Booking Holdings: Navigating AI Disruption in Travel

Booking Holdings (BKNG -0.30%) held its fourth-quarter earnings call for 2024 on February 20, 2025. CEO Glenn Fogel, celebrating his 25th anniversary with the company, shared positive financial outcomes and a strong plan for adapting to the ongoing changes in the travel industry influenced by artificial intelligence (AI).

1. Strong Financial Performance

Booking Holdings has significantly outperformed its financial goals, showing excellent execution in the travel sector. The company's gross bookings reached $166 billion, reflecting a 10% increase from 2023. Revenue also grew by 11% to $24 billion, accompanied by an impressive adjusted EBITDA of over $8 billion, which is a 17% increase year over year.

"We accomplished these excellent top-line results while also enhancing our profitability," said Glenn Fogel, CEO. The company improved profit margins while continuing to invest in strategic initiatives, with adjusted EBITDA margins rising by 170 basis points to 35%. For 2025, the management expects at least 8% revenue growth and 15% growth in earnings, indicating confidence in their market position.

2. Proactive AI Adoption Strategy

Booking Holdings is embracing AI by developing its own technologies while also forming alliances with major AI companies. Management believes that AI-powered services, like specialized travel agents, are essential to creating a more personalized and seamless travel experience.

"We are excited to collaborate with top generative AI organizations in creating innovative solutions," noted Glenn Fogel. The company is utilizing AI to enhance customer service operations, which has helped to stabilize expenses even as payment processing volumes rise.

3. Shifting to a Merchant Platform

Booking.com is evolving from a traditional agency model to a more comprehensive merchant platform, unlocking new streams of revenue and improving user experience. In 2024, merchant bookings constituted 59% of total gross bookings, a notable increase of about 9 percentage points from the previous year.

"By taking control of the payment process, we can bundle various travel elements more effectively and provide flexible payment options," explained Fogel. While these transactions are already adding profit, they are still just a small fraction of total adjusted EBITDA, indicating room for substantial growth in fintech capabilities.

4. Growth in Alternative Accommodations

Booking Holdings is witnessing rapid growth in the vacation rental market, outpacing its traditional hotel business. As of Q4, listings for alternative accommodations reached 7.9 million, marking an 8% increase from last year. This growth is translating into a 19% increase in bookings for alternative accommodations during the fourth quarter.

"The ability to compare both traditional and alternative accommodations has resonated strongly with travelers," said Fogel. This approach has led to remarkable growth across all global regions in this vital segment.

5. Efficiency and Investment Balance

Booking Holdings announced a thorough efficiency program alongside ongoing investments in strategic growth initiatives. CFO Ewout Steenbergen mentioned that the total costs for this transformation are expected to match the anticipated annual savings.

"When fully implemented, we expect this program to save between $400 million to $450 million annually. About $170 million will be reinvested into critical areas like AI capabilities and enhancements in travel services," he added. This balanced strategy combines immediate cost savings with long-term growth potential.

Looking Forward

Leadership at Booking Holdings is optimistic about the company’s future, focusing on adaptability and the persistent appeal of travel experiences. With enhanced payment options, the continued expansion in alternative accommodations, and strategic investments in AI, Booking Holdings is well-prepared to adapt to ongoing changes in the industry.

Management is dedicated to advancing their vision of connected travel experiences, expanding merchant and fintech capabilities, enhancing loyalty programs, and using AI to improve customer experiences and operational efficiency. As Fogel expressed, "I am confident in our company's position to leverage generative AI technology to enhance offerings for our travelers and partners."

Booking, AI, Travel