Booking beats earnings expectations, talks up AI potential

The numbers were big. The prospects for an artificial intelligence-powered future looked bright. And over an hour-long call with financial analysts, Booking Holdings CEO Glen Fogel didn’t speak once about European regulators.

Count this is a good earnings report.

“I am pleased to report a strong start to 2024,” an upbeat Fogel said Thursday to open the call on first quarter earnings. “Our travelers booked nearly 300 million room nights across our platforms in the first quarter, which exceeded our expectations and grew 9% year over year.”

First quarter revenues of $4.4 billion represented a 17% increase over the same period last year. Adjusted EBITDA hit $898 million, an increase of 53%, and net income of $776 million was nearly three times higher than Q1 in 2023.

“We continue to see resiliency in global leisure travel demand, including healthy growth for travel on the books that’s scheduled to take place during our peak summer travel season,” Fogel added in wrapping up the numbers talk.

The tone was a far cry from February’s call with analysts to discuss the fourth quarter and full-year earnings in 2023. During that call, Fogel broke the news that Spanish regulators were recommending a $530 million fine on allegations that Booking.com had violated competition laws.

The company is appealing the draft decision, yet the fine contributed to a loss of $276 million in 2023 while reducing Q4 net income to $222 million, down 82% from the same period in 2022. A noticeably frustrated Fogel said during the call the company “could not disagree more” with Spain’s decision.

It wasn’t the first instance — and it wouldn’t be the last — of bad news for the company from European regulators. Yet it didn’t come up Thursday, allowing Fogel to turn his attention to favored topics like connected trips, the potential of generative AI and the importance of building up the company’s Genius loyalty program.

“These initiatives may seem to be distinct efforts, but I’d like to emphasize they actually all fit together in our ongoing effort to deliver a much better planning, booking and traveling experience for our travelers, while also benefiting our supplier partners,” Fogel said.

By achieving success on that front, he added, “we believe travelers will choose to book directly and more frequently with us, resulting in increased loyalty over time.”

The company has always expected AI to play a central role in that success, and Fogel said Booking is well positioned to leverage the technology. When he was asked if there was something that could continue to drive outsized growth, he singled out AI.

“Is there going to be something down the road that is going to be transformational instead of just incremental?” he said, reframing the question. “I believe that’s possible. … I believe the use of AI, particularly GenAI … I believe that over the next few years, it will become much better because of these technological advancements. Our job is to make sure we get it out fast, and we are able to provide it to both sides of the marketplace, to our supplier partners and our travelers so they see the value and continue to come back. I love it.”

I do believe over time [Booking.com’s AI Trip Planner] will create a much better way for people to do their planning, their booking … and helping them when they are in-destination, which is a really important thing because nobody goes on travel so they can sit in a hotel. They want to do stuff.

Glenn Fogel – Booking Holdings

It hasn’t even been a year since Booking.com added conversational chat capabilities to its mobile app with its “AI Trip Planner.” Yet Fogel was just as enthused for its potential when asked how people were using the tool.

“It’s a very small number of people [using it] compared to the number of people who use our services, but we are continuing to advance it,” he said, noting that any news article he reads about generative AI almost always cites travel as an ideal use case because of the number of permutations generative AI can sort through quickly.

“It’s really something that I believe will make a huge difference. It’s going to take time. You’re not going to see tremendous changes over the next couple of quarters, but I do believe over time this will create a much better way for people to do their planning, their booking … and helping them when they are in-destination, which is a really important thing because nobody goes on travel so they can sit in a hotel. They want to do stuff.”

In the meantime, there were more numbers to admire. Fogel was joined on the call by the company’s new chief financial officer Ewout Steenbergen, who succeeded David Goulden, who a year earlier had announced his plans to retire in March.

Among the other numbers Steenbergen reviewed were a 10% increase from the first quarter of 2023 in gross travel bookings to $43.5 billion, and an 8.5% increase in room nights booked. Marketing expenses for the first quarter were $1.6 billion, a 6% increase over the same quarter in 2023.

Fogel was especially pleased to see air ticket bookings up 33% year over year. “Flight is the most frequently booked vertical in a connected transaction outside of accommodations, and it is an important component of many of the trips our travelers are booking,” he said.

It was enough to put out of mind, at least for a night, any worry over regulations. Speaking at ITB Berlin in March, Fogel voiced concerns on the regulatory environment in Europe, saying it could stifle innovation and investment.

Besides the anti-competitive allegations from Spain, other decisions from European lawmakers that have gone against the company include its blocked acquisition of Etraveli and the threat of being tagged a digital gatekeeper under the Digital Markets Act.

Also in March, the Italian Competition Authority opened an anti-competitive investigation. Regulators alleged that Booking.com gives greater visibility in search to hotels that participate in its preferred partner programs so long as they offer prices on its site that are not higher than what they offer on their own websites or other online travel agencies. In addition, the regulators said when Booking.com finds a hotel partner is offering lower prices on other online channels, it believes it has the right to match that price on Booking.com, without the hotel’s consent.

A statement from the company said it was working with Italian authorities, though it believes concerns about competition should be handled directly with the European Union and not on a country-by-country basis.