The Changing Online Reservation Landscape Only Hurts Booking Stock

Booking Holdings (NASDAQ:BKNG) dished out current-quarter profit guidance that sent Booking stock lower to the tune of 11% on Thursday, but the sellers weren’t interested in following through on Friday. Perhaps the longer-term uptrend can now resume in earnest. Or, maybe it won’t.

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The basic bullish argument still holds water. While softness in the European travel market is driving a growth-slowdown, nothing lasts forever. Demand for travel accommodations is cyclical, and sensitive to headlines. Brexit drama and a tariff war have given would-be travelers everywhere plenty to worry about.

There’s a much bigger but mostly unseen trend in place, however, that fans and followers of Booking Holdings stock would be wise to note. Earnings, Outlook

Results for the recently-completed fourth quarter were more than good enough. Revenue of $3.21 billion was right in line with estimates, up 16% year-over-year, while income of $22.49 per share was not only 33% better than the year-ago figure, but handily topped estimates of $19.39 per share of Booking stock.

The profit outlook for the current quarter, however, raised more than a few red flags. The company is calling for earnings of between $9.90 and $10.20 per share, versus Wall Street’s estimate of $11.76. Europe was cited as the key headwind.

There’s a bigger hurdle ahead, however, and Booking Holdings CEO Glenn Fogel even pointed to it during the earnings conference call.

It’s Complicated

Fogel explained the company is, “excited about the investments we are making in 2019 as we position the company for long-term growth,” mostly referencing ramped-up spending on branding and customer acquisition.

It may be easier said than done, however.

The average consumer, or even the frequent traveler, may not readily recognize the difference between Booking Holdings and its rival Expedia Group (NASDAQ:EXPE), or for that matter, Trivago (NASDAQ:TRVG). They’re all middlemen of some sort, connecting travelers with service providers.

There’s a difference though. While Booking Holdings may compete head-to-head with Expedia, actually relies on Trivago to send it we traffic that ultimately drives revenue. During the final quarter of 2018, roughly one-third of Trivago’s revenue came from Expedia owns two-thirds of Trivago.

Those blurred lines of ownership are only a microcosm of the online travel booking industry’s fuzziness, resulting from growing questions about the true value of middlemen, and ultimately aimed at direct-to-consumer efforts that circumvent the platforms that connect hotels and airlines with paying customers.

Case in point? Hotels chains like Hilton Hotels (NYSE:HLT) and Marriott International (NASDAQ:MAR) are increasingly looking to grow their business with homegrown loyalty programs that directly connects the company with consumers. A recent report from Kalibri confirmed that approach was working.

CEO of hotel management advisor CHMWarnick Chad Crandell said of the Kalibri report, “Ownership is looking for the cost of guest acquisition,” tacitly suggesting advertisers may be rethinking how they can best utilize their promotional budgets.

Another challenger: Google parent Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) continues to muddy the travel arrangement waters, showing ads for online travel agents while simultaneously competing with them. Alphabet says it isn’t, but others aren’t so sure.

Bottom Line for Booking Stock

In that light, at least one of’s latest promotion efforts makes sense. The company will be sending postcards to prospects possibly interested in non-hotel types of accommodations, offering discounts for going directly to the company’s booking site. The approach will, theoretically, lead travelers right past potential competitors.

Any initiative that gets a consumer online, though, could still easily divert that prospective traveler to another booking venue.

In the meantime, Trivago and its rivals like Tripadvisor (NASDAQ:TRIP) continue alienate its customers like Booking Holdings. In September of last year, Trivago began testing the impact of a slight pause before redirecting an individual to a web page. The delay, Trivago hopes, will ultimately keep customers coming back to the Trivago site.

It also means interested travelers are less likely to make their way to Trivago is doing it because it can.

And there’s the rub, for Booking Holdings as well as owners of Booking stock. Companies and consumers are now able to leverage the power of the internet, largely bypassing what brings to the table.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site,, or follow him on Twitter, at @jbrumley.

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