Booking Holdings sees opportunity to recreate "human travel agent” with generative AI

Booking Holdings CEO Glenn Fogel says he is confident about the company’s ability to benefit from generative AI technology to improve both customer experience and operational productivity.

In a call with financial analysts to discuss Booking Holdings’ financial results from the first quarter of this year, Fogel cited the company’s years of experience with traditional artificial intelligence and machine learning, its repository of travel data and its team of AI experts as putting it in a strong position.

Specifically Fogel said he believes large language models can improve the way customers search, book and experience travel.

“A few interesting possibilities are interactive itinerary building and answering travelers’ questions … the way that people interact with us in that connected trip vision, the way that you really are able to recreate that human travel agent into something that’s actually an automated player but that does so much better than a machine did in the past,” he said.

Booking Holdings brands Kayak and OpenTable were two of the first companies to build plugins for OpenAI’s ChatGPT, and Fogel said some of the company’s other brands are developing ways to integrate the technology into their own offerings.

When asked if he has concerns about the security of the company’s proprietary data, Fogel said, “We are looking very closely and I think there’s going to be a lot of interesting regulations in this area. Nobody knows the answer yet.”

Along with generative AI, Fogel spoke of the company’s efforts to build its alternative accommodation business.

In the first quarter, alternative accommodation room nights on Booking.com increased about 45% year over year and represented about 33% of the brand’s total room nights, an increase of two percentage points compared to Q1 2022. While he is pleased with the company’s progress in building its supply of alternative accommodation listings, he said there is still substantial room for growth.

“We are seeing continued momentum and in terms of supply growth both globally and in the U.S. for alternative accommodations, with global listings reaching about 6.7 million by the end of first quarter, which is about 2% higher than year-end 2022,” Fogel said.

Booking Holdings also poured substantially more money into marketing in Q1 this year compared with 2022, spending $1.5 billion this year versus $1.1 billion last year. And marketing spend as a percentage of gross bookings was about 30 basis points lower than Q1 2022 due to higher ROIs in paid channels and a higher mix of direct business.

“The ROIs in the paid channels were better than we expected due to basically three things – higher ADR [average daily rate], a lower cancellation rate and a longer than expected average length of stay that was tied to the expansion of the booking window,” said David Goulden, Booking Holdings CFO.

Booking Holdings financial figures

Overall, Fogel said the first quarter of this year surpassed expectations, with both gross bookings and room nights reaching their highest quarterly levels ever.

Gross travel bookings – the total dollar value of all bookings net of cancellations – was $39.4 billion, an increase of 44% compared with Q1 of 2022 and $15 billion more than Q1 of 2019, pre-pandemic. 

Room nights booked increased 38% year over year to 274 million. Rental car days increased nearly 23% and airline tickets – a strategic priority for the company – rose more than 73%.

Total revenue in the first quarter was $3.8 billion, compared with $2.7 billion in Q1 2022 and $2.8 billion in Q1 2019.

Adjusted EBITDA in the quarter came in at $586 million, an increase of 89% year over year, and net income was $266 million compared with a net loss of $700 million in Q1 2022.

For Booking.com, mobile app activity accounted for about 45% of total room nights, similar to Q4 of 2022, and about 45% of the bookings were processed through the company’s payment platform, up from 34% in Q1 of 2022.

“Our focus remains on continuing to improve our offering to both our supply partners and travelers, and I am encouraged by the progress our teams continue to make,” Fogel said.