Company Profile
Simple bio
Booking Holdings (ticker: BKNG) is the world’s largest online travel company. It mainly provides global accommodation booking services and is one of the brands of the US listed company Booking Holdings.
It was founded in 1996 by Geert-Jan Bruinsma in the Dutch town of Enschede, and later moved to Amsterdam, the capital of the Netherlands. In 2000, it merged with Booking Online to form Booking.com.
Acquired by Priceline
In 2005, it was acquired by the US listed company Priceline Group (later renamed Booking Holdings) for US$133 million, becoming one of its six brands.
Head office in Europe
Although it was acquired by an American company, Booking.com’s operation center is still in Amsterdam, the Netherlands.
The only regulated travel platform
Booking.com is one of the very few Internet giants whose head offices are located in Europe. In 2020, the European Union has regarded Booking.com and a few other large technology giants in the United States as the same level, and must be included in the EU’s strict supervision of enterprises. Among them, Booking.com is the only one listed as a “gatekeeper” in the travel and hotel booking market.
In 2023, the EU DSA will be released. The DSA regulates online intermediaries and platforms such as marketplaces, social networks, content sharing platforms, app stores and online travel and accommodation platforms. Among the 19 super companies included in the supervision, Booking.com is the only online travel operator included.
Its main brands
The main business it provides is accommodation booking, including services for hotels, hostels, apartments, vacation rentals and other properties. The group has six well-known brands: booking.com, Priceline.com, Agoda, KAYAK, rentalcars.com and OpenTable, which provide consumers with travel with local manufacturers.
How to make money?
Operational overview
As of December 31, 2022, the company had approximately 2.7 million properties available for booking, including 400,000 hotels, motels and resorts and 2.3 million homes, apartments, in more than 220 countries and with more than 40 Services are provided in languages. It also offers flights to 54 markets and tours and activities covering more than 1,200 cities.
On November 9, 2023, Booking.com announced the launch of cruise services as a new travel vertical for U.S. customers. The new product addresses travelers’ cruise booking needs and is offered through a partnership with leading cruise agency World Travel Holdings (WTH).
Current operating model
Booking.com is a platform where travelers can find information on flights, hotels, car rentals and more. After customers find what they need, they can choose to book directly with airlines, car rental companies, etc. In these cases, Booking.com simply earns a commission. This is a very good business that draws commissions, and this is what the company sees now.
His main corporate competitive advantage comes from his unique business model to build his brand. The company uses a C2B customer reverse pricing model to allow customers to customize the price they are willing to pay when booking travel products online, and then the company decides whether to accept the plan. This business model uses the flexibility of buyers to enable sellers to sell excess tourism products at lower prices without affecting their sales channels, through a disguised inventory clearance and resource monopoly model.
Artificial intelligence push
Cash flow trends favorable
When Booking.com processes transactions on its platform, it’s called merchant revenue. When it earns commission, it is called agency income. As of 2023, merchant revenue will exceed agency revenue for the first time. However, by the first three quarters of 2023, merchant revenue will only account for 51% of total revenue, which means that it still has a lot of room to grow, allowing it to account for a larger proportion of overall revenue.
Future operating goals
However, management has a bigger picture in mind. Booking.com’s management wants users to book all aspects of travel directly on its platform — something it calls “connected travel.” To make this vision possible, the company had to build its own payments platform.
Travel agencies help people book all aspects of travel. But for a company the size of Booking.com, which relies mainly on agents (such as travel agencies) for its main revenue, this manual cost is too high. As a result, company management hopes to train its artificial intelligence to do the job of a travel agent, furthering its vision of the future of connected travel.
This is not just a vision. If Booking.com can continue to make progress on this front, shareholders should benefit.
Need to change payment model
In addition, many Booking.com users may be arranging travel in different places. If the company’s AI travel agent works, it could allow users to book many, if not all, aspects of travel on Booking.com, which would increase revenue.
As users shop for more travel arrangements in one place, increasingly powerful artificial intelligence technology can support Booking.com’s revenue–this is the company’s management vision for connected travel. The key is that this is only possible if Booking.com handles payments itself. That is, when Booking.com handles consumer payment processing itself, there is the possibility of increasing cash flow.
Why is booking.com so sure?
As of this writing, the company’s pre-order inventory is at an all-time high, but if management’s AI plans are successful, the company’s stock price could continue to reach new highs in the future.
Current progress
In the summer of 2023, Booking.com announced it would begin testing an AI-based travel planner. AI Trip Planner is based on ChatGPT technology. It is designed to help choose a direction, plan a route, or answer a specific question. Initially, the service will be available to a limited number of users in the United States.
Main competitors
Airbnb
Airbnb (ticker: ABNB) is a newly emerging online accommodation sharing website. Please see the special introduction in my previous post “Airbnb’s unique offering is competitive“.
Expedia.com
According to 2015 data, Expedia Group (ticker: EXPE) received 7 billion flight searches in a year, with an average of 40 million visitors each month. As far as travel platforms are concerned, Expedia has been the world’s largest travel retailer since 2012. Under the influence of the popularity of mobile Internet, this 20-year-old brand has been constantly pursuing technological applications.
Its brands include Expedia.com, Hotels.com, travel integrated search (Metasearch) engine company Trivago, Hotwire.com, Egencia, Venere.com, HomeAway, Expedia local experts, and Classic Vacations. Search engines Travelocity, Orbitz and others.
Tripadvisor
TripAdvisor (ticker: TRIP) has 24 travel website brands. Once owned by Expedia.com, it was spun off in December 2011 and listed separately. It has branches in 45 countries around the world, including the United States, the United Kingdom, Spain, India, China and other places, covering 28 languages. With more than 600,000 members and information on more than 1,650,000 hotels, 530,000 attractions, and 2,700,000 restaurants.
Risks
Antitrust investigation
In recent years, there have been frequent disputes between Booking.com and TripAdvisor (ticker: TRIP), including competition authorities from the United Kingdom, France, Germany, Italy, the Czech Republic, Austria, Hungary, Sweden and Switzerland, etc. Customers conducted investigations and questioned its improper behavior to achieve a leading position in the market.
Payment delayed
In 2023, Booking.com was accused of costing accommodation hosts thousands of pounds through late payments. People from Scotland, Thailand and Indonesia said they were affected. The company blamed “unforeseen technical issues.” Hosts from Japan, Hungary, Croatia, Australia, Denmark, the Netherlands, Sweden, New Zealand, England, Europe, and Hungary all had partners protesting loudly.
In July, August and September 2023, the payment scandal was heavily reported in the media in these countries, affecting Booking.com’s long-term image. The CEO of Booking.com has apologized to hosts affected by the payment scandal who were not paid in time. It said this was an error caused by the company’s internal payment system and said it would solve the problem as soon as possible.
Customer data leaked
In November 2014, it was revealed that criminals were able to obtain customer details from the website. The company said it was cracking down on fraudsters and refunding affected customers in the UK, US, France, Italy, UAE and Portugal. However, the site was again targeted by hackers in June 2018.
On April 6, 2021, the Dutch government fined Booking Holdings €475,000 for failing to report a breach within the period specified in the General Data Protection Regulation. The criminals obtained the personal data of more than 4,000 customers, including the credit card information of nearly 300 people.
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