Booking Holdings Inc. (BKNG) Earnings Call Transcript & Summary

All right. We're going to go ahead and get started. I'm Doug Anmuth, JPMorgan's Internet analyst. Very pleased to have with us today booking CEO, Glenn Fogel and CFO, Ewout Steenbergen. Booking is the global leader in online travel with the mission to make it easier for everyone to experience the world. Last year, the company booked more than 1 billion room nights and had over $150 billion in gross bookings. Glenn has been with the company since 2000. He previously served as Head of Worldwide Strategy and Planning, also EVP of Corporate Development and became CEO in 2017. Ewout joined booking all of 2 months ago. He was previously CFO at S&P Global for 8 years and President of Engineering Solutions there, and prior to that, CFO at Voya Financial. So welcome, Glenn and Ewout.

Thank you.

Thank you, Doug.

All right. Let's start with the state of overall travel. You recently reported strong 1Q results, room nights growing 9%, bookings going 10% against some tougher Easter comps. You've noted resiliency in global leisure travel and healthy growth in summer travel on the books. But perhaps also less expansion in the booking window and also just ongoing geopolitical situation in the Middle East. So maybe with that as a backdrop, if you could kind of give us a little bit more on how you're thinking about the current state of travel.

So as you know, Doug, we can't give any updates to what we said in our call -- not that long ago. We were very pleased about the first quarter. We like coming in above expectations. We like the fact that we said things about -- we looked at a healthy amount of travel for the summer, and that I gave a little bit about which I give every quarter about. However, of course, these -- many of these are cancelable and somebody who asked as well to -- are you expecting more? I'm saying, no, we see it every quarter, but people -- they try and read the heals into every single word we say, which is why I'm very careful and don't see anything that we haven't already said. I am pleased with the strength of travel in general. But I really -- and I say this all the time about how important it is to look to the long term. You mentioned, I've been here now since 2000. 2000 -- years I've been in this business at this company. And we've had ups and downs and all sorts of exogenous events, some that even we have at some point a recession or something, you didn't expect something like 2008 in the global financial crisis. And sometimes there are local events that can be really horrific tsunamis, volcanos. Volcanos hit actually that quarter that it happened very badly shut down travel. So I tell you when you look to the long term, though. The long term is travel will continue to grow and slightly better than GDP. If you believe GDP is going to grow then we have an industry that is going to continue to grow. In addition, we got a tailwind approximately depending on which expert consulting company you want to look at, maybe half globally of travel is not done in a digital way, in terms of buying it. That's a lot of opportunity for somebody who's in the digital space like us. So there's still a lot of opportunity there. And then you look at the other thing, just specifically us. And I tell people, I say, "We are gaining share." Look at what we've been doing. We look at the expansion of things we didn't have pre-pandemic. Pre-pandemic, Booking.com. It was essentially a hotel-only type company. Now all the verticals. See what we're doing in flights. See all the different things we're building up, and then I've been talking about this connected trip for a long time. And I believe more than ever, particularly because of the technological changes that we are seeing, seeing what can come through with Gen AI and the stuff we are working so hard on. I believe there's a tremendous opportunity for us to do even better. And that's what I wish people would look at. So many times people tell me, "What's going to happen this quarter? What's going to happen next quarter?" I say we just stopped focusing on that, focus on what we've done, look at the track record, look with all the changes that happened over these 24 years that I've been here, and we have continued to outperform.

Great. With that backdrop, maybe Ewout, you can talk a little bit about what attracted you to Booking, and the opportunity that you saw across the business? And maybe some of the things in your first couple of months that have either surprised you or some of the things you really want to take on at the business?

Sure. And I think actually, both of you already touched on this so far. So being a global leader already today, but then at the same time, having so many still opportunities to further improve in the future. I think that's fascinating. Booking Holdings has been highly successful. As we all know, has been really growing rapidly, has had very strong financial results, added a lot of value for all the stakeholders, for the travelers, for the accommodation partners for shareholders, but look at all the growth opportunities. So we are not a company that is sitting here and say, "Oh, okay, with our size and scale, we're just riding the wave of the markets in the future." Think about the opportunities Glenn was mentioning the different verticals, how we still have alternative accommodations as a growth opportunity in the U.S. Think about some of the growth markets in Asia, where we are very well positioned, both with Agoda and Booking.com. India, Indonesia, Korea, many of those markets are going to be high-growth areas in the future. Think about just the number of aircrafts that the Indian airlines recently have ordered. All of them want to travel, and we are both, Booking.com and Agoda, together, already a very sizable player in that market. Think about the connected trip and the added value that we can deliver at Gen AI on top of that. Payments. I think actually payments is a strategic underpinning of all of our strategies, but it is a revenue component as well in the future and so on and so forth. There are so many of those elements. So actually, that makes me really excited to come here. Moreover, a super high-quality company. Very conservative in the way how it presents results, how does the accounting. And I like the culture. The culture was for me, a very important element of the culture. Down to earth, very low ego, very low politics, very high intellectual challenge for everyone, really to do the right thing and to come to the right decision. So I'm super happy to be here and very much every day think that I made the right decision.

Okay. Great. Let's hit on some of those areas that you talked about. Alternative accommodations. So those room nights grew 13% in 1Q, I think, up to 36% now of total room nights have come a really long way on alternative accommodations. And it is obviously a very big business for you. What's the current area of focus for you there? And how do you feel that you're positioned competitively?

Yes. So it is an important priority. As Ewout mentioned, is one of several priorities. And we have made great progress there. But one of the great things I see is that there's still so much more so far to go. The U.S., for example, is an area where we continue to under-index in the alternative accommodation space. When you look at the largest player there, you see they do a significantly greater number of transactions in the U.S. than we do. That's opportunity for us. And one of the issues is, if we walk in, I said this in some of the one-on-ones we've been doing earlier, if you go outside this building, hit somebody on the street and say, "I need a place out on Cape Cod for my family. I want a home near the beach, where should I go?" Not a lot of people are going to say Booking.com. Some people say that's a negative. I say that's an opportunity. Look at the numbers. In the last 12 quarters, 11 of them, we've grown faster than the leader in that space in terms of growth alternative accommodations. And as you point out, we have a sizable business now. Our alternative accommodations business is 2/3 the size of the leader. So 2/3 of the size and beaten it a line out of the last 12 quarters. And in the U.S., for example, we're still just such a tiny thing. That is all a big opportunity for us. Now we're going to get that opportunity. What are we going to do? We're going to do what we've been doing throughout the world. And that's continuing to improve the product, increase the supply, make sure that the traveler is aware of us and offer them great value. And we offer great value to both sides, offer rate value to the traveler and offer great value to the people who are expecting to get money for renting out their homes and apartments, et cetera. This is something that I have, no doubt, can be accomplished. And sometimes I wonder, maybe it's because we're so big in other parts of the world, like year, for example, and that's the people here don't know about it because if you did that same experiment I just said instead of walking outside this building, walk outside a building anywhere in Europe and ask that same question not about Cape Cod, but in some place there. Like south of France or something, Booking.com will the first thing that comes to them. So one of the things I wanted to do is in the future when people walk anywhere in the streets of Boston that we are set up in the same way.

So what does that mean for your marketing strategy, and how you think about it? I mean, you've been pushing Booking.com, obviously, more as a brand certainly in the U.S. And you have the brand, right? But then you also need to drill people down like focus on alternative accommodations and that opportunity.

Correct. And you've seen our ads, Superbowl ads, that are slowly building out the brand of the alternative accommodation, stuff we got. Critical thing on this to is you got to match up the supply and the demand. If you add on a tremendous amount of supply, but you don't have the demand, the people on the supply side said, why don't I go to the trouble of doing this? You're not any business. This isn't help. You've got to maintain a bounce. So you bring them up together, you're not exactly the same, but you bring them together, so that both sides are happy. Somebody who's looking for a place can find a place, somebody who has a place, get to a customer. And that's what we're doing.

And what about supply? How do you drive that? How do you become the place to go for home owner?

You don't need -- that sounds almost unique in one. You don't have to do that. And in fact, in our hotel business, our hotel partners, they use lots of different distribution ways to get customers. It's no different really. It should not be any different for the great majority of the professional alternative accommodations. What do they want? They want to make money. They want to be profitable. They want to fill up their space. You know what the value of an empty home is in the next morning when nobody showed up? 0 for that revenue, 0. But if somebody came in, most of it flows right to the bottom line. The idea is continuing to build up the service and the product such that people who are on the supply side, recognize that is a good place to get demand, it's easy to use, and they feel that it's a good relationship. That's what we need to continue to build, which we have been building, and that is why our growth has increased. We increased -- we have 7.4 million listings of alternative combinations around the world of Booking.com. That was about an 11% increase over last year approximately. And I'll tell you, that's not what we're going to continue to do. It's -- again, it's one of these things where I sometimes wonder, "Maybe we're not telling the story well enough." Maybe that's the issue because I see the numbers, I see how much we're growing it, and I'm just so pleased that the path we're on.

And let me add one other aspect to this. I also believe the proposition that we have to the market is really unique and differentiating. Because on our platform, you can find traditional accommodations and alternative accommodations at the same place. We're not thinking about it in a compartment here and a compartment there. And that's actually also helping very much the growth that we're seeing within the company. Because in many cases, a consumer goes in. For example, a family needs 2 hotel rooms and finds also an alternative accommodation and ultimately books a home in that same place, and that is ultimately the transaction or the other way around. We see that the way people are originally searching is not always the way how they end up actually booking a certain form of an accommodation. So for us, that this is seamless and altogether on the same platform, we think is really a benefit, and that helps to drive the growth in this space as well.

Okay. Great. Let's talk about connected trip. A question and kind of a discussion that we have often with investors is what differentiates Bookings' vision of the connected trip from packages which have been around in the travel space for a long, long time? So Glenn, maybe you can talk about that, how your vision is somewhat different. And what's the ideal use case in your view for connected trip?

Okay. I take it, the -- well, tie together actually. So if you were to go out and buy a standard "package" old style, the way it was done, you'd be offered a set number of choices, relatively small with perhaps, you have an air trip and you have a hotel and maybe there's some ground transportation, et cetera. And it looks like, "okay, there's a package and what's the difference?" The biggest difference for the connect trip is connect trip will be personalized. So when you're looking in that old-style package, you'd go to a travel agent the way back times and you get a brochure with them all. There is no differentiation between me. I got the same package anything else got. In the world of the connected trip going forward, what I want to do, using all the data we have, all the capabilities we have, everything we know about this customer. And all the knowledge we have about what's out in the travel space, coming up because they're obviously a huge number. Permutations are incredible, the numbers are enormous, being able to present to that customer, what would be optimal choices for that person, given who they are and what we believe their needs are at that time. That is very, very different than a brochure package trip, one. Two, though, there is some similarities. And the similarities are what people want is ease of use. Every person in this room travels, and I'll say a lot of you do your own travel though also back there, a couple of you or somebody else, I try to push off to my wife, myself because it's hard. It's frustrating. It's annoying. Sometimes, people -- we talked a little bit about our beautiful increase in our flight business, loving it. How many accommodations? We see a healthy amount of cross-sell on the hotel part of it. And people sometimes have asked me, well, why doesn't everybody who buys a flight then buy a hotel all the time? And the answer is, have you bought the flight on your own, did you do it with 2 kids, and you want to make sure the seats are together? It's the exact right time to wait to get, which was the connection of this? It's really hard when you are done with that flight. You don't want to buy another thing in the old site. This is exhaustive. I'm done. I'll come back tomorrow or the next day. And the idea of the connected trip that you make it easy. You make it frictionless, seamless, and you make sure you're getting more value for it. So the connected trip is not only for the demand side, the traveler, it's also very important for the partner. The partner supplier, what does the partner supplier need want? They want incremental demand. You know a lot of times what they'd like to do is they'd like to offer something up that's not going to cannibalize their current channels. They want to offer up something without that. We use the connected trip, we be able to do that. I'll be able to have a car rental company or for us special deals, et cetera, that we will put in to a personalized way to a traveler who's going to a certain place that this car rental needs the business and doing all these things. Using all the AI techniques that we have and all the things we will be able to do in the future. It's going to create something that is just more value for the traveler, more value for the supplier and will help us have a better business.

Ewout, any thoughts there? I think when we've talked over the last couple of months, you've kind of pointed out that you wanted to bring more attention to connected trips and the opportunity there.