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The travel industry dealt with its biggest challenge in generations in 2020, as Covid-19 kept people around the world locked down for much of the year. Revenue at
Booking Holdings,
the dominant owner of online travel agencies, fell 55% from 2019.
Beyond the overall slowdown, Booking (ticker: BKNG) has another problem. Investors are valuing the company at a discount to growing competitor
Airbnb
(ABNB) despite Booking’s lead position in online travel — a sign that Wall Street may see its growth prospects as inferior.
In an interview after reporting earnings last week, Booking CEO
Glenn Fogel
said that the company has a robust platform of both traditional hotel rooms and alternative accommodations — the area that Airbnb is known for. In fact, Airbnb says it has 5.6 million active listings, while Booking says it has more than 28 million total listings and 6.2 million alternative listings, which include private houses and apartments that are rented out as vacation properties. Booking owns several travel sites, including Priceline.com, Kayak, and Agoda, along with its namesake brand.
Travelers booked $24 billion of accommodations on Airbnb in 2020, while it booked $35 billion on Booking. But Airbnb stock is worth $119 billion, while Booking is worth $95 billion. Even with less booking revenue and fewer accommodations, Airbnb gets more attention from investors because of its brand identity in the hottest part of the travel market.
Staying somewhere that isn’t a hotel is increasingly popular. Fogel said that most travelers still choose hotels over alternative accommodations, but that there has been more momentum toward private accommodations amid the pandemic.
“We have seen a spike up in terms of interest in individual property units,” he said. Customers “definitely feel safer about being in a home by yourself, instead of a hotel that maybe has 18 floors, you got to get in an elevator with a bunch of people.”
While people who rented a home amid the pandemic may not do so on their next trip, that option of renting a home will “forever be in their consideration set.” Fogel feels good about Booking’s inventory of private homes, and thinks that Booking’s policy of not imposing an additional service fee on travelers sets it apart from other platforms.
But he thinks that the company needs to improve its inventory in the U.S. and make it more clear to consumers that Booking has the same kind of private accommodations as Airbnb. Booking is better-known in Europe than in the U.S.
“We need to increase awareness among the consumer,” Fogel said. “And we need to bring more supply onto our site in the U.S. We need to have great value for the home business so that people know when they come to us, they’re getting a great deal. That’s the thing we need to do more of, and I recognize that we underindex in the U.S.”
As for when travel bounces back to pre-pandemic levels, Fogel doesn’t want to try to pick a date. Booking’s stock already seems to be pricing in a full rebound and then some, because it’s trading at a higher level than it was before the pandemic.
“It’s not like there’s a light switch that we just flick it over to 2019,” he said. “That’s not how it works. It’s going to be a gradual thing. The real thing that we should be looking for is when do governments start dropping international travel restrictions, because that’s a very, very important part of our business. That’s one thing we historically have been a real leader in is international travel. As long as that’s depressed, that’s a big headwind to us.”
Write to Avi Salzman at [email protected]
