Skift Take

Is there one little thing that Wall Street is forgetting about the Booking Holdings-Airbnb face-off? Booking Holdings has a huge hotel business and Airbnb doesn't. Booking is certainly lagging in short-term rentals, but CEO Glenn Fogel is probably justified in liking his cards.

There was a relative absence of explicit discussion about Airbnb during Booking Holdings’ fourth quarter earnings call on Wednesday, but CEO Glenn Fogel emphasized that upping the company’s U.S. market share, including piling on single-home alternative accommodations, would be a key priority for 2021.

Fogel said he didn’t know what the mix of short-term rentals versus hotels would be in the future, but added that Booking has a competitive advantage in that it can offer whatever accommodation type the customer prefers. Airbnb, of course, only has a fledgling hotel business, much of it powered by its HotelTonight unit, and Fogel characterized Booking.com as the largest hotel accommodations business in the world.

Of course, the push into the United States, where Europe-oriented Booking.com has been “under-indexed,” according to Fogel, has been discussed for several years, and in addition to Airbnb it would involve taking market share away from Expedia, if successful.

Expedia is still the largest online travel player in the United States while Booking’s largest strength is in Europe.

But Fogel said Wednesday, during the company’s fourth quarter and full-year 2020 earnings call with financial analysts, that Booking Holdings is making unspecified changed to enhance its U.S. focus.

“As we scaled the company over many, many years, we had a very global approach, and we tried not to make changes solely for any particular market,” Fogel said. “[We] really believed that scaling the business, keying everything the same, was the best way to achieve a very, very large global share of the business. That being said, we’ve come to a state where we recognize that we’re continuing to be under-indexed in the U.S. and maybe we need to make some changes there, which we are doing.”

Fogel said on boarding single homes, as opposed to adding short-term rental managers with multiple properties, comes with higher costs because Booking would need to have more frequent contacts with owners. But he said he was heartened that individual owners are increasingly signing on with channel managers, actually property managers, and that this would be less costly for the company.

Among other priorities, he said, for 2021 Booking would be putting an increased percentage of the company’s transactions through its new payments platform, and increasing Booking.com’s flights’ business.

Both of these goals could adversely impact Booking’s margins, officials said.

After the earnings call, Brian Yarbrough, an analyst for Edward Jones, told Skift that Booking envisions the payments platform and flights would attract legions of new customers and much higher revenue, and this would offset the lower margins. He said Edward Jones and Wall Street aren’t overly concerned about this changing margin dynamic at this point, but it could become an issue if the revenue boost doesn’t turn out as expected.

Booking Holdings notched a net loss of $4.02 per diluted share in the fourth quarter compared with net income of $27.75 per diluted share a year earlier. Total revenue for the 4th quarter was $1.2 billion, a 63 percent decline from the year-ago period.

Booked room nights fell 60 percent in the fourth quarter compared to a year earlier. There was a also a drop-off in booked room nights compared with the third quarter because of weakness in Europe.

Fogel said the company is encouraged by strength in bookings from the UK and Germany for the summer season, but the outlook, depending on the progress of Covid vaccine distribution and the lifting of travel restrictions, is uncertain.

He said the company has been making changes, such as paring its workforce, cutting costs, and enhancing its payments platform, to be in a strong position whenever travel comes back.

“We’re also encouraged to see that some countries are making notable progress with vaccinations, including Israel, UAE and the UK,” said Chief Financial Officer David Goulden. “We are confident that when vaccinations are broadly available and when travel restrictions are listed, people will return to travel.”

He said Booking quickly saw a rebound in domestic bookings in Israel, which has the highest vaccinations rates globally, when Israel lifted its lockdown February 7.

“We quickly saw domestic bookings return to solid double-digit growth versus the same period in 2019,” Goulden said.

At the end of the earnings call, Fogel paid tribute to all the victims of Covid-19 over the past year, and to then-Marriott CEO Arne Sorenson, who passed away on February 15.

Said Fogel: “I also want to reiterate my deepest condolences to the family and friends of Arne Sorenson as well as to the entire Marriott organization. He left a profound mark on the full industry and will be greatly missed. And it so sad he will not see the recovery in the industry that he dedicated his life to.”

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Tags: airbnb, booking, booking holdings, booking.com, earnings, payments, short-term rentals

Photo credit: Booking.com is making its flights' business and booking its U.S. presence a big priority. Bookin.com

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