Booking Holdings: How the Travel Giant Is Preparing for AI Disruption

Booking Holdings (BKNG -0.30%) presented its fourth-quarter 2024 earnings call on February 20, 2025, marking a significant milestone with CEO Glenn Fogel celebrating his 25th anniversary at the company. During this call, the travel giant shared positive financial results and expressed optimism about how it intends to adapt to the ongoing transformation brought about by artificial intelligence (AI) in the travel sector.

Exceeding Financial Expectations

Booking Holdings has exceeded its long-term financial targets, showcasing exceptional performance within the travel industry. The company reported gross bookings of $166 billion for the year, reflecting a 10% rise compared to 2023, and revenues of $24 billion, which is an 11% increase year-over-year. Notably, adjusted EBITDA—an important measure of profitability—was over $8 billion, rising 17% from the previous year.

According to CEO Glenn Fogel, this performance is particularly impressive because it reflects not only robust revenue growth but also an increase in profit margins, which went up by 170 basis points to 35%. Looking ahead to 2025, the company expects at least 8% growth in revenue and a 15% increase in earnings, showing confidence in its competitive edge.

Embracing AI with a Dual Strategy

Booking Holdings is proactively addressing the challenges posed by AI by developing its own capabilities while also partnering with leading AI firms. The CEO noted that AI-driven solutions, such as a specialized travel agent, will enhance the travel experience by providing seamless and personalized service.

The company is already applying AI technology to streamline operational processes, particularly in customer service, helping to stabilize expenses even as payment processing demands rise. By blending in-house AI efforts with strategic alliances, Booking aims to safeguard its market share as consumer preferences evolve. The company believes its travel expertise, proprietary data, and established trust with customers position it well in an AI-enabled future.

Growth of the Merchant Platform

Booking.com is quickly transitioning from a traditional agency model to a merchant platform, unlocking new revenue avenues and improving customer experiences. In 2024, 59% of total gross bookings were generated through merchant transactions, a jump of 9 percentage points from the previous year, surpassing earlier expectations.

This shift allows Booking to manage the payment process, enabling more effective bundling of travel services, flexible payment methods, and a more integrated booking process. While current merchant transactions provide additional profit, they represent only a small portion of the total adjusted EBITDA, indicating significant growth potential in the future.

Accelerating Alternative Accommodation Services

Booking Holdings has also seen considerable growth in the alternative accommodation market, including vacation rentals, which are now outpacing growth in the hotel sector. By the end of the fourth quarter, the number of listings for alternative accommodations reached 7.9 million, an 8% increase from the previous year. This broad array of options has bolstered the company’s growth in alternative accommodation bookings, which surged by 19% in the last quarter.

Management attributes this success to the platform's unique capability to feature both traditional and alternative options side-by-side, allowing consumers to easily compare choices. This comprehensive approach has resonated globally, driving growth across all regions.

Strategic Efficiency and Investment Balance

As part of its efforts to adapt to changes, Booking Holdings revealed a detailed efficiency program while still investing in growth initiatives. The anticipated costs related to this transformation over the next couple of years will be approximately equal to the estimated annual savings. The transformation plan is expected to realize savings of $400 million to $450 million annually once fully rolled out.

Rather than solely enhancing margins, the company plans to reinvest around $170 million into strategic priorities such as enhancing AI capabilities, developing connected trip initiatives, and expanding fintech services. This dual focus underscores management's commitment to both current profitability and sustainable long-term growth.

Looking Forward

In conclusion, Booking Holdings' leadership is optimistic about the company's future. CEO Glenn Fogel highlighted the importance of adaptability and the lasting appeal of travel experiences. With advancing payment solutions, faster growth in alternative accommodations, and targeted AI investments, the company is well-prepared to adapt to any shifts in the industry landscape.

Management's priorities include progressing towards their connected trip vision, expanding merchant and fintech capabilities, enhancing the loyalty program, and leveraging AI to improve both customer experience and operational efficiency.

AI, Finance, Growth, Earnings, Strategy