Booking Holdings and Expedia Are Both Growing Steadily, But In Very Different Ways

Booking Holdings (NASDAQ:BKNG) and Expedia Group (NASDAQ:EXPE) are the two largest online travel agencies (OTAs) in the world. While their business models are identical in terms of their various revenue sources, there is a notable difference in their core focus area: Booking Holdings makes most of its revenues through agency bookings, while Expedia relies heavily on merchant bookings (details about these two booking methods are available further below). Trefis captures the differences in key operating metrics for Booking Holdings vs Expedia in an interactive dashboard, parts of which are highlighted here. You can view our interactive dashboard to observe recent revenue trends and associated analysis to see the impact of future earnings on their stock prices. Additionally, you can find more of our Information Technology company data here.

Understanding How Booking Holdings And Expedia Make Money

Despite multiple product offerings across regions, Expedia Group and Booking Holdings’ business model is nearly the same with three prominent revenue streams as described below.

• Agency Revenues: These are commissions received from the service provider for travel-related transactions, where the company does not receive booking payments from the customer.
• Merchant Revenues: These are commissions received from the customer for travel-related transactions, where the company receives booking payments from the customer.
• Advertising Revenues: These are revenues earned from referrals, advertising placements, and subscription fees.

Comparison of Revenue Streams

Expedia Group and Booking Holdings reported total revenues of $11.2 billion and $14.5 billion in 2018, respectively. Moreover, both the company’s revenues have grown at a similar CAGR of 19% since 2016.

• Agency Revenues contributed 27% and 72% of total revenues in 2018 to Expedia Group and Booking Holdings respectively. This was primarily due to significantly larger agency bookings at Booking Holdings as compared to Expedia Group.
• On the other hand, Expedia Group has a higher share of merchant revenues due to its stronghold on merchant bookings. In 2018, Merchant Revenues for Expedia Group and Booking Holdings contributed 53% and 20% of total revenues, respectively.
• Both the companies received nearly similar Advertising Revenues of $1 billion in 2018.

Comparison of Operational Metrics

Despite lower revenues, Expedia Group’s Gross bookings have been 10% higher than Booking Holdings in the last two years. In 2018, Expedia Group and Booking Holdings reported gross bookings of $99 billion and $92 billion, respectively. (Note: Gross Bookings represent the total dollar value of transactions through agency and merchant bookings, which includes air tickets and other categories).

• Room bookings remain the key service category for Booking Holdings and Expedia Group as compared to other services such as air tickets and rental cars.
• In 2018, Expedia Group and Booking Holdings reported room nights of 350 million and 760 million, respectively.
• Notably, Booking Holdings room nights are nearly twice that of Expedia Group despite similar gross bookings.

Per Trefis, Expedia’s Revenues (shows key revenue components) are expected to cross $12.2 billion in 2019 – leading to an EPS of $6.80 for the year. This EPS figure coupled with a P/E multiple of 20x, works out to a price estimate of $136 for Expedia’s stock (shows cash and valuation analysis), which is roughly 5% higher than the current market price.

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