Booking Holdings, formerly known as the Priceline Group, has seen a deceleration in its room night growth over the years. In the second quarter of 2021, the company reported a slower growth rate of 7%, compared to the previous quarter’s 9%. This trend is expected to continue in the third quarter, with growth estimated at only 3-5%. Factors such as a narrowing booking window and moderate market growth in Europe are contributing to this deceleration. As a result, Booking’s share price dropped more than 5% in after-market trading following the earnings call. Despite these challenges, net income for the company increased by 18% to $1.5 billion, with revenue reaching $5.9 billion, a 7% increase.
One could argue that these trends signal the end of the glory days of online travel, when companies could achieve high levels of room night growth. However, Booking Holdings remains optimistic about its future prospects. The company has been focusing on expanding its alternative accommodations business, which includes short-term rental listings. In the second quarter, the number of listings grew by 11% to 7.8 million. Booking’s CFO, Ewout Steenbergen, highlighted the company’s success in this area, stating that the alternative accommodation business is growing faster than its overall business. CEO Glenn Fogel also mentioned that Booking’s short-term rental business now rivals that of Airbnb, with the company successfully catching up to its competitors in the industry.
In addition to its alternative accommodations business, Booking Holdings has been making strides in other areas as well. The company reported that direct bookings, excluding its B2B business, now account for a significant percentage of overall bookings. This shift is seen as a “game-changer” for Booking, as it allows the company to have more control over its distribution channels. Furthermore, Booking has increased its investment in social media marketing, citing attractive returns on investment in this channel. By phasing out underperforming marketing channels and focusing on social media, Booking aims to drive incremental ROI and strengthen its marketing leverage. As part of its commitment to shareholders, the company declared a $8.75 per share cash dividend, which will be payable on September 30th.
Overall, Booking Holdings’ second-quarter performance reflects a mix of challenges and opportunities for the company. While room night growth has slowed down and market conditions remain uncertain, Booking remains focused on expanding its alternative accommodations business, increasing direct bookings, and optimizing its marketing strategies. By adapting to changing market dynamics and embracing new opportunities, Booking Holdings aims to position itself for long-term success in the competitive online travel industry. Despite the short-term challenges, the company’s solid financial results and strategic initiatives demonstrate its resilience and ability to navigate the evolving travel landscape.
