Despite the coronavirus pandemic continuing to “weigh heavily” on Booking Holdings’ financial performance, the online travel giant saw marked improvement in the third quarter of 2020 compared to Q2 of this year.
Gross travel bookings for the period ending September 30 were $13.4 billion, a decrease of 47% over a year prior. In Q2, gross travel bookings had plummeted 91% to $2.1 billion, a period in which Booking Holdings president and CEO Glenn Fogel said the company felt the "full impact" of COVID-19.
Room nights booked in the third quarter decreased 43% over a year prior, compared to a year-over-year decrease of 87% in Q2.
Total revenues for Q3 2020 were $2.6 billion, a 48% decrease from the year prior. Net income for the quarter was $801 million, a 59% decrease compared to the same period in 2019.
Speaking on a call with analysts, Fogel says that although the business is operating “significantly below pre-COVID levels,” the improvement in Q3 over Q2 was “entirely driven by domestic travel” with very modest improvement in international travel.
Booking Holdings’ domestic business has benefited by international travel restrictions, Fogel says, in part due to pent-up demand from consumers.
Adjusted EBITDA for the third quarter of 2020 was $1 billion, a 60% decrease year-over-year. Comparatively, Booking Holdings posted an adjusted EBITDA loss of $376 million for the second quarter of 2020.
Despite an improved performance in Q3 over Q2, Fogel says it will be “very challenging to reach profitability in Q4” due to a recent rise in virus infections, more government restrictions coming into play and the onset of winter weather in parts of the world.
Although he believes it will take years and not quarters for travel to return to pre-COVID-19 volumes, Fogel says he is optimistic on the long-term outlook for the industry.
Connected trip
Fogel reemphasizes Booking Holdings’ three-phase approach to help its businesses emerge from the pandemic and says work in this area is complete across Booking Holdings-owned brands Kayak, OpenTable Agoda and Priceline.
As part of the company’s cost-cutting measures - in August, the brand said it was reducing its workforce by 25% - Fogel believes the “vast majority” of employee reductions will be announced by the end of 2020.
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Although Booking.com had recently downplayed its long-discussed “connected trip” strategy, Fogel maintains it is a priority for the business.
He points to the online travel agency’s recent launch of flights in the United States as a “key component” of the connected trip effort and an “obvious opportunity to remove friction in the booking process for our customers.”
Having just launched in October, Fogel says it is “very, very, very early” in the process and did not share how the flights business is performing.
A seamless payment network will also help realize the connected trip vision, and Booking.com is continuing to develop and extend payment solutions to its supply partners.
Lodging and marketing
Booking Holdings CFO David Goulden says that in Q3 2020, Booking.com’s alternative accommodations bookings “increased nicely” – accounting for one-third of all new bookings in the quarter - though newly booked room nights have decreased year-over-year in October.
Fogel says that, particularly in the U.S., Booking.com is not getting as much alternative accommodations inventory as it should, primarily with individual home units. “The strategy is to continue to build that out and offer the customer what they want when they want it.”
Marketing expenses for the quarter totaled $731 million and Goulden says he expects marketing spend to remain “significantly below 2019 levels” in the fourth quarter.
With performance marketing, Fogel says that, as virus cases rise, the OTA is “immediately” readjusting expectations because “we’re not going to pay for a bunch of clicks that aren’t going to end up in revenue.”
Looking ahead, Goulden expects room night declines in November and December will be worse than in October. He says he anticipates that recovery will be U-shaped and last into the early spring of 2021.