Booking Holdings reported a 4% increase in revenue to $15.1 billion for the full-year 2019, but the travel giant is expecting a “significant and negative impact” for the first quarter of 2020 due to the COVID-19 coronavirus.
The Connecticut, U.S.-based online travel agency warns about a potential year-over-year decline in non-GAAP revenue for the first quarter between 9% and 5%.
Room nights booked are also expected to decrease by as much as 10%, and total gross travel bookings are expected to decline by as much as 15%.
In a call to discuss earnings, Booking Holdings CEO Glenn Fogel outlined steps that the company is taking to manage the outbreak, including facilitating cancelations for customers, ensuring the health and safety of its 26,000 employees and managing its marketing efforts appropriately.
“We will continue to participate in those paid channels that provide us quality traffic and attractive ROIs, recognizing that we need to incorporate higher cancellation rates in our bidding calculations,” said Fogel.
“In regard to brand marketing, we will be very cognizant of when and where brand marketing money should be spent this year.”
CFO David Goulden summarized the decrease in business in the first quarter as tapering off at the end of January to a projected decline in March.
Cutting costs
Independent of the financial impact of COVID-19, Fogel said: “In 2020, we will further emphasize the need to make sure our expenses are appropriate for our revenue and we'll look at ways to streamline and make all aspects of our company more efficient.”
Operating expenses for Booking Holdings jumped from $9.186 billion in 2018 to $9.721 billion in 2019.
Since becoming the CEO of Booking.com in June 2019, Fogel said he has reviewed spending levels for projects within that organization and wants to apply the same strategies to the entire company.
“I always believe that you should be a cost-effective company,” he said. “I believe it's also very natural as companies grow very rapidly and achieve great success on the bottom line, sometimes discipline lightens up a little bit.”
Fogel added that a high margin “does not give us a license to spend money.”
In addition to becoming a more cost-conscious organization, Fogel said that the goal is to “bring all of our companies together.”
“In the past, we've run all of these companies independently and that was the right thing to do at the time, but while doing that, you do lose out on some cost efficiencies,” says Fogel.
Fogel adds: “Now is the time to start bringing that in.”
Financials
Despite the gloomy outlook, the company achieved financial success in 2019.
Adjusted EBITDA increased by 2% to $5.9 billion for the full-year 2019, with gross travel bookings up 4% to $96.4 billion.
Over 845 million room nights were booked last year, which a represented an 11% increase since 2018.
Subscribe to our newsletter below
In the fourth quarter, gross travel bookings increased by 6% year-over-year to $20.7 billion and net income rose by 81% to $1.2 billion.
Revenue in the fourth quarter rose by 4% to $3.3 billion, higher than the analyst expectations of $3.28 billion.
The company reports a 12% increase in room nights booked to 191 million in the fourth quarter.
Booking Holdings’ alternative accommodations business reached 6.3 million listings in 2019 and achieved $3.1 billion in revenue.
During the call, Fogel said that over 50% of Booking.com gross bookings now occur on properties that are enabled on its payment platform.
“This payment platform is foundational for our connected trip strategy in which we envision a frictionless customer experience across multiple products that we believe will drive increased loyalty."