Higher Gross Bookings To Continue To Drive Booking Holdings’ 2018 Results

Booking Holdings (NASDAQ: BKNG) is scheduled to announce its fiscal fourth quarter results on Wednesday, February 27. Booking Holdings 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% increase in accommodation room night reservations during the period. While the company’s focus on increasing its direct business and reducing the dependence on performance marketing channels will 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.

We have maintained our price estimate for Booking Holdings at $1907, which is slightly ahead of the current market price. We have created an interactive dashboard on What To Expect From Booking Holdings’ 2018 Results, which details our key forecasts and estimates for the company. You can modify our forecasts to see the impact any changes would have on the company’s earnings. In addition, you can see all of our Technology company data here.

Going forward, Booking Holdings expects a 9% to 12% increase in hotel room nights booked in the fiscal fourth quarter, with a 6% to 9% rise in gross travel bookings and a 13% to 16% growth rate for revenue. Adjusted earnings of $18.90 to $19.40 per share would be well above the current investor expectations of $18.69 per share. It should be noted that the company expects to achieve these growth rates despite witnessing substantial pressure from unfavorable currency movements.

Segment Overview

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. The company also generates advertising revenues primarily from sending referrals to online travel companies and travel service providers.

For full-year fiscal 2018, we expect Booking Holdings’ Agency gross bookings to reach $80 billion. The company has witnessed increased gross bookings over the past few years, primarily due to bookings on Booking.com. With a take rate of 14.2%, we forecast the company’s Agency revenues to reach $11.4 billion for 2018. Further, we expect the company’s Merchant gross bookings to hit $12.6 billion in 2018. Despite a slight decline in its average daily rate over recent years in this segment, a significant increase across night rooms booked has led to growth in Merchant revenue. With a take rate of 18%, which is less than the previous year’s figure, we estimate the company’s Merchant revenues to grow to $2.3 billion in 2018.

With travel bookings continuing to shift to online channels globally, the company’s leading position in terms of global gross bookings, as well as its focus on growing its properties globally and improving its technological capabilities, should help it continue its strong growth. The company made a strategic investment in China’s biggest ride-sharing company, Didi Chuxing, and also bought Asia Pacific-focused hotel search tool HotelsCombined – adding new ways for the company to connect its customers to travel accommodations and services.

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