The road back to a flywheel of growth would be a lengthy one for Booking Holdings. Google has a ton of data, too, as do other competitors. Can Booking Holdings create a product that is really deeper and differentiated from its rivals? That's CEO Glenn Fogel's bet.
We’ve heard the doubts for several years: Are online travel agencies’ glory days, when revenue was growing 25 or 30 percent and room nights booked were jumping at similar clips, long-gone history?
In contrast to Expedia Group and TripAdvisor, which posted weak third quarters and saw their market caps sliced up on Thursday, Booking Holdings reported $2 billion in net income, a 10 percent leap. Its room night growth, however, was a not-spectacular 11 percent — the same as Expedia’s — and revenue growth clocked merely 4 percent growth to $5 billion.
Contrast Booking Holdings third-quarter performance to its third quarter of 2015, for example, when room nights grew 22 percent and revenue climbed 9.4 percent. In the third quarter of 2013 and 2014, respectively, room night growth stood at 35.6 percent and 26.7 percent, respectively.
Is today’s competition in online travel, with Airbnb breaking through and Google asserting itself ever-more intensely, too rigorous to replicate the robust growth of a few years ago?
Booking Holdings CEO Glenn Fogel has been touting “the connected trip” like an evangelist, and he argued Thursday in the company’s third-quarter earnings call that the resulting data trove, along with increased cooperation among his previously mostly siloed business units, might engender a “flywheel effect” that could enable Booking Holdings “to start cranking up again.”
Fogel said even the largest hotel chain doesn’t have full view of their customers like Booking Holdings does, in terms of the type of ground transportation, restaurant reservations, or attractions they want when traveling. “That’s the advantage that a full OTA (online travel agency) like us has,” Fogel said.
Flights and Data
Fogel said one of the advantages of a flight feature that Booking.com launched in Europe in partnership with eTraveli, along with a flight-booking debut in Asia, carried out by Booking Holding brands Agoda and Priceline, is the more complete view these products give of the customer.
Booking.com previously used sister brand Kayak to offer flights, but this was a referral business to airlines and didn’t have the full booking data that Booking.com now gets with an integrated flight-booking offering.
“So one of the benefits in something like this is you can offer connected-trip car rental or other types of ground transfers much more efficiently,” Fogel said.
Booking Holdings brands traditionally operated mostly independently, and the CEO, who several months ago took on an additional role as CEO of Booking.com, said he wants to see more collaboration.
“I am proud of our interbrand cooperation development of this product, which demonstrates how we are able to leverage our deep travel expertise across our company to build new services,” Fogel said, pointing to Agoda-Priceline teaming up. “We look forward to introducing other areas of collaboration across the brands in the future.”
Fogel views this type of interbrand partnerships as key to building out his vision of “the connected trip,” which would lead to the type of service that rivals can’t mimic and would spur customers to keep coming back for more.
He contended that this more complete view of the customer, fostered by integrating Booking Holdings’ Rentalcars.com business into Booking.com, led to advances in its ground transportation offerings. In the third quarter, rental car days climbed 8.5 percent to 21 million.
Trip.com Group Joint Venture With TripAdvisor
Asked to comment on Trip.com Group’s joint venture with TripAdvisor in China, despite Booking Holdings large investment in Trip.com Group, Fogel said it’s understandable that TripAdvisor would want to improve its position in China.
Fogel cited Booking Holdings’ own partnerships with Trip.com Group, Meituan, and Didi in China, as well as tie-ups with Grab in Southeast Asia, among others. Booking Holdings in the third quarter saw a $49 million pre-tax loss on its equity investments in Trip.com Group and Meituan in China.
“And I don’t begrudge those who want to improve their own position,” Fogel said. “That is the obligation of any corporation to try and improve their business for their shareholders. I suppose that’s what they’ve done, but I have no details exactly about what the deal is so I really can’t comment on the specifics.”
In other news, Fogel said Booking Holdings has 6.2 million short-term rental listings as of September 30, a jump of 200,000 over the second quarter, and is intent on doing more “blocking and tackling” in the United States to onboard vacation rentals that have a single owner.
And while Expedia and TripAdvisor complained this week about strong search engine optimization headwinds from Google, Fogel said it wasn’t a big factor for Booking Holdings.
“Regarding SEO, we saw saw some headwinds on the SEO channel that did create some modest pressure, but it’s a small channel for us.”
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Photo credit: Booking Holdings believes it can gain a more complete view of travelers at the airport or in their destinations to boost the number of repeat customers. Getty Images/AzmanL / Medjet