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Booking Holdings Is Still the King of the Online Travel Mountain

By Nicholas Rossolillo - Nov 11, 2018 at 10:31AM

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It turns out that shareholders have been worried about nothing over the last few months.

Shares of Booking Holdings (BKNG -1.53%) have seen big ups and downs this year. The stock is up 13% year-to-date as of this writing and is only off its all-time highs by roughly the same percentage, but earnings have soared 25% over the last trailing 12-month stretch.

The downturn looks like it could be ending, though, especially after a bounce following its third-quarter financial report. Travel industry competition is fierce and is rapidly changing, but Booking Holdings is still on top.

2018 with a little context

The third quarter, the busiest period of the year as it encompasses the summer vacation months, was much better than expected -- or at least better than Booking had let on a few months ago. CFO David Goulden said that was because peak summer travel came after the second-quarter report, and accommodation booking accelerated after the last update.

Revenue was up 11%, and earnings up 8% from the year prior. A one-time tax charge and generally higher taxes compared with 2017 were blamed for the lower earnings increase. Gross travel bookings were up a solid 12%, though, an impressive feat given that the online travel company has a market cap of $95 billion. Gross travel bookings are expected to climb another 6% to 9% in the fourth quarter.

However, as always, three months does not make or break a business, so adding the third quarter to the rest of the year paints a much more accurate picture of how well Booking is doing.

Metric

9 Months Ended September 30, 2018

9 Months Ended September 30, 2017

% Change (YOY)

Gross travel bookings

$73.2 billion

$63.2 billion

16%

Total revenue

$11.3 billion

$9.9 billion

14%

Operating income

$4.2 billion

$3.6 billion

17%

Earnings per share

$69.07

$57.85

19%

Data source: Booking Holdings quarterly earnings. YOY = year over year.

What management is up to

Booking's results are even more impressive considering all of the smaller competitors gunning for it. First, there's Airbnb and its five million unique places to stay available on its site -- a number that rivals the 5.7 million unique properties on Booking.com. Expedia Group (NASDAQ: EXPE) just trails Booking with $11 billion in revenue over the last 12 months and posted 11% in gross bookings growth in the third quarter, although it's far less profitable than Booking.

Then there's TripAdvisor (NASDAQ: TRIP), a more recent entrant into the reservation services department, and metasearch (a search aggregator that lists accommodation results from multiple sites in one place) travel competition from Alphabet's (NASDAQ: GOOGL)(NASDAQ: GOOG) Google Flights, to name just a few. To differentiate itself from the crowd, Booking has been increasing its spending on brand advertising to get more customers to go directly to the Booking suite of services.

A couple sitting in beach chairs on a white sand tropical beach.

Image source: Getty Images.

More than just spending on advertising, though, is Booking's goal to better integrate all of its websites to create a more unified platform. CEO Glen Fogel gave a few examples, like how Booking.com's hotel and unique property listings are side by side, and how it's now also listing local experiences and events available for reservation from the FareHarbor acquisition made earlier in the year. Fogel said Priceline and Agoda are working better together in overlap markets like the U.S. to increase cost efficiency, as are KAYAK and OpenTable on technical and managerial cooperation to drive site innovation.

The idea is to keep integrating services to build a one-stop shop where travelers can look for all of their needs -- from flights and transportation, room accommodation, places to eat, and entertainment. Size can sometimes make a company vulnerable to small upstarts, but in the case of Booking Holdings, its size and breadth of offerings mean it can innovate in this area unlike any of its competitors have been able to so far.

While growth rates have been decelerating as of late, that's OK. In short, Booking is still the king of online travel and continues to play first fiddle in the industry.

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BKNG
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