With the recent launch of flights for its U.S. point of sale, and development of a payments platform, Booking.com continues to work on CEO Glenn Fogel's signature connected trip strategy. It's probably tough to learn too much so far about flights when hardly anyone is flying, but the initiative looks to be proceeding apace under the covers.
Booking Holdings is sticking with its connected trip strategy despite the pandemic, with chief financial officer David Goulden acknowledging that the company’s industry-leading margins could be compromised somewhat because of that push in the short-term.
In 2019, Booking Holdings recording EBITDA margins of 38.6 percent.
For the connected trip strategy, Booking.com wants to facilitate the entire trip, whether it is a flight and accommodation with ground transportation tacked on or a tour and dining reservation, and to be able to deliver it all via the most convenient, local payment method.
“We expect to have industry-leading margins in the long term,” Goulden said.”Between now and when we get back to full recovery, there’ll be some puts and takes.”
The margin dilution would come from Booking.com recently launching flights for U.S. flyers, which has lower margins than accommodations, and further development of a payments platform that CEO Glenn Fogel said could potential deliver reduced transaction costs to various suppliers such as alternative accommodation or attractions’ providers.
Fogel added that the further development of its payments platform would be essential if Booking.com were to launch vacation packages, which is a goal.
Increased marketing spend when a recovery takes shape — hopefully next spring, officials said — could also eat into margins for a short period, Goulden said.
He said that more than 50 percent of new room night bookings came through Booking.com’s mobile channel, particularly via its app, in the third quarter and into October, and that is encouraging for the connected trip strategy because it would enable the company to communicate with travelers better during their trips.
Slowing growth of alternative accommodations bookings
Booking Holdings officials expressed satisfaction that the third quarter witnessed sequential improvements in booked rooms night. They declined 43 percent year over year in the third quarter compared with a steeper 87 percent in the second quarter, which ended June 30.
However, room nights in October, a month after the third quarter closed, dipped to being down 58 percent, and were even lower with a 70 percent decline in the past seven days, Fogel said.
The acceleration of alternative accommodations that was seen in the second quarter, where they amounted to 40 percent of all lodging bookings has started to moderate.
“In Q3, we continued to see an increase in the mix of customers booking alternative accommodations versus the prior year levels,” Goulden said. “However, as we progress through the quarter and into October, we saw this increase in the alternative accommodation share moderate. Booking.com’s alternative accommodations represented approximately one-third of all new bookings in the quarter.”
Fogel, however, said travelers are increasingly considering alternative accommodations, and that once they try them, these short-term rentals will increasingly be part of their considerations.
“I think that trend has just been accelerated,” Fogel said. “In fact, it brought forward what would have happened perhaps on a year or two years or whatever in the future because now people did try this. And now I do believe that there is a continuous shift once you’ve tried it.”
For the third quarter, which ended September 30, Booking Holdings saw its net income decline 59 percent to $810 million on revenue of $2.6 billion, which was a 48 percent decline.
The company expects an adjusted EBITDA loss in the fourth quarter, which is its seasonably weakest quarter, because of increased lockdowns and other coronavirus restrictions in Europe.
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Tags: alternative accommodations, booking holdings, booking.com, flights, mobile, short-term rentals
Photo credit: A screenshot from Booking.com's video, #ExploreNextDoor. The company saw improvements in the third quarter compared with the second quarter. Booking.com