Q3 2024 Earnings Summary
- Strategic Investments in AI and GenAI Position Booking Holdings Ahead of Competitors: Booking Holdings is leveraging its significant resources, data, and AI expertise to develop generative AI technologies across its brands. This enhances customer experiences, drives operational efficiency, and provides a competitive advantage over hotels and other competitors that lack similar resources. , ,
- Strong Growth in Alternative Accommodations and Flights Boosts Diversification: The company's alternative accommodations segment grew 14% in Q3, outpacing the overall business, with alternative accommodations representing 35% of Booking.com's room nights. Additionally, air tickets booked on their platforms increased 39% year-over-year, accelerating from Q2's growth of 28%, indicating successful expansion into new verticals and strengthening their connected trip vision. ,
- Optimistic Outlook and Growth in Asia Market: Booking Holdings is optimistic about its long-term outlook in Asia, aiming to grow faster than the high single-digit growth projected for the region over the next five years. Operating two complementary brands, Agoda and Booking.com, over the last 12 months, about 24% of global room nights were booked by bookers in Asia, slightly higher than pre-pandemic levels, highlighting their strong position and growth potential in this important market.
- Challenges in the U.S. Market: Booking Holdings acknowledges that it is a "challenger" in the U.S. market and admits that their platform is "not as easy yet as some of our competitors" for property managers, indicating potential difficulties in gaining market share in this key region.
- Uncertainty in AI Investments' Financial Impact: The company has made significant investments in AI but admits that it's "difficult at this time" to translate these investments into measurable financial benefits, creating uncertainty about the return on these investments.
- Limited Impact from Asian Partnerships: Partnerships with super apps in Asia, such as Grab, are "not something that is... influencing our Asia numbers at all", suggesting that these strategic initiatives are not driving growth as expected.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +9% | Strong travel demand and the ongoing shift from agency to merchant revenues drove higher topline performance. Marketing efficiency and growth in alternative accommodations also contributed, though currency fluctuations had a modest net impact. Continued recovery in international travel bolstered overall revenue, and this momentum is expected to persist. |
Merchant Revenue | +26% | Fueled by the strategic shift from agency to merchant transactions at Booking.com, which enables incremental payment-related revenues and offers consumers more flexible payment options. Higher volumes of merchant bookings should continue to support revenue growth going forward. |
Agency Revenue | -12% | The decline comes from the same shift to merchant bookings, reducing the volume of agency-based transactions. While agency revenues still contribute a sizable share, this trend will likely persist as the company invests in the merchant model for its payment platform growth. |
Revenue Outside the U.S. | +8% | Driven by robust leisure travel demand in Europe and continuing recovery across Asia. The company’s brand marketing in key international regions enhanced bookings. Foreign exchange headwinds partially muted gains, but higher cross-border travel indicates further upside potential in these markets. |
The Netherlands | +24% | Reflects the region’s role as Booking.com’s headquarters, benefiting from innovation tax incentives and strong European travel activity. The country’s advantageous tax structure continued to favorably impact reported income, and healthy booking trends there are expected to remain resilient. |
Diluted EPS | +8% | Net income growth from higher operating margins and a 7% reduction in share count (via buybacks) drove EPS upward. While marketing investments expanded, these were offset by cost efficiencies and the product mix shift to merchant. Continued profitability improvements and disciplined share repurchases bode well for future EPS growth. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Room Night Growth | Q4 2024 | no prior guidance | 6%–8% | no prior guidance |
Gross Bookings Growth | Q4 2024 | no prior guidance | 7%–9% | no prior guidance |
Constant Currency Accommodation ADRs | Q4 2024 | no prior guidance | approximately flat year-over-year | no prior guidance |
Revenue Growth | Q4 2024 | no prior guidance | 7%–9% | no prior guidance |
Adjusted EBITDA | Q4 2024 | no prior guidance | $1.6B–$1.65B (9%–13% growth) | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue Growth | Q3 2024 | Expected to grow 2% to 4% | 8.9% year-over-year (calculated from 7,341In Q3 2023 vs. 7,994In Q3 2024) | Beat |
Adjusted EBITDA | Q3 2024 | Expected to be between $3.25B and $3.35B | ~$3.33B, derived from Operating Income (EBIT) 3,179+ D&A 155= 3,334 (in millions of USD) | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
AI Investments and Transformative Potential | Q2 2024: Emphasized AI as core to connected trip. Q1 2024: Focused on AI-driven customer service and differentiation. Q4 2023: Cited AI as a key competitive edge. | **Described as “transformational” and critical for long-term success; active use of GenAI across brands and operations. ** | Consistently mentioned with highly positive sentiment; significant future impact. |
Alternative Accommodations Growth and Supply Constraints | Q2 2024: 12% growth, recognized U.S. supply gap. Q1 2024: 13% growth; opportunity in high-end homes. Q4 2023: 19% Q4 growth, 24% full-year. | **14% room night growth; mix at 35% of total; supply gaps remain in places like the Hamptons. ** | Continuously emphasized with strong growth but ongoing supply constraints. |
Challenges in the US Market (brand awareness, platform complexity, supply gaps) | Q2 2024: Noted lack of supply parity in U.S.. Q1 2024: Highlighted lower brand recognition, platform improvements needed. Q4 2023: Still limited single-property listings. | **Brand awareness not at desired level; platform usability for property managers needs improvement; supply is focus area. ** | Recurring challenges framed as growth opportunities. |
Genius Loyalty Program and Direct Booking | Q2 2024: Over half the business from Genius Levels 2 & 3; direct mix in mid-50%. Q1 2024: Genius expanded across verticals; direct channel ~50%. Q4 2023: Planned expansion to more verticals; app driving direct bookings. | **Higher-tier Genius bookings in the mid-50% range; direct channel in the mid-50% (low 60% excluding B2B). ** | Consistently growing loyalty and direct mix; strategically important for retention. |
Asia Growth Momentum Driven by Agoda | Q2 2024: Mid-teens growth in Asia; flights up 28%. Q1 2024: Mid-teens growth, especially in China, Japan, Korea. Q4 2023: Mid-teens growth in Asia. | **Double-digit growth in Asia with Agoda’s localization driving expansion. ** | Steady momentum with Agoda central to regional success. |
The Connected Trip Vision and Flight Expansion | Q2 2024: Connected trips +45% YOY, flights +28%. Q1 2024: Connected transactions +50%, flights +33%. Q4 2023: Flights +58% in 2023; expanding AI tools. | **Connected trips up over 40% YOY; flights grew 39% YOY, attracting new customers. ** | Ongoing focus with strong flight growth fueling cross-selling and loyalty. |
Social Media Marketing | Q2 2024: Cited “very attractive incremental ROI,” disciplined expansion. Q1 2024: No mention. Q4 2023: No mention. | **Improved ROI; incremental spend remains relatively small; AI-driven targeting boosts effectiveness. ** | Newer focus since Q2 2024; showing encouraging results. |
Operating Expenses and Margin Pressures | Q2 2024: Lower full-year OpEx guidance; IT costs still a factor. Q1 2024: 11% OpEx increase, pressured by IT investments. Q4 2023: 21% rise in fixed expenses, partly reclassified. | **Fixed OpEx +7% YOY, below expectations; targeting 10% full-year OpEx growth; AI to enhance efficiencies. ** | Consistent caution on costs, with emphasis on disciplined spending and efficiency gains. |
Flat or Limited ADR Growth | Q2 2024: ADRs ~flat/down slightly YOY. Q1 2024: ~1% overall ADR growth, impacted by Asia mix. Q4 2023: +4% ADR but affected by mix. | **Constant currency ADRs down <1% YOY; expecting near flat in Q4. ** | Stabilizing ADR with mix effects creating slight volatility. |
Competitive Positioning vs Peers in Alternative Accommodations | Q2 2024: Unique proposition, supply gap in U.S. vs peers. Q1 2024: 2/3 competitor’s size, faster growth for most quarters. Q4 2023: High growth rate, 33% of total room nights. | **Outpaced largest competitor in 12 of last 13 quarters; at about 2/3 competitor’s size. ** | Consistent outperformance in growth, with scope to improve U.S. inventory. |
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Impact of AI on Financials
Q: How will AI translate to financials?
A: Management is excited about AI being transformational but it's difficult to quantify its financial impact at this time because it's still early. They expect companies successful in AI to be the long-term winners. -
Q4 Bookings Outlook
Q: What factors affect Q4 bookings?
A: They expect robust Q4 bookings with continuation of recent trends. Easier comps due to last year's Middle East conflict will help. Events don't significantly impact results, and while the booking window may be less expanded, they've considered geopolitical risks in their outlook. -
Marketing Efficiency and ROI
Q: How is marketing ROI improving?
A: Through continuous optimization, they've achieved higher growth with higher ROIs. Marketing leverage is expected to continue due to growth of direct channels. Merchandising as a percentage of gross bookings is expected to be flat compared to last year. -
Fixed Cost Investments
Q: How will fixed investments impact margins longer term?
A: They see significant opportunities for efficiencies and operating leverage. Headcount growth slowed to 3%, down from 13% a year ago. AI offers efficiency opportunities, and they continue to invest in growth areas like flights (up 39%), fintech, and geographical expansion. -
Alternative Accommodations Growth
Q: What's the outlook for AA mix and growth?
A: Alternative Accommodation listings grew 10% to 7.9 million, with room nights up 14%. They see significant opportunity, especially in the U.S., and are focused on expanding inventory to meet customer needs. -
Europe Growth Reacceleration
Q: What's driving Europe's outperformance?
A: They've seen reacceleration in Europe since August, with underlying improvement in demand. Their strong platform, with many options and an expanded booking window, contributed to the growth. -
U.S. Brand and Market Share
Q: How is the U.S. business performing?
A: Brand awareness is improving but not yet where they’d like it to be. Growth is stable, characterized as low to mid-single digits. They're investing in marketing, like the baseball playoffs, and working to simplify the platform for property managers. -
Incrementality of AA Volume
Q: Is AA attracting new customers?
A: Management believes AA is bringing in customers who wouldn’t have come otherwise, especially in Europe. They emphasize offering all travel aspects in their connected trip vision to attract travelers seeking better service. -
Social Media Advertising
Q: Why is social media marketing now effective?
A: They're seeing good results from social platforms due to collaboration and creative approaches. Although spend is still relatively small, AI is enhancing ad effectiveness, and a meaningful part of the increased marketing spend is going to social channels. -
Asia Growth Drivers
Q: What's behind Asia's strong performance?
A: They're pleased with growth, benefiting from market recovery and their own efforts. The Agoda team has localized services, catering to preferences in payment methods and inventory, contributing to success in the region.