Booking Holdings: How the Travel Giant Is Preparing for AI Disruption

Booking Holdings (BKNG) held its fourth-quarter 2024 earnings call on February 20, 2025, highlighting CEO Glenn Fogel's milestone of 25 years with the company. The travel giant reported strong financial results and shared an optimistic outlook regarding the ongoing AI transformation that is reshaping the travel industry.

1. Surpassing Financial Goals

Booking's performance exceeded its long-term growth targets, showcasing effective management within the travel sector. In 2024, the company reported gross bookings of $166 billion, a 10% increase compared to 2023, with revenue climbing to $24 billion, marking an 11% year-on-year growth. Notably, adjusted EBITDA surged to over $8 billion, reflecting a 17% year-on-year increase.

According to Glenn Fogel, CEO, this positive trajectory also involved expansion in profit margins, achieved alongside strategic investments. Adjusted EBITDA margins increased by 170 basis points to 35%, surpassing the company's expectations. Management forecasts continued growth for 2025, projecting at least 8% revenue growth and 15% earnings growth on a constant-currency basis.

2. Strategic Approach to AI Adoption

Booking Holdings is responding proactively to the AI disruption faced by the travel industry. The company is focusing on developing its own AI capabilities while also establishing partnerships with major AI firms.

Fogel stated, "We believe that compelling AI-powered offerings, like a dedicated travel agent, will be crucial in providing a seamless and personalized experience for our travelers. Additionally, we're excited to collaborate with leading generative AI organizations on developments in this area."

AI is already being utilized by Booking to enhance operational efficiency, particularly in customer service, which allows the company to manage stable expenses despite increasing payment processing volumes. By combining in-house AI advancements with strategic partnerships, Booking is preparing to adapt to evolving consumer preferences.

3. Expansion of Merchant Platform

Booking.com is undergoing a significant transformation from a primarily agency model to a merchant platform, which is creating new revenue streams and improving customer experiences.

In 2024, the share of merchant gross bookings reached 59% of the total, increasing about 9 percentage points year-over-year, which was above management's initial expectations for the year.

Taking control over the payment process allows Booking to bundle various travel components more effectively, offer flexible payment options, and enhance the overall booking experience. While merchant transactions are generating additional profits, they currently account for a small share of total adjusted EBITDA, indicating a substantial growth opportunity as the fintech capabilities develop.

4. Growth in Alternative Accommodations

Booking is experiencing significant growth in its vacation rental market, with rates surpassing those of the traditional hotel sector.

By the end of Q4, there were 7.9 million listings for alternative accommodations on Booking.com, a rise of 8% from the previous year. This growth has contributed to a 19% increase in alternative accommodations room nights during the fourth quarter, up from 14% growth in the prior quarter.

Fogel emphasized that this success stems from the platform's capability to present both traditional and alternative accommodations side-by-side, allowing travelers to evaluate all their options in one place. This strategy is resonating with consumers, as growth was seen in all global regions within this important segment.

5. Balancing Efficiency with Investments

Booking Holdings announced a thorough efficiency program while also maintaining investments in strategic initiatives.

Chief Financial Officer Ewout Steenbergen remarked, "We estimate the total transformation cost over the next two to three years will match our anticipated annual run rate savings... Included in our 2025 guidance is approximately $150 million in cost savings associated with the transformation program."

This transformational initiative is projected to yield $400 million to $450 million in annual run-rate savings once fully implemented. Rather than simply enhancing profit margins, management intends to reinvest about $170 million into strategic focuses like AI capabilities, travel connectivity initiatives, and expanded fintech solutions, reflecting a commitment to both immediate profitability and long-term growth potential.

Looking to the Future

Booking Holdings' leadership expressed confidence in the company's strategic path, with Glenn Fogel emphasizing the importance of adaptability and the ongoing demand for travel experiences. By enhancing payment capabilities, accelerating growth in alternative accommodations, and making strategic investments in AI, the company seems well-prepared to navigate changes within the industry.

Management is dedicated to advancing their vision of connected travel, improving merchant and fintech capabilities, enhancing loyalty programs, and leveraging AI to improve customer experiences and operational efficiencies. As Fogel affirmed, "I am confident in our company's position to harness generative AI technology for delivering even better experiences for our travelers and partners."

Travel, Earnings, AI, Growth, Investment