For years, industry analysts would muse: When is Booking.com going to launch flights? Well, now that business is showing strength, albeit from a small base. Seen as strategic, that airline ticket business comes at a price — lower profit margins.
During the first three months of the year, with Europe its weakest region, and countries such as India still battling existential Covid crises, Booking Holdings’ airline tickets sales jumped 49 percent.
That increase from around 2 million tickets sold in the pre-Covid first quarter of 2019 came because Booking Holdings’ largest brand, Booking.com, as well as sister brand Agoda in Asia, didn’t offer flights at that earlier juncture. But they have started selling airline tickets over the last year.
Another portfolio brand, Priceline, which likewise drove the increase in airline tickets sold in the first quarter, has been selling flights, starting with Name Your Own Price, since its earliest days in 1997.
Compared with the fourth quarter of 2020, Booking Holdings’ flights business similarly jumped around 50 percent to 3 million airline tickets sold.
Despite Europe, accounting for about half of Booking Holdings’ business, which the company reported for the first time Wednesday, Booking saw strength in the travel recoveries of Israel, the UK and the U.S.
Up until recently, Booking.com and Agoda had focused on selling hotels stays and later alternative accommodations, so the brands have been filling an obvious gap. For years, there seemed no sense to dilute the brands’ focus on hotels because the accommodations’ business was doing so well.
Adding Flights Comes With Lower Profit Margins
Booking.com is the Group’s largest brand, and so adding flights to its lineup was a key part of CEO Glenn Fogel’s “connected trip” strategy, where the company hopes to offer flights, hotels, short-term rentals, packages, tours and activities, and ground transportation consolidated in one place for the traveler, and have it all processed through the company’s relatively new payments platform.
“In Booking.com’s flight offering, we are now live in 18 countries with the most recent launch in the UK,” Fogel told financial analysts during the company’s first quarter earnings call Wednesday. “We can now expose a large segment of customers to flights as these 18 countries collectively represented more than half of Booking.com’s room nights booked in 2019.”
But as with the rise of short-term rentals, Booking Holdings’ ramping up of its airline tickets business comes at a cost — lower margins than with hotels.
Still, flights are an incremental business for Booking.com and Agoda, and essential if the parent company is going to make good on its long-term strategy to provide travelers with a relatively seamless connected trip.
There are plenty of skeptics about Fogel’s connected-trip strategy. Would it really be that much different than what Expedia does?
Expedia.com, for one, has offered a full-service product — flights, hotels, short-term rentals, activities, cars and cruises, for example — for years. One of the key differences with Booking, however, is that the latter intends to process the bulk of its sales through its own payments platform, and views that as a game-changing differentiator.
Expedia Group in first quarter of 2019 generated about 10 percent of its revenue from flights, a much higher percentage presumably than at Booking Holdings. Expedia Group reports its first quarter of 2021 earnings on Thursday so there will be updated numbers on its flights’ business
Fogel of Booking Holdings acknowledged that the 49 percent increase in airline tickets sold during the first quarter comes from a relatively small base, but vowed to make additional investments into the product “to make sure that it’s absolutely a great, great service.”
Fogel clearly sees flights as a must-have, and not a frill.
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Photo credit: Booking Holdings' sale of airline tickets jumped 49 percent in the first quarter of 2021 as Booking.com and Agoda ramped up their fledgling flights' businesses. Bookin.com