At the Morgan Stanley Conference, I listened to another conversation between Brian Nowak, analyst at Morgan Stanley, and Ewout Steenbergen, CFO of Booking Holdings ($BKNG (-1,03%) ), followed.
The discussion centered on Booking Holdings' growth strategies and innovation approaches with a particular focus on the company's financial performance and future plans.
Steenbergen emphasized that the company is focused on growth in the US, alternative accommodations, connected travel and other businesses. He highlighted the impressive growth in the fourth quarter, including 10% growth in the U.S. (outpacing its largest competitors), 52% growth in airline tickets and 19% growth in alternative accommodations. He also pointed out the importance of diversifying customer acquisition channels and expanding direct sales, which is around 60% in the B2C sector. Steenbergen emphasized that despite the strong performance, continuous efforts are needed to improve the position in a highly competitive market.
Nowak discussed the forecast growth rates of 8 % for bookings and sales and 15 % for earnings per share. He asked about the key operational areas where improvements are needed to achieve these targets.
Steenbergen suggested redefining growth targets in the context of generative AI opportunities and mentioned that Booking Holdings can gain market share in the US and expand in Asia. He also mentioned the growth potential of other business areas and reiterated the company's commitment to capital returns and share buybacks.
Nowak inquired about the planned use of the expected cost savings of 400 to 450 million US dollars. Steenbergen explained that the company is taking a disciplined approach to achieving savings and efficiencies while strategically reinvesting in areas that will enable faster growth. He emphasized that the company is focused on growing as quickly as possible while maintaining an EBITDA margin of approximately 30%.
Nowak elaborated on the strong performance of Booking Holdings in the US and asked about the factors that influenced the accelerated growth in the fourth quarter.
Steenbergen attributed this to easier comparables, a potential impact of the Middle East conflict on consumer behavior, a shift in spending following the US presidential election and an extension of the booking period. However, he also acknowledged that investments in brand, product, offer and performance marketing played a role.
When asked about the potential of alternative accommodation in the US, Steenbergen replied that it is already contributing to growth, although the company's position in this sector is stronger in other regions. He sees this as an opportunity to close the gap and further boost growth.
Nowak shifted the focus to investments in Asia and asked about the key investment areas and competitive conditions. Steenbergen pointed out that every market is highly competitive, but Booking Holdings is well positioned with Booking.com and Agoda. He highlighted Agoda's localization strategy and planned strategic investments in the region.
A large part of the conversation was dedicated to generative AI. Nowak inquired about Booking.com's vision for the future of travel and how consumers will book travel in the next three to five years. Steenbergen emphasized that the company is preparing for all scenarios and is working closely with major language model developers. He pointed out that while travel appears attractive on the surface, it is actually complex, particularly in terms of fulfillment, payments, customer service and regulatory compliance. He raised the question of whether consumers entrust their travel planning to a generic agent or prefer a specialized platform with a vertical agent they can trust and rely on. He also speculated on whether the providers that have invested heavily in AI would use it as a performance marketing channel for established travel companies such as Booking Holdings. Steenbergen highlighted the potential for AI to drive efficiencies, enhance the core product and develop a vertical travel specialist agent.
Nowak questioned whether reliance on these new agents as a paid marketing channel could impact Booking Holdings' high-margin direct business. Steenbergen acknowledged this risk, but argued that multiple agents as lead generators could reduce customer acquisition costs. He reiterated that the company is focused on developing a superior vertical agent to generate more direct business.
Nowak inquired about Booking Holdings' investments in generative AI to drive value for its hotel partners. Steenbergen emphasized that the company is focused on helping independent and family-owned hotels that often do not have the latest technology. He gave examples of AI-powered tools that help hotels respond to customer queries. He reiterated that the company will invest in both sides of its two-sided marketplace.
An analyst from the audience asked if Booking Holdings used its customer data to predict what type of hotels or activities customers would prefer.
Steenbergen replied that Booking Holdings has extensive data on customer preferences and is investing in modernizing its data environment. He believes this will give the company an advantage in personalizing offers and streamlining the search process.
Another analyst in the audience asked about the factors influencing the 15% EPS growth, particularly in relation to direct business growth and the use of payments. Steenbergen explained that the company is looking to leverage marketing by shifting more business to direct sales and increasing ROI in performance marketing channels. He also expects leverage in fixed costs. These factors in combination with the share buyback program should lead to EPS growth in the mid double-digit range.
In summary, the meeting provided valuable insights into Booking Holdings' growth strategies, investment priorities and innovation initiatives. Steenbergen confidently conveyed the company's ability to grow in a competitive market, improve its profitability and create value for its shareholders.
