Booking Holdings reports 200M room nights milestone during upbeat Q3 earnings

Booking Holdings saw an acceleration in the rate of its room night growth in the third quarter of 2018, exceeding the high end of its guidance, driven by a delayed summer travel peak and improved results from some of its performance marketing channels.

More than 201 million room nights were booked in the third quarter of 2018, an increase of 13% over the same period in 2017. The company now expects room nights to grow again in the fourth quarter, between 9 and 12%.

Booking Holdings total revenue was $4.8 billion in the quarter, an 11% increase from the same time a year earlier. Net income increased a bit less – up 3% to $1.8 billion. And adjusted EBITDA for the third quarter was $2.4 billion, an 8% increase year-over-year. 

Marketing measures

In a call with analysts to discuss the earnings, CEO Glenn Fogel said some of the room night growth is attributed to optimization of performance marketing channels - where it spent $1.3 billion in the third quarter of 2018.

At the same time, Fogel says they are continuing to ramp up brand advertising – with a 27% increase in spending to more than $160 million in the third quarter – to “further our goal of bringing more customers directly to our platforms and to increase awareness, particularly in our Home segment.”

Fogel says more of the brand marketing budget is now going to digital video.

“One of the good things about that is the measurement of that spend is better than it used to be when you are doing over-the-air TV. So at least we are getting better data to measure against,” he says.

Direct business accounted for more than half of the room nights booked, is the largest source of new customers and is growing faster than the overall growth rate.

Gross travel bookings were up 12% year-over-year, to $24.3 billion. While the bulk of that is from agency bookings – more than $19 billion versus just $5 billion for merchant bookings – merchant bookings are far outpacing agency bookings in terms of growth. Merchant bookings were up 65.7% year-over-year in the third quarter compared with just 2.3% growth in agency bookings.

Chief financial officer David Goulden says that is due in part to efforts to build out the global payments platform, primarily on Booking.com, to better serve the needs of both travelers and partners with a wider range of payment options.

Rental properties

The company continues to build its inventory of alternative accommodations, now at more than 5.7 million listings – a 21% increase year-over-year. Fogel says he is pleased to see that they are drawing new customers whose first booking on the platform is for an alternative accommodation.

“We believe we are building a leading platform to search and discover truly unique accommodations in the same frictionless path that our customers have come to expect from us, and the best customer benefit comes from offering both hotels and accommodations in one unified platform.”

Fogel says the company’s recent announcement of new tools for professional short-term rental managers signals its commitment to serving the needs of hosts, while it also plans to invest more in marketing the Home sector in the coming quarters to drive awareness among travelers.

"It’s a really long-term project,” he says.

“There’s a lot of effort, and we were starting from behind from some of our competitors, no doubt.”

When asked whether he sees alternative accommodations as “additive or cannibalistic,” Fogel says: “I think about providing the choices and what the consumer decides is fine by us. It’s not our decision to try to direct them one way or another.”

“We’ve always said it’s important for us to get every type of accommodation on the platform…. By providing that incredible breadth it really makes it more appealing to the consumer… they know they will be able to get what they want on our site.”

Fogel says today more than 50% of the company’s accommodation booking transactions take place on mobile devices. He says the company will continue to invest in mobile development since it provides an opportunity to interact with customers throughout their trip, providing services and assistance that improve their travel experience and drive loyalty.

He noted Booking Holdings’ recent $200 million investment in Southeast Asian on-demand transportation platform Grab is also part of that overall strategy to “make all aspects of travel easier for our customers by having an integrated, seamless way to experience the world at the lowest friction possible.”

“As long as we continue to build our products, make things better for the customers, create what I’ve talked about in the past - this holistic system that really makes it easier for people to travel, as long as we focus on that… I believe in the long run we will continue to grow this company at a reasonable rate. And as we’ve said so many times, we are still at single digit in accommodations in this whole industry. So that’s a lot of ramp left,” he says.