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    Booking Holdings Inc (BKNG)

    Q2 2024 Earnings Summary

    Reported on Jan 10, 2025 (After Market Close)
    Pre-Earnings Price$3664.18Last close (Aug 1, 2024)
    Post-Earnings Price$3311.59Open (Aug 2, 2024)
    Price Change
    $-352.59(-9.62%)

    What went well

    • Strong customer engagement through Genius loyalty program: 30% of active travelers are Level 2 and Level 3 members, contributing to more than half of Booking.com's business. These members book more frequently and more directly, enhancing profitability.
    • Robust growth in alternative accommodations segment: BKNG achieved 12% growth in alternative accommodations in Q2, expanding market share and diversifying its platform to attract a broader customer base.
    • Increasing direct booking mix boosts profitability: BKNG's direct booking mix has increased to the low 60% level for B2C, which is a game changer by reducing reliance on paid channels and improving marketing efficiency.

    What went wrong

    • Booking Holdings is lagging behind competitors in the U.S. alternative accommodations market, lacking sufficient supply to be fully competitive. Glenn Fogel admits, "we still do not have anywhere near the number or the type of home accommodations in the U.S. to be fully competitive... it's a disappointment to me that is not done yet."
    • There is increased marketing intensity in the alternative accommodations space, which could escalate costs for Booking Holdings and impact margins. As noted, "marketing intensity in the alternative space appears to have escalated a bit year-to-date."
    • Expected deleveraging in the third quarter due to higher operating expenses could impact profitability. Ewout Steenbergen mentions, "If you look at deleverage in the third quarter, that mostly relates to SNO and fixed OpEx."

    Q&A Summary

    1. European Market Share Gains
      Q: Is BKNG gaining market share in Europe despite slowing travel?
      A: Despite a mild moderation in the European travel market, BKNG's performance has remained steady, indicating market share gains. Growth in Europe has been quite steady and stable from May through July, as the company continues to provide value to both travelers and suppliers.

    2. Alternative Accommodations Growth
      Q: How is BKNG's alternative accommodations segment performing?
      A: BKNG's alternative accommodations business is experiencing strong growth, with bookings increasing and the segment becoming a rival to any competitor. The company has grown faster than the biggest player in the industry for 11 of the last 12 quarters, focusing on offering customers a choice between hotels and alternative accommodations without preference.

    3. Marketing Strategy and Direct Mix
      Q: What are BKNG's key marketing investment priorities to drive direct traffic?
      A: BKNG is making progress in using social media channels, achieving attractive incremental ROI and increasing spend in this area. The direct mix for B2C bookings is now at a low 60% level, which is a significant shift. The company is diversifying paid channels and leveraging data and algorithms to optimize marketing spend effectively.

    4. Cost Structure and Margins
      Q: How is BKNG managing costs amid potential margin pressures?
      A: BKNG is emphasizing operating leverage by running more volume over the same fixed infrastructure due to its scale. The company is carefully managing headcount, benchmarking expenses, and optimizing procurement and real estate costs. As a result, the outlook for fixed operating expenses growth has been reduced to low double digits.

    5. Loyalty Program Impact
      Q: How does BKNG's loyalty program drive repeat bookings?
      A: BKNG's Genius loyalty program has 30% of active users at Level 2 or 3, contributing to over half of Booking.com's business. These customers book more frequently and directly, with partners supplying most of the benefits. The program creates value for travelers and suppliers, fostering higher repeat rates.

    6. Connected Trip Progress
      Q: What is the impact of growth in connected trip bookings?
      A: Connected trip bookings are up 45%, representing a high single-digit percentage of total bookings. Customers booking connected trips have higher basket sizes and repeat rates, often returning directly. BKNG is focused on enhancing the customer experience by offering multiple services in one place, aligning with the vision of the connected trip.

    7. U.S. Market Opportunities
      Q: Is BKNG reaching supply parity in U.S. alternative accommodations?
      A: BKNG acknowledges it hasn't yet achieved supply parity in the U.S. alternative accommodations market but views this as a significant opportunity. The company is working on acquiring the necessary properties to offer a competitive product and aims to improve its offering without heavy spending on marketing a subpar product.

    8. Booking Window Trends
      Q: How does the tightening booking window affect BKNG?
      A: While the booking window had been expanding, it may have stabilized. BKNG isn't overly concerned, as booking patterns tend to average out over time. The company focuses on optimizing marketing spend to achieve the right return on investment, regardless of booking window fluctuations.

    9. B2B Business Strategy
      Q: Why is BKNG's B2B business smaller than competitors'?
      A: Although BKNG's B2B segment is smaller compared to some competitors, the company is encouraged by its growth. All brands are active in this space, and B2B remains an important part of BKNG's commercial strategy, contributing to diversification and expansion efforts.

    10. Advertising Revenue Opportunities
      Q: Can BKNG increase advertising revenues?
      A: Advertising revenue is seen as an attractive growth opportunity. Currently, it primarily comes from KAYAK and OpenTable, but there are prospects for expansion through apps like Agoda and Booking.com. The company intends to balance monetization with customer experience to avoid overwhelming users with ads.

    11. Shift from Goods to Services
      Q: Will the shift from goods to services boost travel demand?
      A: BKNG believes that as people become wealthier, they spend more on services like travel. While the significant shift from goods to services may not continue indefinitely, the company expects ongoing demand for experiences, supporting future travel growth.

    12. Impact of Airline Tech Issues
      Q: Have recent airline tech issues affected BKNG?
      A: Recent technological disruptions impacting airlines did not significantly affect BKNG. The company continues to focus on providing value to customers and hopes such industry-wide issues are mitigated in the future to avoid disrupting travelers.

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