What Will Booking Holdings’ Revenue Growth Look Like Through Fiscal 2019?
Booking Holdings (NASDAQ: BKNG) is a giant online travel company, providing travel and related accommodations at hotels, hostels, apartments, vacation rentals, and other properties. In the first nine months of fiscal 2018, the company’s revenues grew 15% year-over-year (y-o-y) to $11.3 billion. This revenue growth was largely driven by growth across operating segments. In addition, the company’s gross bookings grew 16% y-o-y to $73 million, largely due to a 13% growth in accommodation room night reservations during this period. While the company’s focus on increasing its direct business and reducing the dependence on performance marketing channels will likely be a drag on its performance in the short term, we believe that its strategy to drive loyalty and build a larger direct brand could increase its long-term value.
Going forward, we forecast Booking Holdings’ revenue to increase more than 25% from fiscal 2017 through fiscal 2019. To arrive at our fiscal 2019 net revenue estimates for the company, we have broken down the revenue streams and estimated separately. We have also created an interactive dashboard on What Will Drive Booking Holdings’ Near-Term Growth? which provides a detailed analysis of how to arrive at this growth figure. You can make changes to these variables to arrive at your own revenue estimates for the company. We maintain our price estimate for Booking Holdings at $1907, which is about 10% ahead of the current market price.
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Booking Holdings generates revenue from three segments: Agency, Merchant, and Advertising and other revenue. The company primarily generates its revenues from commissions earned from facilitating reservations of accommodations and rental cars on an agency basis. The company also derives net revenues and travel reservation commissions on a merchant basis and customer processing fees from its accommodation, rental car, airline ticket, attractions, in-stay services, and vacation package reservation services. In addition, the company also generates advertising revenues primarily from sending referrals to online travel companies and travel service providers.
Looking at fiscal 2019, we expect Booking Holdings’ Agency gross bookings to reach $88 billion. The company has witnessed increased gross bookings over the past couple of years, primarily due to the bookings on Booking.com. With a take rate of 14.5%, we forecast the company’s Agency revenues to reach $12.8 billion in 2019. Further, we expect the company’s Merchant gross bookings to hit $13.9 billion in 2019. Despite a slight decline in its average daily rate over the years in this segment, significant growth across the night rooms booked has led to increased Merchant revenue. With a take rate of 17.5%, which is less than the previous year’s figure, we estimate the company’s Merchant revenues to grow to $2.4 billion in 2019.
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