Booking’s Network Continues to Strengthen With Payments, Flights, and Vacation Rental Traction

While inflation and credit market concerns present overhangs on Booking’s BKNG near-term travel demand, we see the company exhibiting solid financial health. Further, we expect Booking’s global online travel agency leadership position to increase over the next decade, driven by a healthy position in Asia-Pacific, continued leadership in Europe, and an expanding presence in vacation rentals, restaurant bookings, experiences, flights, and payments, all of which are backed by leading marketing and technology scale.

Booking has built a leading network (the source of its narrow moat) of hotel properties and other services, which drives an increasing user base. We see this network effect continuing to expand in both developed and emerging markets, as well as vertical markets such as rentals, attractions, flights, and payments (where it looks to focus near-term investment) resulting in a full connected trip offering. In developed markets, replicating Booking’s leading network in Europe is proving costly and time consuming for key competitors, given around 60% of all hotels in the region are small boutique establishments. In emerging markets, the firm has a presence in China with its Trip.com and Meituan-Dianping partnerships, and in its own Booking.com and Agoda.com platforms, which is crucial. This expanding network positions Booking well for the increasing global shift to booking via mobile applications. Booking.com is a top-10 travel iOS application in 152 markets, versus 100 for Airbnb and 25 for core Expedia, according to App Annie on Aug. 4, 2023.

Focused entry from Google, Meta, Amazon, Alibaba, and others could double the current handful of players that have dominant scale, leading to a meaningful impact on profitability. That said, replicating Booking’s network would require significant time and expense, and we expect most of the aforementioned operators to deploy a metasearch model (don’t control hotel relationships) versus directly competing against Booking’s OTA model (control hotel relationships).