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There are signs of changing traveler behavior, but Booking Holdings CEO Glenn Fogel thinks the travel market will be more similar than different when travel fully recovers a few years from now.
With the travel industry intently focused on whether a recovery is taking shape and which new travel patterns will emerge, Booking Holdings officials on a first quarter earnings call on Thursday pointed to more domestic bookings taking place versus international ones in countries where a tentative rebound is beginning. They also cited a trend toward alternative accommodations rather than hotels when consumers were booking stays at least two months in advance.
The giant travel company, with brands such as Booking.com, Priceline, Agoda, Kayak and OpenTable, began to feel the real impact of coronavirus in mid-March, and during that month saw more cancellations than bookings.
In April, according to chief financial officer David Goulden, regions such as China, Hong Kong, Taiwan, and Macau (he called them “Greater China,”) as well as South Korea, Vietnam, and Germany saw double-digit improvements, but from a low base. However, he said, there was no general rebound because Singapore, for one, which had started to produce a travel rebound, reverted as coronavirus cases spiked.
At Booking.com, the largest brand in the group, there was changing consumer behavior: In addition to leaning into domestic trips, travelers either booked last-minute, or stays of two months or more in advance, and for the latter group, they tended to book alternative accommodations rather than hotels, Goulden said. There were also more mobile/direct bookings through the Booking.com app, but Goulden was reluctant to label that as a strong trend.
Years, Not Quarters
CEO Fogel struck a note of optimism during the earnings call with analysts Thursday, arguing that travel will eventually recover, although it will take years, not quarters.
However, he said travel will rebound later than other parts of the economy because that recovery will depend on whether there is a coronavirus vaccine, treatments, and how comfortable people feel about traveling.
Striking a contrarian view, Fogel is not in the same camp as many, such as Airbnb CEO Brian Chesky and many others, who argue that travel will look different in a post-coronavirus era.
“Overall, it will come back very similar,” Fogel said, referring to the mix of hotel versus alternative accommodations’ supply in its business.
Hotels may have new owners, but the buildings will still be there, Fogel said. “Here’s the point — hotels don’t disappear.”
He also argued that owners of vacation homes in the long run won’t bow out of the business out of fear of having strangers in their properties, or because of increased regulatory constraints.
Alternative accommodations will still be a good business for owners, Fogel said. “I really don’t see a lot of changes.”
He doesn’t expect a sea change when travel recovers. “I don’t think the world is going to be hugely different once we get past this,” Fogel said. “There have been pandemics in the past. I’ll go back 100 years, go back, Hong Kong, flu, there have been pandemics. There have been terrible things. But in the end, people want to travel, people are willing to supply accommodations. And I don’t see that there’s going to be a great change in the long run.”
Booking Holdings managed to secure some $4 billion in new financing recently, and Fogel said the company will continue investing in two key areas — a new payment platform, and the connected trip.
Both enable Booking.com to become more of a merchant, and this would enable the company to provide more value to consumers in travel packages in markets such as the United States, where its market share is lacking, and to have improved capacity to issue refunds because the company — and not a bevy of suppliers — will control the money, he said.
When it comes to marketing, officials said they expect spend to remain very low throughout 2020. But Fogel said the company may be able to use more video ads eventually that combine performance and brand marketing, and that better positions the company to measure return on investment.
When it comes to competitors, Fogel said some of the weaker players may be swept away, but the strong and sophisticated ones will still be there when a recovery happens. Fogel said he doesn’t see any big change in competitive positioning in terms of performance marketing.
The company will continue to look for acquisitions, he said, although despite lower valuations there is increased risk.
Fogel also subscribed to the theory that some hoteliers might be doing less brand advertising of their own because of cash constraints during a recovery, and may lean into Booking.com and others as they have done historically during such periods.
Recover in 2023?
Booking Holdings notched a net loss of $699 million in the first quarter compared with profits of $765 million a year earlier. Revenue decreased 19 percent to $2.3 billion.
The company took impairments charged of $489 million for OpenTable and Kayak, and wrote down its investment in China’s car-sharing service Didi Chuxing by $100 million.
“The COVID-19 pandemic has profoundly impacted our company and the entire travel industry,” Fogel said during the earnings announcement. “We have taken immediate steps to stabilize the company by reducing costs and bolstering our liquidity position.”
For those focused on the timing of a recovery, a Booking Holdings financial filing Thursday, forecast that cash flows for Kayak and OpenTable would revert to 2019 levels in 2023.