Skift Take

Could investors be whispering in Glenn Fogel's ears that what's good for Barry Diller's Expedia Group might be beneficial for Booking Holdings as well? Booking Holdings is usually a first mover in such online travel initiatives, but in this case, when it comes to cost cutting, it appears as though Booking Holdings heard the rumblings emanating from Expedia Group's Seattle headquarters.

Like other travel companies, Booking Holdings officials are grappling with the fluid nature of the coronavirus and the negative impact on its business.

And, like one other company, Expedia Group, that’s been making headlines about attacking internal bloat, Booking Holdings intends to get costs in line, although the extent of any budget trims wasn’t specified.

Booking Holdings CEO Glenn Fogel said during the company’s fourth quarter and full-year 2019 earnings call Wednesday it’s “very natural, as companies grow very rapidly and achieve great success on the bottom line, sometimes discipline lightened up a little bit. So certainly, before the coronavirus, I was already thinking that we need to make sure that we’re doing everything we can to spend money correctly.”

Booking Holdings forecast a 5 to 10 percent decline in room nights booked in the first quarter, a 10 to 15 percent decline in gross travel bookings, and a 3 to 7 percent falloff in revenue. As expected, the company said the most significant adverse impact has been in greater China, followed by Asia-Pacific excluding China, and there has been softness in European bookings, as well, in the past few days following the virus’ entry into Italy.

Asked to compare the coronavirus with past travel disruptions, Fogel, who’s been with the company 20 years this week, said it makes no sense to compare coronavirus to SARS (Severe Acute Respiratory Syndrome), 9/11, the financial crisis, swine flu, or the volcano in Iceland because coronavirus could play out differently.

“I am confident the business will be coming back,” Fogel said. “It’s something that we’ve seen over and over and over again. As I said many, many times here, travel is a basic need for people. They have been doing it for a very, very long time. And as soon as the air clears, so to speak, you’ll see people will be coming back to travel.”

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Getting All Expedia-Like?

Meanwhile, Fogel said one of the things Booking Holdings will be emphasizing in 2020 is cost-containment, a task he said he’s been thinking about more intensely since taking on the added role of CEO in June.

Is it mere coincidence that Expedia Group recently announced an initiative to trim $300 to $500 million from its annual run rate in 2020, and began laying off 12 percent of its workforce  earlier this week?

Fogel noted that Booking Holdings’ various brands, including, Agoda, Kayak, Priceline, and OpenTable, traditionally were operated independently. He spoke publicly throughout 2019 about bringing the brands closer together, but he was mostly referring to shared learnings and teams from various business units cooperating newly with one another.

But another reason for the push is for synergies of the budget-cutting variety.

“Now it’s time to start bringing that in, and that’s what we’re going to be doing,” Fogel said.

Unlike at Expedia Group, Fogel didn’t offer a specific number for the cost reductions he’s aiming to achieve.

The U.S. is Booking’s Largest Opportunity

In other news from the earnings announcement, Fogel said Booking Holdings’ largest opportunity is expanding in the United States, where “we under-indexed significantly.”

He said a new company payment system will enable to better address the needs of price-conscious U.S. consumers, as well as the development of a flights feature, a vacation packages product, and better leveraging cross-selling between sister companies OpenTable and

Alternative Accommodations

There were a number of firsts in the earnings announcement.

For the first time, Booking Holdings provided a revenue number, $3.1 billion in 2019, for its alternative accommodations business, and said that represented 21 percent of the company’s total revenue. That alternative accommodations business, with its 6.3 million listings, notched a “solid growth rate” of 14 percent, as expressed in euros, Fogel said.

On its overall financials, Booking Holdings saw its net income rise 81 percent to $1.2 billion in the fourth quarter on revenue of $3.3 billion, a 4 percent increase. The net income figure was bolstered by an unrealized gain of $326 million on marketable equitable securities. Net income for the full year jumped 21.7 percent to $4.86 billion while revenue increased 3.7 percent to $15 billion.

News about the coronavirus first was publicized in late January 2020 so it didn’t impact 2019 financial results.

Booked room nights in the fourth quarter climbed 11.8 percent to 191 million. In contrast, Expedia Group’s room nights jumped 11 percent to 91.6 million during the same period.

No More Numbers on Performance Versus Brand Marketing

In another departure from current practices, Booking Holdings announced that starting in the first quarter it will no longer break out performance and brand marketing expenses, but will report them on a combined basis “as we view our overall marketing spend as an investment in customer acquisition and retention,” chief financial officer David Goulden said.

In 2019, Booking Holdings’ performance marketing spend declined 0.62 percent to around $4.42 billion while brand marketing jumped 7.6 percent to $548 million. The company is trying to lean into brand marketing to generate more direct bookings.

“In each quarter of 2019, our direct channel grew faster than our primary paid channels and our direct channel increased its share for the year,” Fogel said. “The direct channel represents over 50 percent of our total booked room nights and when including rooms booked through branded search terms, this number increases to over 60 percent.”

Fogel said the company will manage its paid marketing efforts “appropriately in 2020, and seemed to be warning metasearch partners — and perhaps Google — that Booking Holdings will focus on generating quality leads and return on investment. Booking Holdings contributed to bringing Trivago to its knees in the past couple of years when it clamped down on what it considered inefficient spend in the Trivago channel.

“We will continue to participate in those paid channels that provide us quality traffic and attractive ROIs (return on investments), recognizing that we need to incorporate higher cancellation rates in our bidding calculations,” Fogel said.

Consider those words as shots fired.

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Tags: booking holdings,, coronavirus, earnings, expedia, marketing, opentable

Photo credit: A lodging rating as seen in the Netherlands on July 8, 2019. Booking Holdings is feeling the impact of coronavirus. jbdodane /

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