With revenue of more than $4.3 billion in the second quarter of 2022 - double the corresponding quarter in 2021 - Booking.com is starting to talk recovery. Net profit climbed to $857 million, compared with a loss of $167 million in the corresponding quarter last year, while the number of overnights booked through the global giant in the second quarter jumped by 56% to 246 million overnights, compared with 198 million overnights in the first quarter of the year. "All this is happening without the Asian market reopening to tourism," says Glenn Fogel CEO and president of Booking Holdings, in an interview with Globes.
Global demand for vacations and travel has led to major congestion at airports and flight cancellations - but it has benefitted online travel agent Booking, whose position is only getting stronger. In fact, the numbers make it look like 2022 may be Booking's peak year, but Fogel advises caution. "We’re still before the fourth quarter, and we’ve already seen how things change overnight.
"In November last year, we were still issuing profit warnings, but in February things started to improve, and bookings shot up. The night Russia invaded Ukraine we saw fluctuations once more. We’ve learned to live with uncertainty, so I can't say definitively this will be our record year."
Can we already talk about a full recovery for the industry?
"The numbers certainly make us happy: the number of overnight stays booked in the second quarter of this year compared to 2019 grew by 16%. This quarter also indicates a significant improvement compared to the pre-pandemic period. Reservations reached $45 billion, a growth of 38% compared with the corresponding quarter in 2019.
"Actually, real growth was supposed to reach 48%. What diminished it were the eroding currency rates - the dollar strengthened against the euro. Above all, we should remember there are whole parts of the world that haven’t yet recovered from Covid-19 in terms of tourism. The Asian market data compared to 2019 is still negative."
The fuel price effect
Booking was founded in 1996 in the Netherlands, and moved to the US in 2005 when it was acquired by the Priceline Group. It includes several subsidiaries, including Kayak and Agoda. Fogel, a Harvard Law School and Wharton School graduate, joined the company in February 2000 after three years as a vice president at Morgan Stanley. He has served as CEO and president of Booking Holdings since January 2017.
With currencies devaluing, tourism product prices the world over have become more expensive, and you have profited.
"Correct. The rise in prices has narrowed the gap relative to exchange rate influences. When you look at the global numbers, the average cost per room has risen by 25% since 2019. That’s because fuel has become more expensive and is pushing prices up, and also because of rents and salaries, which have risen significantly in all industries.
"It’s been hard to hire workers for the tourism industry, workers because of the epidemic that let many of them go. And now, to bring them back, they have to be paid more. The price increases are more pronounced in Europe and the US than in Asia, which hasn’t yet stabilized and is still below the recovery level.
"It’s hard to predict what will happen in terms of prices when the restrictions in Asia are lowered, but I assume they will also rise there as a result of energy costs, which have risen since the war in Ukraine. Fuel prices affect our industry greatly, and is an issue that concerns us, but we hope that governments will find a way to allow citizens to travel and relax."
To what extent is the war in Ukraine disrupting the global tourism industry?
"When the war started, we saw an immediate impact, not only in tourism in Ukraine or Russia, but in Eastern Europe as a whole. The drop in reservations happened in an instant. These days, we see some recovery in the region. War is a terrible thing, and of course it affects the choice of destinations where people want to vacation. I’m very proud of Booking's actions to support refugees from Ukraine, through collaborations with hotels and the UN, hosting 50,000 refugees for free, or for a nominal fee."
Large American companies boycotted Russia and stopped their activities there. Is Booking also doing that?
"We suspended the activity in Russia and Belarus. It was not easy to do, because this is a diplomatic and political situation."
Not just hotels
The pandemic also changed consumer habits when it comes to vacation preferences, with vacationers looking for more rural accommodation options, preferring private homes over hotels.
Have these habits been abandoned or maintained?
"When Airbnb started out, we saw there was interest in non-hotel accommodation alternatives, and the trend remains stable to this day. During the Covid-19 period, people looked for accommodation solutions in houses or villas, rather than hotels, for fear of crowds or meeting other guests in lobbies or elevators.
"In the second quarter of this year, 32% of accommodation bookings were made at non-hotel solutions, that is, private homes or villas, and this trend will continue to increase. On the other hand, we also see that the large hotel chains like Marriott, Accor, or Intercontinental are back to full operations, so that today, fear of crowds is minimal."
Will the growth trend continue in the third quarter?
"Even now, reservations for this quarter are 15% higher than in the third quarter of 2019, and this also takes into account the currency exchange rates, which lower the income on bookings due to the strong dollar. On the other hand, people haven’t yet gone back to making vacation bookings in the long-term, they’re not booking months in advance, the way it was before the pandemic.
"The second quarter of 2022 was the first time we saw that the volume of travel to international destinations was greater than in 2019. 45% of reservations made on Booking are for international destinations. In the first quarter of this year, we were at 40%. The main thing is that Asia isn’t yet in the picture as a long-term destination, for example for vacationers from Europe."
"We are not a monopoly"
One of the most outstanding phenomena during the pandemic was the increase in consumer activity online. Various companies, also in aviation and tourism, tried to entice consumers into ordering directly from them - and skip intermediaries like Booking.
How did you deal with this trend?
"I've been with the company for 22 years, and every business has always wanted consumers to buy directly from them so as not to waste money on distribution or marketing. If a business provides value to consumers, it will succeed in attracting them directly, but apparently, we manage to provide value to travelers and our partners.
"Consumers use us because we offer the largest selection, because our website and app are easy to use, and because we have 24/7 service in 40 languages. No business likes to pay commissions, but we just keep growing. That means something, doesn't it?".
Your size has led governments, in Israel as well, to intervene - mainly in light of the conditions that Booking placed on hotels, when it prohibited them from offering cheaper prices on their own websites, for example.
"I'm a big believer in the free market, which is best for society and consumers. It's unfortunate that sometimes businesses fail to compete, and then they go to governments to ask for help through regulation. Throughout the years, we’ve seen how regulations change, and we continue to abide by all local laws. My job is to improve our service to customers."
Booking is a monopoly in many of its market segments, which gives you tremendous power.
"When you do a Google search for a vacation, you get many options, and Booking is one of them. In 2019, we sold $100 billion in tourism products, out of a market that generates $7 trillion annually. So, am I a monopoly or a fairly small percentage of the market?"
You are a business that can afford to charge high commission fees from hotels that have no choice but to appear on Booking.
"Commissions are a function of a free market. In the end, we’re a business that wants to make money. As in any field, if we charge too much, they won't use our services. When I fill up my car, I can look for the cheapest gas station in the area, and it's like that in our industry as well.
"People will always look for the best prices, hotels that offer them will take customers away from us, but also from our competitors, such as Expedia and Airbnb, or travel agents and tour operators. There are so many ways to book accommodations today, and no business is forced to appear with us.
"Sometimes, when a hotel reaches full occupancy, it will allocate fewer rooms to us, and vice versa. They have the freedom to choose how much they invest in sales and marketing for themselves, or how much they prefer to give to our competitors or other suppliers."
Expanding the search
Booking has become the Google of hotel searches.
"I don't agree with that. Europe is our strongest market, and when you look at it, 80% of reservations on the continent are made through all kinds of other channels. On the other hand, 90% of searches in Europe are made through Google. Comparing us to Google reflects the opposite of the reality, and that worries me, because governments may get the wrong idea. Unlike Google, which has no competitors in internet search, tourism businesses have a lot of competitors. It's a very competitive market."
Is this why Booking is trying to promote reservations of additional vacation products, such as car rentals and plane tickets? The data show that balancing all components of a vacation is still a long way off.
"The complementary products that Booking offers are important from a long-term perspective. It's something I call the Connected Trip. Travelers schedule their trip but when it comes time to build in all the other parts, it's confusing and mostly time-consuming. Don't you think that the consumer would prefer to do everything in one place that can offer everything?
"These days, there are a lot of canceled flights. When something like that happens, you have to call your car rental company, move the pick-up time, and change your arrival time at the hotel. If you could do all of this in one place, it would be efficient, and that's what we're trying to do. That way, we’ll bring more customers to our partners.
"We also offer the OpenTable app for booking restaurants. If you're vacationing in London in a particular neighborhood, wouldn't it be nice if the restaurant manager knew you were there, and sent you a marketing promo to incentivize you to come? Right now, when you arrive in a neighborhood, the restaurant manager doesn't know about it at all. That’s a situation we want to change, and when we do, the number of all-inclusive services will increase, too."
ID Card: Glenn Fogel
- Personal: 60 years old, married and the father of a daughter and a son. Lives in New York.
- Professional: Graduated from Harvard Law School, and holds a degree in economics from The Wharton School at the University of Pennsylvania. Worked as an investment banker in the aviation sector, and served as Vice President at Morgan Stanley. He joined Booking in 2000, and in January 2017 was appointed president and CEO.
- One thing more: His daughter lived in Israel on a six-month study program, and his son plans to do so soon.
Published by Globes, Israel business news - en.globes.co.il - on August 18, 2022.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.