In this segment from the Market Foolery podcast, host Chris Hill is joined by Scott Phillips, The Motley Fool's director of research in Australia, to chat about The Priceline Group, which gave itself a new name late last month: Booking Holdings (NASDAQ:BKNG). The online-travel-site operator's top line is rising, but its margins and the bottom line are temporarily less than ideal, which could be good for investors. And as for that less-than-inspiring name change, the Fools have some thoughts on that, too.
A full transcript follows the video.
This video was recorded on Feb. 28, 2018.
Chris Hill: Let's start with, and bear with me, people, because if you've been listening for the last couple of years, you know that I haven't really made the switch from Google to Alphabet, so it's going to take me even longer to make the switch from Priceline to their brand-new name, Booking Holdings.
Scott Phillips: They didn't get the marketers involved with that, Chris. What should we call this thing?
Hill: We'll get to that in a second.
Hill: We're going to see if we can help them.
Phillips: A bit of Australian flair.
Hill: Exactly. Fourth quarter revenue for Priceline/Booking Holdings came in higher than expected. They wrapped up another great year. The stock is up 9%. I mean, this thing, I kid that we're going to help them. Maybe the one thing we could help them with is their name, because when it comes to running their business, these people are fantastic.
Phillips: They're doing a spectacular job. Interestingly enough, it was partly a case of low expectations. Revenue is up, margins are still down because of their concerns around how much commission they can get from the bookings they're passing through. So, they're still in that weird situation of, top line is growing, that's good. Margins, kind of falling away. I think they'll be OK. And I think there's an Australian operation, Flight Centre, who most of your listeners won't now, who've been exactly through this thing. When you're getting top line growth, you're struggling on the bottom line a little bit because of some one-off changes, for most investors, that's a good chance to get invested, because when the growth returns, which it will, from a one-off change, then you're off to the races.
Hill: But it seems like this is a situation where, in any given quarter, they can have those margin pressures. But this is such a behemoth that it seems like, if you are a hotel, if you're anything involved with travel, I'm not saying you bend over backwards to do whatever you can to be involved with Booking Holdings, but you want to be on their platform.
Phillips: And here's the story: $2.3 billion in sales in the fourth quarter of last year, $2.8 billion this year. There was a whole lot more people using this platform. And when you're the go-to place, you can pretty much call the tune. If you're more relevant to more people over a longer period of time, that's absolutely the recipe. And Priceline, or Booking, as we have to now call them, is getting it done.
Hill: We were talking right before we started taping about companies that have made name changes. And in this form, I mean, I mentioned Alphabet and Google, and I suppose that applies as well. What we were talking about was Tapestry (NYSE:TPR), which is a name that I don't think either of us particularly loves, but it's the parent company of Coach and Kate Spade and Stuart Weitzman. And I understand the reasoning in a couple of ways. One is, if you're Tapestry, or in this case, if you're Booking Holdings, you have multiple parts of your business, and you don't necessarily want Wall Street analysts focusing on the namesake. In the case of Booking Holdings, yes, they own Priceline, but they also own booking.com, which is a more significant part of their business. Same thing with Coach, and probably even more relevant in the case of Coach, because there were quarters where Stuart Weitzman was doing well, Kate Spade was doing well, but the namesake brand was not, and they got, maybe, overly punished as a result of that. And then there's the internal, where if you work at booking.com, you might have some level of resentment. "We're bigger than Priceline, why is the company named after Priceline?"
Phillips: I think that's right, Chris. I have to say, when you go from $2.3 billion to $2.8 billion in revenue, the last thing you should be worrying about is what your corporate name is. If Wall Street can't cope with the fact that you've grown your revenue by $500 million year on year -- yes, the companies will manage the share price, yes, they manage the Street. Your listeners know well that's frankly a short-term and pretty stupid thing to bother with, but companies do. It's going to make a lot more money next year and the year after and the year after that. You'd be wasting time changing your name to try and get some sort of relevance. The business is the business is the business. You can call it something entirely different if you want to, like Tapestry. To change it from one brand to another is kind of crazy. What happens when the other brand gets bigger? Do they change it again? What is the company if it's not the business you're working for?
Hill: That's where I feel like we could help them. Say what you want about Tapestry, and goodness knows we did, but at least they took a flyer on a brand new name, and it's creative. If anyone has suggestions, you can tweet @MarketFoolery or email firstname.lastname@example.org. We'd like to come up with something better. Maybe it's Global Travel something. I'm not sure.
Phillips: I bet we can just go through the Carole King discography and pick another album. There's plenty there.
Hill: Exactly. Tapestry worked. [laughs]
Phillips: It worked for them.