liability	related	to	an	acquisition, primarily	offset	by	the	total	proceeds	of	$2.4	billion	from	the	issuance	of	Senior	Notes,	excess	tax	benefits	on	stock-based	awards	of	$101.5	million	and	the	exercise	of employee	stock	options	of	$20.9	million.	Net	cash	provided	by	financing	activities	was	approximately	$1.4	billion	for	the	year	ended	December	31,	2014.	Cash	provided by	financing	activities	for	the	year	ended	December	31,	2014	primarily	consisted	of	total	proceeds	of	$2.3	billion	from	the	issuance	of	Convertible	Senior	Notes	and Euro	denominated	Senior	Notes,	excess	tax	benefits	on	stock-based	awards	of	$23.4	million	and	the	exercise	of	employee	stock	options	of	$16.4	million,	partially	offset by	treasury	stock	purchases	of	$750.4	million	and	payments	of	$125.1	million	related	to	the	conversion	of	Senior	Notes.

# Contingencies

French	tax	authorities	recently	concluded	an	audit	that	started	in	2013	of	the	years	2003	through	2012	to	determine	whether	Booking.com	is	in	compliance	with its	tax	obligations	in	France.	Booking.com	received	formal	assessments	in	December	2015	in	which	the	French	tax	authorities	claim	that	Booking.com	has	a	permanent establishment	in	France	and	seek	to	recover	unpaid	income	taxes	and	value-added	taxes	of	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	assessments.	If	we are	unable	to	resolve	the	matter	with	the	French	authorities,	we	would	expect	to	challenge	the	assessments	in	the	French	courts.	In	order	to	contest	the	assessments	in court,	we	may	be	required	to	pay,	upfront,	the	full	amount	or	a	significant	part	of	any	such	assessments,	though	any	such	payment	would	not	constitute	an	admission	by us	that	we	owe	the	taxes.	At	the	end	of	2016,	French	authorities	announced	their	intention	to	also	audit	the	tax	years	2013	to	2015,	which	could	result	in	additional assessments.	See	Part	I	Item	IA	Risk	Factors	-	"We	may	have	exposure	to	additional	tax	liabilities."

A	number	of	U.S.	jurisdictions	have	initiated	lawsuits	against	online	travel	companies,	including	us,	related	to,	among	other	things,	the	payment	of	travel transaction	taxes	(e.g.,	hotel	occupancy	taxes,	excise	taxes,	sales	taxes,	etc.).	In	addition,	a	number	of	U.S.	states,	counties	and	municipalities	have	initiated	audit proceedings,	issued	proposed	tax	assessments	or	started	inquiries	relating	to	the	payment	of	travel	transaction	taxes.	For	additional	information,	see	Note	14	to	the Consolidated	Financial	Statements	and	Part	I	Item	1A	Risk	Factors	-	"Adverse	application	of	U.S.	state	and	local	tax	laws	could	have	an	adverse	effect	on	our	business and	results	of	operations."	in	this	Annual	Report.

As	a	result	of	this	litigation	and	other	attempts	by	U.S.	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	$27	million	as	of	both	December	31,	2016	and	2015. The	accrual	is	based	on	our	estimate	of	the	probable	cost	of	resolving	these	issues.	Our	legal	expenses	for	these	matters	are	expensed	as	incurred	and	are	not	reflected	in the	amount	accrued.	The	actual	cost	may	be	less	or	greater,	potentially	significantly,	than	the	liabilities	recorded.	An	estimate	for	a	reasonably	possible	loss	or	range	of loss	in	excess	of	the	amount	accrued	cannot	be	reasonably	made.	If	we	were	to	suffer	adverse	determinations	in	the	near	term	in	more	of	the	pending	proceedings	than currently	anticipated	given	results	to	date,	because	of	our	available	cash	we	believe	that	it	would	not	have	a	material	impact	on	our	liquidity.

The	following	table	represents	our	material	contractual	obligations	and	commitments	as	of	December	31,	2016:

|  |  | Payments	due	by	Period	(in	thousands) | Payments	due	by	Period	(in	thousands) | Payments	due	by	Period	(in	thousands) |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Contractual\tObligations | Total | Less\tthan\n1\tYear | 1\tto\t3\nYears | 3\tto\t5\tYears | \t More\tthan\t5\tYears |
| Operating\tlease\tobligations(1) | $523,820 | $102,339 | $193,885 | $134,124 | $93,472 |
| Land\tlease\tobligation(1) | 63,851 | 1,317 | 2,633 | 2,633 | 57,268 |
| Building\tconstruction\tobligation(1) | 233,385 | 34,860 | 136,516 | 62,009 | — |
| Senior\tNotes(2) | 8,481,228 | 137,794 | 1,260,587 | 2,250,337 | 4,832,510 |
| Revolving\tcredit\tfacility(3) | 9,447 | 3,188 | 5,075 | 1,184 | — |
| Earnout\t-\tacquisition | 9,170 | — | 9,170 | — | — |
| Total(4) | $9,320,901 | $279,498 | $1,607,866 | $2,450,287 | $4,983,250 |

(1) See	the	section	on	"Operating	Leases"	and	"Building	Construction"	section	of	Note	14	to	the	Consolidated	Financial	Statements	for	more details.

(2) Represents	the	aggregate	principal	amount	of	our	Senior	Notes	outstanding	as	of	December	31,	2016	and	cumulative	interest	to	maturity	of	$1.1	billion.

Convertible	debt	does	not	reflect	the	market	value	in	excess	of	the	outstanding

principal	amount	because	we	can	settle	the	conversion	premium	amount	in	cash	or	shares	of	common	stock	at	our	option.	See	Note	10	to	the	Consolidated	Financial Statements.

(3) Represents	fees	on	uncommitted	funds	and	outstanding	letters	of	credit	as	of	December	31,	2016.

(4) We	reported	"Other	long-term	liabilities"	of	$139	million	on	the	Consolidated	Balance	Sheet	at	December	31,	2016,	of	which	approximately	$53	million	related	to deferred	rents,	approximately	$30	million	related	to	unrecognized	tax	benefits	(see	Note	13	to	the	Consolidated	Financial	Statements)	and	approximately	$27 million	related	to	our	accrual	for	the	potential	resolution	of	issues	related	to	travel	transaction	taxes	(see	Note	14	to	the	Consolidated	Financial	Statements).		A variety	of	factors	could	affect	the	timing	of	payments	for	the	liabilities	related	to	travel	transaction	taxes	and	unrecognized	tax	benefits.		We	believe	that	these matters	will	likely	not	be	resolved	in	the	next	twelve	months	and	accordingly	we	have	classified	the	estimated	liability	as	non-current	in	the	Consolidated	Balance Sheet.		Therefore,	we	have	excluded	long-term	liabilities	of	$130	million	from	the	contractual	obligations	table	above	because	we	cannot	reasonably	estimate	the timing	of	such	payments	or	the	liability	is	related	to	deferred	rents,	which	represents	the	difference	in	rent	expense	recognized	in	the	income	statements	and	rent payments	related	to	operating	leases.

We	believe	that	our	existing	cash	balances	and	liquid	resources	will	be	sufficient	to	fund	our	operating	activities,	capital	expenditures	and	other	obligations through	at	least	the	next	twelve	months.	However,	if	during	that	period	or	thereafter,	we	are	not	successful	in	generating	sufficient	cash	flow	from	operations	or	in raising	additional	capital	when	required	in	sufficient	amounts	and	on	terms	acceptable	to	us,	we	may	be	required	to	reduce	our	planned	capital	expenditures	and	scale back	the	scope	of	our	business	plan,	either	of	which	could	have	a	material	adverse	effect	on	our	future	financial	condition	or	results	of	operations.	If	additional	funds were	raised	through	the	issuance	of	equity	securities,	the	percentage	ownership	of	our	then	current	stockholders	would	be	diluted.	We	may	not	generate	sufficient	cash flow	from	operations	in	the	future,	revenue	growth	or	sustained	profitability	may	not	be	realized,	and	future	borrowings	or	equity	sales	may	not	be	available	in	amounts sufficient	to	make	anticipated	capital	expenditures,	finance	our	strategies	or	repay	our	indebtedness.

# Off-Balance	Sheet	Arrangements.

As	of	December	31,	2016,	we	did	not	have	any	off-balance	sheet	arrangements	that	have,	or	are	reasonably	likely	to	have,	a	current	or	future	effect	on	our financial	condition,	results	of	operations,	liquidity,	capital	expenditures	or	capital	resources.

# Item	7A.		Quantitative	and	Qualitative	Disclosures	About	Market	Risk

We	manage	our	exposure	to	interest	rate	risk	and	foreign	currency	risk	through	internally	established	policies	and	procedures	and,	when	deemed	appropriate, through	the	use	of	derivative	financial	instruments.	We	use	currency	exchange	derivative	contracts	to	manage	short-term	foreign	currency	risk.

The	objective	of	our	policies	is	to	mitigate	potential	income	statement,	cash	flow	and	fair	value	exposures	resulting	from	possible	future	adverse	fluctuations	in rates.	We	evaluate	our	exposure	to	market	risk	by	assessing	the	anticipated	near-term	and	long-term	fluctuations	in	interest	rates	and	foreign	exchange	rates.	This evaluation	includes	the	review	of	leading	market	indicators,	discussions	with	financial	analysts	and	investment	bankers	regarding	current	and	future	economic	conditions and	the	review	of	market	projections	as	to	expected	future	rates.	We	utilize	this	information	to	determine	our	own	investment	strategies	as	well	as	to	determine	if	the	use of	derivative	financial	instruments	is	appropriate	to	mitigate	any	potential	future	market	exposure	that	we	may	face.	Our	policy	does	not	allow	speculation	in	derivative instruments	for	profit	or	execution	of	derivative	instrument	contracts	for	which	there	are	no	underlying	exposures.	We	do	not	use	financial	instruments	for	trading purposes	and	are	not	a	party	to	any	leveraged	derivatives.	To	the	extent	that	changes	in	interest	rates	and	currency	exchange	rates	affect	general	economic	conditions,	we would	also	be	affected	by	such	changes.

We	did	not	experience	any	material	changes	in	interest	rate	exposures	during	the	year	ended	December	31,	2016.	Based	upon	economic	conditions	and	leading market	indicators	at	December	31,	2016,	we	do	not	foresee	a	significant	adverse	change	in	interest	rates	in	the	near	future.

Fixed	rate	investments	are	subject	to	unrealized	gains	and	losses	due	to	interest	rate	volatility.	We	performed	a	sensitivity	analysis	to	determine	the	impact	a change	in	interest	rates	would	have	on	the	fair	value	of	our	available-for-sale	investments	assuming	an	adverse	change	of	100	basis	points.	As	of	December	31,	2016,	a hypothetical	100	basis	point	(1.0%)	increase	in	interest	rates	would	have	resulted	in	a	decrease	in	the	fair	values	of	our	investments	in	debt	securities	by	approximately $204	million.	These	hypothetical	losses	would	only	be	realized	if	we	sold	the	investments	prior	to	their	maturity.	This	amount	excludes	our	investment	in	Ctrip.com International	Ltd.	("Ctrip")	senior	convertible	notes,	which	are	also	subject	to	market	price	risk,	which	could	potentially	have	a	more	significant	impact	on	the	change	in fair	value.	The	fair

value	of	our	Ctrip	senior	convertible	notes	will	likely	increase	as	the	market	price	of	Ctrip's	American	Depositary	Shares	("ADSs")	increase	and	decrease	as	the	price	of Ctrip's	ADSs	fall.

As	of	December	31,	2016,	the	outstanding	aggregate	principal	amount	of	our	debt	was	approximately	$7.4	billion.	We	estimate	that	the	market	value	of	such debt	was	approximately	$8.4	billion	as	of	December	31,	2016.	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	notes.

We	conduct	a	significant	portion	of	our	business	outside	the	United	States	through	subsidiaries	with	functional	currencies	other	than	the	U.S.	Dollar	(primarily Euros).	As	a	result,	we	face	exposures	to	adverse	movements	in	currency	exchange	rates	as	the	operating	results	of	our	international	operations	are	translated	from	local currencies	into	U.S.	Dollars	upon	consolidation.	If	the	U.S.	Dollar	weakens	against	the	local	currencies,	the	translation	of	these	foreign-currency-denominated	balances will	result	in	increased	net	assets,	gross	bookings,	gross	profit,	operating	expenses,	and	net	income.	Similarly,	our	net	assets,	gross	bookings,	gross	profit,	operating expenses,	and	net	income	will	decrease	if	the	U.S.	Dollar	strengthens	against	the	local	currency.	Additionally,	foreign	exchange	rate	fluctuations	on	transactions, denominated	in	currencies	other	than	the	functional	currency,	result	in	gains	and	losses	that	are	reflected	in	the	Consolidated	Statements	of	Operations.

Throughout	2015,	the	U.S.	Dollar	strengthened	significantly	year-over-year	relative	to	substantially	all	currencies	in	which	we	transact,	most	notably	the	Euro, Brazilian	Real,	British	Pound	Sterling,	Russian	Ruble	and	Australian	Dollar.	In	2016,	the	U.S.	Dollar	continued	to	be	stronger	year-over-year	relative	to	the	British Pound	Sterling,	Russian	Ruble	and	many	other	major	currencies	in	which	we	transact.	Since	the	"Brexit"	referendum	in	the	United	Kingdom	in	June	2016,	the	U.S. Dollar	has	strengthened	significantly	against	the	British	Pound	Sterling.	As	a	result	of	these	currency	exchange	rate	changes,	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,	although	to	a	much	lesser	extent	in 2016	than	in	2015.	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.

From	time	to	time,	we	enter	into	foreign	exchange	derivative	contracts	to	minimize	the	impact	of	short-term	foreign	currency	fluctuations	in	our	consolidated operating	results.	Our	derivative	contracts	principally	address	foreign	exchange	fluctuation	risk	for	the	Euro,	the	British	Pound	Sterling	and	certain	other	currencies versus	the	U.S.	Dollar.	As	of	December	31,	2016	and	2015,	there	were	no	such	outstanding	derivative	contracts.	Foreign	exchange	gains	of	$3.4	million	for	the	year ended	December	31,	2016,	foreign	exchange	losses	of	$6.6	million	for	the	year	ended	December	31,	2015	and	foreign	exchange	gains	of	$13.7	million	for	the	year	ended December	31,	2014	were	recorded	in	"Foreign	currency	transactions	and	other"	in	the	Consolidated	Statements	of	Operations.

# Item	8.		Financial	Statements	and	Supplementary	Data

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	Schedules):	Consolidated	Balance	Sheets	as	of	December	31,	2016	and	2015; 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,	2016,	2015	and	2014;	Notes	to	the	Consolidated	Financial	Statements;	and	Report	of Independent	Registered	Public	Accounting	Firm.

# Item	9.		Changes	in	and	Disagreements	with	Accountants	on	Accounting	and	Financial	Disclosure

# Item	9A.	Controls	and	Procedures

Disclosure	Controls	and	Procedures.	Under	the	supervision	and	with	the	participation	of	our	management,	including	our	principal	executive	officer	and	our principal	financial	officer,	we	conducted	an	evaluation	of	our	disclosure	controls	and	procedures,	as	such	term	is	defined	under	Exchange	Act	Rule	13a-15(e).	Based	on this	evaluation,	our	principal	executive	officer	and	our	principal	financial	officer	concluded	that	our	disclosure	controls	and	procedures	were	effective	as	of	the	end	of the	period	covered	by	this	Annual	Report	on	Form	10-K.

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,	2016.

Management's	Report	on	Internal	Control	Over	Financial	Reporting.	Our	management	is	responsible	for	establishing	and	maintaining	adequate	internal	control over	financial	reporting,	as	such	term	is	defined	in	Exchange	Act	Rule	13a-15(f).	Under	the	supervision	and	with	the	participation	of	our	management,	including	our principal	executive	officer	and	principal	financial	officer,	we	conducted	an	evaluation	of	the	effectiveness	of	our	internal	control	over	financial	reporting	based	on	the framework	in	the	Internal	Control	-	Integrated	Framework	(2013)	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission.

Based	on	our	evaluation,	our	management	concluded	that	our	internal	control	over	financial	reporting	was	effective	as	of	December	31,	2016.	Our	independent registered	public	accounting	firm	also	attested	to,	and	reported	on	the	effectiveness	of	internal	control	over	financial	reporting.

Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may	not	prevent	or	detect	misstatements.	Projections	of	any	evaluation	of effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the	degree	of	compliance	with	the policies	or	procedures	may	deteriorate.

Changes	in	Internal	Controls.	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,	2016	that	materially	affected,	or	is	reasonably	likely	to	materially	affect,	our	internal	control	over	financial	reporting.

# REPORT	OF	INDEPENDENT	REGISTERED	PUBLIC	ACCOUNTING	FIRM

# To	the	Board	of	Directors	and	Stockholders	of

# Norwalk,	Connecticut

We	have	audited	the	internal	control	over	financial	reporting	of	The	Priceline	Group	Inc.	and	subsidiaries	(the	"Company")	as	of	December	31,	2016,	based	on criteria	established	in	Internal	Control	-	Integrated	Framework	(2013)	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission.	The Company's	management	is	responsible	for	maintaining	effective	internal	control	over	financial	reporting	and	for	its	assessment	of	the	effectiveness	of	internal	control over	financial	reporting,	included	in	the	accompanying	"Management's	Report	on	Internal	Control	Over	Financial	Reporting"	appearing	in	Item	9A.	Our	responsibility	is to	express	an	opinion	on	the	Company's	internal	control	over	financial	reporting	based	on	our	audit.

We	conducted	our	audit	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require	that	we plan	and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	effective	internal	control	over	financial	reporting	was	maintained	in	all	material	respects.	Our audit	included	obtaining	an	understanding	of	internal	control	over	financial	reporting,	assessing	the	risk	that	a	material	weakness	exists,	testing	and	evaluating	the	design and	operating	effectiveness	of	internal	control	based	on	the	assessed	risk,	and	performing	such	other	procedures	as	we	considered	necessary	in	the	circumstances.	We believe	that	our	audit	provides	a	reasonable	basis	for	our	opinion.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	by,	or	under	the	supervision	of,	the	company's	principal	executive	and	principal financial	officers,	or	persons	performing	similar	functions,	and	effected	by	the	company's	board	of	directors,	management,	and	other	personnel	to	provide	reasonable assurance	regarding	the	reliability	of	financial	reporting	and	the	preparation	of	financial	statements	for	external	purposes	in	accordance	with	generally	accepted accounting	principles.	A	company's	internal	control	over	financial	reporting	includes	those	policies	and	procedures	that	(1)	pertain	to	the	maintenance	of	records	that,	in reasonable	detail,	accurately	and	fairly	reflect	the	transactions	and	dispositions	of	the	assets	of	the	company;	(2)	provide	reasonable	assurance	that	transactions	are recorded	as	necessary	to	permit	preparation	of	financial	statements	in	accordance	with	generally	accepted	accounting	principles,	and	that	receipts	and	expenditures	of	the company	are	being	made	only	in	accordance	with	authorizations	of	management	and	directors	of	the	company;	and	(3)	provide	reasonable	assurance	regarding prevention	or	timely	detection	of	unauthorized	acquisition,	use,	or	disposition	of	the	company's	assets	that	could	have	a	material	effect	on	the	financial	statements.

Because	of	the	inherent	limitations	of	internal	control	over	financial	reporting,	including	the	possibility	of	collusion	or	improper	management	override	of controls,	material	misstatements	due	to	error	or	fraud	may	not	be	prevented	or	detected	on	a	timely	basis.	Also,	projections	of	any	evaluation	of	the	effectiveness	of	the internal	control	over	financial	reporting	to	future	periods	are	subject	to	the	risk	that	the	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the degree	of	compliance	with	the	policies	or	procedures	may	deteriorate.

In	our	opinion,	the	Company	maintained,	in	all	material	respects,	effective	internal	control	over	financial	reporting	as	of	December	31,	2016,	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,	2016	of	the	Company	and	our	report	dated	February	27,	2017	expressed	an	unqualified	opinion	on	those	financial statements.

# /s/	DELOITTE	&	TOUCHE	LLP

Stamford,	Connecticut

# Item	9B.	Other	Information

# PART	III

# Item	10.	Directors,	Executive	Officers	and	Corporate	Governance

Information	required	by	Part	III	Item	10	will	be	included	in	our	Proxy	Statement	relating	to	our	2017	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,	2016,	and	is	incorporated	herein	by	reference.

# Item	11.	Executive	Compensation

Information	required	by	Part	III	Item	11	will	be	included	in	our	Proxy	Statement	relating	to	our	2017	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,	2016,	and	is	incorporated	herein	by	reference.

# Item	12.	Security	Ownership	of	Certain	Beneficial	Owners	and	Management	and	Related	Stockholder	Matters

# Item	13.	Certain	Relationships	and	Related	Transactions,	and	Director	Independence

# Item	14.	Principal	Accountant	Fees	and	Services

# PART	IV

# Item	15.	Exhibits	and	Financial	Statement	Schedules.

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:	Consolidated	Balance	Sheets	as	of	December	31,	2016	and	2015;	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, 2016,	2015	and	2014;	Notes	to	the	Consolidated	Financial	Statements;	and	Report	of	Independent	Registered	Public	Accounting	Firm.

All	financial	statement	schedules	have	been	omitted	because	they	are	not	applicable,	not	material	or	the	required	information	is	shown	in	the	Consolidated Financial	Statements	or	the	notes	thereto.

In	reviewing	the	agreements	included	as	exhibits	to	this	Annual	Report	on	Form	10-K,	please	remember	they	are	included	to	provide	you	with	information regarding	their	terms	and	are	not	intended	to	provide	any	other	factual	or	disclosure	information	about	the	Company	or	the	other	parties	to	the	agreements.	Some agreements	contain	representations	and	warranties	by	each	of	the	parties	to	the	applicable	agreement.	These	representations	and	warranties	have	been	made	solely	for	the benefit	of	the	other	parties	to	the	applicable	agreement	and:

•should	not	be	treated	as	categorical	statements	of	fact,	but	rather	as	a	way	of	allocating	the	risk	to	one	of	the	parties	if	those	statements	prove	to	be inaccurate;

•may	have	been	qualified	by	disclosures	that	were	made	to	the	other	party	in	connection	with	the	negotiation	of	the	applicable	agreement,	which	disclosures	are not	necessarily	reflected	in	the	agreement;

•may	apply	standards	of	materiality	in	a	way	that	is	different	from	what	may	be	viewed	as	material	to	you	or	other	investors;

•were	made	only	as	of	the	date	of	the	applicable	agreement	or	such	other	date	or	dates	as	may	be	specified	in	the	agreement	and	are	subject	to	more	recent developments.

Accordingly,	these	representations	and	warranties	may	not	describe	the	actual	state	of	affairs	as	of	the	date	they	were	made	or	at	any	other	time.	Additional	information about	the	Company	may	be	found	elsewhere	in	this	Annual	Report	on	Form	10-K	and	the	Company's	other	public	filings,	which	are	available	without	charge	through the	SEC's	website	at	http://www.sec.gov.

10.1(o)+ priceline.com	Incorporated	1999	Omnibus	Plan	(As	Amended	and	Restated	Effective	June	6,	2013).

10.2(p)+ Form	of	Restricted	Stock	Unit	Award	Agreement	for	Employees	in	the	Netherlands	under	the	1999	Omnibus	Plan.

10.3(q)+ Form	of	Restricted	Stock	Unit	Agreement	for	awards	under	the	1999	Omnibus	Plan	to	non-employee	directors.

10.4(r)+ 2014	Form	of	Performance	Share	Unit	Agreement	under	the	1999	Omnibus	Plan.

10.5(s)+ 2015	Form	of	Performance	Share	Unit	Agreement	under	the	1999	Omnibus	Plan.

10.6(t)+ 2016	Form	of	Performance	Share	Unit	Agreement	under	the	1999	Omnibus	Plan.

10.7(u)+ Amended	and	Restated	KAYAK	Software	Corporation	2012	Equity	Incentive	Plan.

10.8(v)+ OpenTable,	Inc.	Amended	and	Restated	2009	Equity	Incentive	Award	Plan.

10.10(x)+ Amended	and	Restated	Rocket	Travel,	Inc.	2012	Stock	Incentive	Plan.

10.11(x)+ The	Priceline	Group	Inc.	Amended	and	Restated	Annual	Bonus	Plan.

10.13(z)+ Transition	Agreement	dated	November	7,	2013	by	and	between	the	Registrant	and	Jeffery	H.	Boyd.

10.16(aa)+ Indemnification	Agreement,	dated	September	12,	2011	by	and	between	the	Registrant	and	Darren	R.	Huston.

10.17(bb)+ Letter	agreement,	dated	October	19,	2005	by	and	between	the	Registrant	and	Daniel	J.	Finnegan.

10.18(cc)+ Letter	amendment,	dated	December	16,	2008,	to	letter	agreement,	dated	October	19,	2005	by	and	between	the	Registrant	and	Daniel	J.	Finnegan.

10.19(dd)+ Second	Amended	and	Restated	Employment	Agreement,	dated	April	21,	2015	by	and	between	the	Registrant	and	Peter	J.	Millones.

10.20(ee)+ Amended	and	Restated	Employment	contract,	dated	May	19,	2016	by	and	between	Booking.com	Holding	B.V.	and	Gillian	Tans.

10.21(ff)+ Separation	Letter,	dated	April	27,	2016	by	and	between	the	Registrant	and	Darren	R.	Huston.

10.22(ee)+ Employment	Letter	Agreement,	dated	May	19,	2016	by	and	between	the	Registrant	and	Jeffery	H.	Boyd.

10.23(gg)+ Employment	Agreement,	dated	December	15,	2016	by	and	between	the	Registrant	and	Glenn	D.	Fogel.

10.24(gg)+ Non-Competition	and	Non-Solicitation	Agreement,	dated	December	15,	2016	by	and	between	the	Registrant	and	Glenn	D.	Fogel.

10.25(gg)+ Employee	Confidentiality	and	Assignment	Agreement,	dated	December	15,	2016	by	and	between	the	Registrant	and	Glenn	D.	Fogel.

10.26(gg)+ Letter	Agreement,	dated	December	15,	2016	by	and	between	the	Registrant	and	Jeffery	H.	Boyd.

10.27(hh) Credit	Agreement,	dated	as	of	June	19,	2015,	among	the	Registrant,	the	lenders	from	time	to	time	party	thereto,	and	Bank	of	America,	N.A.	as Administrative	Agent.

+ Indicates	a	management	contract	or	compensatory	plan	or arrangement.

(v) Previously	filed	as	an	exhibit	to	the	Quarterly	Report	on	Form	10-Q	filed	for	the	quarter	ended	September	30,	2014	(File	No.	1-36691).

(aa) Previously	filed	as	an	exhibit	to	the	Quarterly	Report	on	Form	10-Q	filed	for	the	quarter	ended	September	30,	2011	(File	No.	0-25581).

(cc) Previously	filed	as	an	exhibit	to	the	Annual	Report	on	Form	10-K	filed	for	the	year	ended	December	31,	2008	(File	No.	0-25581).

(ii) This	document	is	being	furnished	in	accordance	with	SEC	Release	Nos.	33-8212	and	34-47551.

# Signatures

Pursuant	to	the	requirements	of	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	the	registrant	has	duly	caused	this	report	to	be	signed	on	its	behalf by	the	undersigned,	thereunto	duly	authorized.

Name: Glenn	D.	Fogel

Title: Chief	Executive	Officer	and	President

# Power	of	Attorney

KNOW	ALL	PERSONS	BY	THESE	PRESENTS,	that	each	person	whose	signature	appears	below	constitutes	and	appoints	Glenn	D.	Fogel,	Daniel	J. Finnegan	and	Peter	J.	Millones,	and	each	of	them	severally,	his	or	her	true	and	lawful	attorney-in-fact	with	power	of	substitution	and	resubstitution	to	sign	in	his	or	her name,	place	and	stead,	in	any	and	all	capacities,	to	do	any	and	all	things	and	execute	any	and	all	instruments	that	such	attorney	may	deem	necessary	or	advisable	under the	Securities	Exchange	Act	of	1934	and	any	rules,	regulations	and	requirements	of	the	Securities	and	Exchange	Commission	in	connection	with	this	Annual	Report	on Form	10-K	and	any	and	all	amendments	hereto,	as	fully	and	for	all	intents	and	purposes	as	he	or	she	might	do	or	could	do	in	person,	and	hereby	ratifies	and	confirms	all said	attorneys-in-fact	and	agents,	each	acting	alone,	and	his	or	her	substitute	or	substitutes,	may	lawfully	do	or	cause	to	be	done	by	virtue	hereof.

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	report	has	been	signed	below	by	the	following	persons	on	behalf	of	the	registrant	and in	the	capacities	and	on	the	dates	indicated.

# INDEX	TO	CONSOLIDATED	FINANCIAL	STATEMENTS

# Page	No.

| Report	of	Independent	Registered	Public	Accounting	Firm | 69 |
| :--- | :--- |
| Consolidated\tBalance\tSheets\tas\tof\tDecember\t31,\t2016\tand\t2015 | 70 |
| Consolidated\tStatements\tof\tOperations\tfor\tthe\tyears\tended\tDecember\t31,\t2016,\t2015\tand\t2014 | 71 |
| Consolidated\tStatements\tof\tComprehensive\tIncome\tfor\tthe\tyears\tended\tDecember\t31,\t2016,\t2015\tand\t2014 | 72 |
| Consolidated\tStatements\tof\tChanges\tin\tStockholders'\tEquity\tfor\tthe\tyears\tended\tDecember\t31,\t2016,\t2015\tand\t2014 | 73 |
| Consolidated\tStatements\tof\tCash\tFlows\tfor\tthe\tyears\tended\tDecember\t31,\t2016,\t2015\tand\t2014 | 74 |
| Notes\tto\tConsolidated\tFinancial\tStatements | 75 |

We	have	audited	the	accompanying	consolidated	balance	sheets	of	The	Priceline	Group	Inc.	and	subsidiaries	(the	"Company")	as	of	December	31,	2016	and	2015,	and the	related	consolidated	statements	of	operations,	comprehensive	income,	changes	in	stockholders'	equity,	and	cash	flows	for	each	of	the	three	years	in	the	period	ended December	31,	2016.	These	financial	statements	are	the	responsibility	of	the	Company's	management.	Our	responsibility	is	to	express	an	opinion	on	these	financial statements	based	on	our	audits.

We	conducted	our	audits	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require	that	we	plan	and perform	the	audit	to	obtain	reasonable	assurance	about	whether	the	financial	statements	are	free	of	material	misstatement.	An	audit	includes	examining,	on	a	test	basis, evidence	supporting	the	amounts	and	disclosures	in	the	financial	statements.	An	audit	also	includes	assessing	the	accounting	principles	used	and	significant	estimates made	by	management,	as	well	as	evaluating	the	overall	financial	statement	presentation.	We	believe	that	our	audits	provide	a	reasonable	basis	for	our	opinion.

In	our	opinion,	such	consolidated	financial	statements	present	fairly,	in	all	material	respects,	the	financial	position	of	The	Priceline	Group	Inc.	and	subsidiaries	as	of December	31,	2016	and	2015,	and	the	results	of	their	operations	and	their	cash	flows	for	each	of	the	three	years	in	the	period	ended	December	31,	2016,	in	conformity with	accounting	principles	generally	accepted	in	the	United	States	of	America.

We	have	also	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States),	the	Company's	internal	control	over financial	reporting	as	of	December	31,	2016,	based	on	the	criteria	established	in	Internal	Control	-	Integrated	Framework	(2013)	issued	by	the	Committee	of	Sponsoring Organizations	of	the	Treadway	Commission	and	our	report	dated	February	27,	2017	expressed	an	unqualified	opinion	on	the	Company's	internal	control	over	financial reporting.

# CONSOLIDATED	BALANCE	SHEETS

# (In	thousands,	except	share	and	per	share	data)

|  | December	31,<br>2016 | 2015 |
| :--- | :--- | :--- |
| ASSETS |  |  |
| Current\tassets: |  |  |
| Cash\tand\tcash\tequivalents | $2,081,075 | $1,477,265 |
| Short-term\tinvestments | 2,218,880 | 1,171,246 |
| Accounts\treceivable,\tnet\tof\tallowance\tfor\tdoubtful\taccounts\tof\t$25,565\tand\t$15,014,\trespectively | 860,115 | 645,169 |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 241,449 | 259,557 |
| Total\tcurrent\tassets | 5,401,519 | 3,553,237 |
| Property\tand\tequipment,\tnet | 347,017 | 274,786 |
| Intangible\tassets,\tnet | 1,993,885 | 2,167,533 |
| Goodwill | 2,396,906 | 3,375,000 |
| Long-term\tinvestments | 9,591,067 | 7,931,363 |
| Other\tassets | 108,579 | 118,656 |
| Total\tassets | $19,838,973 | $17,420,575 |
| LIABILITIES\tAND\tSTOCKHOLDERS'\tEQUITY |  |  |
| Current\tliabilities: |  |  |
| Accounts\tpayable | $419,108 | $322,842 |
| Accrued\texpenses\tand\tother\tcurrent\tliabilities | 857,467 | 681,587 |
| Deferred\tmerchant\tbookings | 614,361 | 434,881 |
| Convertible\tdebt | 967,734 | — |
| Total\tcurrent\tliabilities | 2,858,670 | 1,439,310 |
| Deferred\tincome\ttaxes | 822,334 | 892,576 |
| Other\tlong-term\tliabilities | 138,767 | 134,777 |
| Long-term\tdebt | 6,170,522 | 6,158,443 |
| \t\tTotal\tliabilities | 9,990,293 | 8,625,106 |
| Commitments\tand\tContingencies\t(See\tNote\t14)\nConvertible\tdebt | 28,538 | — |
| Stockholders'\tequity: |  |  |
| respectively | 485 | 482 |
|  | (6,855,164) | (5,826,640) |
| Treasury\tstock,\t13,190,929\tand\t12,427,945\tshares,\trespectively |  |  |
| Additional\tpaid-in\tcapital | 5,482,653 | 5,184,910 |
| Retained\tearnings | 11,326,852 | 9,191,865 |
| Accumulated\tother\tcomprehensive\tincome\t(loss) | (134,684) | 244,852 |
| \t\tTotal\tstockholders'\tequity | 9,820,142 | 8,795,469 |
| Total\tliabilities\tand\tstockholders'\tequity | $19,838,973 | $17,420,575 |

# CONSOLIDATED	STATEMENTS	OF	OPERATIONS

# (In	thousands,	except	per	share	data)

|  |  | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2014 |
| Agency\trevenues | $7,982,116 | $6,527,898 | $5,845,802 |
| Merchant\trevenues | 2,048,005 | 2,082,973 | 2,186,054 |
| Advertising\tand\tother\trevenues | 712,885 | 613,116 | 410,115 |
| Total\trevenues | 10,743,006 | 9,223,987 | 8,441,971 |
| Cost\tof\trevenues | 428,314 | 632,180 | 857,841 |
| Gross\tprofit | 10,314,692 | 8,591,807 | 7,584,130 |
| Operating\texpenses: |  |  |  |
| Performance\tadvertising | 3,479,287 | 2,738,218 | 2,334,453 |
| Brand\tadvertising | 295,698 | 273,704 | 257,077 |
| Sales\tand\tmarketing | 435,225 | 353,221 | 310,910 |
| Personnel,\tincluding\tstock-based\tcompensation\tof\t$249,574,\t$247,395,\tand\t$186,425,\nrespectively | 1,350,032 | 1,166,226 | 950,191 |
| General\tand\tadministrative | 455,909 | 415,420 | 352,869 |
| Information\ttechnology | 142,393 | 113,617 | 97,498 |
| Depreciation\tand\tamortization | 309,135 | 272,494 | 207,820 |
| Impairment\tof\tgoodwill | 940,700 | — | — |
| Total\toperating\texpenses | 7,408,379 | 5,332,900 | 4,510,818 |
| Operating\tincome | 2,906,313 | 3,258,907 | 3,073,312 |
| Other\tincome\t(expense): |  |  |  |
| Interest\tincome | 94,946 | 55,729 | 13,933 |
| Interest\texpense | (207,900) | (160,229) | (88,353) |
| Foreign\tcurrency\ttransactions\tand\tother | (16,913) | (26,087) | (9,444) |
| Impairment\tof\tcost-method\tinvestments | (63,208) | — | — |
| Total\tother\texpense | (193,075) | (130,587) | (83,864) |
| Earnings\tbefore\tincome\ttaxes | 2,713,238 | 3,128,320 | 2,989,448 |
| Income\ttax\texpense | 578,251 | 576,960 | 567,695 |
| Net\tincome | $2,134,987 | $2,551,360 | $2,421,753 |
| Net\tincome\tapplicable\tto\tcommon\tstockholders\tper\tbasic\tcommon\tshare | $43.14 | $50.09 | $46.30 |
| Weighted-average\tnumber\tof\tbasic\tcommon\tshares\toutstanding | 49,491 | 50,940 | 52,301 |
| Net\tincome\tapplicable\tto\tcommon\tstockholders\tper\tdiluted\tcommon\tshare | $42.65 | $49.45 | $45.67 |
| Weighted-average\tnumber\tof\tdiluted\tcommon\tshares\toutstanding | 50,063 | 51,593 | 53,023 |

# CONSOLIDATED	STATEMENTS	OF	COMPREHENSIVE	INCOME

# (In	thousands)

|  |  | Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2014 |
| Net\tincome | $2,134,987 | $2,551,360 | $2,421,753 |
| Other\tcomprehensive\tincome\t(loss),\tnet\tof\ttax |  |  |  |
| Foreign\tcurrency\ttranslation\tadjustments(1) | (93,984) | (114,505) | (187,356) |
| Unrealized\tgain\t(loss)\ton\tmarketable\tsecurities(2) | (285,552) | 619,259 | (157,275) |
| Comprehensive\tincome | $1,755,451 | $3,056,114 | $2,077,122 |

(1)	Foreign	currency	translation	adjustments	includes	a	tax	charge	of	$34,268,	$60,418	and	$55,597	for	the	years	ended	December	31,	2016,	2015	and	2014,	respectively, associated	with	net	investment	hedges	(See	Note	12).	The	remaining	balance	in	foreign	currency	translation	adjustments	excludes	income	taxes	as	a	result	of	the Company's	intention	to	indefinitely	reinvest	the	earnings	of	its	international	subsidiaries	outside	of	the	United	States	(See	Note	13).

See	Notes	to	Consolidated	Financial	Statements.

# CONSOLIDATED	STATEMENTS	OF	CHANGES	IN	STOCKHOLDERS'	EQUITY

|  |  |  |  |  |  |  | Accumulated |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Common\tStock | Common\tStock | Treasury\tStock | Treasury\tStock | Additional |  | Other |  |
|  | Shares | Amount | Shares | Amount | Paid-in\nCapital | Retained\nEarnings | Comprehensive\nIncome\t(Loss) | \tTotal |
| Balance,\tDecember\t31,\t2013 | 61,265 | $476 | (9,257) | $(1,987,207) | $ 4,592,979 | $4,218,752 | $84,729 | $ 6,909,729 |
| Net\tincome | — | — | — | — | — | 2,421,753 | — | 2,421,753 |
| Foreign\tcurrency\ttranslation\tadjustment,\tnet\tof\ttax\tcharge\tof\t$55,597 | — | — | — | — | — | — | (187,356) | (187,356) |
| Unrealized\tgain\t(loss)\ton\tmarketable\tsecurities,\tnet\tof\ttax\tbenefit\tof\t$7,621 | — | — | — | — | — | — | (157,275) | (157,275) |
| Reclassification\tadjustment\tfor\tconvertible\tdebt | — | — | — | — | 8,204 | — | — | 8,204 |
| Exercise\tof\tstock\toptions\tand\tvesting\tof\trestricted\tstock\tunits\tand\tperformance\nshare\tunits | 256 | 2 | — | — | 16,389 | — | — | 16,391 |
| Repurchase\tof\tcommon\tstock | — | — | (631) | (750,378) | — | — | — | (750,378) |
| Stock-based\tcompensation\tand\tother\tstock-based\tpayments | — | — | — | — | 189,292 | — | — | 189,292 |
| Conversion\tof\tdebt | 300 | 2 | — | — | (1,658) | — | — | (1,656) |
| Issuance\tof\tsenior\tconvertible\tnotes | — | — | — | — | 80,873 | — | — | 80,873 |
| Stock\toptions\tand\trestricted\tstock\tunits\tassumed\tin\tacquisitions | — | — | — | — | 13,751 | — | — | 13,751 |
| Excess\ttax\tbenefits\ton\tstock-based\tawards\tand\tother\tequity\tdeductions | — | — | — | — | 23,366 | — | — | 23,366 |
| Balance,\tDecember\t31,\t2014 | 61,821 | $480 | (9,888) | $(2,737,585) | $ 4,923,196 | $6,640,505 | $(259,902) | $ 8,566,694 |
| Net\tincome | — | — | — | — | — | 2,551,360 | — | 2,551,360 |
| Foreign\tcurrency\ttranslation\tadjustment,\tnet\tof\ttax\tcharge\tof\t$60,418 | — | — | — | — | — | — | (114,505) | (114,505) |
| Unrealized\tgain\t(loss)\ton\tmarketable\tsecurities,\tnet\tof\ttax\tcharge\tof\t$1,551 | — | — | — | — | — | — | 619,259 | 619,259 |
| Reclassification\tadjustment\tfor\tconvertible\tdebt | — | — | — | — | 329 | — | — | 329 |
| Exercise\tof\tstock\toptions\tand\tvesting\tof\trestricted\tstock\tunits\tand\tperformance\nshare\tunits | 219 | 2 | — | — | 20,849 | — | — | 20,851 |
| Repurchase\tof\tcommon\tstock | — | — | (2,540) | (3,089,055) | — | — | — | (3,089,055) |
| Stock-based\tcompensation\tand\tother\tstock-based\tpayments | — | — | — | — | 249,133 | — | — | 249,133 |
| Conversion\tof\tdebt | — | — | — | — | (110,105) | — | — | (110,105) |
| Excess\ttax\tbenefits\ton\tstock-based\tawards\tand\tother\tequity\tdeductions | — | — | — | — | 101,508 | — | — | 101,508 |
| Balance,\tDecember\t31,\t2015 | 62,040 | $482 | (12,428) | $(5,826,640) | $ 5,184,910 | $9,191,865 | $244,852 | $ 8,795,469 |
| Net\tincome | — | — | — | — | — | 2,134,987 | — | 2,134,987 |
| Foreign\tcurrency\ttranslation\tadjustment,\tnet\tof\ttax\tcharge\tof\t$34,268 | — | — | — | — | — | — | (93,984) | (93,984) |
| Unrealized\tgain\t(loss)\ton\tmarketable\tsecurities,\tnet\tof\ttax\tcharge\tof\t$15,313 | — | — | — | — | — | — | (285,552) | (285,552) |
| Reclassification\tadjustment\tfor\tconvertible\tdebt | — | — | — | — | (28,538) | — | — | (28,538) |
| Exercise\tof\tstock\toptions\tand\tvesting\tof\trestricted\tstock\tunits\tand\tperformance\nshare\tunits | 339 | 3 | — | — | 15,569 | — | — | 15,572 |
| Repurchase\tof\tcommon\tstock | — | — | (763) | (1,028,524) | — | — | — | (1,028,524) |
| Stock-based\tcompensation\tand\tother\tstock-based\tpayments | — | — | — | — | 249,726 | — | — | 249,726 |
| Excess\ttax\tbenefits\ton\tstock-based\tawards\tand\tother\tequity\tdeductions | — | — | — | — | 60,986 | — | — | 60,986 |
| Balance,\tDecember\t31,\t2016 | 62,379 | \t $485 | (13,191) | $(6,855,164) | \t$5,482,653 | $11,326,852 | \t$(134,684) | \t$9,820,142 |

# CONSOLIDATED	STATEMENTS	OF	CASH	FLOWS

|  | 2016 | Year	Ended	December	31,<br>2015 | 2014 |
| :--- | :--- | :--- | :--- |
| OPERATING\tACTIVITIES: |  |  |  |
| Net\tincome | $2,134,987 | $2,551,360 | $2,421,753 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet\tcash\tprovided\tby\toperating\tactivities: |  |  |  |
| Depreciation | 140,059 | 101,517 | 78,241 |
| Amortization | 169,076 | 170,977 | 129,579 |
| Provision\tfor\tuncollectible\taccounts,\tnet | 46,241 | 24,324 | 22,990 |
| Deferred\tincome\ttax\texpense\t(benefit) | (111,905) | (61,335) | 31,707 |
| Stock-based\tcompensation\texpense\tand\tother\tstock-based\tpayments | 249,726 | 249,133 | 189,292 |
| Amortization\tof\tdebt\tissuance\tcosts | 7,758 | 7,578 | 5,229 |
| Amortization\tof\tdebt\tdiscount | 68,974 | 66,687 | 54,731 |
| Loss\ton\tearly\textinguishment\tof\tdebt | — | 3 | 6,270 |
| Impairment\tof\tgoodwill | 940,700 | — | — |
| Impairment\tof\tcost-method\tinvestments | 63,208 | — | — |
| Changes\tin\tassets\tand\tliabilities: |  |  |  |
| Accounts\treceivable | (284,221) | (68,694) | (182,209) |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 5,495 | (81,611) | (48,932) |
| Accounts\tpayable,\taccrued\texpenses\tand\tother\tcurrent\tliabilities | 516,356 | 166,201 | 203,870 |
| Other | (21,757) | (23,909) | 1,876 |
| Net\tcash\tprovided\tby\toperating\tactivities | 3,924,697 | 3,102,231 | 2,914,397 |
| INVESTING\tACTIVITIES: |  |  |  |
| Purchase\tof\tinvestments | (6,741,202) | (8,669,690) | (10,552,214) |
| Proceeds\tfrom\tsale\tof\tinvestments | 3,684,103 | 5,084,238 | 10,902,500 |
| Additions\tto\tproperty\tand\tequipment | (219,889) | (173,915) | (131,504) |
| Acquisitions\tand\tother\tinvestments,\tnet\tof\tcash\tacquired | (7,813) | (140,338) | (2,496,366) |
| Acquisition\tof\tland\tuse\trights | (48,494) | — | — |
| Proceeds\tfrom\tforeign\tcurrency\tcontracts | — | 453,818 | 14,354 |
| Payments\ton\tforeign\tcurrency\tcontracts | — | (448,640) | (94,661) |
| Net\tcash\tused\tin\tinvesting\tactivities | (3,333,295) | (3,894,527) | (2,357,891) |
| FINANCING\tACTIVITIES: |  |  |  |
| Proceeds\tfrom\trevolving\tcredit\tfacility | — | 225,000 | 995,000 |
| Payments\trelated\tto\trevolving\tcredit\tfacility | — | (225,000) | (995,000) |
| Proceeds\tfrom\tthe\tissuance\tof\tlong-term\tdebt | 994,705 | 2,399,034 | 2,264,753 |
| Payment\tof\tdebt\tissuance\tcosts\t-\trevolving\tcredit\tfacility | — | (4,005) | — |
| Payments\trelated\tto\tconversion\tof\tsenior\tnotes | — | (147,629) | (125,136) |
| Repurchase\tof\tcommon\tstock | (1,013,526) | (3,089,055) | (750,378) |
| Payments\tof\tcontingent\tconsideration | — | (10,700) | — |
| Proceeds\tfrom\texercise\tof\tstock\toptions | 15,572 | 20,851 | 16,389 |
| Excess\ttax\tbenefits\ton\tstock-based\tawards\tand\tother\tequity\tdeductions | 60,986 | 101,508 | 23,366 |
| Net\tcash\tprovided\tby\t(used\tin)\tfinancing\tactivities | 57,737 | (729,996) | 1,428,994 |
| Effect\tof\texchange\trate\tchanges\ton\tcash,\tcash\tequivalents\tand\trestricted\tcash | (45,203) | (149,131) | (136,476) |
| Net\tincrease\t(decrease)\tin\tcash,\tcash\tequivalents\tand\trestricted\tcash | 603,936 | (1,671,423) | 1,849,024 |
| Cash,\tcash\tequivalents\tand\trestricted\tcash,\tbeginning\tof\tperiod | 1,478,071 | 3,149,494 | 1,300,470 |
| Cash,\tcash\tequivalents\tand\trestricted\tcash,\tend\tof\tperiod | $2,082,007 | $1,478,071 | $3,149,494 |
| SUPPLEMENTAL\tCASH\tFLOW\tINFORMATION: |  |  |  |
| Cash\tpaid\tduring\tthe\tperiod\tfor\tincome\ttaxes | $636,550 | $534,105 | $491,530 |
| Cash\tpaid\tduring\tthe\tperiod\tfor\tinterest | $125,912 | $54,299 | $16,950 |
| Non-cash\tinvesting\tactivity\tfor\tcontingent\tconsideration | $— | $9,170 | $10,700 |
| Non-cash\tfinancing\tactivity\tfor\tacquisitions | $— | $— | $13,751 |

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS

# 1. BUSINESS	DESCRIPTION

The	Priceline	Group	Inc.	("The	Priceline	Group"	or	the	"Company")	helps	people	experience	the	world	by	providing	consumers,	travel	service	providers	and restaurants	with	leading	travel	and	restaurant	online	reservation	and	related	services.	Through	its	online	travel	companies	("OTCs"),	the	Company	connects	consumers wishing	to	make	travel	reservations	with	providers	of	travel	services	around	the	world.	The	Company	is	the	leader	in	the	worldwide	online	accommodation	reservation market	based	on	room	nights	booked.	The	Company	offers	consumers	a	broad	array	of	accommodation	reservations	(including	hotels,	bed	and	breakfasts,	hostels, apartments,	vacation	rentals	and	other	properties)	through	its	Booking.com,	priceline.com	and	agoda.com	brands.	The	Company's	priceline.com	brand	also	offers consumers	reservations	for	rental	cars,	airline	tickets,	vacation	packages	and	cruises.	The	Company	offers	rental	car	reservations	worldwide	through	Rentalcars.com. The	Company	also	allows	consumers	to	easily	compare	airline	ticket,	hotel	reservation	and	rental	car	reservation	information	from	hundreds	of	travel	websites	at	once through	KAYAK.	The	Company	provides	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.

# 2. SUMMARY	OF	SIGNIFICANT	ACCOUNTING	POLICIES

Basis	of	Presentation	—	The	Company's	Consolidated	Financial	Statements	include	the	accounts	of	the	Company	and	its	wholly-owned	subsidiaries,	including OpenTable,	Inc.	("OpenTable")	since	its	acquisition	in	July	2014.		All	intercompany	accounts	and	transactions	have	been	eliminated	in	consolidation.

Use	of	Estimates	—	The	preparation	of	financial	statements	in	conformity	with	accounting	principles	generally	accepted	in	the	United	States	of	America requires	management	to	make	estimates	and	assumptions	that	affect	the	amounts	reported	in	the	financial	statements	and	footnotes	thereto.		Actual	results	may	differ significantly	from	those	estimates.		The	estimates	underlying	the	Company's	Consolidated	Financial	Statements	relate	to,	among	other	things,	stock-based compensation,	the	allowance	for	doubtful	accounts,	the	valuation	of	goodwill,	long-lived	assets	and	intangibles,	income	taxes,	the	accrual	for	loyalty	programs	and	the accrual	for	travel	transaction	taxes.

Reclassifications	—	Certain	amounts	from	prior	periods	have	been	reclassified	to	conform	to	the	current	year	presentation.

Fair	Value	of	Financial	Instruments	—	The	Company's	financial	instruments,	including	cash,	restricted	cash,	accounts	receivable,	accounts	payable,	accrued expenses	and	deferred	merchant	bookings,	are	carried	at	cost	which	approximates	their	fair	value	because	of	the	short-term	nature	of	these	financial	instruments.		See Notes	4,	5	and	10	for	information	on	fair	value	for	investments,	derivatives,	and	the	Company's	outstanding	Senior	Notes.

Cash	and	Cash	Equivalents	—	Cash	and	cash	equivalents	consists	primarily	of	cash	and	highly	liquid	investment	grade	securities	with	an	original	maturity	of three	months	or	less.	Cash	equivalents	are	recognized	based	on	settlement	date.

Restricted	Cash	—	Restricted	cash	at	December	31,	2016	and	2015	collateralizes	office	leases.	In	2016,	the	Company	changed	the	presentation	of	restricted cash	on	the	balance	sheet	to	include	it	in	"Prepaid	expenses	and	other	current	assets."	The	Consolidated	Balance	Sheet	as	of	December	31,	2015	was	adjusted	to	conform with	this	change.

The	following	table	shows	a	reconciliation	of	cash,	cash	equivalent	and	restricted	cash	reported	in	the	Consolidated	Balance	Sheets	to	the	total	amount	shown in	the	Consolidated	Statements	of	Cash	Flows:

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| As\tincluded\tin\tthe\tConsolidated\tBalance\tSheets: |  |  |  |
| Cash\tand\tcash\tequivalents | $2,081,075 | $1,477,265 | $3,148,651 |
| Restricted\tcash | 932 | 806 | 843 |
| Total\tcash,\tcash\tequivalents\tand\trestricted\tcash\tas\tshown\tin\tthe\tConsolidated\n\t\tStatements\tof\tCash\tFlows | $2,082,007 | $1,478,071 | $3,149,494 |

Investments	—	The	Company	has	classified	its	investments	in	debt	securities	and	equity	securities	with	readily	determinable	fair	value	as	available-for-sale securities.		These	securities	are	recognized	based	on	trade	date	and	carried	at	estimated	fair	value	with	the	aggregate	unrealized	gains	and	losses	related	to	these investments,	net	of	taxes,	reflected	as	a	part	of	"Accumulated	other	comprehensive	income	(loss)"	within	stockholders'	equity.

The	fair	value	of	the	investments	is	based	on	the	specific	quoted	market	price	of	the	securities	or	comparable	securities	at	the	balance	sheet	dates.		Investments in	debt	securities	are	considered	to	be	impaired	when	a	decline	in	fair	value	is	judged	to	be	other	than	temporary	because	the	Company	either	intends	to	sell	or	it	is	more- likely-than	not	that	it	will	have	to	sell	the	impaired	security	before	recovery.	Once	a	decline	in	fair	value	is	determined	to	be	other	than	temporary,	an	impairment	charge is	recorded	and	a	new	cost	basis	in	the	investment	is	established.		If	the	Company	does	not	intend	to	sell	the	debt	security,	but	it	is	probable	that	the	Company	will	not collect	all	amounts	due,	then	only	the	impairment	due	to	the	credit	risk	would	be	recognized	in	earnings	and	the	remaining	amount	of	the	impairment	would	be recognized	in	"Accumulated	other	comprehensive	income	(loss)"	within	stockholders'	equity.	Marketable	securities	are	presented	as	current	assets	on	the	Company's Consolidated	Balance	Sheets	if	they	are	available	to	meet	short-term	working	capital	needs	of	the	Company.	Marketable	debt	securities	not	held	to	meet	short-term working	capital	needs	of	the	Company	are	classified	as	short-term	or	long-term	investments	on	the	Company's	Consolidated	Balance	Sheets	based	on	the	maturity	date of	the	debt	security.		See	Notes	4	and	5	for	further	detail	of	investments.

Equity	investments	without	readily	determinable	fair	values,	in	companies	over	which	the	Company	does	not	have	the	ability	to	exercise	significant	influence, are	accounted	for	using	the	cost	method	of	accounting	and	classified	within	"Other	assets"	in	the	Consolidated	Balance	Sheets.	Under	the	cost	method,	investments	are carried	at	cost	and	are	adjusted	to	fair	value	only	for	other-than-temporary	declines	in	fair	value.

Property	and	Equipment	—	Property	and	equipment	are	stated	at	cost	less	accumulated	depreciation.		Depreciation	is	computed	on	a	straight-line	basis	over	the estimated	useful	lives	of	the	assets	or,	when	applicable,	the	life	of	the	lease	related	to	leasehold	improvements,	whichever	is	shorter.

Building	Construction-in-progress	—	Building	construction-in-progress	is	associated	with	the	construction	of	an	office	building	in	the	Netherlands	and	is included	in	"Property	and	equipment,	net"	in	the	Consolidated	Balance	Sheet	at	December	31,	2016.	Depreciation	of	the	building	and	its	related	components	will commence	once	it	is	ready	for	the	Company's	use.

Website	and	Internal-use	Software	Capitalization	—	Certain	direct	development	costs	associated	with	website	and	internal-use	software	are	capitalized	and include	external	direct	costs	of	services	and	payroll	costs	for	employees	devoting	time	to	the	software	projects	principally	related	to	website	and	mobile	app development,	including	support	systems,	software	coding,	designing	system	interfaces	and	installation	and	testing	of	the	software.		These	costs	are	recorded	as	property and	equipment	and	are	generally	amortized	over	a	period	of	two	to	five	years	beginning	when	the	asset	is	substantially	ready	for	use.	Costs	incurred	for	enhancements that	are	expected	to	result	in	additional	features	or	functionality	are	capitalized	and	amortized	over	the	estimated	useful	life	of	the	enhancements.	Costs	incurred	during the	preliminary	project	stage,	as	well	as	maintenance	and	training	costs,	are	expensed	as	incurred.	Additions	to	capitalized	costs	during	the	years	ended	December	31, 2016,	2015	and	2014	were	$54.2	million,	$44.2	million	and	$20.9	million,	respectively.	Costs	capitalized	in	2016	were	higher	than	in	2015	primarily	related	to	activity for	agoda.com.	Costs	for	2015	reflect	a	full	year	of	activity	for	OpenTable	compared	to	a	partial	year's	activity	in	2014	and	higher	development	costs	for	priceline.com.

Land	use	rights	—	Land	use	rights	represent	prepayments	for	the	lease	of	land	where	the	Company	is	constructing	an	office	building	in	the	Netherlands.	The land	use	rights	are	recorded	as	rent	expense	in	"General	and	administrative"	expense	in	the	Consolidated	Statement	of	Operations	on	a	straight-line	basis	over	the	lease period.	At	December	31,	2016,	the	Company	had	approximately	$45.3	million	associated	with	land	use	rights	recorded	in	"Other	assets"	in	the	Consolidated	Balance Sheet.	See	Note	14	for	further	details.

Goodwill	—	The	Company	accounts	for	acquired	businesses	using	the	purchase	method	of	accounting	which	requires	that	the	assets	acquired	and	liabilities assumed	be	recorded	at	the	date	of	acquisition	at	their	respective	fair	values.		Any	excess	of	the	purchase	price	over	the	estimated	fair	values	of	the	net	assets	acquired	is recorded	as	goodwill.		The	Company's	Consolidated	Financial	Statements	reflect	an	acquired	business	starting	at	the	date	of	the	acquisition.

Goodwill	is	not	subject	to	amortization	and	is	reviewed	at	least	annually	for	impairment,	or	earlier	if	an	event	occurs	or	circumstances	change	and	there	is	an indication	of	impairment.		The	Company	tests	goodwill	at	a	reporting	unit	level.		The	fair	value	of	the	reporting	unit	is	compared	to	its	carrying	value,	including goodwill.		Fair	values	are	determined	using	a

combination	of	standard	valuation	techniques,	including	an	income	approach	(discounted	cash	flows)	and	market	approaches	(EBITDA	multiples	of	comparable publicly-traded	companies	and	precedent	transactions)	and	based	on	market	participant	assumptions.		An	impairment	is	recorded	to	the	extent	that	the	implied	fair	value of	goodwill	is	less	than	the	carrying	value	of	goodwill.	See	Note	9	for	further	information.

Impairment	of	Long-Lived	Assets	and	Intangible	Assets	—	The	Company	reviews	long-lived	assets	and	amortizable	intangible	assets	for	impairment	whenever events	or	changes	in	circumstances	indicate	that	the	carrying	amount	of	the	asset	may	not	be	recoverable.		The	assessment	of	possible	impairment	is	based	upon	the Company's	ability	to	recover	the	carrying	value	of	the	assets	from	the	estimated	undiscounted	future	net	cash	flows,	before	interest	and	taxes,	of	the	related	operations. The	amount	of	impairment	loss,	if	any,	is	measured	as	the	excess	of	the	carrying	value	of	the	asset	over	the	present	value	of	estimated	future	cash	flows,	using	a	discount rate	commensurate	with	the	risks	involved	and	based	on	assumptions	representative	of	market	participants.

Agency	revenues	are	derived	from	travel-related	transactions	where	the	Company	does	not	facilitate	payments	for	the	travel	services	provided.	Agency revenues	consist	primarily	of	accommodation	reservation	commissions,	as	well	as	certain	global	distribution	system	("GDS")	reservation	booking	fees	and	travel insurance	fees,	and	are	reported	at	the	net	amounts	received,	without	any	associated	cost	of	revenue.		Such	revenues	are	primarily	recognized	by	the	Company	when	the customer's	travel	is	completed.

Merchant	revenues	are	derived	from	services	where	the	Company	facilitates	payments	for	the	travel	services	provided.	Name	Your	Own	Price®	travel reservation	services	are	presented	in	the	income	statement	on	a	gross	basis	so	merchant	revenue	and	costs	of	revenues	include	the	reservation	price	to	the	customer	and the	cost	charged	by	the	service	provider,	respectively.	For	all	other	merchant	transactions,	the	Company	presents	merchant	revenue	on	a	net	basis	in	the	income statement.

Merchant	revenue	also	includes	ancillary	fees,	including	damage	excess	waiver	and	travel	insurance	and	certain	GDS	reservation	booking	fees,	customer processing	fees	associated	with	priceline.com's	opaque	reservation	services	and	merchant	retail	accommodation	reservation	services	at	priceline.com	and	agoda.com	and are	generally	recognized	by	the	Company	when	the	customer	completes	his/her	travel.

Merchant	Retail	Services:		Merchant	revenues	for	the	Company's	merchant	retail	services	are	derived	from	transactions	where	customers	book	accommodation reservations	or	rental	car	reservations	from	travel	service	providers	at	disclosed	rates	which	are	subject	to	contractual	arrangements.		The	Company	charges	the	customer at	the	time	of	booking	and	any	amounts	owed	to	the	travel	service	provider	along	with	the	Company's	deferred	revenue	are	included	in	deferred	merchant	bookings. Reservations	are	generally	refundable	upon	cancellation,	subject	to	cancellation	penalties	in	certain	cases.		Merchant	revenue	and	the	cost	charged	by	travel	service provider	for	priceline.com,	agoda.com	and	Rentalcars.com	are	recognized	when	the	customer	completes	their	travel.	Revenue	for	Booking.com's	merchant	transactions is	comprised	of	accommodation	reservation	commissions	which	are	recognized	when	the	customer	completes	their	travel.

Merchant	Opaque	Services:		The	Company	describes	its	priceline.com	Name	Your	Own	Price®	and	Express	Deals®	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.	The	Name	Your	Own Price®	service	connects	consumers	that	are	willing	to	accept	a	level	of	flexibility	regarding	their	travel	itinerary	with	travel	service	providers	that	are	willing	to	accept	a lower	price	in	order	to	sell	their	excess	capacity	without	disrupting	their	existing	distribution	channels	or	retail	pricing	structures.		The	Company's	Name	Your	Own Price®	services	use	a	pricing	system	that	allows	consumers	to	"bid"	the	price	they	are	prepared	to	pay	when	submitting	an	offer	for	a	particular	travel	service.		The Company	accesses	databases	in	which	participating	travel	service	providers	file	secure	discounted	rates,	not	generally	available	to	the	public,	to	determine	whether	it	can fulfill	the	consumer's	offer.		The	Company	selects	the	travel	service	provider	and	determines	the	price	it	will	accept	from	the	consumer.	Express	Deals®	allows consumers	to	select	hotel,	rental	car	and	airline	ticket	reservations	with	price	and	certain	information	regarding	amenities	disclosed	prior	to	making	the	reservation.	The Company	recognizes	revenues	and	costs	for	these	services	when	it	confirms	the	customer's	non-refundable	offer.		In	circumstances	where	the	Company	makes	certain customer	concessions,	the	Company	accrues	for	such	estimated	losses.

Pursuant	to	the	terms	of	the	Company's	retail	and	opaque	merchant	services,	its	travel	service	providers	are	permitted	to	bill	the	Company	for	the	underlying cost	of	the	service	during	a	specified	period	of	time.		In	the	event	that	the	Company	is	not	billed	by	the	travel	provider	within	the	specified	time	period,	the	Company reduces	its	cost	by	the	unbilled	amounts.

Advertising	and	other	revenues	are	primarily	earned	by	KAYAK	and	OpenTable	and	to	a	lesser	extent	by	priceline.com	for	advertising	placements	on	its website	and	Booking.com's	BookingSuite	branded	accommodation	marketing	and	business	analytics	services.	KAYAK	earns	advertising	revenue	primarily	by	sending referrals	to	OTCs	and	travel	service	providers	and	from	advertising	placements	on	its	websites	and	mobile	apps.	Revenue	related	to	referrals	is	earned	when	a	customer clicks	on	a	referral	placement	or	upon	completion	of	the	travel.	Revenue	for	advertising	placements	is	earned	based	upon	when	a	customer	clicks	on	an	advertisement	or when	KAYAK	displays	an	advertisement.	OpenTable	earns	reservation	fees	when	diners	are	seated	through	its	online	restaurant	reservation	service	and	subscription fees	for	restaurant	management	services	on	a	straight-line	basis	over	the	contractual	period	that	the	service	is	provided.

Cost	of	revenues	consists	primarily	of	the	cost	paid	to	travel	service	providers	for	priceline.com's	Name	Your	Own	Price®	and	vacation	package	reservation services,	net	of	applicable	taxes	and	charges,	and	fees	paid	to	third	parties	by	KAYAK	and	priceline.com	to	return	travel	itinerary	information	for	consumer	search queries.

# Loyalty	Programs

The	Company	provides	various	loyalty	programs.	Participating	customers	earn	loyalty	points	on	current	transactions	that	can	be	redeemed	for	future	qualifying transactions.	When	the	points	are	earned,	the	Company	estimates	the	amount	of	loyalty	points	expected	to	be	redeemed	and	records	a	reduction	in	revenue.	At December	31,	2016	and	2015,	a	liability	of	$84.4	million	and	$71.1	million,	respectively,	for	loyalty	points	programs	was	included	in	"Accrued	expenses	and	other current	liabilities"	in	the	Consolidated	Balance	Sheets.

# Tax	Recovery	Charge,	Occupancy	Taxes	and	State	and	Local	Taxes

The	Company	provides	an	online	travel	service	to	facilitate	online	travel	purchases	by	consumers	from	travel	service	providers,	including	accommodation, rental	car	and	airline	ticket	reservations,	and	sometimes	as	part	of	a	vacation	package	reservation.		For	merchant	transactions,	the	Company	charges	the	consumer	an amount	intended	to	cover	the	taxes	that	the	Company	anticipates	the	travel	service	provider	will	owe	and	remit	to	the	local	taxing	authorities	("tax	recovery	charge"). Tax	rate	information	for	calculating	the	tax	recovery	charge	is	provided	to	the	Company	by	the	travel	service	providers.

In	certain	taxing	jurisdictions,	the	Company	is	required	by	statute	or	court	order	to	collect	and	remit	certain	taxes	(local	occupancy	tax,	general	excise	and/or sales	tax)	imposed	upon	its	margin	and/or	service	fee.	The	tax	recovery	charge	and	occupancy	and	other	related	taxes	collected	from	customers	and	remitted	to	those jurisdictions	are	reported	on	a	net	basis	in	the	Consolidated	Statement	of	Operations.	Except	in	those	jurisdictions,	the	Company	does	not	charge	the	customer	or	remit occupancy	or	other	related	taxes	based	on	its	margin	or	service	fee	(see	Note	14).

Performance	Advertising	—	Advertising	expenses	classified	as	performance	advertising	are	generally	managed	by	the	Company	by	monitoring	return	on investment.	These	expenses	primarily	consist	of:	(1)	search	engine	keyword	purchases;	(2)	referrals	from	meta-search	and	travel	research	websites;	(3)	affiliate programs;	and	(4)	other	performance-based	advertisements.	Performance	advertising	expense	is	recognized	as	incurred.		Included	in	"Accrued	expenses	and	other current	liabilities"	in	the	Consolidated	Balance	Sheets	are	accrued	performance	advertising	liabilities	of	$267.5	million	and	$188.2	million	at	December	31,	2016	and 2015,	respectively.

Brand	Advertising	—	Advertising	expenses	classified	as	brand	advertising	are	generally	managed	by	the	Company	to	a	targeted	spending	level	to	drive	brand awareness.	This	includes	both	online	and	offline	activities	such	as	online	videos	(for	example,	on	YouTube	and	Facebook),	television	advertising,	billboards	and	subway and	bus	advertisements.	Brand	advertising	expense	is	generally	recognized	as	incurred	with	the	exception	of	advertising	production	costs,	which	are	expensed	the	first time	the	advertisement	is	displayed	or	broadcast.

In	2016,	the	Company	changed	the	presentation	of	advertising	expenses	from	"Advertising	-	Online"	and	"Advertising	-	Offline"	to	"Performance	advertising" and	"Brand	advertising"	in	the	Consolidated	Statements	of	Operations.	This	change	in	presentation	had	no	impact	on	total	advertising	expenses,	operating	income	or	net income.	As	a	result,	for	the	years	ended	December	31,	2015	and	2014,	brand	advertising	in	online	channels	of	$59.0	million	and	$25.8	million	,	respectively,	is	now recorded	in	"Brand	advertising"	rather	than	"Advertising	-	Online".	The	Company	believes	its	new	presentation	is	helpful	because	it	separates	performance	advertising that	is	typically	managed	on	a	return	on	investment	basis	from	brand	advertising

that	is	generally	spent	to	build	brand	awareness	and	managed	to	a	targeted	spending	level.	See	above	for	the	descriptions	and	accounting	policies	of	performance advertising	and	brand	advertising.

Sales	and	Marketing	—	Sales	and	marketing	expenses	consist	primarily	of	(1)	credit	card	and	other	payment	processing	fees	associated	with	merchant transactions;	(2)	fees	paid	to	third	parties	that	provide	call	center,	website	content	translations	and	other	services;	(3)	customer	relations	costs;	(4)	public	relations	costs; (5)	provisions	for	bad	debt,	primarily	related	to	agency	accommodation	commission	receivables;	and	(6)	provisions	for	customer	chargebacks.

Personnel	—	Personnel	expenses	consist	of	compensation	to	the	Company's	personnel,	including	salaries,	stock-based	compensation,	bonuses,	payroll	taxes	and employee	health	benefits.		Included	in	"Accrued	expenses	and	other	current	liabilities"	in	the	Consolidated	Balance	Sheets	are	accrued	compensation	liabilities	of	$242.6 million	and	$186.1	million	at	December	31,	2016	and	2015,	respectively.

Stock-Based	Compensation	—	Stock-based	compensation	is	recognized	in	the	financial	statements	based	upon	fair	value.		The	fair	value	of	performance	share units	and	restricted	stock	units	is	determined	based	on	the	number	of	units	granted	and	the	quoted	price	of	the	Company's	common	stock	as	of	the	grant	date	or acquisition	date.		Stock-based	compensation	related	to	performance	share	units	reflects	the	estimated	probable	outcome	at	the	end	of	the	performance	period.		The	fair value	of	employee	stock	options	assumed	in	acquisitions	was	determined	using	the	Black	Scholes	model	and	the	market	value	of	the	Company's	common	stock	at	the respective	acquisition	dates.	Fair	value	is	recognized	as	expense	on	a	straight	line	basis,	net	of	estimated	forfeitures,	over	the	employee	requisite	service	period	(see "Recent	Accounting	Pronouncements"	described	later	in	this	footnote	for	accounting	changes	that	are	effective	January	1,	2017).

The	benefits	of	tax	deductions	in	excess	of	recognized	compensation	costs	are	reported	as	a	credit	to	additional	paid-in	capital	and	as	financing	cash	flows,	but only	when	such	excess	tax	benefits	are	realized	by	a	reduction	to	current	taxes	payable.		See	Note	3	for	further	information	on	stock-based	awards.

Information	Technology	—	Information	technology	expenses	consist	primarily	of:	(1)	software	license	and	system	maintenance	fees;	(2)	data	communications and	other	expenses	associated	with	operating	our	services;	(3)	outsourced	data	center	costs;	and	(4)	payments	to	outside	consultants.

Income	Taxes	—	The	Company	accounts	for	income	taxes	under	the	asset	and	liability	method.		The	Company	records	the	estimated	future	tax	effects	of temporary	differences	between	the	tax	bases	of	assets	and	liabilities	and	amounts	reported	in	the	Consolidated	Balance	Sheets,	as	well	as	operating	loss	and	tax	credit carryforwards.		Deferred	taxes	are	classified	as	noncurrent	on	the	balance	sheet.

The	Company	records	deferred	tax	assets	to	the	extent	it	believes	these	assets	will	more	likely	than	not	be	realized.		The	Company	regularly	reviews	its deferred	tax	assets	for	recoverability	considering	historical	profitability,	projected	future	taxable	income,	the	expected	timing	of	the	reversals	of	existing	temporary differences,	the	carryforward	periods	available	for	tax	reporting	purposes,	and	tax	planning	strategies.		A	valuation	allowance	is	provided	when	it	is	more	likely	than	not that	some	portion	or	all	of	a	deferred	tax	asset	will	not	be	realized.		The	ultimate	realization	of	deferred	tax	assets	depends	on	the	generation	of	future	taxable	income during	the	period	in	which	related	temporary	differences	become	deductible.		In	determining	the	future	tax	consequences	of	events	that	have	been	recognized	in	the financial	statements	or	tax	returns,	significant	judgments,	estimates,	and	interpretation	of	statutes	are	required.

Deferred	taxes	are	measured	using	the	enacted	tax	rates	expected	to	apply	to	taxable	income	in	the	years	in	which	those	temporary	differences	are	expected	to be	recovered	or	settled.		The	effect	on	deferred	taxes	of	a	change	in	tax	rates	is	recognized	in	income	in	the	period	that	includes	the	enactment	date	of	such	change.

Income	taxes	are	not	accrued	for	unremitted	earnings	of	international	subsidiaries	that	have	been	or	are	intended	to	be	indefinitely	reinvested	outside	of	the United	States.

The	Company	recognizes	liabilities	when	it	believes	that	uncertain	positions	may	not	be	fully	sustained	upon	review	by	the	tax	authorities.		Liabilities recognized	for	uncertain	tax	positions	are	based	on	a	two	step	approach	for	recognition	and	measurement.		First,	the	Company	evaluates	the	tax	position	for	recognition by	determining	if	the	weight	of	available	evidence	indicates	it	is	more	likely	than	not	that	the	position	will	be	sustained	on	audit	based	on	its	technical	merits.		Secondly, the	Company	measures	the	tax	benefit	as	the	largest	amount	that	is	more	than	50%	likely	of	being	realized	upon	ultimate	settlement.		Interest	and	penalties	attributable	to uncertain	tax	positions,	if	any,	are	recognized	as	a	component	of	income	tax	expense.		See	Note	13	for	further	details	on	income	taxes.

Segment	Reporting	—	The	Company	determined	that	its	brands	constitute	its	operating	segments.	The	Company's	Booking.com	brand	represents	a	substantial majority	of	gross	profit	and	net	income.	Based	on	similar	economic	characteristics	and	other	similar	operating	factors,	the	Company	has	aggregated	the	operating segments	into	one	reportable	segment.	For	geographic	information,	see	Note	16.

Foreign	Currency	Translation	—	The	functional	currency	of	the	Company's	foreign	subsidiaries	is	generally	their	respective	local	currency.		Assets	and liabilities	are	translated	into	U.S.	Dollars	at	the	rate	of	exchange	existing	at	the	balance	sheet	date.		Income	statement	amounts	are	translated	at	average	monthly exchange	rates	applicable	for	the	period.		Translation	gains	and	losses	are	included	as	a	component	of	"Accumulated	other	comprehensive	income	(loss)"	in	the Company's	Consolidated	Balance	Sheets.		Foreign	currency	transaction	gains	and	losses	are	included	in	"Foreign	currency	transactions	and	other"	in	the	Company's Consolidated	Statements	of	Operations.

In	November	2015,	the	Company	issued	Senior	Notes	due	November	25,	2022	for	an	aggregate	principal	amount	of	750	million	Euros.	In	March	2015,	the Company	issued	Senior	Notes	due	March	3,	2027	for	an	aggregate	principal	amount	of	1.0	billion	Euros.	In	September	2014,	the	Company	issued	Senior	Notes	due September	23,	2024	for	an	aggregate	principal	amount	of	1.0	billion	Euros.	The	Company	designated	the	carrying	value,	plus	accrued	interest,	of	these	Euro- denominated	Senior	Notes	as	a	hedge	of	the	Company's	net	investment	in	Euro	functional	currency	subsidiaries.	The	foreign	currency	transaction	gains	or	losses	on these	liabilities	and	the	foreign	currency	translation	gains	or	losses	from	translating	the	Euro-denominated	net	assets	of	these	subsidiaries	into	U.S.	Dollars	are	included as	a	component	of	"Accumulated	other	comprehensive	income	(loss)"	in	the	Company's	Consolidated	Balance	Sheets	(see	Notes	10	and	12).

Derivative	Financial	Instruments	—	As	a	result	of	the	Company's	international	operations,	it	is	exposed	to	various	market	risks	that	may	affect	its	consolidated results	of	operations,	cash	flow	and	financial	position.		These	market	risks	include,	but	are	not	limited	to,	fluctuations	in	currency	exchange	rates.		The	Company's primary	foreign	currency	exposures	are	in	Euros	and	British	Pound	Sterling,	in	which	it	conducts	a	significant	portion	of	its	business	activities.		As	a	result,	the Company	faces	exposure	to	adverse	movements	in	currency	exchange	rates	as	the	financial	results	of	its	international	operations	are	translated	from	local	currencies	into U.S.	Dollars	upon	consolidation.		Additionally,	foreign	exchange	rate	fluctuations	on	transactions	denominated	in	currencies	other	than	the	functional	currency	result	in gains	and	losses	that	are	reflected	in	income.

The	Company	may	enter	into	derivative	instruments	to	hedge	certain	net	exposures	of	nonfunctional	currency	denominated	assets	and	liabilities	and	the volatility	associated	with	translating	earnings	for	its	international	businesses	into	U.S.	Dollars,	even	though	it	does	not	elect	to	apply	hedge	accounting	or	hedge accounting	does	not	apply.		Gains	and	losses	resulting	from	a	change	in	fair	value	for	these	derivatives	are	reflected	in	income	in	the	period	in	which	the	change	occurs and	are	recognized	in	the	Consolidated	Statements	of	Operations	in	"Foreign	currency	transactions	and	other."		Cash	flows	related	to	these	contracts	are	classified	within "Net	cash	provided	by	operating	activities"	on	the	cash	flow	statement.

The	Company,	from	time	to	time,	utilizes	derivative	instruments	to	hedge	the	impact	of	changes	in	currency	exchange	rates	on	the	net	assets	of	its	foreign subsidiaries.	These	instruments	are	designated	as	net	investment	hedges.		Hedge	ineffectiveness	is	assessed	and	measured	based	on	changes	in	forward	exchange	rates. The	Company	records	gains	and	losses	on	these	derivative	instruments	as	currency	translation	adjustments,	which	offset	a	portion	of	the	translation	adjustments	related to	the	foreign	subsidiaries'	net	assets.		Gains	and	losses	are	recognized	in	the	Consolidated	Balance	Sheet	in	"Accumulated	other	comprehensive	income	(loss)"	and	will be	realized	upon	a	partial	sale	or	liquidation	of	the	investment.		The	Company	formally	documents	all	derivatives	designated	as	hedging	instruments	for	accounting purposes,	both	at	hedge	inception	and	on	an	on-going	basis.		These	net	investment	hedges	expose	the	Company	to	liquidity	risk	as	the	derivatives	have	an	immediate cash	flow	impact	upon	maturity,	which	is	not	offset	by	the	translation	of	the	underlying	hedged	equity.		The	cash	flows	from	these	contracts	are	classified	within	"Net cash	used	in	investing	activities"	on	the	cash	flow	statement.

The	Company	does	not	use	derivative	instruments	for	trading	or	speculative	purposes.		The	Company	recognizes	all	derivative	instruments	on	the	balance	sheet at	fair	value	and	its	derivative	instruments	are	generally	short-term	in	duration.		The	derivative	instruments	do	not	contain	leverage	features.

The	Company	is	exposed	to	the	risk	that	counterparties	to	derivative	instruments	may	fail	to	meet	their	contractual	obligations.		The	Company	regularly reviews	its	credit	exposure	as	well	as	assessing	the	creditworthiness	of	its	counterparties.		See	Note	5	for	further	detail	on	derivatives.

# Recent	Accounting	Pronouncements

# Simplifying	the	Test	for	Goodwill	Impairment

In	January	2017,	the	Financial	Accounting	Standards	Board	("FASB")	issued	a	new	accounting	update	to	simplify	the	test	for	goodwill	impairment	by eliminating	Step	2,	which	measures	a	goodwill	impairment	loss	by	comparing	the	implied	fair	value	of	a	reporting	unit's	goodwill,	which	requires	a	hypothetical purchase	price	allocation,	with	the	carrying	amount	of	that	reporting	unit's	goodwill.	Under	this	update,	an	entity	would	perform	its	quantitative	annual,	or	interim, goodwill	impairment	test	using	the	current	Step	1	test	and	recognize	an	impairment	charge	for	the	excess	of	the	carrying	value	of	a	reporting	unit	over	its	fair	value.

For	public	business	entities,	this	update	is	effective	for	their	annual	or	any	interim	goodwill	impairment	tests	in	fiscal	years	beginning	after	December	15,	2019. Early	adoption	is	permitted	for	interim	or	annual	goodwill	impairment	tests	occurring	after	January	1,	2017.	The	accounting	update	will	be	applied	prospectively.	The Company	is	currently	evaluating	when	it	will	adopt	this	update	and	what	the	impact	upon	adoption	will	be,	if	any.

# Definition	of	a	Business

In	January	2017,	the	FASB	issued	a	new	accounting	update	to	clarify	the	definition	of	a	business	and	provide	additional	guidance	to	assist	entities	with evaluating	whether	transactions	should	be	accounted	for	as	asset	acquisitions	(or	disposals)	or	business	combinations	(or	disposals	of	a	business).	Under	this	update,	an entity	first	determines	whether	substantially	all	of	the	fair	value	of	the	assets	acquired	is	concentrated	in	a	single	identifiable	asset	or	a	group	of	similar	identifiable assets.	If	this	criterion	is	met,	the	transaction	should	be	accounted	for	as	an	asset	acquisition	as	opposed	to	a	business	combination.	This	distinction	is	important	because the	accounting	for	an	asset	acquisition	significantly	differs	from	the	accounting	for	a	business	combination.	This	update	eliminates	the	requirement	to	evaluate	whether	a market	participant	could	replace	missing	elements	(e.g.	inputs	or	processes),	narrows	the	definition	of	outputs	and	requires	that	a	business	include,	at	a	minimum,	an input	and	a	substantive	process	that	together	significantly	contribute	to	the	ability	to	create	outputs.

For	public	business	entities,	this	update	is	effective	for	annual	reporting	periods	beginning	after	December	15,	2017,	including	interim	periods	within	those annual	reporting	periods.		The	accounting	update	will	be	applied	prospectively	and	early	adoption	is	permitted.	The	Company	expects	to	early	adopt	this	update	in	the first	quarter	of	2017	and	does	not	expect	a	significant	impact	to	its	Consolidated	Financial	Statements.

# Restricted	Cash

In	November	2016,	the	FASB	issued	a	new	accounting	update	on	the	classification	and	presentation	of	restricted	cash	in	the	statement	of	cash	flows	to	address the	diversity	in	practice.	This	accounting	update	requires	entities	to	show	changes	in	cash,	cash	equivalents	and	restricted	cash	on	a	combined	basis	in	the	statement	of cash	flows.	In	addition,	this	accounting	guidance	requires	a	reconciliation	of	the	total	cash,	cash	equivalent	and	restricted	cash	in	the	statement	of	cash	flows	to	the related	captions	in	the	balance	sheet	if	cash,	cash	equivalents	and	restricted	cash	are	presented	in	more	than	one	line	item	in	the	balance	sheet.

This	accounting	update	is	effective	for	public	business	entities	for	fiscal	years	beginning	after	December	15,	2018,	including	those	interim	periods	within	those fiscal	years.	The	Company	early	adopted	this	accounting	update	in	the	fourth	quarter	of	2016	and	applied	it	retrospectively	to	all	prior	periods	presented,	therefore,	the Consolidated	Statements	of	Cash	Flows	for	the	years	ended	December	31,	2015	and	2014	were	adjusted.	See	the	section	above	on	accounting	policies	related	to "Restricted	Cash"	for	the	reconciliation	of	cash,	cash	equivalent	and	restricted	cash	reported	in	the	Consolidated	Balance	Sheets	to	the	total	shown	in	the	Consolidated Statements	of	Cash	Flows.

# Intra-entity	Transfers	of	Assets	Other	Than	Inventory

In	October	2016,	the	FASB	issued	new	accounting	guidance	on	income	tax	accounting	associated	with	intra-entity	transfers	of	assets	other	than	inventory.	This accounting	update,	which	is	part	of	the	FASB's	simplification	initiative,	is	intended	to	reduce	diversity	in	practice	and	the	complexity	of	tax	accounting,	particularly	for those	transfers	involving	intellectual	property.	This	new	guidance	requires	an	entity	to	recognize	the	income	tax	consequences	of	an	intra-entity	transfer	of	an	asset	other than	inventory	when	the	transfer	occurs.

For	public	business	entities,	this	update	is	effective	for	annual	reporting	periods	beginning	after	December	15,	2017.	Entities	are	required	to	apply	this accounting	update	on	a	modified	retrospective	basis	with	a	cumulative-effect	adjustment	to

retained	earnings	as	of	the	beginning	of	the	period	of	adoption.	The	Company	expects	to	early	adopt	this	update	in	the	first	quarter	of	2017	and	the	adoption	of	this accounting	update	will	have	an	insignificant	impact	to	the	Company's	Consolidated	Financial	Statements.

# Measurement	of	Credit	Losses	on	Financial	Instruments

In	June	2016,	the	FASB	issued	new	accounting	guidance	on	the	measurement	of	credit	losses	for	financial	assets	measured	at	amortized	cost,	which	includes accounts	receivable	and	available-for-sale	debt	securities.	For	financial	assets	measured	at	amortized	cost,	this	new	guidance	requires	an	entity	to	(1)	estimate	its	lifetime expected	credit	losses	upon	recognition	of	the	financial	assets	and	establish	an	allowance	to	present	the	net	amount	expected	to	be	collected,	(2)	recognize	this	allowance and	changes	in	the	allowance	during	subsequent	periods	through	net	income	and	(3)	consider	relevant	information	about	past	events,	current	conditions	and	reasonable and	supportable	forecasts	in	assessing	the	lifetime	expected	credit	losses.	For	available-for-sale	debt	securities,	this	new	guidance	made	several	targeted	amendments	to the	existing	other-than-temporary	impairment	model,	including	(1)	requiring	disclosure	of	the	allowance	for	credit	losses,	(2)	allowing	reversals	of	the	previously recognized	credit	losses	until	the	entity	has	the	intent	to	sell,	is	more-likely-than-not	required	to	sell	the	securities	or	the	maturity	of	the	securities,	(3)	limiting impairment	to	the	difference	between	the	amortized	cost	basis	and	fair	value	and	(4)	not	allowing	entities	to	consider	the	length	of	time	that	fair	value	has	been	less	than amortized	cost	as	a	factor	in	evaluating	whether	a	credit	loss	exists.

This	update	is	effective	for	public	business	entities	for	fiscal	years	beginning	after	December	15,	2019,	including	interim	periods	within	those	fiscal	years. Early	adoption	is	permitted	for	fiscal	years	beginning	after	December	15,	2018,	including	interim	periods	within	those	fiscal	years.	Entities	are	required	to	apply	this accounting	update	on	a	modified	retrospective	basis	with	a	cumulative-effect	adjustment	to	retained	earnings	as	of	the	beginning	of	the	period	of	adoption.	The	Company is	currently	evaluating	the	impact	to	its	Consolidated	Financial	Statements	of	adopting	this	new	guidance.

# Share-based	Compensation

In	March	2016,	the	FASB	issued	new	accounting	guidance	to	improve	the	accounting	for	certain	aspects	of	share-based	payment	transactions	as	part	of	its simplification	initiative.	The	key	provisions	of	this	accounting	update	are:	(1)	recognizing	current	excess	tax	benefits	in	the	income	statement	in	the	period	the	benefits are	deducted	on	the	income	tax	return	as	opposed	to	an	adjustment	to	additional	paid-in	capital	in	the	period	the	benefits	are	realized	by	reducing	a	current	income	tax liability;	(2)	allowing	an	entity-wide	election	to	account	for	forfeitures	related	to	service	conditions	as	they	occur	instead	of	estimating	the	total	number	of	awards	that will	be	forfeited	because	the	requisite	service	period	will	not	be	rendered;	(3)	allowing	the	net	settlement	of	an	equity	award	for	employee	statutory	tax	withholding purposes	to	not	exceed	the	maximum	statutory	tax	rate	by	relevant	tax	jurisdiction	instead	of	withholding	taxes	for	each	employee	based	on	a	minimum	statutory withholding	tax	rate;	and	(4)	requiring	the	presentation	of	excess	tax	benefits	as	operating	cash	flow	and	cash	payments	for	employee	statutory	tax	withholding	related	to vested	stock	awards	as	financing	cash	flow	in	the	Consolidated	Statements	of	Cash	Flows.	Under	this	new	accounting	standard,	all	previously	unrecognized	equity deductions	will	be	recognized	as	a	deferred	tax	asset,	net	of	any	valuation	allowance,	with	a	cumulative-effect	adjustment	to	retained	earnings	as	of	the	beginning	of	the year	of	adoption	of	this	standard.

For	public	business	entities,	this	update	is	effective	for	annual	reporting	periods	beginning	after	December	15,	2016,	including	interim	periods	within	those annual	reporting	periods.	Early	adoption	was	permitted.	The	Company	will	adopt	this	accounting	update	in	the	first	quarter	of	2017.	The	Company	will	record	a	deferred tax	asset	of	approximately	$300	million	related	to	previously	unrecognized	U.S.	equity	deductions,	with	an	offsetting	cumulative-effect	adjustment	to	retained	earnings as	of	January	1,	2017.	The	Company	will	elect	to	account	for	forfeitures	related	to	service	conditions	as	they	occur,	as	a	result,	there	will	be	a	cumulative	net	charge	to retained	earnings	for	$7.0	million	(forfeiture	true-up	adjustment	less	deferred	tax	benefit)	and	recognition	of	deferred	tax	assets	for	$2.0	million,	with	an	offsetting	credit to	additional	paid-in	capital	for	$9.0	million.	In	addition,	the	Company	will	elect	to	change	the	presentation	of	excess	tax	benefits	in	the	consolidated	statements	of	cash flows	for	periods	prior	to	January	1,	2017	to	reflect	these	excess	tax	benefits	in	operating	cash	flows	instead	of	financing	cash	flows.

# Leases

In	February	2016,	the	FASB	issued	a	new	accounting	standard	intended	to	improve	the	financial	reporting	of	lease	transactions.		The	new	accounting	standard requires	lessees	to	recognize	an	asset	and	a	liability	on	the	balance	sheet	for	the	right	and	obligation	created	by	entering	into	a	lease	transaction	for	all	leases	with	the exception	of	short-term	leases.		The	new	standard	retains	the	dual-model	concept	by	requiring	entities	to	determine	if	a	lease	is	an	operating	or	financing	lease	and	the

current	"bright	line"	percentages	could	be	used	as	guidance	in	applying	the	new	standard.	The	lessor	accounting	model	remains	largely	unchanged.	The	new	standard significantly	expands	qualitative	and	quantitative	disclosures	for	lessees.

The	update	is	effective	for	public	business	entities	for	fiscal	years,	and	interim	periods	within	those	fiscal	years,	beginning	after	December	15,	2018.		Early adoption	is	allowed.	Entities	are	required	to	recognize	and	measure	leases	at	the	beginning	of	the	earliest	period	presented	using	a	modified	retrospective	approach.	The Company	is	currently	evaluating	the	impact	to	its	Consolidated	Financial	Statements	of	adopting	this	new	guidance.

# Recognition	and	Measurement	of	Financial	Instruments

In	January	2016,	the	FASB	issued	a	new	accounting	update	which	amends	the	guidance	on	the	recognition	and	measurement	of	financial	instruments.	The update	requires	(1)	an	entity	to	measure	equity	investments	(except	those	accounted	for	under	the	equity	method	or	those	that	result	in	consolidation	of	the	investee)	at fair	value	with	changes	in	fair	value	recognized	in	net	income	rather	than	accumulated	other	comprehensive	income	(loss);	(2)	allows	an	entity	to	elect	to	measure	those equity	investments	that	do	not	have	a	readily	determinable	fair	value	at	cost	less	impairment,	if	any,	plus	or	minus	changes	resulting	from	observable	price	changes	in orderly	transactions	for	the	identical	or	a	similar	investment	of	the	same	issuer;	(3)	simplifies	the	impairment	assessment	of	equity	investments	without	readily determinable	fair	values	by	requiring	a	qualitative	assessment	to	identify	impairment;	and	(4)	clarifies	that	an	entity	should	evaluate	the	need	for	a	valuation	allowance on	a	deferred	tax	asset	related	to	available-for-sale	securities	in	combination	with	the	entity's	evaluation	of	their	other	deferred	tax	assets.

This	update	is	effective	for	fiscal	years	beginning	after	December	15,	2017,	including	interim	periods	within	those	fiscal	years.	Early	adoption,	although allowed	in	certain	circumstances,	is	not	applicable	to	the	Company.	An	entity	would	apply	this	update	by	a	cumulative-effect	adjustment	to	the	balance	sheet	as	of	the beginning	of	the	fiscal	year	of	adoption.	After	the	adoption	of	this	new	accounting	guidance,	in	the	first	quarter	of	2018,	the	Company	will	record	fair	value	changes	in its	investments	in	Ctrip	equity	securities	in	net	income,	which	could	vary	significantly	quarter	to	quarter	(see	Note	4	for	their	carrying	values	and	fair	values	of	these equity	investments).	In	addition,	the	Company	intends	to	continue	to	use	the	cost	method	of	accounting	for	equity	investments	without	a	readily	determinable	fair	value.

# Revenue	from	Contracts	with	Customers

In	May	2014,	the	FASB	issued	a	new	accounting	standard	on	the	recognition	of	revenue	from	contracts	with	customers	that	was	designed	to	create	greater comparability	for	financial	statement	users	across	industries	and	jurisdictions.	The	core	principle	of	this	standard	is	that	an	"entity	recognizes	revenue	to	depict	the transfer	of	promised	goods	or	services	to	customers	in	an	amount	that	reflects	the	consideration	to	which	the	entity	expects	to	be	entitled	in	exchange	for	those	goods	or services."	The	new	standard	also	requires	enhanced	disclosures	on	the	nature,	amount,	timing	and	uncertainty	of	revenue	from	contracts	with	customers.	Since	May 2014,	the	FASB	has	issued	several	amendments	to	this	standard,	including	additional	guidance,	and	deferred	the	effective	date	for	public	business	entities	to	annual	and interim	periods	beginning	after	December	15,	2017.

The	Company	will	adopt	this	new	standard	in	the	first	quarter	of	2018	by	applying	the	modified	retrospective	transition	approach,	which	means	that	revenues for	2016	and	2017	will	be	reported	on	a	historical	basis	and	revenues	for	2018	will	be	reported	on	the	new	basis	and	historical	basis.	Based	on	the	Company's preliminary	analysis,	the	revenue	standard	is	expected	to	change	the	timing	of	revenue	recognition	for	travel	reservation	services,	but	the	Company	does	not	currently expect	material	impacts	to	its	annual	gross	profit	or	net	income,	although	the	effects	on	quarterly	gross	profit	and	net	income	may	be	more	significant.	In	addition,	the adoption	of	the	revenue	standard	is	expected	to	change	the	presentation	of	Name	Your	Own	Price®	revenue	from	"gross"	to	"net"	reporting,	which	will	decrease	revenue and	cost	of	revenue	equally,	but	have	no	impact	on	gross	profit	or	net	income.

# 3. STOCK-BASED	COMPENSATION

The	Company's	1999	Omnibus	Plan,	as	amended	and	restated	effective	June	6,	2013,	(the	"1999	Plan")	is	the	primary	stock	compensation	plan	from	which broad-based	employee	equity	awards	may	be	made.		As	of	December	31,	2016,	there	were	2,292,522	shares	of	common	stock	available	for	future	grant	under	the	1999 Plan.	In	addition,	under	plans	assumed	in	connection	with	various	acquisitions,	there	were	107,637	shares	of	common	stock	available	for	future	grant	as	of	December	31, 2016.

Stock-based	compensation	issued	under	the	plans	generally	consists	of	restricted	stock	units,	performance	share	units	and	stock	options.	Restricted	stock	units and	performance	share	units	generally	vest	over	periods	from	1	to	3	years.	Stock

options	granted	to	employees	generally	have	a	term	of	10	years.	The	Company	issues	new	shares	of	common	stock	upon	the	vesting	of	restricted	stock	units	and performance	share	units	and	the	exercise	of	stock	options.	See	Note	2	for	the	Company's	accounting	policy	on	stock-based	compensation.

Stock-based	compensation	included	in	personnel	expenses	in	the	Consolidated	Statements	of	Operations	was	approximately	$249.6	million,	$247.4	million	and $186.4	million	for	the	years	ended	December	31,	2016,	2015	and	2014,	respectively.		Stock-based	compensation	for	the	years	ended	December	31,	2016,	2015	and	2014 includes	charges	amounting	to	$20.7	million,	$22.6	million	and	$20.6	million,	respectively,	representing	the	impact	of	adjusting	the	estimated	probable	outcome	at	the end	of	the	performance	period	for	outstanding	unvested	performance	share	units.		Included	in	stock-based	compensation	are	approximately	$2.6	million,	$2.6	million, and	$2.3	million	for	the	years	ended	December	31,	2016,	2015,	and	2014,	respectively,	for	restricted	stock	units	awarded	to	non-employee	directors.		The	related	tax benefit	for	stock-based	compensation	is	$45.3	million,	$52.9	million	and	$38.4	million	for	the	years	ended	December	31,	2016,	2015	and	2014,	respectively.

# Restricted	Stock	Units	and	Performance	Share	Units

The	following	table	summarizes	the	activity	of	restricted	stock	units	and	performance	share	units	("share-based	awards")	during	the	years	ended	December	31, 2014,	2015	and	2016:

| Share-based	Awards | Shares | Weighted-average	Grant<br>Date	Fair	Value |
| :--- | :--- | :--- |
| Unvested\tat\tDecember\t31,\t2013 | 534,319 | $615.10 |
| Granted | 128,484 | $1,308.13 |
| Assumed\tin\tan\tacquisition | 43,993 | $1,238.68 |
| Vested | (195,730) | $492.22 |
| Performance\tShares\tAdjustment | 68,499 | $1,085.94 |
| Forfeited/Canceled | (9,250) | $972.19 |
| Unvested\tat\tDecember\t31,\t2014 | 570,315 | $912.26 |
| Granted | 198,141 | $1,226.41 |
| Vested | (161,862) | $757.66 |
| Performance\tShares\tAdjustment | 64,328 | $1,238.30 |
| Forfeited/Canceled | (33,665) | $1,151.70 |
| Unvested\tat\tDecember\t31,\t2015 | 637,257 | $1,070.10 |
| Granted | 202,740 | $1,314.93 |
| Vested | (298,753) | $858.23 |
| Performance\tShares\tAdjustment | 52,224 | $1,294.84 |
| Forfeited/Canceled | (77,862) | $1,278.06 |
| Unvested\tat\tDecember\t31,\t2016 | 515,606 | $1,287.88 |

Share-based	awards	granted	by	the	Company	during	the	years	ended	December	31,	2016,	2015	and	2014	had	aggregate	grant	date	fair	values	of	approximately $266.6	million,	$243.0	million	and	$168.1	million,	respectively.		Share-based	awards	that	vested	during	the	years	ended	December	31,	2016,	2015,	and	2014	had	grant date	fair	values	of	$256.4	million,	$122.6	million	and	$96.3	million,	respectively.

As	of	December	31,	2016,	there	was	$320.0	million	of	total	future	compensation	cost	related	to	unvested	share-based	awards	to	be	recognized	over	a	weighted- average	period	of	1.8	years.

During	the	year	ended	December	31,	2016,	the	Company	made	broad-based	grants	of	117,005	restricted	stock	units	that	generally	have	a	three-year	vesting period,	subject	to	certain	exceptions	for	terminations	other	than	for	"cause,"	for	"good	reason"	or	on	account	of	death	or	disability.	These	share-based	awards	had	a	total grant	date	fair	value	of	$154.9	million	based	on	a	weighted-average	grant	date	fair	value	per	share	of	$1,324.21.

In	addition,	during	the	year	ended	December	31,	2016,	the	Company	granted	85,735	performance	share	units	to	executives	and	certain	other	employees.		The performance	share	units	had	a	total	grant	date	fair	value	of	$111.7	million	based	upon	a	weighted-average	grant	date	fair	value	per	share	of	$1,302.25.		The	performance share	units	are	payable	in	shares	of	the	Company's	common	stock	upon	vesting.	Subject	to	certain	exceptions	for	terminations	other	than	for	"cause,"	for	"good	reason" or	on	account	of	death	or	disability,	recipients	of	these	performance	share	units	generally	must	continue	their	service	through	the	requisite	service	period	in	order	to receive	any	shares.		Stock-based	compensation	related	to	performance	share	units	reflects	the	estimated	probable	outcome	at	the	end	of	the	performance	period.		The actual	number	of	shares	to	be	issued	on	the	vesting	date	will	be	determined	upon	completion	of	the	performance	period	which	generally	ends	December	31,	2018, assuming	there	is	no	accelerated	vesting	for,	among	other	things,	a	termination	of	employment	under	certain	circumstances.		As	of	December	31,	2016,	the	estimated number	of	probable	shares	to	be	issued	is	a	total	of	118,132	shares,	net	of	performance	share	units	forfeited	and	vested	since	the	grant	date.		If	the	maximum performance	thresholds	are	met	at	the	end	of	the	performance	period,	a	maximum	number	of	172,930	total	shares	could	be	issued.		If	the	minimum	performance thresholds	are	not	met,	45,962	shares	would	be	issued	at	the	end	of	the	performance	period.

# 2015	Performance	Share	Units

During	the	year	ended	December	31,	2015,	the	Company	granted	107,623	performance	share	units	with	a	grant	date	fair	value	of	$133.2	million,	based	on	a weighted-average	grant	date	fair	value	per	share	of	$1,237.53.	The	actual	number	of	shares	to	be	issued	will	be	determined	upon	completion	of	the	performance	period which	generally	ends	December	31,	2017,	assuming	there	is	no	accelerated	vesting	for,	among	other	things,	a	termination	of	employment	under	certain	circumstances.

At	December	31,	2016,	there	were	75,929	unvested	2015	performance	share	units	outstanding,	net	of	performance	share	units	that	were	forfeited	or	vested	since the	grant	date.	As	of	December	31,	2016,	the	number	of	shares	estimated	to	be	issued	pursuant	to	these	performance	share	units	at	the	end	of	the	performance	period	is	a total	of	131,844	shares.	If	the	maximum	performance	thresholds	are	met	at	the	end	of	the	performance	period,	a	maximum	of	188,240	total	shares	could	be	issued pursuant	to	these	performance	share	units.	If	the	minimum	performance	thresholds	are	not	met,	43,953	shares	would	be	issued	at	the	end	of	the	performance	period.

During	the	year	ended	December	31,	2014,	the	Company	granted	72,277	performance	share	units	with	a	grant	date	fair	value	of	$96.1	million,	based	on	a weighted-average	grant	date	fair	value	per	share	of	$1,329.11.	The	actual	number	of	shares	to	be	issued	will	be	determined	based	upon	completion	of	the	performance period	which	ended	December	31,	2016.

At	December	31,	2016,	there	were	43,428	unvested	2014	performance	share	units	outstanding,	net	of	performance	share	units	that	were	forfeited	or	vested	since the	grant	date.	As	of	December	31,	2016,	the	total	number	of	shares	expected	to	be	issued	pursuant	to	these	performance	share	units	during	2017	is	70,474	shares.

# Stock	Options

The	following	table	summarizes	the	activity	for	stock	options	during	the	years	ended	December	31,	2014,	2015	and	2016:

|  |  |  |  | Weighted-average |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  | Aggregate | Remaining |
|  | Number\tof | Weighted\tAverage | \tIntrinsic\tValue | Contractual\tTerm |
| Employee\tStock\tOptions | Shares | \tExercise\tPrice | (000's) | (in\tyears) |
| Balance,\tDecember\t31,\t2013 | 137,708 | $315.36 | $116,686 | 6.6 |
| Assumed\tin\tacquisitions | 61,897 | $457.67 |  |  |
| Exercised | (51,003) | $293.59 |  |  |
| Forfeited | (2,217) | $517.91 |  |  |
| Balance,\tDecember\t31,\t2014 | 146,385 | $380.05 | $111,277 | 6.5 |
| Assumed\tin\tacquisitions | 1,422 | $230.37 |  |  |
| Exercised | (52,697) | $355.85 |  |  |
| Forfeited | (6,006) | $511.87 |  |  |
| Balance,\tDecember\t31,\t2015 | 89,104 | $383.03 | $79,474 | 5.4 |
| Exercised | (38,150) | $404.40 |  |  |
| Forfeited | (1,971) | $241.65 |  |  |
| Balance,\tDecember\t31,\t2016 | 48,983 | $372.07 | $53,587 | 4.4 |
| Vested\tand\texercisable\tas\tof\tDecember\t31,\t2016 | 46,601 | $351.22 | $51,953 | 4.3 |
| Vested\tand\texercisable\tas\tof\tDecember\t31,\t2016\tand\nexpected\tto\tvest\tthereafter,\tnet\tof\testimated\tforfeitures | 48,931 | $372.11 | $53,528 | 4.4 |

For	the	years	ended	December	31,	2016,	2015	and	2014,	the	Company	recorded	stock-based	compensation	expense	related	to	employee	stock	options	of	$6.8 million,	$24.9	million	and	$24.7	million,	respectively.	Employee	stock	options	assumed	in	acquisitions	during	the	year	ended	December	31,	2015	had	a	total	acquisition- date	fair	value	of	$1.4	million	based	on	a	weighted-average	acquisition	date	fair	value	of	$1,015.81	per	share.	For	the	year	ended	December	31,	2014,	employee	stock options	assumed	in	acquisitions	had	a	total	acquisition	date	fair	value	of	$45.5	million	based	on	a	weighted	average	acquisition	date	fair	value	of	$734.76	per	share.	As	of December	31,	2016,	there	was	$1.3	million	of	total	future	compensation	costs	related	to	unvested	employee	stock	options	to	be	recognized	over	a	weighted-average period	of	1.0	year.

# 4. INVESTMENTS

# Short-term	and	Long-term	Investments	in	Available	for	Sale	Securities

See	Note	2	for	the	Company's	accounting	policy	related	to	its	investments	in	available-for-sale	securities.	The	following	table	summarizes,	by	major	security type,	the	Company's	investments	as	of	December	31,	2016	(in	thousands):

|  | Cost | Gross<br>Unrealized<br>Gains | Gross<br>Unrealized<br>Losses | Fair	Value |
| :--- | :--- | :--- | :--- | :--- |
| Short-term\tinvestments: |  |  |  |  |
| International\tgovernment\tsecurities | $249,552 | $221 | $(89) | $249,684 |
| U.S.\tgovernment\tsecurities | 456,971 | 57 | (140) | 456,888 |
| Corporate\tdebt\tsecurities | 1,510,119 | 1,119 | (928) | 1,510,310 |
| Commercial\tpaper | 1,998 | — | — | 1,998 |
| Total\tshort-term\tinvestments | $2,218,640 | $1,397 | $(1,157) | $2,218,880 |
| Long-term\tinvestments: |  |  |  |  |
| International\tgovernment\tsecurities | $655,857 | $4,110 | $(623) | $659,344 |
| U.S.\tgovernment\tsecurities | 773,718 | 337 | (7,463) | 766,592 |
| Corporate\tdebt\tsecurities | 6,042,271 | 9,973 | (50,455) | 6,001,789 |
| U.S.\tgovernment\tagency\tsecurities | 4,979 | — | (27) | 4,952 |
| Ctrip\tconvertible\tdebt\tsecurities | 1,275,000 | 65,800 | (47,712) | 1,293,088 |
| Ctrip\tequity\tsecurities | 655,311 | 213,233 | (3,242) | 865,302 |
| Total\tlong-term\tinvestments | $9,407,136 | $293,453 | $(109,522) | $9,591,067 |

The	Company's	investment	policy	seeks	to	preserve	capital	and	maintain	sufficient	liquidity	to	meet	operational	and	other	needs	of	the	business.		As	of December	31,	2016,	the	weighted-average	life	of	the	Company's	fixed	income	investment	portfolio,	excluding	the	Company's	investment	in	Ctrip	convertible	debt securities,	was	approximately	2.0	years	with	an	average	credit	quality	of	A+/A1/A+.

The	Company	invests	in	international	government	securities	with	high	credit	quality.	As	of	December	31,	2016,	investments	in	international	government securities	principally	included	debt	securities	issued	by	the	governments	of	the	Netherlands,	Belgium,	France,	Germany	and	Austria.

On	August	7,	2014	and	May	26,	2015,	the	Company	invested	$500	million	and	$250	million,	respectively,	in	five-year	senior	convertible	notes	issued	at	par	by Ctrip.com	International	Ltd.	("Ctrip").	On	December	11,	2015,	the	Company	invested	$500	million	in	a	Ctrip	ten-year	senior	convertible	note	issued	at	par	value,	which included	a	put	option	allowing	the	Company	to	require	a	prepayment	in	cash	from	Ctrip	at	the	end	of	the	sixth	year	of	the	note.	On	September	12,	2016,	the	Company invested	$25	million	in	a	Ctrip	six-year	senior	convertible	note	issued	at	par	value,	which	included	a	put	option	allowing	the	Company	to	require	prepayment	in	cash from	Ctrip	at	the	end	of	the	third	year	of	the	note.	The	conversion	feature	associated	with	this	September	2016	Ctrip	convertible	note	met	the	definition	of	an	embedded derivative	(see	Note	5).	As	of	December	31,	2016,	the	Company	had	also	invested	$630.3	million	and	$25.0	million	of	its	international	cash	in	Ctrip	American Depositary	Shares	("ADSs")	and	Ctrip	ordinary	shares,	respectively.	The	convertible	debt	and	equity	securities	of	Ctrip	have	been	marked-to-market	in	accordance	with the	accounting	guidance	for	available-for-sale	securities.

In	connection	with	the	Company's	investments	in	Ctrip's	convertible	notes,	Ctrip	granted	the	Company	the	right	to	appoint	an	observer	to	its	board	of	directors and	permission	to	acquire	its	shares	(through	the	acquisition	of	Ctrip	ADSs	in	the	open	market)	so	that	combined	with	ADSs	issuable	upon	conversion	of	the	August 2014,	May	2015	and	September	2016	convertible	notes	and	ordinary	shares,	the	Company	could	hold	up	to	an	aggregate	of	approximately	15%	of	Ctrip's	outstanding equity.	As	of	December	31,	2016,	the	Company	did	not	have	significant	influence	over	Ctrip.

The	following	table	summarizes,	by	major	security	type,	the	Company's	investments	as	of	December	31,	2015	(in	thousands):

|  | Cost | Gross<br>Unrealized<br>Gains | Gross<br>Unrealized<br>Losses | Fair	Value |
| :--- | :--- | :--- | :--- | :--- |
| Short-term\tinvestments: |  |  |  |  |
| International\tgovernment\tsecurities | $395,404 | $497 | $(104) | $395,797 |
| U.S.\tgovernment\tsecurities | 457,001 | — | (507) | 456,494 |
| Corporate\tdebt\tsecurities | 305,654 | 25 | (419) | 305,260 |
| Commercial\tpaper | 11,688 | — | — | 11,688 |
| U.S.\tgovernment\tagency\tsecurities | 2,009 | — | (2) | 2,007 |
| Total\tshort-term\tinvestments | $1,171,756 | $522 | $(1,032) | $1,171,246 |
| Long-term\tinvestments: |  |  |  |  |
| International\tgovernment\tsecurities | $718,947 | $1,367 | $(683) | $719,631 |
| U.S.\tgovernment\tsecurities | 580,155 | 277 | (1,982) | 578,450 |
| Corporate\tdebt\tsecurities | 4,294,282 | 1,273 | (18,941) | 4,276,614 |
| U.S.\tmunicipal\tsecurities | 1,080 | 3 | — | 1,083 |
| Ctrip\tconvertible\tdebt\tsecurities | 1,250,000 | 158,600 | (30,050) | 1,378,550 |
| Ctrip\tequity\tsecurities | 630,311 | 346,724 | — | 977,035 |
| Total\tlong-term\tinvestments | $7,474,775 | $508,244 | $(51,656) | $7,931,363 |

The	Company	recognized	net	realized	gains	of	$1.1	million	and	$2.2	million	related	to	investments	for	the	years	ended	December	31,	2016	and	2015, respectively.	There	were	no	significant	realized	gains	or	losses	related	to	investments	for	the	year	ended	December	31,	2014.	As	of	December	31,	2016,	the	Company does	not	consider	any	of	its	investments	to	be	other-than-temporarily	impaired.

# Cost-method	Investments

The	Company	held	investments	in	equity	securities	of	private	companies,	which	are	typically	at	an	early	stage	of	development,	of	approximately	$7.6	million and	$62.3	million	as	of	December	31,	2016	and	December	31,	2015,	respectively.	These	investments	are	accounted	for	under	the	cost	method	and	included	in	"Other assets"	in	the	Company's	Consolidated	Balance	Sheets.	The	Company	evaluates	its	investments	quarterly	to	determine	if	any	indicators	of	other-than-temporary impairment	exist.

In	March	2016,	the	Company	received	an	operating	performance	update	from	Hotel	Urbano,	which	showed	2015	results	significantly	below	expectations, significantly	reduced	forecasts	and	the	need	for	additional	funding	in	the	near	term.	This	update	combined	with	increased	political	turmoil,	the	declaration	of	a	public health	emergency	related	to	the	Zika	virus	and	sustained	poor	macroeconomic	conditions	in	Brazil	in	the	first	quarter	of	2016	indicated	a	potential	other-than-temporary impairment	in	the	fair	value	of	the	Company's	investment.	As	a	result,	the	Company	analyzed	all	information	available	and	based	on	the	best	estimate	of	the	fair	value	of this	investment,	recognized	an	impairment	of	approximately	$50	million	for	the	three	months	ended	March	31,	2016.	In	the	second	quarter	of	2016,	after	discussions with	Hotel	Urbano's	management,	the	Company	reviewed	their	additional	funding	needs	and	based	on	its	business	prospects,	the	Company	recognized	an	impairment	of approximately	$10	million	for	the	three	months	ended	June	30,	2016	to	write-off	the	remainder	of	its	investment	in	Hotel	Urbano.	In	addition,	the	Company	recognized an	impairment	of	approximately	$3	million	for	an	investment	in	another	private	company	during	the	three	months	ended	June	30,	2016.

There	has	been	no	further	identified	events	or	changes	in	circumstances	to	indicate	a	potential	impairment	with	the	Company's	cost-method	investments	as	of December	31,	2016.

# 5. FAIR	VALUE

# MEASUREMENTS

Financial	assets	and	liabilities	carried	at	fair	value	as	of	December	31,	2016	are	classified	in	the	categories	described	in	the	tables	below	(in	thousands):

|  | Level	1 | Level	2 | Total |
| :--- | :--- | :--- | :--- |
| ASSETS: |  |  |  |
| Cash\tequivalents: |  |  |  |
| Money\tmarket\tfunds | $977,468 | $— | $977,468 |
| International\tgovernment\tsecurities | — | 30,266 | 30,266 |
| U.S.\tgovernment\tsecurities | — | 176,140 | 176,140 |
| Corporate\tdebt\tsecurities | — | 9,273 | 9,273 |
| Commercial\tpaper | — | 1,998 | 1,998 |
| Time\tdeposits | 49,160 | — | 49,160 |
| Short-term\tinvestments: |  |  |  |
| International\tgovernment\tsecurities | — | 249,684 | 249,684 |
| U.S.\tgovernment\tsecurities | — | 456,888 | 456,888 |
| Corporate\tdebt\tsecurities | — | 1,510,310 | 1,510,310 |
| Commercial\tpaper | — | 1,998 | 1,998 |
| Long-term\tinvestments: |  |  |  |
| International\tgovernment\tsecurities | — | 659,344 | 659,344 |
| U.S.\tgovernment\tsecurities | — | 766,592 | 766,592 |
| Corporate\tdebt\tsecurities | — | 6,001,789 | 6,001,789 |
| U.S.\tgovernment\tagency\tsecurities | — | 4,952 | 4,952 |
| Ctrip\tconvertible\tdebt\tsecurities | — | 1,293,088 | 1,293,088 |
| Ctrip\tequity\tsecurities | 865,302 | — | 865,302 |
| Derivatives: |  |  |  |
| Currency\texchange\tderivatives | — | 756 | 756 |
| Total\tassets\tat\tfair\tvalue | $1,891,930 | $11,163,078 | $13,055,008 |

|  | Level	1 | Level	2 | Total |
| :--- | :--- | :--- | :--- |
| LIABILITIES: |  |  |  |
| Currency\texchange\tderivatives | $— | $1,015 | $1,015 |

|  | Level	1 | Level	2 | Total |
| :--- | :--- | :--- | :--- |
| ASSETS: |  |  |  |
| Cash\tequivalents: |  |  |  |
| Money\tmarket\tfunds | $99,117 | $— | $99,117 |
| International\tgovernment\tsecurities | — | 10,659 | 10,659 |
| U.S.\tgovernment\tsecurities | — | 90,441 | 90,441 |
| Corporate\tdebt\tsecurities | — | 1,855 | 1,855 |
| Commercial\tpaper | — | 335,663 | 335,663 |
| Short-term\tinvestments: |  |  |  |
| International\tgovernment\tsecurities | — | 395,797 | 395,797 |
| \t\tU.S.\tgovernment\tsecurities | — | 456,494 | 456,494 |
| Corporate\tdebt\tsecurities | — | 305,260 | 305,260 |
| Commercial\tpaper | — | 11,688 | 11,688 |
| U.S.\tgovernment\tagency\tsecurities | — | 2,007 | 2,007 |
| Long-term\tinvestments: |  |  |  |
| International\tgovernment\tsecurities | — | 719,631 | 719,631 |
| U.S.\tgovernment\tsecurities | — | 578,450 | 578,450 |
| Corporate\tdebt\tsecurities | — | 4,276,614 | 4,276,614 |
| U.S.\tmunicipal\tsecurities | — | 1,083 | 1,083 |
| Ctrip\tconvertible\tdebt\tsecurities | — | 1,378,550 | 1,378,550 |
| Ctrip\tequity\tsecurities | 977,035 | — | 977,035 |
| Derivatives: |  |  |  |
| Currency\texchange\tderivatives | — | 363 | 363 |
| Total\tassets\tat\tfair\tvalue | $1,076,152 | $8,564,555 | $9,640,707 |

|  | Level	1 | Level	2 | Total |
| :--- | :--- | :--- | :--- |
| LIABILITIES: |  |  |  |
| Currency\texchange\tderivatives | $— | $644 | $644 |

There	are	three	levels	of	inputs	to	measure	fair	value.		The	definition	of	each	input	is	described	below:

Level	1: Quoted	prices	in	active	markets	that	are	accessible	by	the	Company	at	the	measurement	date	for	identical	assets	and liabilities.

Level	2: Inputs	that	are	observable,	either	directly	or	indirectly.	Such	prices	may	be	based	upon	quoted	prices	for	identical	or	comparable	securities	in active	markets	or	inputs	not	quoted	on	active	markets,	but	corroborated	by	market	data.

Level	3: Unobservable	inputs	are	used	when	little	or	no	market	data	is	available.

Investments	in	corporate	debt	securities,	U.S.	and	international	government	securities,	commercial	paper,	government	agency	securities,	convertible	debt securities	and	municipal	securities	are	considered	"Level	2"	valuations	because	the	Company	has	access	to	quoted	prices,	but	does	not	have	visibility	to	the	volume	and frequency	of	trading	for	all	of	these	investments.		For	the	Company's	investments,	a	market	approach	is	used	for	recurring	fair	value	measurements	and	the	valuation techniques	use	inputs	that	are	observable,	or	can	be	corroborated	by	observable	data,	in	an	active	marketplace.

The	Company's	derivative	instruments	are	valued	using	pricing	models.		Pricing	models	take	into	account	the	contract	terms	as	well	as	multiple	inputs	where applicable,	such	as	interest	rate	yield	curves,	option	volatility	and	currency	rates.	Derivatives	are	considered	"Level	2"	fair	value	measurements.	The	Company's derivative	instruments	are	typically	short-term	in	nature.

As	of	December	31,	2016	and	2015,	the	Company's	cash	consisted	of	bank	deposits.		Other	financial	assets	and	liabilities,	including	restricted	cash,	accounts receivable,	accounts	payable,	accrued	expenses	and	deferred	merchant	bookings	are	carried	at	cost	which	approximates	their	fair	value	because	of	the	short-term	nature of	these	items.		As	of	December	31,	2016	and	2015,	the	Company	held	investments	in	equity	securities	of	private	companies	of	approximately	$7.6	million	and	$62.3 million,	respectively,	and	these	investments	are	accounted	for	under	the	cost	method	of	accounting	(see	Note	4).	See	Note	4	for	information	on	the	carrying	value	of available-for-sale	investments,	Note	10	for	the	estimated	fair	value	of	the	Company's	outstanding	Senior	Notes	and	Note	18	for	the	Company's	contingent	liabilities associated	with	business	acquisitions.

In	the	normal	course	of	business,	the	Company	is	exposed	to	the	impact	of	foreign	currency	fluctuations.		The	Company	limits	these	risks	by	following established	risk	management	policies	and	procedures,	including	the	use	of	derivatives.		See	Note	2	for	the	Company's	accounting	policy	on	derivative	financial instruments.

Derivatives	Not	Designated	as	Hedging	Instruments	—	The	Company	is	exposed	to	adverse	movements	in	currency	exchange	rates	as	the	operating	results	of its	international	operations	are	translated	from	local	currency	into	U.S.	Dollars	upon	consolidation.		The	Company	enters	into	average-rate	derivative	contracts	to	hedge translation	risk	from	short-term	foreign	exchange	rate	fluctuations	for	the	Euro,	British	Pound	Sterling	and	certain	other	currencies	versus	the	U.S.	Dollar.	As	of December	31,	2016	and	2015,	there	were	no	outstanding	derivative	contracts	related	to	foreign	currency	translation	risk.	Foreign	exchange	gains	of	$3.4	million	for	the year	ended	December	31,	2016,	foreign	exchange	losses	of	$6.6	million	for	the	year	ended	December	31,	2015	and	foreign	exchange	gains	of	$13.7	million	for	the	year ended	December	31,	2014,	were	recorded	related	to	these	derivatives	in	"Foreign	currency	transactions	and	other"	in	the	Consolidated	Statements	of	Operations.

The	Company	also	enters	into	foreign	currency	forward	contracts	to	hedge	its	exposure	to	the	impact	of	movements	in	currency	exchange	rates	on	its transactional	balances	denominated	in	currencies	other	than	the	functional	currency.	Currency	exchange	derivatives	outstanding	as	of	December	31,	2016	associated	with foreign	currency	transaction	risks	resulted	in	a	net	liability	of	$0.3	million,	with	a	liability	in	the	amount	of	$1.0	million	recorded	in	"Accrued	expenses	and	other	current liabilities"	and	an	asset	in	the	amount	of	$0.7	million	recorded	in	"Prepaid	expenses	and	other	current	assets"	in	the	Consolidated	Balance	Sheet.		Currency	exchange derivatives	outstanding	as	of	December	31,	2015	associated	with	foreign	exchange	transaction	risks	resulted	in	a	net	liability	of	$0.3	million,	with	a	liability	in	the amount	of	$0.7	million	recorded	in	"Accrued	expenses	and	other	current	liabilities"	and	an	asset	in	the	amount	of	$0.4	million	recorded	in	"Prepaid	expense	and	other current	assets"	in	the	Consolidated	Balance	Sheet.	Derivatives	associated	with	these	transaction	risks	resulted	in	foreign	exchange	losses	of	$15.8	million,	$15.3	million and	$21.8	million	for	the	years	ended	December	31,	2016,	2015	and	2014,	respectively.	These	mark-to-market	adjustments	on	the	derivative	contracts,	offset	by	the effect	of	changes	in	currency	exchange	rates	on	transactions	denominated	in	currencies	other	than	the	functional	currency,	resulted	in	net	losses	of	$13.9	million,	$13.8 million	and	$11.8	million	for	the	years	ended	December	31,	2016,	2015	and	2014,	respectively.	These	net	impacts	are	reported	in	"Foreign	currency	transactions	and other"	in	the	Consolidated	Statements	of	Operations.

The	settlement	of	derivative	contracts	not	designated	as	hedging	instruments	resulted	in	a	net	cash	inflow	of	$4.5	million	for	the	year	ended	December	31,	2016 and	net	cash	outflows	of	$33.9	million	and	$8.9	million	for	the	years	ended	December	31,	2015	and	2014,	respectively,	and	were	reported	within	"Net	cash	provided	by operating	activities"	in	the	Consolidated	Statements	of	Cash	Flows.

Derivatives	Designated	as	Hedging	Instruments	—	The	Company	had	no	foreign	currency	forward	contracts	designated	as	hedges	of	its	net	investment	in	a foreign	subsidiary	outstanding	as	of	December	31,	2016	and	2015.	A	net	cash	inflow	of	$5.2	million	for	the	year	ended	December	31,	2015	and	a	net	cash	outflow	of $80.3	million	for	the	year	ended	December	31,	2014	were	reported	within	"Net	cash	used	in	investing	activities"	in	the	Consolidated	Statements	of	Cash	Flows.

Embedded	Derivative	—	In	September	2016,	the	Company	invested	$25	million	in	a	Ctrip	convertible	note	(see	Note	4).	The	Company	determined	that	the conversion	option	for	this	note	met	the	definition	of	an	embedded	derivative.	At	December	31,	2016,	the	embedded	derivative	had	an	estimated	fair	value	of	$1.8	million and	is	reported	in	the	balance	sheet	with	its	host	contract	in	"Long-term	investments."	The	embedded	derivative	is	bifurcated	for	measurement	purposes	only	and	the mark-to-market	for	the	year	ended	December	31,	2016	was	$1.1	million	loss	and	included	in	"Foreign	currency	transactions	and	other"	in	the	Company's	Consolidated Statement	of	Operations.

# 6. ACCOUNTS	RECEIVABLE	RESERVES

The	Company	records	a	provision	for	uncollectible	agency	commissions,	principally	receivables	from	accommodations	related	to	agency	reservations.		The Company	also	accrues	for	costs	associated	with	merchant	transactions	made	on	its	websites	by	individuals	using	fraudulent	credit	cards	and	for	other	amounts	"charged back"	as	a	result	of	payment	disputes.		Changes	in	accounts	receivable	reserves	consisted	of	the	following	(in	thousands):

|  |  | For	the	Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2014 |
| Balance,\tbeginning\tof\tyear | $15,014 | $14,212 | $14,116 |
| Provision\tcharged\tto\texpense | 46,241 | 24,324 | 22,990 |
| Charge-offs\tand\tadjustments | (35,233) | (22,682) | (21,546) |
| Currency\ttranslation\tadjustments | (457) | (840) | (1,348) |
| Balance,\tend\tof\tyear | $25,565 | $15,014 | $14,212 |

# 7. NET	INCOME	PER	SHARE

The	Company	computes	basic	net	income	per	share	by	dividing	net	income	applicable	to	common	shareholders	by	the	weighted-average	number	of	common shares	outstanding	during	the	period.		Diluted	net	income	per	share	is	based	upon	the	weighted-average	number	of	common	and	common	equivalent	shares	outstanding during	the	period.

Common	equivalent	shares	related	to	stock	options,	restricted	stock	units,	and	performance	share	units	are	calculated	using	the	treasury	stock	method. Performance	share	units	are	included	in	the	weighted-average	common	equivalent	shares	based	on	the	number	of	shares	that	would	be	issued	if	the	end	of	the	reporting period	were	the	end	of	the	performance	period,	if	the	result	would	be	dilutive.

The	Company's	convertible	notes	have	net	share	settlement	features	requiring	the	Company	upon	conversion	to	settle	the	principal	amount	of	the	debt	for	cash and	the	conversion	premium	for	cash	or	shares	of	the	Company's	common	stock,	at	the	Company's	option.		The	convertible	notes	are	included	in	the	calculation	of diluted	net	income	per	share	if	their	inclusion	is	dilutive	under	the	treasury	stock	method.

A	reconciliation	of	the	weighted-average	number	of	shares	outstanding	used	in	calculating	diluted	earnings	per	share	is	as	follows	(in	thousands):

|  |  | For	the	Year	Ended	December	31, |  |
| :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2014 |
| Weighted-average\tnumber\tof\tbasic\tcommon\tshares\toutstanding | 49,491 | 50,940 | 52,301 |
| Weighted-average\tdilutive\tstock\toptions,\trestricted\tstock\tunits\tand\tperformance\tshare\nunits | 238 | 395 | 340 |
| Assumed\tconversion\tof\tConvertible\tSenior\tNotes | 334 | 258 | 382 |
| Weighted-average\tnumber\tof\tdiluted\tcommon\tand\tcommon\tequivalent\tshares |  |  |  |
| outstanding | 50,063 | 51,593 | 53,023 |
| Anti-dilutive\tpotential\tcommon\tshares | 2,443 | 2,563 | 2,574 |

Anti-dilutive	potential	common	shares	for	the	years	ended	December	31,	2016,	2015	and	2014	include	approximately	2.0	million	shares,	2.1	million	shares and	2.1	million	shares,	respectively,	that	could	be	issued	under	the	Company's	outstanding	convertible	notes.		Under	the	treasury	stock	method,	the	convertible	notes will	generally	have	an	anti-dilutive	impact	on	net	income	per	share	if	the	conversion	prices	for	the	convertible	notes	exceed	the	Company's	average	stock	price.

# 8. PROPERTY	AND	EQUIPMENT

Property	and	equipment	at	December	31,	2016	and	2015	consisted	of	the	following	(in	thousands):

|  | 2016 | 2015 | (years) |
| :--- | :--- | :--- | :--- |
| Computer\tequipment\tand\tsoftware | $522,675 | $396,961 | 2\tto\t5\tyears |
| Leasehold\timprovements | 143,191 | 109,724 | 2\tto\t11\tyears |
| Office\tequipment,\tfurniture\tand\tfixtures | 34,176 | 28,447 | 2\tto\t10\tyears |
| Building\tconstruction-in-progress | 5,945 | — |  |
| Total | 705,987 | 535,132 |  |
| Less:\taccumulated\tdepreciation | (358,970) | (260,346) |  |
| Property\tand\tequipment,\tnet | $347,017 | $274,786 |  |

# 9. INTANGIBLE	ASSETS	AND

# GOODWILL

The	Company's	intangible	assets	at	December	31,	2016	and	2015	consisted	of	the	following	(in	thousands):

|  | Gross	Carrying<br>Amount | Accumulated<br>Amortization | Net	Carrying<br>Amount | Gross	Carrying<br>Amount | Accumulated<br>Amortization | Net	Carrying<br>Amount | Amortization<br>Period | Average	Useful<br>Life |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Supply\tand\tdistribution\nagreements | $809,287 | $(270,813) | $538,474 | $824,932 | $(227,994) | $596,938 | 10\t-\t20\tyears | 16\tyears |
| Technology | 112,141 | (80,549) | 31,592 | 112,639 | (61,404) | 51,235 | \t1\t-\t5\tyears | 5\tyears |
| Patents | 1,623 | (1,598) | 25 | 1,623 | (1,562) | 61 | 15\tyears | 15\tyears |
| Internet\tdomain\tnames | 39,495 | (25,089) | 14,406 | 40,352 | (20,954) | 19,398 | 2\t-\t20\tyears | 8\tyears |
| Trade\tnames | 1,667,221 | (261,412) | 1,405,809 | 1,671,356 | (183,101) | 1,488,255 | 4-20\tyears | 20\tyears |
| Non-compete\tagreements | 21,900 | (18,321) | 3,579 | 22,847 | (11,201) | 11,646 | 3-4\tyears | 3\tyears |
| Other | — | — | — | 135 | (135) | — |  |  |
| Total\tintangible\tassets | $2,651,667 | $(657,782) | $1,993,885 | $2,673,884 | $(506,351) | $2,167,533 |  |  |

Intangible	assets	are	amortized	on	a	straight-line	basis.		Amortization	expense	was	approximately	$169.1	million,	$171.0	million	and	$129.6	million	for	the years	ended	December	31,	2016,	2015	and	2014,	respectively.

The	annual	estimated	amortization	expense	for	intangible	assets	for	the	next	five	years	and	thereafter	is	expected	to	be	as	follows	(in	thousands):

| 2017 | $159,451 |
| :--- | :--- |
| 2018 | 141,161 |
| 2019 | 130,997 |
| 2020 | 124,216 |
| 2021 | 119,469 |
| Thereafter | 1,318,591 |

A	roll-forward	of	goodwill	for	the	years	ended	December	31,	2016	and	2015	consisted	of	the	following	(in	thousands):

|  | 2016 | 2015 |
| :--- | :--- | :--- |
| Balance,\tbeginning\tof\tyear | $3,375,000 | \t $3,326,474 |
| Acquisitions | — | 74,584 |
| Impairment | (940,700) | — |
| Currency\ttranslation\tadjustments | (37,394) | (26,058) |
| Balance,\tend\tof\tyear | $2,396,906 | \t $3,375,000 |

A	substantial	portion	of	the	intangibles	and	goodwill	relates	to	the	acquisitions	of	OpenTable	in	July	2014	and	KAYAK	in	May	2013.	See	Note	18	for	further information	on	the	acquisition	of	OpenTable.

As	of	September	30,	2016,	the	Company	performed	its	annual	goodwill	impairment	testing.	Other	than	OpenTable,	the	fair	values	of	the	Company's	reporting units	substantially	exceeded	their	respective	carrying	values.	For	OpenTable,	the	Company	recognized	a	non-cash	impairment	charge	to	goodwill	of	$940.7	million, which	is	not	tax	deductible,	resulting	in	an	adjusted	carrying	value	of	OpenTable	goodwill	of	$580.1	million	as	of	September	30,	2016.	The	goodwill	impairment	charge was	included	in	operating	expenses	in	the	Consolidated	Statement	of	Operations	for	the	year	ended	December	31,	2016.	OpenTable's	estimated	fair	value	was determined	using	a	combination	of	standard	valuation	techniques,	including	an	income	approach	(discounted	cash	flows)	and	market	approaches	(EBITDA	multiples	of comparable	publicly-traded	companies	and	precedent	transactions).	Also,	the	Company	tested	the	recoverability	of	OpenTable's	other	long-lived	assets	and	concluded there	was	no	impairment	as	of	September	30,	2016.	Since	the	annual	impairment	test,	there	have	been	no	further	events	or	changes	in	circumstances	to	indicate	a potential	impairment.

The	goodwill	impairment	was	primarily	the	result	of	a	change	in	OpenTable's	business	strategy	that	occurred	during	the	third	quarter	2016.	OpenTable's	post- acquisition	strategy	was	premised	on	significant	and	rapid	investment	in	international	expansion	and	various	other	growth	initiatives,	resulting	in	near-term	reduced earnings	and	profit	margins	but	with	the	goal	of	achieving	significantly	increased	revenues	and	profitability	in	the	long	term.	This	strategy	had	resulted	in	limited progress	as	of	September	30,	2016.	As	a	result,	while	OpenTable	intends	to	continue	to	pursue	and	invest	in	international	expansion	and	its	other	growth	initiatives,	it intends	to	do	so	in	a	more	measured	and	deliberate	manner.	This	change	in	strategy	resulted	in	OpenTable	updating	its	forecasted	financial	results	to	reflect	(a)	a	material reduction	in	forecasted	long-term	financial	results	from	these	initiatives,	partially	offset	by	(b)	improved	earnings	and	profit	margins	in	the	near	term	as	a	result	of	the reduced	investments.	Based	on	the	updated	forecast,	the	Company	estimated	a	significant	reduction	in	the	fair	value	of	the	OpenTable	business	and	recorded	the goodwill	impairment	discussed	above.

# Revolving	Credit	Facility

In	June	2015,	the	Company	entered	into	a	$2.0	billion	five-year	unsecured	revolving	credit	facility	with	a	group	of	lenders.	Borrowings	under	the	revolving credit	facility	will	bear	interest,	at	the	Company's	option,	at	a	rate	per	annum	equal	to	either	(i)	the	adjusted	LIBOR	for	the	interest	period	in	effect	for	such	borrowing plus	an	applicable	margin	ranging	from	0.875%	to	1.50%;	or	(ii)	the	greatest	of	(a)	Bank	of	America,	N.A.'s	prime	lending	rate,	(b)	the	federal	funds	rate	plus	0.5%,	and (c)	an	adjusted	LIBOR	for	an	interest	period	of	one	month	plus	1.00%,	plus	an	applicable	margin	ranging	from	0.00%	to

0.50%.	Undrawn	balances	available	under	the	revolving	credit	facility	are	subject	to	commitment	fees	at	the	applicable	rate	ranging	from	0.085%	to	0.20%.

The	revolving	credit	facility	provides	for	the	issuance	of	up	to	$70.0	million	of	letters	of	credit	as	well	as	borrowings	of	up	to	$50.0	million	on	same-day	notice, referred	to	as	swingline	loans.	Borrowings	under	the	revolving	credit	facility	may	be	made	in	U.S.	Dollars,	Euros,	British	Pounds	Sterling	and	any	other	foreign currency	agreed	to	by	the	lenders.	The	proceeds	of	loans	made	under	the	facility	would	be	used	for	working	capital	and	general	corporate	purposes,	which	could	include acquisitions,	share	repurchases	or	debt	repayments.	The	Company	paid	$4.0	million	in	debt	issuance	costs	related	to	the	revolving	credit	facility	during	the	year	ended December	31,	2015.	As	of	December	31,	2016	and	2015,	there	were	no	borrowings	outstanding	and	approximately	$3.8	million	and	$2.5	million	of	letters	of	credit issued	under	this	facility.

Upon	entering	into	this	new	revolving	credit	facility,	the	Company	terminated	its	$1.0	billion	five-year	revolving	credit	facility	entered	into	in	October	2011 and	recognized	interest	expense	of	$1.0	million	related	to	the	write-off	of	the	remaining	unamortized	debt	issuance	costs	in	2015.

# Outstanding	Debt

Outstanding	debt	as	of	December	31,	2016	consisted	of	the	following	(in	thousands):

| December	31,	2016 | Outstanding<br>Principal<br>Amount | Unamortized	Debt<br>Discount	and	Debt<br>Issuance	Cost | Carrying<br>Value |
| :--- | :--- | :--- | :--- |
| Short-term\tdebt: |  |  |  |
| 1.0%\tConvertible\tSenior\tNotes\tdue\tMarch\t2018 | $1,000,000 | $(32,266) | $967,734 |
| Long-term\tdebt: |  |  |  |
| 0.35%\tConvertible\tSenior\tNotes\tdue\tJune\t2020 | $1,000,000 | $(90,251) | $909,749 |
| 0.9%\tConvertible\tSenior\tNotes\tdue\tSeptember\t2021 | 1,000,000 | (104,592) | 895,408 |
| 2.15%\t(€750\tMillion)\tSenior\tNotes\tdue\tNovember\t2022 | 791,063 | (5,336) | 785,727 |
| 2.375%\t(€1\tBillion)\tSenior\tNotes\tdue\tSeptember\t2024 | 1,054,750 | (12,861) | 1,041,889 |
| 3.65%\tSenior\tNotes\tdue\tMarch\t2025 | 500,000 | (3,727) | 496,273 |
| 3.6%\tSenior\tNotes\tdue\tJune\t2026 | 1,000,000 | (7,619) | 992,381 |
| 1.8%\t(€1\tBillion)\tSenior\tNotes\tdue\tMarch\t2027 | 1,054,750 | (5,655) | 1,049,095 |
| Total\tlong-term\tdebt | $6,400,563 | $(230,041) | $6,170,522 |

| December	31,	2015 | Outstanding<br>Principal<br>Amount | Unamortized	Debt<br>Discount	and	Debt<br>Issuance	Cost | Carrying<br>Value |
| :--- | :--- | :--- | :--- |
| Long-term\tdebt: |  |  |  |
| 1.0%\tConvertible\tSenior\tNotes\tdue\tMarch\t2018 | $1,000,000 | $(58,929) | $941,071 |
| 0.35%\tConvertible\tSenior\tNotes\tdue\tJune\t2020 | 1,000,000 | (114,898) | 885,102 |
| 0.9%\tConvertible\tSenior\tNotes\tdue\tSeptember\t2021 | 1,000,000 | (125,258) | 874,742 |
| 2.15%\t(€750\tMillion)\tSenior\tNotes\tdue\tNovember\t2022 | 815,217 | (6,555) | 808,662 |
| 2.375%\t(€1\tBillion)\tSenior\tNotes\tdue\tSeptember\t2024 | 1,086,957 | (14,688) | 1,072,269 |
| 3.65%\tSenior\tNotes\tdue\tMarch\t2025 | 500,000 | (4,160) | 495,840 |
| 1.8%\t(€1\tBillion)\tSenior\tNotes\tdue\tMarch\t2027 | 1,086,957 | (6,200) | 1,080,757 |
| Total\tlong-term\tdebt | $6,489,131 | $(330,688) | $6,158,443 |

Based	upon	the	closing	price	of	the	Company's	common	stock	for	the	prescribed	measurement	periods	during	the	three	months	ended	December	31,	2016,	the contingent	conversion	threshold	on	the	2018	Notes	(as	defined	below)	was	exceeded.	Therefore,	the	2018	Notes	are	currently	convertible	at	the	option	of	the	holders, and,	accordingly,	the	Company	reported	the	carrying	value	of	the	2018	Notes	as	a	current	liability	in	the	Company's	Consolidated	Balance	Sheet	as	of	December	31, 2016.

Since	these	notes	are	convertible	at	the	option	of	the	holders	and	the	principal	amount	is	required	to	be	paid	in	cash,	the	Company	reclassified	the	unamortized	debt discount	for	the	2018	Notes	in	the	amount	of	$28.5	million	before	tax	as	of	December	31,	2016	from	additional	paid-in-capital	to	convertible	debt	in	the	mezzanine section	in	the	Company's	Consolidated	Balance	Sheet.	The	contingent	conversion	threshold	on	the	2018	Notes	was	not	exceeded	at	December	31,	2015,	therefore,	the 2018	Notes	were	reported	as	a	non-current	liability	in	the	Consolidated	Balance	Sheet.	The	determination	of	whether	or	not	the	2018	Notes	are	convertible	is	performed on	a	quarterly	basis.	Consequently,	the	2018	Notes	may	not	be	convertible	in	future	quarters.

The	contingent	conversion	thresholds	on	the	2020	Notes	(as	defined	below)	and	the	2021	Notes	(as	defined	below)	were	not	exceeded	at	December	31,	2016 and	December	31,	2015,	and	therefore	these	notes	were	reported	as	a	non-current	liability	in	the	Consolidated	Balance	Sheets.

# Fair	Value	of	Debt

As	of	December	31,	2016	and	2015,	the	estimated	fair	value	of	the	outstanding	Senior	Notes	was	approximately	$8.4	billion	and	$7.0	billion,	respectively,	and was	considered	a	"Level	2"	fair	value	measurement	(see	Note	5).	Fair	value	was	estimated	based	upon	actual	trades	at	the	end	of	the	reporting	period	or	the	most	recent trade	available	as	well	as	the	Company's	stock	price	at	the	end	of	the	reporting	period.		A	substantial	portion	of	the	market	value	of	the	Company's	debt	in	excess	of	the outstanding	principal	amount	relates	to	the	conversion	premium	on	the	Convertible	Senior	Notes.

# Convertible	Debt

If	the	note	holders	exercise	their	option	to	convert,	the	Company	delivers	cash	to	repay	the	principal	amount	of	the	notes	and	delivers	shares	of	common	stock or	cash,	at	its	option,	to	satisfy	the	conversion	value	in	excess	of	the	principal	amount.		In	cases	where	holders	decide	to	convert	prior	to	the	maturity	date,	the	Company charges	the	proportionate	amount	of	remaining	debt	issuance	costs	to	interest	expense.

# Description	of	Senior	Convertible	Notes

In	August	2014,	the	Company	issued	in	a	private	placement	$1.0	billion	aggregate	principal	amount	of	Convertible	Senior	Notes	due	September	15,	2021, with	an	interest	rate	of	0.9%	(the	"2021	Notes").	The	Company	paid	$11.0	million	in	debt	issuance	costs	during	the	year	ended	December	31,	2014,	related	to	this offering.	The	2021	Notes	are	convertible,	subject	to	certain	conditions,	into	the	Company's	common	stock	at	a	conversion	price	of	approximately	$2,055.50	per	share. The	2021	Notes	are	convertible,	at	the	option	of	the	holder,	prior	to	September	15,	2021,	upon	the	occurrence	of	specific	events,	including	but	not	limited	to	a	change	in control,	or	if	the	closing	sales	price	of	the	Company's	common	stock	for	at	least	20	trading	days	in	the	period	of	30	consecutive	trading	days	ending	on	the	last	trading day	of	the	immediately	preceding	calendar	quarter	is	more	than	150%	of	the	conversion	price	in	effect	for	the	notes	on	the	last	trading	day	of	the	immediately	preceding quarter.	In	the	event	that	all	or	substantially	all	of	the	Company's	common	stock	is	acquired	on	or	prior	to	the	maturity	of	the	2021	Notes	in	a	transaction	in	which	the consideration	paid	to	holders	of	the	Company's	common	stock	consists	of	all	or	substantially	all	cash,	the	Company	would	be	required	to	make	additional	payments	in the	form	of	additional	shares	of	common	stock	to	the	holders	of	the	2021	Notes	in	an	aggregate	value	ranging	from	$0	to	approximately	$375	million	depending	upon the	date	of	the	transaction	and	the	then	current	stock	price	of	the	Company.	As	of	June	15,	2021,	holders	will	have	the	right	to	convert	all	or	any	portion	of	the	2021 Notes.	The	2021	Notes	may	not	be	redeemed	by	the	Company	prior	to	maturity.		The	holders	may	require	the	Company	to	repurchase	the	2021	Notes	for	cash	in	certain circumstances.		Interest	on	the	2021	Notes	is	payable	on	March	15	and	September	15	of	each	year.

In	May	2013,	the	Company	issued	in	a	private	placement	$1.0	billion	aggregate	principal	amount	of	Convertible	Senior	Notes	due	June	15,	2020,	with	an interest	rate	of	0.35%	(the	"2020	Notes").	The	2020	Notes	were	issued	with	an	initial	discount	of	$20.0	million.	The	Company	paid	$1.0	million	in	debt	issuance	costs during	the	year	ended	December	31,	2013,	related	to	this	offering.	The	2020	Notes	are	convertible,	subject	to	certain	conditions,	into	the	Company's	common	stock	at	a conversion	price	of	approximately	$1,315.10	per	share.	The	2020	Notes	are	convertible,	at	the	option	of	the	holder,	prior	to	June	15,	2020,	upon	the	occurrence	of specific	events,	including	but	not	limited	to	a	change	in	control,	or	if	the	closing	sales	price	of	the	Company's	common	stock	for	at	least	20	trading	days	in	the	period	of 30	consecutive	trading	days	ending	on	the	last	trading	day	of	the	immediately	preceding	calendar	quarter	is	more	than	150%	of	the	conversion	price	in	effect	for	the notes	on	the	last	trading	day	of	the	immediately	preceding	quarter.	In	the	event	that	all	or	substantially	all	of	the	Company's	common	stock	is	acquired	on	or	prior	to	the maturity	of	the	2020	Notes	in	a	transaction	in	which	the	consideration	paid	to	holders	of	the	Company's	common	stock	consists	of	all	or	substantially	all	cash,	the Company	would	be	required	to	make	additional	payments	in	the	form	of	additional	shares	of	common	stock	to	the	holders	of	the	2020	Notes	in	an	aggregate	value ranging	from	$0	to	approximately	$397	million	depending	upon	the	date	of	the	transaction	and	the	then	current	stock	price	of	the	Company.	As	of

March	15,	2020,	holders	will	have	the	right	to	convert	all	or	any	portion	of	the	2020	Notes.	The	2020	Notes	may	not	be	redeemed	by	the	Company	prior	to	maturity. The	holders	may	require	the	Company	to	repurchase	the	2020	Notes	for	cash	in	certain	circumstances.		Interest	on	the	2020	Notes	is	payable	on	June	15	and	December 15	of	each	year.

In	March	2012,	the	Company	issued	in	a	private	placement	$1.0	billion	aggregate	principal	amount	of	Convertible	Senior	Notes	due	March	15,	2018,	with	an interest	rate	of	1.0%	(the	"2018	Notes").	The	Company	paid	$20.9	million	in	debt	issuance	costs	during	the	year	ended	December	31,	2012,	related	to	this	offering.	The 2018	Notes	are	convertible,	subject	to	certain	conditions,	into	the	Company's	common	stock	at	a	conversion	price	of	approximately	$944.61	per	share.	The	2018	Notes are	convertible,	at	the	option	of	the	holder,	prior	to	March	15,	2018,	upon	the	occurrence	of	specific	events,	including	but	not	limited	to	a	change	in	control,	or	if	the closing	sales	price	of	the	Company's	common	stock	for	at	least	20	trading	days	in	the	period	of	30	consecutive	trading	days	ending	on	the	last	trading	day	of	the immediately	preceding	calendar	quarter	is	more	than	150%	of	the	conversion	price	in	effect	for	the	notes	on	the	last	trading	day	of	the	immediately	preceding	quarter.	In the	event	that	all	or	substantially	all	of	the	Company's	common	stock	is	acquired	on	or	prior	to	the	maturity	of	the	2018	Notes	in	a	transaction	in	which	the	consideration paid	to	holders	of	the	Company's	common	stock	consists	of	all	or	substantially	all	cash,	the	Company	would	be	required	to	make	additional	payments	in	the	form	of additional	shares	of	common	stock	to	the	holders	of	the	2018	Notes	in	aggregate	value	ranging	from	$0	to	approximately	$344	million	depending	upon	the	date	of	the transaction	and	the	then	current	stock	price	of	the	Company.	As	of	December	15,	2017,	holders	will	have	the	right	to	convert	all	or	any	portion	of	the	2018	Notes.	The 2018	Notes	may	not	be	redeemed	by	the	Company	prior	to	maturity.		The	holders	may	require	the	Company	to	repurchase	the	2018	Notes	for	cash	in	certain circumstances.		Interest	on	the	2018	Notes	is	payable	on	March	15	and	September	15	of	each	year.

In	March	2010,	the	Company	issued	in	a	private	placement	$575.0	million	aggregate	principal	amount	of	Convertible	Senior	Notes	due	March	15,	2015,	with an	interest	rate	of	1.25%	(the	"2015	Notes").		The	Company	paid	$13.3	million	in	debt	issuance	costs	associated	with	the	2015	Notes	for	the	year	ended	December	31, 2010.		The	2015	Notes	were	convertible,	subject	to	certain	conditions,	into	the	Company's	common	stock	at	a	conversion	price	of	approximately	$303.06	per	share.		In March	2015,	in	connection	with	the	maturity	or	conversion	prior	to	maturity	of	the	2015	Notes,	the	Company	paid	$37.5	million	to	satisfy	the	aggregate	principal	amount due	and	paid	an	additional	$110.1	million	in	satisfaction	of	the	conversion	value	in	excess	of	the	principal	amount,	which	was	charged	to	additional	paid-in	capital. During	the	year	ended	December	31,	2014,	the	Company	delivered	cash	of	$122.9	million	to	repay	the	aggregate	principal	amount	and	issued	300,256	shares	of	its common	stock	and	paid	cash	of	$2.2	million	in	satisfaction	of	the	conversion	value	in	excess	of	the	principal	amount	associated	with	the	2015	Notes	that	were	converted prior	to	maturity.

Cash-settled	convertible	debt,	such	as	the	Company's	Convertible	Senior	Notes,	is	separated	into	debt	and	equity	components	at	issuance	and	each	component is	assigned	a	value.		The	value	assigned	to	the	debt	component	is	the	estimated	fair	value,	as	of	the	issuance	date,	of	a	similar	bond	without	the	conversion	feature.		The difference	between	the	bond	cash	proceeds	and	this	estimated	fair	value,	representing	the	value	assigned	to	the	equity	component,	is	recorded	as	a	debt	discount.		Debt discount	is	amortized	using	the	effective	interest	rate	method	over	the	period	from	the	origination	date	through	the	stated	maturity	date.	The	Company	estimated	the straight	debt	borrowing	rates	at	debt	origination	to	be	3.50%	for	the	2018	Notes,	3.13%	for	the	2020	Notes	and	3.18%	for	the	2021	Notes.		The	yield	to	maturity	was estimated	at	an	at-market	coupon	priced	at	par.

Debt	discount	after	tax	of	$82.5	million	($142.9	million	before	tax)	less	financing	costs	associated	with	the	equity	component	of	convertible	debt	of	$1.6 million	after	tax	was	recorded	in	additional	paid-in	capital	related	to	the	2021	Notes	at	December	31,	2014.	Debt	discount	after	tax	of	$92.4	million	($154.3	million before	tax)	less	financing	costs	associated	with	the	equity	component	of	convertible	debt	of	$0.1	million	after	tax	was	recorded	in	additional	paid-in	capital	related	to	the 2020	Notes	at	June	30,	2013.	Debt	discount	after	tax	of	$80.9	million	($135.2	million	before	tax)	less	financing	costs	associated	with	the	equity	component	of convertible	debt	of	$2.8	million	after	tax	was	recorded	in	additional	paid-in	capital	related	to	the	2018	Notes	at	March	31,	2012.	Debt	discount	after	tax	of	$69.1	million ($115.2	million	before	tax)	less	financing	costs	associated	with	the	equity	component	of	convertible	debt	of	$1.6	million	after	tax	was	recorded	in	additional	paid-in capital	related	to	the	2015	Notes	at	March	31,	2010.

For	the	years	ended	December	31,	2016,	2015	and	2014,	the	Company	recognized	interest	expense	of	$94.5	million,	$92.7	million	and	$75.3	million, respectively,	related	to	convertible	notes,	comprised	of	$22.5	million,	$22.6	million	and	$17.1	million,	respectively,	for	the	contractual	coupon	interest,	$67.5	million, $65.6	million	and	$54.4	million,	respectively,	related	to	the	amortization	of	debt	discount	and	$4.5	million,	$4.5	million	and	$3.8	million,	respectively,	related	to	the amortization	of	debt	issuance	costs.		For	the	years	ended	December	31,	2016,	2015	and	2014,	included	in	the	amortization	of	debt	discount	mentioned	above	was	$2.8 million,	$2.7	million	and	$2.6	million,	respectively,	of	original	issuance	discount	amortization	related	to	the	2020	Notes.	In	addition,	the	Company	incurred	interest expense	for	the	write-off	of	unamortized	debt	issuance	costs	related	to	debt	conversions	of	$0.5	million	for	the	year	ended	December	31,	2014.	The	remaining	period	for amortization

of	debt	discount	and	debt	issuance	costs	is	the	period	until	the	stated	maturity	date	for	the	respective	debt.		The	weighted-average	effective	interest	rates	for	the	years ended	December	31,	2016,	2015,	and	2014	are	3.4%,	3.4%	and	3.5%,	respectively.

In	addition,	if	the	Company's	convertible	debt	is	redeemed	or	converted	prior	to	maturity,	a	gain	or	loss	on	extinguishment	is	recognized.		The	gain	or	loss	is the	difference	between	the	fair	value	of	the	debt	component	immediately	prior	to	extinguishment	and	its	carrying	value.		To	estimate	the	fair	value	of	the	debt	at	the conversion	date,	the	Company	estimated	its	straight	debt	borrowing	rate,	considering	its	credit	rating	and	straight	debt	of	comparable	corporate	issuers.		For	the	year ended	December	31,	2014	the	Company	recognized	non-cash	losses	of	$6.3	million	($3.8	million	after	tax)	in	"Foreign	currency	transactions	and	other"	in	the Consolidated	Statement	of	Operations	in	connection	with	the	conversion	of	the	2015	Notes.

# Other	Long-term	Debt

In	May	2016,	the	Company	issued	Senior	Notes	due	June	1,	2026,	with	an	interest	rate	of	3.6%	(the	"2026	Notes")	for	an	aggregate	principal	amount	of	$1.0 billion.	The	2026	Notes	were	issued	with	an	initial	discount	of	$1.9	million.	In	addition,	the	Company	paid	$6.2	million	in	debt	issuance	costs	during	the	year	ended December	31,	2016.	Interest	on	the	2026	Notes	is	payable	semi-annually	on	June	1	and	December	1,	beginning	December	1,	2016.

In	November	2015,	the	Company	issued	Senior	Notes	due	November	25,	2022,	with	an	interest	rate	of	2.15%	(the	"2022	Notes")	for	an	aggregate	principal amount	of	750	million	Euros.	The	2022	Notes	were	issued	with	an	initial	discount	of	2.2	million	Euros.	In	addition,	the	Company	paid	$3.7	million	in	debt	issuance costs	during	the	year	ended	December	31,	2015.	Interest	on	the	2022	Notes	is	payable	annually	on	November	25.	Subject	to	certain	limited	exceptions,	all	payments	of interest	and	principal,	including	payments	made	upon	any	redemption	of	the	2022	Notes	will	be	made	in	Euros.

In	March	2015,	the	Company	issued	Senior	Notes	due	March	15,	2025,	with	an	interest	rate	of	3.65%	(the	"2025	Notes")	for	an	aggregate	principal	amount	of $500	million.	The	2025	Notes	were	issued	with	an	initial	discount	of	$1.3	million.	In	addition,	the	Company	paid	$3.2	million	in	debt	issuance	costs	during	the	year ended	December	31,	2015.	Interest	on	the	2025	Notes	is	payable	semi-annually	on	March	15	and	September	15.

In	March	2015,	the	Company	issued	Senior	Notes	due	March	3,	2027,	with	an	interest	rate	of	1.8%	(the	"2027	Notes")	for	an	aggregate	principal	amount	of 1.0	billion	Euros.	The	2027	Notes	were	issued	with	an	initial	discount	of	0.3	million	Euros.	In	addition,	the	Company	paid	$6.3	million	in	debt	issuance	costs	during	the year	ended	December	31,	2015.	Interest	on	the	2027	Notes	is	payable	annually	on	March	3.	Subject	to	certain	limited	exceptions,	all	payments	of	interest	and	principal for	the	2027	Notes	will	be	made	in	Euros.

In	September	2014,	the	Company	issued	Senior	Notes	due	September	23,	2024,	with	an	interest	rate	of	2.375%	(the	"2024	Notes")	for	an	aggregate	principal amount	of	1.0	billion	Euros.	The	2024	Notes	were	issued	with	an	initial	discount	of	9.4	million	Euros.	In	addition,	the	Company	paid	$6.5	million	in	debt	issuance	costs during	the	year	ended	December	31,	2014.	Interest	on	the	2024	Notes	is	payable	annually	on	September	23.	Subject	to	certain	limited	exceptions,	all	payments	of interest	and	principal,	including	payments	made	upon	any	redemption	of	the	2024	Notes,	will	be	made	in	Euros.

The	aggregate	principal	value	of	the	2022	Notes,	2024	Notes	and	2027	Notes	and	accrued	interest	thereon	are	designated	as	a	hedge	of	the	Company's	net investment	in	certain	Euro	functional	currency	subsidiaries.	The	foreign	currency	transaction	gains	or	losses	on	these	liabilities	are	measured	based	upon	changes	in	spot rates	and	are	recorded	in	"Accumulated	other	comprehensive	income	(loss)"	in	the	Consolidated	Balance	Sheets.	The	Euro-denominated	net	assets	of	these	subsidiaries are	translated	into	U.S.	Dollars	at	each	balance	sheet	date,	with	effects	of	foreign	currency	changes	also	reported	in	"Accumulated	other	comprehensive	income	(loss)"	in the	Consolidated	Balance	Sheets.	Since	the	notional	amount	of	the	recorded	Euro-denominated	debt	and	related	interest	are	not	greater	than	the	notional	amount	of	the Company's	net	investment,	the	Company	does	not	expect	to	incur	any	ineffectiveness	on	this	hedge.

Debt	discount	is	amortized	using	the	effective	interest	rate	method	over	the	period	from	the	origination	date	through	the	stated	maturity	date.		The	Company estimated	the	effective	interest	rates	at	debt	origination	to	be	3.62%	for	the	2026	Notes,	2.20%	for	the	2022	Notes,	3.68%	for	the	2025	Notes,	1.80%	for	the	2027	Notes and	2.48%	for	the	2024	Notes.

For	the	years	ended	December	31,	2016	and	2015,	the	Company	recognized	interest	expense	of	$108.0	million	and	$61.5	million,	respectively,	related	to	other long-term	debt	which	was	comprised	of	$104.1	million	and	$59.0	million,	respectively,	for	the	contractual	coupon	interest,	$1.5	million	and	$1.1	million,	respectively, related	to	the	amortization	of	debt	discount	and	$2.4	million	and	$1.4	million,	respectively,	related	to	the	amortization	of	debt	issuance	costs.	The	remaining

period	for	amortization	of	debt	discount	and	debt	issuance	costs	is	the	period	until	the	stated	maturity	dates	for	the	respective	debt.

In	March	2016,	the	Company	received	a	ten-year	loan	from	the	State	of	Connecticut	in	the	amount	of	$2.5	million	with	an	interest	rate	of	1%	in	connection	with the	construction	of	office	space	in	Connecticut.		As	of	December	31,	2016,	the	loan	is	reported	in	"Other	long-term	liabilities"	in	the	Consolidated	Balance	Sheet.	The loan	will	be	forgiven	if	certain	employment	and	salary	conditions	are	met	in	2017	for	a	portion	of	the	loan	and	in	2019	for	the	remaining	balance	of	the	loan.

# 11. TREASURY

# STOCK

In	the	first	quarter	of	2016,	the	Company's	Board	of	Directors	authorized	a	program	to	repurchase	up	to	$3.0	billion	of	the	Company's	common	stock,	in addition	to	amounts	previously	authorized.	In	the	year	ended	December	31,	2016,	the	Company	repurchased	635,877	shares	of	its	common	stock	in	the	open	market	for an	aggregate	cost	of	$861.5	million,	which	included	stock	repurchases	in	December	2016	of	10,215	shares	for	an	aggregate	cost	of	$15.0	million	that	were	settled	in January	2017.	As	a	result,	the	Consolidated	Balance	Sheet	at	December	31,	2016	includes	$15.0	million	in	"Accrued	expenses	and	other	current	liabilities"	for	these unsettled	stock	repurchases.	The	Consolidated	Statement	of	Cash	Flows	for	the	year	ended	December	31,	2016	excludes	the	impact	of	these	stock	repurchases	settled	in January	2017.

As	of	December	31,	2016,	the	Company	had	a	remaining	authorization	of	$2.1	billion	to	purchase	its	common	stock.	In	the	first	quarter	of	2017,	the	Company's Board	of	Directors	authorized	a	program	to	repurchase	up	to	$2.0	billion	of	the	Company's	common	stock,	in	addition	to	amounts	previously	authorized.	The	Company may	make	additional	repurchases	of	shares	under	its	stock	repurchase	program,	depending	on	prevailing	market	conditions,	alternate	uses	of	capital	and	other	factors. Whether	and	when	to	initiate	and/or	complete	any	purchase	of	common	stock	and	the	amount	of	common	stock	purchased	will	be	determined	at	the	Company's discretion.

In	the	first	quarter	of	2015,	the	Company's	Board	of	Directors	authorized	the	repurchase	of	up	to	$3.0	billion	of	the	Company's	common	stock,	in	addition	to amounts	previously	authorized.	In	the	year	ended	December	31,	2015,	the	Company	repurchased	2,468,259	shares	of	its	common	stock	in	the	open	market	for	an aggregate	cost	of	$3.0	billion	related	to	this	authorization	and	5,813	shares	for	an	aggregate	cost	of	$7.2	million	covered	under	the	remaining	authorization	as	of December	31,	2014	to	repurchase	common	stock.

In	2014,	the	Company	repurchased	114,645	share	of	its	common	stock	in	privately	negotiated,	off-market	transactions	and	438,897	shares	of	its	common	stock in	the	open	market	for	aggregate	costs	of	$147.3	million	and	$500.0	million,	respectively.	All	these	shares	were	covered	under	the	Company's	remaining	authorizations as	of	December	31,	2013	to	repurchase	common	stock.

The	Board	of	Directors	has	given	the	Company	the	general	authorization	to	repurchase	shares	of	its	common	stock	to	satisfy	employee	withholding	tax obligations	related	to	stock-based	compensation.		In	the	years	ended	December	31,	2016,	2015	and	2014,	the	Company	repurchased	127,107,	65,849,	and	77,761	shares at	an	aggregate	cost	of	$167.0	million,	$81.9	million	and	$103.1	million,	respectively,	to	satisfy	employee	withholding	taxes	related	to	stock-based	compensation.

# 12. ACCUMULATED	OTHER	COMPREHENSIVE	INCOME	(LOSS)

The	table	below	provides	the	balances	for	each	classification	of	accumulated	other	comprehensive	income	(loss)	as	of	December	31,	2016	and	2015	(in

# thousands):

|  | December	31,	2016 | December	31,	2015 |
| :--- | :--- | :--- |
| Foreign\tcurrency\ttranslation\tadjustments,\tnet\tof\ttax\t(1) | $(311,247) | $(217,263) |
| Net\tunrealized\tgain\ton\tmarketable\tsecurities,\tnet\tof\ttax\t(2) | 176,563 | 462,115 |
| Accumulated\tother\tcomprehensive\tincome\t(loss) | $(134,684) | $244,852 |

(1)							Foreign	currency	translation	adjustments,	net	of	tax,	include	net	losses	from	fair	value	adjustments	of	$35.0	million	after	tax	($52.6	million	before	tax)	and $34.8	million	after	tax	($52.6	million	before	tax)	at	December	31,	2016	and	2015,	respectively,	associated	with	settled	derivatives	that	previously	had	been designated	as	net	investment	hedges	(see	Note	5).

Foreign	currency	translation	adjustments,	net	of	tax,	include	foreign	currency	transaction	gains	of	$182.6	million	after	tax	($310.4	million	before	tax)	and $126.8	million	after	tax	($220.5	million	before	tax)	at	December	31,	2016	and	2015,	respectively,	associated	with	the	Company's	2022	Notes,	2024	Notes	and 2027	Notes.	The	2022	Notes,	2024	Notes	and	2027	Notes	are	Euro-denominated	debt	and	are	designated	as	hedges	of	certain	of	the	Company's	Euro- denominated	net	assets	(see	Note	10).

The	remaining	balance	in	foreign	currency	translation	adjustments	excludes	income	taxes	as	a	result	of	the	Company's	intention	to	indefinitely	reinvest	the earnings	of	its	international	subsidiaries	outside	of	the	United	States.

(2)									The	unrealized	gains	before	tax	at	December	31,	2016	and	2015	were	$185.9	million	and	$456.1	million,	respectively,	of	which	unrealized	gains	of	$148.5 million	and	$481.3	million,	respectively,	were	exempt	from	tax	in	the	Netherlands	and	unrealized	gains	of	$37.4	million	and	unrealized	losses	of	$25.2	million, respectively,	were	taxable.

# TAXES

# Provision	for	Income	Taxes

The	income	tax	expense	(benefit)	for	the	year	ended	December	31,	2016	is	as	follows	(in	thousands):

|  | Current | Deferred | Total |
| :--- | :--- | :--- | :--- |
| International | $627,718 | $(14,359) | $613,359 |
| U.S.\tFederal | 63,613 | (32,405) | 31,208 |
| U.S.\tState | (1,175) | (65,141) | (66,316) |
| Total | $690,156 | $(111,905) | $578,251 |

|  | Current | Deferred | Total |
| :--- | :--- | :--- | :--- |
| International | $526,052 | $(17,789) | $508,263 |
| U.S.\tFederal | 88,237 | (68,696) | 19,541 |
| U.S.\tState | 24,006 | 25,150 | 49,156 |
| Total | $638,295 | $(61,335) | $576,960 |

|  | Current | Deferred | Total |
| :--- | :--- | :--- | :--- |
| International | $496,719 | $(10,613) | $486,106 |
| U.S.\tFederal | 10,316 | 47,847 | 58,163 |
| U.S.\tState | 28,953 | (5,527) | 23,426 |
| Total | $535,988 | $31,707 | $567,695 |

The	U.S.	pre-tax	loss	for	the	year	ended	December	31,	2016	compared	to	the	pre-tax	income	for	the	year	December	31,	2015	is	primarily	due	to	the	impairment charge	for	goodwill	of	$940.7	million	related	to	OpenTable	(see	Note	9)	and	increased	interest	expense	in	2016.		Income	tax	expense	on	the	Company's	U.S.	pre-tax	loss for	the	year	ended	December	31,	2016	includes	the	impact	of	the	non-deductible	impairment	charge	of	OpenTable	goodwill,	U.S.	income	tax	on	the	Company's international	interest	income,	which	increased	during	the	year,	and	the	tax	benefits	arising	from	U.S.	state	tax	law	changes	resulting	in	a	net	decrease	to	deferred	tax liabilities,	mostly	associated	with	acquired	intangible	assets.

The	U.S.	pre-tax	income	for	the	year	ended	December	31,	2015,	decreased	compared	to	the	year	ended	December	31,	2014,	primarily	due	to	higher	interest expense	and	increased	intangible	amortization	from	the	OpenTable	acquisition.	Income	tax	expense	on	the	Company's	U.S.	pre-tax	income	for	the	year	ended	December 31,	2015,	includes	the	impact	of	increases	in	state	income	tax	rates	on	the	Company's	deferred	tax	liabilities	and	U.S.	income	tax	on	the	Company's	international	interest income	which	increased	during	the	year.

# Deferred	Income	Taxes

At	December	31,	2016,	the	Company	had	approximately	$727.8	million	of	available	net	operating	loss	carryforwards	("NOLs")	for	U.S.	federal	income	tax purposes,	comprised	of	approximately	$22.8	million	of	NOLs	generated	from	operating	losses	and	approximately	$705.0	million	of	NOLs	generated	from	equity-related transactions,	including	equity-based	compensation	and	stock	warrants.	The	NOLs	mainly	expire	from	December	31,	2019	to	December	31,	2021	and	an	additional	$207 million	expires	at	December	31,	2033.		The	Company	also	had	approximately	$583.9	million	of	U.S.	state	NOLs,	the	majority	of	which	were	generated	from	equity related	transactions	and	mainly	expire	between	December	31,	2020	and	December	31,	2034.	In	addition,	the	Company	has	$133.5	million	of	non-U.S.	NOLs,	of	which $66.1	million	expire	between	December	31,	2019	and	December	31,	2023.	Further	at	December	31,	2016,	the	Company	had	approximately	$34.3	million	of	U.S. research	tax	credit	carryforwards,	subject	to	annual	limitation,	that	mainly	expire	between	December	31,	2028	and	December	31,	2034,	and	$26.0	million	of	federal alternative	minimum	tax	credit	carryforwards,	that	do	not	expire,	that	are	available	to	reduce	future	tax	liabilities.

The	utilization	of	these	NOLs,	allowances	and	credits	is	dependent	upon	the	Company's	ability	to	generate	sufficient	future	taxable	income	and	the	tax	laws	in the	jurisdictions	where	the	losses	were	generated.	Because	of	a	2016	change	in	state	tax	law,	the	Company	estimates	that	approximately	$230	million	of	unrecognized state	NOLs	($20.7	million	tax-effected)	generated	from	equity-related	transactions	will	expire	before	the	Company	has	the	capacity	to	utilize	them.	The	Company periodically	evaluates	the	likelihood	of	the	realization	of	deferred	tax	assets,	and	reduces	the	carrying	amount	of	these	deferred	tax	assets	by	a	valuation	allowance	to	the extent	it	believes	a	portion	will	not	be	realized.	The	Company	considers	many	factors	when	assessing	the	likelihood	of	future	realization	of	the	deferred	tax	assets, including	its	recent	cumulative	earnings	experience	by	taxing	jurisdiction,	expectations	of	future	income,	tax	planning	strategies,	the	carryforward	periods	available	for tax	reporting	purposes,	and	other	relevant	factors.

The	tax	effects	of	temporary	differences	that	give	rise	to	significant	portions	of	deferred	tax	assets	and	liabilities	at	December	31,	2016	and	2015	are	as	follows (in	thousands):

|  | 2016 | 2015 |
| :--- | :--- | :--- |
| Deferred\ttax\tassets/(liabilities): |  |  |
| Net\toperating\tloss\tcarryforward\t—\tU.S. | $15,977 | $59,220 |
| Net\toperating\tloss\tcarryforward\t—\tInternational | 18,371 | 18,153 |
| Accrued\texpenses | 72,631 | 61,703 |
| Stock-based\tcompensation\tand\tother\tstock\tbased\tpayments | 60,937 | 77,761 |
| Other | — | 8,001 |
| Subtotal | 167,916 | 224,838 |
| Discount\ton\tconvertible\tnotes | (77,845) | (112,886) |
| Intangible\tassets\tand\tother | (740,329) | (822,685) |
| Euro\tdenominated\tdebt | (117,737) | (92,230) |
| Fixed\tassets | (2,245) | (3,658) |
| Other | (3,958) | — |
| Less\tvaluation\tallowance\ton\tdeferred\ttax\tassets | (24,475) | (64,845) |
| Net\tdeferred\ttax\tliabilities\t(1) | $(798,673) | $(871,466) |

(1)			Includes	deferred	tax	assets	of	$23.7	million	and	$21.1	million	as	of	December	31,	2016	and	2015,	respectively,	reported	in	"Other	assets"	in	the	Consolidated Balance	Sheets.

The	valuation	allowance	on	deferred	tax	assets	of	$24.5	million	at	December	31,	2016	includes	$4.1	million	related	to	U.S.	federal	net	operating	loss carryforwards	derived	from	equity	transactions,	$18.5	million	related	to	international	operations	and	$1.9	million	related	to	U.S.	research	credits	and	capital	loss carryforwards.		During	the	year	ended	December	31,	2016,	the	Company	utilized	the	majority	of	its	pre-2006	federal	equity	NOLs	resulting	in	a	$40	million	decrease	in the	valuation	allowance.	Additionally,	since	January	1,	2006,	the	Company	has	generated	tax	benefits	arising	from	equity	transactions	that	are	not	included	in	the deferred	tax	table	above	in	accordance	with	current	accounting	principles.	Pursuant	to	the	adoption	of	an	accounting	update	issued	in	March	2016,	the	Company	will record	a	deferred	tax	asset	for	approximately	$300	million,	net	of	valuation	allowances,	with	a	corresponding	credit	to	retained	earnings	on	January	1,	2017,	representing the	previously	unrecognized	tax	benefit	related	to	equity	transactions	(see	Note	2).

It	is	the	practice	and	intention	of	the	Company	to	indefinitely	reinvest	the	unremitted	earnings	of	its	international	subsidiaries	outside	of	the	United	States, therefore,	at	December	31,	2016,	no	provision	has	been	made	for	U.S.	taxes	on	approximately	$13.0	billion	of	cumulative	unremitted	international	earnings.		The Company	estimates	that	the	deferred	tax	liability	it	would	record	if	such	earnings	were	not	indefinitely	reinvested	internationally	is	approximately	$2.3	billion	as	of December	31,	2016.

# Reconciliation	of	U.S.	Federal	Statutory	Income	Tax	Rate	to	Effective	Income	Tax	Rate

A	significant	portion	of	the	Company's	taxable	earnings	are	generated	in	the	Netherlands.	According	to	Dutch	corporate	income	tax	law,	income	generated from	qualifying	innovative	activities	is	taxed	at	a	rate	of	5%	("Innovation	Box	Tax")	rather	than	the	Dutch	statutory	rate	of	25%.		A	portion	of	Booking.com's	earnings during	the	years	ended	December	31,	2016,	2015	and	2014	qualifies	for	Innovation	Box	Tax	treatment,	which	had	a	significant	beneficial	impact	on	the	Company's effective	tax	rate	for	those	years.

The	effective	income	tax	rate	of	the	Company	is	different	from	the	amount	computed	using	the	expected	U.S.	statutory	federal	rate	of	35%	as	a	result	of	the following	items	(in	thousands):

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Income\ttax\texpense\tat\tfederal\tstatutory\trate | $949,633 | $1,094,912 | $1,046,307 |
| Adjustment\tdue\tto: |  |  |  |
| Foreign\trate\tdifferential | (377,542) | (316,078) | (289,692) |
| Innovation\tBox\tTax\tbenefit | (324,633) | (260,193) | (233,545) |
| Impairment\tof\tgoodwill\tand\tcost-method\tinvestment | 343,484 | — | — |
| Other | (12,691) | 58,319 | 44,625 |
| Income\ttax\texpense | $578,251 | $576,960 | $567,695 |

# Uncertain	Tax	Positions

See	Note	2	for	the	Company's	accounting	policy	on	uncertain	tax	positions.	The	following	is	a	reconciliation	of	the	total	beginning	and	ending	amount	of unrecognized	tax	benefits	(in	thousands):

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Unrecognized\ttax\tbenefit\t—\tJanuary\t1 | $42,594 | $52,356 | $22,104 |
| Gross\tincreases\t—\ttax\tpositions\tin\tcurrent\tperiod | 2,468 | 3,411 | 9,305 |
| Gross\tincreases\t—\ttax\tpositions\tin\tprior\tperiods | 859 | 4,305 | 6,569 |
| Increase\tacquired\tin\tbusiness\tcombination | — | — | 17,767 |
| Gross\tdecreases\t—\ttax\tpositions\tin\tprior\tperiods | (217) | (10,365) | (2,164) |
| Reduction\tdue\tto\tlapse\tin\tstatute\tof\tlimitations | (9,077) | (7,113) | (346) |
| Reduction\tdue\tto\tsettlements\tduring\tthe\tcurrent\tperiod | (3,912) | — | (879) |
| Unrecognized\ttax\tbenefit\t—\tDecember\t31 | $32,715 | $42,594 | $52,356 |

The	unrecognized	tax	benefits	are	included	in	"Other	long-term	liabilities"	and	"Deferred	income	taxes"	in	the	Consolidated	Balance	Sheets	for	the	years	ended December	31,	2016,	2015	and	2014.	The	Company	does	not	expect	further	significant	changes	in	the	amount	of	unrecognized	tax	benefits	during	the	next	twelve	months.

The	Company's	Netherlands,	U.S.	federal,	Connecticut,	Singapore,	and	U.K.	income	tax	returns,	constituting	the	returns	of	the	major	taxing	jurisdictions,	are subject	to	examination	by	the	taxing	authorities	as	prescribed	by	applicable	statute.	The	statute	of	limitations	remains	open	for:	the	Company's	Netherlands	returns	from 2010	and	forward;	the	Company's	Singapore	returns	from	2012	and	forward;	the	Company's	U.S.	Federal	and	Connecticut	returns	from	2013	and	forward;	and	the Company's	U.K.	returns	for	the	tax	years	2008,	2015,	and	2016.	No	income	tax	waivers	have	been	executed	that	would	extend	the	period	subject	to	examination	beyond the	period	prescribed	by	statute	in	the	major	taxing	jurisdictions	in	which	the	company	is	a	taxpayer.	See	Note	14	for	more	information	regarding	tax	contingencies.

# 14. COMMITMENTS	AND

# Competition	Reviews

The	online	travel	industry	has	become	the	subject	of	investigations	by	various	national	competition	authorities	("NCAs"),	particularly	in	Europe.	The	Company is	or	has	been	involved	in	investigations	predominately	related	to	whether	Booking.com's	contractual	parity	arrangements	with	accommodation	providers,	sometimes also	referred	to	as	"most	favored	nation"	or	"MFN"	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.

In	Europe,	investigations	into	Booking.com's	price	parity	provisions	were	initiated	in	2013	and	2014	by	NCAs	in	France,	Germany,	Italy,	Austria,	Sweden, Ireland	and	Switzerland.	A	number	of	other	NCAs	have	also	looked	at	these	issues.	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.	Under	the	commitments,	Booking.com	replaced	its	existing	price	parity	agreements	with	accommodation	providers	with	"narrow"	price	parity agreements.	Under	a	"narrow"	price	parity	agreement,	subject	to	certain	exceptions,	an	accommodation	provider	is	still	required	to	offer	the	same	or	better	rates	on Booking.com	as	it	offers	to	a	consumer	directly	online,	but	it	is	no	longer	required	to	offer	the	same	or	better	rates	on	Booking.com	as	it	offers	to	other	OTCs.	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	online	travel	companies	that	offer	lower	rates	of	commission	or	other	benefits,	offer	lower	rates	to	consumers	that	book	through	offline	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.	Nearly	all	NCAs	in	the	European	Economic	Area	have	now	closed	their	investigations	following	Booking.com's	implementation	of	the commitments	in	their	jurisdictions.	Booking.com	has	also	recently	resolved	the	concerns	of	the	NCAs	in	Australia,	New	Zealand	and	Georgia	further	to	agreeing	to implement	the	"narrow"	price	parity	clause	in	these	countries.	The	Turkish	NCA	recently	imposed	fines	on	Booking.com	following	an	investigation	into	Booking.com's "wide"	parity	clauses.	Booking.com	is	in	ongoing	discussions	with	various	NCAs	in	other	countries	regarding	their	concerns.	The	Company	is	currently	unable	to predict	the	long-term	impact	the	implementation	of	these	commitments	will	have	on	Booking.com's	business,	on	investigations	by	other	countries,	or	on	industry practice	more	generally.

A	working	group	of	10	European	NCAs	(France,	Germany,	Belgium,	Hungary,	Ireland,	Italy,	the	Netherlands,	Czech	Republic,	the	United	Kingdom	and Sweden)	was	established	by	the	European	Commission	in	December	2015	to	monitor	the	effects	of	the	narrow	price	parity	clause	in	Europe.	This	working	group	(the "ECN	Working	Group")	issued	questionnaires	during	2016	to	online	travel	agencies,	including	Booking.com	and	Expedia,	meta-search	sites	and	hotels	about	the	narrow price	parity	clause.	On	February	17,	2017	the	ECN	Working	Group	issued	a	statement	that	it	would	publish	its	report	soon	and	that	it	had	decided	to	keep	the	sector under	review	and	re-assess	the	competitive	situation	in	due	course.	Separately,	the	French	NCA,	which	is	conducting	its	own	review	of	the	effects	of	the	narrow	price parity	clause,	on	February	9,	2017,	issued	a	report	stating	that	it	has	not	ruled	out	the	possibility	of	issuing	an	opinion	at	its	own	initiative	if	a	change	in	competition requires	it,	and	that	it	would	continue	to	contribute	actively	to	the	ECN	Working	Group	process.

The	Company	is	unable	to	predict	how	these	appeals	and	the	remaining	investigations	in	other	countries	will	ultimately	be	resolved,	or	whether	further	action	in Europe	will	be	taken	as	a	result	of	the	working	group's	findings.	Possible	outcomes	include	requiring	Booking.com	to	amend	or	remove	its	rate	parity	clause	from	its contracts	with	accommodation	providers	in	those	jurisdictions	and/or	the	imposition	of	fines.	The	Company	is	unable	to	predict	the	impact	these	possible	outcomes might	have	on	its	business.

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.	Legislation	in	Austria	prohibiting	"narrow"	price	parity	agreements (including	the	narrow	parity	clause)	became	effective	on	December	31,	2016.	Similar	legislation	was	approved	by	the	Italian	Senate	in	June	2016	but	not	ultimately passed,	and	could	be	introduced	again	in	2017.	A	motion	to	prohibit	the	narrow	price	parity	clause	has	also	been	proposed	in	Switzerland.	It	is	not	yet	clear	how	the Macron	Law	and	the	Austrian	legislation	or	the	proposed	Italian	and	Swiss	legislation	may	affect	the	Company's	business	in	the	long	term	in	France,	Austria,	Italy	and Switzerland,	respectively.

# Litigation	Related	to	Travel	Transaction	Taxes

The	Company	and	certain	third-party	OTCs	are	currently	involved	in	approximately	thirty	lawsuits,	including	certified	and	putative	class	actions,	brought	by	or against	U.S.	states,	cities	and	counties	over	issues	involving	the	payment	of	travel	transaction	taxes	(e.g.,	hotel	occupancy	taxes,	excise	taxes,	sales	taxes,	etc.)	related	to the	priceline.com	business.	Generally,

the	complaints	allege,	among	other	things,	that	the	OTCs	violated	each	jurisdiction's	respective	relevant	travel	transaction	tax	ordinance	with	respect	to	the	charge	and remittance	of	amounts	to	cover	taxes	under	each	law.	The	Company	believes	that	the	laws	at	issue	generally	do	not	apply	to	the	services	it	provides,	namely	the facilitation	of	travel	reservations,	and,	therefore,	that	it	does	not	owe	the	taxes	that	are	claimed	to	be	owed.	However,	the	Company	has	been	involved	in	this	type	of litigation	for	many	years,	and	state	and	local	jurisdictions	where	these	issues	have	not	been	resolved	could	assert	that	the	Company	is	subject	to	travel	transaction	taxes and	could	seek	to	collect	such	taxes,	retroactively	and/or	prospectively.	From	time	to	time,	the	Company	has	found	it	expedient	to	settle	claims	pending	in	these	matters without	conceding	that	the	claims	at	issue	are	meritorious	or	that	the	claimed	taxes	are	in	fact	due	to	be	paid.		The	Company	may	also	settle	current	or	future	travel transaction	tax	claims.

On	August	5,	2016,	the	tax	appeal	court	of	the	State	of	Hawaii	ruled	that	online	travel	companies,	including	the	Company,	owe	General	Excise	Tax	(GET)	on the	gross	amounts	collected	from	consumers	on	rental	car	reservations.		The	tax	appeal	court	rejected	the	online	travel	companies'	arguments	that	GET	applies	only	to amounts	retained	by	online	travel	companies	and	does	not	include	amounts	paid	to	rental	car	company	suppliers.		The	online	travel	companies	argued	that	GET	should not	apply	to	gross	amounts	charged	to	consumers	for	rental	car	reservations	pursuant	to	the	2015	decision	of	the	Hawaii	Supreme	Court	in	Travelocity.com,	L.P.,	et	al.	v. Director	of	Taxation	that	GET	applies	to	amounts	retained	by	online	travel	companies	for	hotel	reservations	and	not	for	gross	amounts	charged	to	consumers.		The Company	intends	to	appeal	the	tax	appeal	court	decision	to	the	Hawaii	appellate	courts.		The	Company	must	pay	the	amount	of	the	judgment,	which	has	not	yet	been entered	and	which	we	believe	will	be	immaterial	to	our	financial	condition,	results	of	operations	and	cash	flows,	in	order	to	appeal	the	decision.

Litigation	is	subject	to	uncertainty	and	there	could	be	adverse	developments	in	these	pending	or	future	cases	and	proceedings.	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	attorneys'	fees	and	costs.	An	adverse outcome	in	one	or	more	of	these	unresolved	proceedings	could	have	an	adverse	effect	on	the	Company's	results	of	operations	or	cash	flows	in	any	given	operating period.	However,	the	Company	believes	that	even	if	the	Company	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	its	liquidity	or	financial	condition.

As	a	result	of	the	travel	transaction	tax	litigation	generally	and	other	attempts	by	U.S.	jurisdictions	to	levy	similar	taxes,	the	Company	has	established	an accrual	(including	estimated	interest	and	penalties)	for	the	potential	resolution	of	issues	related	to	travel	transaction	taxes	in	the	amount	of	approximately	$27	million	at both	December	31,	2016	and	2015.	The	Company's	legal	expenses	for	these	matters	are	expensed	as	incurred	and	are	not	reflected	in	the	amount	accrued.	The	actual	cost may	be	less	or	greater,	potentially	significantly,	than	the	liabilities	recorded.	An	estimate	for	a	reasonably	possible	loss	or	range	of	loss	in	excess	of	the	amount	accrued cannot	be	reasonably	made.

# Patent	Infringement

On	February	9,	2015,	International	Business	Machines	Corporation	("IBM")	filed	a	complaint	in	the	U.S.	District	Court	for	the	District	of	Delaware	against	The Priceline	Group	Inc.	and	its	subsidiaries	KAYAK	Software	Corporation,	OpenTable,	Inc.	and	priceline.com	LLC	(the	"Subject	Companies").	In	the	complaint,	IBM alleges	that	the	Subject	Companies	have	infringed	and	continue	to	willfully	infringe	certain	IBM	patents	that	IBM	claims	relate	to	the	presentation	of	applications	and advertising	in	an	interactive	service,	preserving	state	information	in	online	transactions	and	single	sign-on	processes	in	a	computing	environment	and	seeks	unspecified damages	(including	a	request	that	the	amount	of	compensatory	damages	be	trebled),	injunctive	relief	and	costs	and	reasonable	attorneys'	fees.	The	Subject	Companies believe	the	claims	to	be	without	merit	and	are	contesting	them.	The	Subject	Companies	asked	the	court	to	dismiss	the	case	due	to	lack	of	patentable	subject	matter	in	the asserted	patents,	and	on	March	30,	2016	that	motion	was	denied	without	prejudice	to	refiling	later	in	the	case.	Concurrently	with	the	litigation,	the	Subject	Companies filed	two	Inter	Partes	Review	("IRP")	petitions	and	four	Covered	Business	Method	("CBM")	petitions	for	the	patents-in-suit	with	the	U.S.	Patent	and	Trademark	Office (the	"PTAB").	The	PTAB	denied	one	of	the	IPR	petitions	and	granted	one	of	the	IPR	petitions,	and	denied	the	four	CBM	petitions.	Expert	discovery	has	concluded	and summary	judgment	briefing	has	begun.	Trial	in	the	District	Court	is	scheduled	for	August	2017.		The	Company	does	not	believe	a	loss	contingency	is	probable	or reasonably	estimable	and	therefore	has	not	recorded	a	liability	for	this	matter.

# French	and	Italian	Tax	Matters

French	tax	authorities	recently	concluded	an	audit	of	Booking.com	that	started	in	2013	of	the	years	2003	through	2012.	They	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.	In	December	2015,	the	French	tax authorities	issued	Booking.com	assessments	for	approximately	356	million	Euros,	the	majority	of	which	would	represent	penalties	and	interest.	The	Company	believes that	Booking.com	has	been,	and	continues	to	be,	in	compliance	with	French	tax	law,	and	the	Company	intends	to	contest	the	assessments.	If	the	Company	is	unable	to resolve	the	matter	with	the	French	authorities,	it	would	expect	to	challenge	the	assessments	in	the	French	courts.	In	order	to	contest	the	assessments	in	court,	the Company	may	be	required	to	pay,	upfront,	the	full	amount	or	a	significant	part	of	any	such	assessments,	though	any	such	payment	would	not	constitute	an	admission	by it	that	it	owes	the	taxes.	At	the	end	of	2016,	French	authorities	announced	their	intention	to	also	audit	the	tax	years	2013	to	2015,	which	could	result	in	additional assessments.

Italian	tax	authorities	have	initiated	a	process	to	determine	whether	Booking.com	should	be	subject	to	additional	tax	obligations	in	Italy.	Italian	tax	authorities may	determine	that	the	Company	owes	additional	taxes,	and	may	also	assess	penalties	and	interest.	The	Company	believes	that	it	has	been,	and	continues	to	be,	in compliance	with	Italian	tax	law.

# Other

The	Company	accrues	for	certain	legal	contingencies	where	it	is	probable	that	a	loss	has	been	incurred	and	the	amount	can	be	reasonably	estimated.	Such accrued	amounts	are	not	material	to	the	Company's	consolidated	balance	sheets	and	provisions	recorded	have	not	been	material	to	the	Company's	consolidated	results	of operations	or	cash	flows.	An	estimate	for	a	reasonably	possible	loss	or	range	of	loss	in	excess	of	the	amount	accrued	cannot	be	reasonably	made.

From	time	to	time,	the	Company	has	been,	and	expects	to	continue	to	be,	subject	to	legal	proceedings	and	claims	in	the	ordinary	course	of	business,	including claims	of	alleged	infringement	of	third-party	intellectual	property	rights.	Such	claims,	even	if	not	meritorious,	could	result	in	the	expenditure	of	significant	financial	and managerial	resources,	divert	management's	attention	from	the	Company's	business	objectives	and	adversely	affect	the	Company's	business,	results	of	operations, financial	condition	and	cash	flows.

# Contingent	Consideration	for	Business	Acquisitions	(see	Note	18)

# Employment	Contracts

The	Company	has	employment	agreements	with	certain	members	of	senior	management	that	provide	for	cash	severance	payments	of	up	to	approximately	$17.8 million,	accelerated	vesting	of	equity	instruments,	including	without	limitation,	stock	options,	restricted	stock	units	and	performance	share	units	upon,	among	other things,	death	or	termination	without	"cause"	or	"good	reason,"	as	those	terms	are	defined	in	the	agreements.	In	addition,	certain	of	the	agreements	provide	for	the extension	of	health	and	insurance	benefits	after	termination	for	periods	up	to	two	years.

# Building	Construction

In	September	2016,	the	Company	signed	a	turnkey	agreement	to	construct	an	office	building	in	the	Netherlands,	which	will	be	the	future	headquarters	of	the Booking.com	business.	The	turnkey	agreement	provides	for	payments	by	Booking.com	of	approximately	270	million	Euros	and	consists	of	two	components,	land	use rights	and	the	building	to	be	constructed.	Upon	signing	this	agreement,	Booking.com	paid	approximately	48	million	Euros	to	the	developer,	which	included approximately	43	million	Euros	for	the	acquired	land	use	rights	and	approximately	5	million	Euros	for	the	building	construction.	The	land	use	rights	are	included	in "Other	assets"	and	the	building	construction-in-progress	is	included	in	"Property	and	equipment,	net"	in	the	Consolidated	Balance	Sheet	at	December	31,	2016,	and	both are	reflected	as	investing	activities	in	the	Company's	Consolidated	Statement	of	Cash	Flows	for	the	year	ended	December	31,	2016.	The	land	use	rights	asset	and required	future	lease	payments	to	the	Municipality	in	Amsterdam	of	approximately	60	million	Euros	are	recognized	as	rent	expense	on	a	straight-line	basis	over	the remaining	49-year	term	of	the	lease	and	are	recorded	in	general	and	administrative	expense	in	the	statements	of	operations.	In	2017,	Booking.com	expects	to	pay approximately	34	million	Euros	related	to	the	building	construction,	with	the	remainder	of	payments	being	paid	periodically	beginning	in	2018	until	the	expected completion	of	the	building	in	late	2020.	The	Company	utilized	its	international	cash	for	the	September	2016	payment	and	expects	all	future	payments	to	be	made	from its	international	cash.

# Operating	Leases

The	Company	leases	certain	facilities	and	equipment	through	operating	leases.		Rental	expense	for	leased	office	space	was	approximately	$77.3	million,	$64.8 million	and	$57.2	million	for	the	years	ended	December	31,	2016,	2015	and	2014,	respectively.		Rental	expense	for	data	center	space	was	approximately	$22.2	million, $21.6	million	and	$14.9	million	for	the	years	ended	December	31,	2016,	2015	and	2014,	respectively.

The	Company's	headquarters	and	the	headquarters	of	the	priceline.com	business	are	located	in	Norwalk,	Connecticut,	United	States	of	America,	where	the Company	leases	approximately	90,000	square	feet	of	office	space.	The	Company	leases	approximately	258,000	square	feet	of	office	space	in	Amsterdam,	Netherlands for	the	headquarters	of	the	Booking.com	business;	the	KAYAK	business	is	headquartered	in	Stamford,	Connecticut,	United	States	of	America,	where	the	Company leases	approximately	18,000	square	feet	of	office	space;	the	agoda.com	business	has	significant	support	operations	in	Bangkok,	Thailand,	where	the	Company	leases approximately	140,000	square	feet	of	office	space;	the	OpenTable	business	is	headquartered	in	San	Francisco,	California,	United	States	of	America,	where	the	Company leases	approximately	60,000	square	feet	of	office	space;	and	the	Rentalcars.com	business	is	headquartered	in	Manchester,	England,	where	the	Company	leases approximately	45,000	square	feet	of	office	space.		The	Company	leases	additional	office	space	to	support	its	operations	in	various	locations	around	the	world,	including hosting	and	data	center	facilities	in	the	United	States,	the	United	Kingdom,	Switzerland,	the	Netherlands,	Germany,	Singapore,	Hong	Kong	and	China	and	sales	and support	facilities	in	numerous	locations.

Other	than	the	office	building	in	the	Netherlands	that	is	currently	under	construction,	as	discussed	above,	the	Company	does	not	own	any	real	estate	as	of December	31,	2016.	Minimum	payments	for	operating	leases	for	office	space,	data	centers	and	equipment	having	initial	or	remaining	non-cancellable	terms	in	excess	of one	year	have	been	translated	into	U.S.	Dollars	at	the	December	31,	2016	spot	exchange	rates,	as	applicable,	and	are	as	follows	(in	thousands):

| 2017 | 2018 | 2019 | 2020 | 2021 | After<br>2021 | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| $103,656 | $103,561 | $92,958 | $79,340 | $57,418 | $150,738 | $587,671 |

# 15. BENEFIT	PLANS

The	Company	maintains	a	defined	contribution	401(k)	savings	plan	(the	"Plan")	covering	certain	U.S.	employees.	In	connection	with	acquisitions,	effective	as of	the	date	of	such	acquisitions,	the	Company	assumed	defined	contribution	plans	covering	the	U.S.	employees	of	the	acquired	companies.	The	Company	also	maintains certain	other	defined	contribution	plans	outside	of	the	United	States	for	which	it	provides	contributions	for	participating	employees.		The	Company's	matching contributions	during	the	years	ended	December	31,	2016,	2015	and	2014	were	approximately	$10.2	million,	$8.4	million	and	$6.2	million,	respectively.

# 16. GEOGRAPHIC	INFORMATION

The	Company's	international	information	consists	of	the	results	of	Booking.com,	agoda.com	and	Rentalcars.com	and	the	results	of	the	international	businesses of	KAYAK	and	OpenTable	since	July	24,	2014	(in	each	case	regardless	of	where	the	consumer	resides,	where	the	consumer	is	physically	located	while	using	our services	or	the	location	of	the	travel	service	provider	or	restaurant).	The	Company's	geographic	information	is	as	follows	(in	thousands):

|  | United<br>	States | The<br>	Netherlands | Other | Total<br>Company |
| :--- | :--- | :--- | :--- | :--- |
| 2016 |  |  |  |  |
| Revenues | $1,680,446 | $7,783,376 | $1,279,184 | $10,743,006 |
| Intangible\tassets,\tnet | 1,918,095 | 51,317 | 24,473 | 1,993,885 |
| Goodwill | 1,801,835 | 228,670 | 366,401 | 2,396,906 |
| Other\tlong-lived\tassets | 102,457 | 195,669 | 123,485 | 421,611 |
| 2015 |  |  |  |  |
| Revenues | $1,817,360 | $6,205,116 | $1,201,511 | $9,223,987 |
| Intangible\tassets,\tnet | 2,052,351 | 78,027 | 37,155 | 2,167,533 |
| Goodwill | 2,742,535 | 232,982 | 399,483 | 3,375,000 |
| Other\tlong-lived\tassets | 89,656 | 138,329 | 103,142 | 331,127 |
| 2014 |  |  |  |  |
| Revenues | $1,798,484 | $5,519,207 | $1,124,280 | $8,441,971 |
| Intangible\tassets,\tnet | 2,183,957 | 108,650 | 42,154 | 2,334,761 |
| Goodwill | 2,712,479 | 224,731 | 389,264 | 3,326,474 |
| Other\tlong-lived\tassets | 80,668 | 97,056 | 77,915 | 255,639 |

# 17.				SELECTED	QUARTERLY	FINANCIAL	DATA	(UNAUDITED)

(1)		tIncludes	a	non-cash	charge	in	the	third	quarter	of	2016	related	to	an	impairment	of	OpenTable	goodwill	of	$940.7	million,	which	is	not	tax	deductible	(see	Note	9).

The	goodwill	impairment	charge	reduced	basic	and	diluted	net	income	per	share	for	the	third	quarter	of	2016	by	$19.03	and	$18.82,	respectively.

# Subsequent	Event	-	Acquisition	activity	in	2017

On	February	7,	2017,	the	Company	signed	a	definitive	agreement	to	acquire	the	Momondo	Group,	which	operates	the	travel	meta-search	websites	Momondo and	Cheapflights.	The	Company	will	use	approximately	$550	million	of	its	international	cash	to	fund	this	acquisition.	The	deal	is	expected	to	close	later	in	the	year, subject	to	regulatory	approval.

# Acquisition	activity	in	2015

The	Company	paid	approximately	$75	million,	net	of	cash	acquired,	to	acquire	certain	businesses	in	2015.	The	Company's	consolidated	financial	statements include	the	accounts	of	these	businesses	starting	at	their	respective	acquisition	dates.	Revenues	and	earnings	of	these	businesses	since	their	respective	acquisition	date and	pro	forma	results	of	operations	have	not	been	presented	separately	as	such	financial	information	is	not	material	to	the	Company's	results	of	operations.	As	of	both December	31,	2016	and	2015,	the	Company's	Consolidated	Balance	Sheets	include	a	long-term	liability	of	approximately	$9	million	for	estimated	contingent consideration	for	a	business	acquisition.	The	estimated	acquisition-date	contingent	liability	is	based	upon	the	probability-weighted	average	payments	for	specific performance	factors	from	the	acquisition	date	through	the	performance	period	which	ends	at	March	31,	2019.	The	range	of	undiscounted	outcomes	for	the	estimated contingent	payments	is	approximately	$0	to	$90	million.

# OpenTable,	Inc.

On	July	24,	2014,	the	Company	acquired	OpenTable,	Inc.,	a	leading	online	restaurant	reservation	business,	in	a	cash	transaction.	The	purchase	price	of OpenTable	was	approximately	$2.5	billion	(approximately	$2.4	billion	net	of	cash	acquired)	or	$103.00	per	share	of	OpenTable	common	stock.	The	Company	funded the	acquisition	from	cash	on	hand	in	the	United	States	and	$995	million	borrowed	under	the	Company's	previous	revolving	credit	facility,	which	the	Company	repaid during	the	third	quarter	of	2014.	Also,	in	connection	with	this	acquisition,	the	Company	assumed	unvested	employee	stock	options	and	restricted	stock	units	with	an acquisition	fair	value	of	approximately	$95	million.

OpenTable	has	built	a	strong	brand	helping	diners	secure	restaurant	reservations	online	across	the	United	States	and	select	non-U.S.	markets.		OpenTable	also helps	restaurants	manage	their	reservations	and	connect	directly	with	their	customers.		The	Company	believes	that	OpenTable	has	significant	global	potential	and intends	to	leverage	its	international	experience	and	capabilities	in	support	of	OpenTable's	international	growth.	During	the	third	quarter	of	2016,	the	Company	changed its	business	strategy	to	pursue	and	invest	in	OpenTable	international	expansion	and	other	growth	initiatives	in	a	more	measured	and	deliberate	manner.	This	change	in strategy	resulted	in	a	material	reduction	in	forecasted	long-term	financial	results	for	OpenTable.	As	a	result,	the	Company	recognized	a	non-cash	impairment	charge	for OpenTable	goodwill	of	$940.7	million.	See	Note	9	for	further	information.

The	purchase	price	allocations	were	completed	as	of	December	31,	2014.	The	aggregate	purchase	price	was	allocated	to	the	assets	acquired	and	liabilities assumed	as	follows	(in	millions):

| assumed	as	follows	(in	millions): |  |
| :--- | :--- |
| Current\tassets\t(1) | $203 |
| Identifiable\tintangible\tassets\t(2) | 1,435 |
| Goodwill\t(3) | 1,500 |
| Other\tlong-term\tassets | 38 |
| Total\tliabilities\t(4) | (647) |
| Total\tconsideration | $2,529 |

(1)	Includes	cash	acquired	of	$126	million.

(2)	Acquired	definite-lived	intangibles,	with	a	weighted-average	life	of	18.8	years,	consisted	of	trade	names	of	$1.1	billion	with	an	estimated	useful life	of	20	years,	supply	and	distribution	agreements	of	$290	million	with	an	estimated	useful	life	of	15	years,	and	technology	of	$15	million	with estimated	useful	life	of	5	years.

(3)	Goodwill	is	not	tax	deductible.

(4)	Includes	deferred	tax	liabilities	of	$543	million.

The	Company's	consolidated	financial	statements	include	the	accounts	of	OpenTable	starting	on	July	24,	2014.	OpenTable's	revenues	and	earnings	since	the acquisition	date	and	pro	forma	results	of	operations	have	not	been	presented	separately	as	such	financial	information	is	not	material	to	the	Company's	results	of operations.

In	the	second	quarter	of	2014,	the	Company	acquired	certain	businesses	that	provide	hotel	marketing	services.	The	Company's	consolidated	financial statements	include	the	accounts	of	these	businesses	starting	at	their	respective	acquisition	dates.	The	Company	paid	approximately	$98	million,	net	of	cash	acquired,	to purchase	these	businesses.	As	of	December	31,	2014,	the	Company	recognized	a	liability	of	$10.7	million	for	estimated	contingent	payments	related	to	an	acquisition.	In 2015,	the	Company	paid	$18.4	million	to	settle	this	contingent	liability.	The	cash	payment	related	to	the	acquisition-date	estimated	fair	value	of	$10.7	million	is	reported as	a	financing	activity	and	the	remaining	cash	payment	of	$7.7	million,	which	was	charged	to	general	and	administrative	expenses	as	a	fair	value	adjustment,	is	included as	an	operating	activity	in	the	Consolidated	Statement	of	Cash	Flows	for	the	year	ended	December	31,	2015.

The	Company	incurred	$6.9	million	of	professional	fees	for	the	year	ended	December	31,	2014	related	to	these	consummated	acquisitions.	These	acquisition- related	expenses	were	included	in	general	and	administrative	expenses.

# INDEX	TO	EXHIBITS

10.12(y)+ Form	of	Non-Competition	and	Non-Solicitation	Agreement.

10.14(t)+ Second	Amended	and	Restated	Employment	Agreement	dated	March	5,	2015	by	and	between	the	Registrant,	Booking.com	Holding	B.V.	and Darren	R.	Huston.

10.15(z)+ Amended	and	Restated	Non-Competition	and	Non-Solicitation	Agreement	dated	November	7,	2013	by	and	between	the	Registrant	and	Darren	R. Huston.



Question: what was the difference in percentage change in priceline group and the s&p 500 index for the five year period ended 2016?
Calculation: price_priceline = 313.45
price_s_p_500 = 198.18
percent_change_priceline = (price_priceline - 100) / 100
percent_change_s_p_500 = (price_s_p_500 - 100) / 100
difference = percent_change_priceline - percent_change_s_p_500
answer = difference * 100
Answer: 115.27%