Booking Holdings Business Model Was Slowing Things Down Pre-Covid

25.08.2023 - 14:21 / skift.com / Dennis Schaal / David Goulden / Morgan Chase

Booking Holdings has an answer to critics, who over the last few years mused that its best days were behind it, and that online travel agencies generally would be hard-pressed to rekindle the growth of yesteryear.

It was the business model, stupid.

David Goulden, the Booking Holdings chief financial officer, said at an investor conference last month that the company’s business model was a major reason for its slowing growth leading up to the Covid-19 pandemic in early 2020.

After all, room night growth had progressively cooled from 28 percent year over year in 2016 to 11 percent in 2019. Gross bookings notched just 4 percent growth that year, and revenue’s uptick was a tad slower than that at 3.7 percent.

Goulden pointed to flagship brand Booking.com’s pay at the hotel, or agency, business model as one of the culprits behind the sluggish pre-Covid growth. Today, Booking.com has transitioned to doing much more business on a merchant model basis where guests pre-pay for accommodations, and it has expanded into flights.

“Booking.com, our biggest brand, we were almost entirely an accommodations focused business and entirely dependent upon the agency model where we did not touch customer money, right?,” Goulden said. “We basically made a booking, passed it on to the property partner and the booker, and the property partner managed the payment flow. Very scalable model, been very successful for us, but wasn’t quite as differentiated by the time we got to 2019 as it was in 2014. So that really explains the majority as to why things were slowing down.”

Fast forward to late 2022, and Booking.com processes 40 percent of its gross bookings through its home-grown payments platform. In other words, lots of guests pre-pay for their hotel and short-term rental stays, and Booking.com — and not the hotelier — handles the dinero.

“We relied entirely upon what we got from our property partners to give us great rate because it’s still primarily what we do, but we couldn’t participate in those more targeted pricing promotional activities, and now we can,” Goulden said.

Today, whether through its Genius loyalty program, which might tell members they unlocked a reward of $110 on their next accommodation booking or can “Get 10% back in Travel Credits,” Booking is actively engaged in merchandising, or peppering customers with various discount or cash back offers.

“So we have said and continue to say that coming out of the Covid, we expect to grow faster than we did going into Covid, faster on the top line, faster on the bottom line and, of course, the two have a level of connectivity,” he said.

In addition to the business model tweak and an enhanced ability to merchandise, Booking has built a flights business, which is