Booking Holdings said that it would be “challenging” to reach profitability in the fourth quarter, as travel restrictions grew.
The OTA said that in the long term it remained focused on providing a “frictionless customer experience” and spoke out against efforts by the European Commission to impose additional regulations.
Glenn Fogel, president & CEO, told analysts: “It's difficult to predict exactly what the next two months will look like in terms of travel demand, as we enter the winter months in the Northern Hemisphere amid rising Covid case counts in many areas. Given the trends we're currently seeing, we believe that year-over-year room night decline to be greater in Q4 than what we observed in October. If this turns out to be the case, it will be a very challenging for us to reach profitability in Q4.
“I continue to recognise there'll likely be years and not quarters before the travel market returns to pre-Covid volumes.”
For the third quarter, consolidated revenue was $2.6bn, down 48% on the year, with adjusted Ebitda of $1bn, a 60% drop. Reported room nights, including the impact of cancellations, were down 43% an improvement from the 87% decrease in the second quarter. The company said that the improvement was almost entirely driven by domestic travel with a “modest” improvement in international travel.
In October, reported room nights declined by about 58% on the year, and over the seven days to 4 November, by about 70%. Fogel said: “We believe this worsening result is driven by increased virus infections and certain governments reimposing public health related restrictions. We believe that travel will continue to be greatly affected by infection trends and governments’ public health responses.”
Commenting on the latest round of lockdowns, Fogel said: “Now compared to April, there's a sense that they're trying to do it in a more selective way. Everybody knows the impact on the economies that a full lockdown can do. So the governments are doing their best to try and not do complete lockdowns. But travel is always something that is immediately looked at as a potential increase in infections because people come from different regions. So I feel that we are still going to have a lot of disruption due to these very, very steep increasing infection rates.”
Fogel said that the shift towards alternative accommodations was moderating after seeing growth in the previous quarter. He said: “Booking.com's alternative accommodations represented approximately one-third of all new bookings in the quarter. I do believe that the trend that has been going on for a very long time of more and more people contemplating and then using the alternative accommodations, I think that trend has just been accelerated. In fact, it brought forward what would have happened perhaps on a year or two years.”
Fogel also commentated on the European Commission’s plans for a new regulatory framework for the digital community, which proposes to designate some large online companies who operate across Europe as gatekeepers and to establish rules and regulations for these businesses.
The CEO said: “The criteria for being a gatekeeper and the associated rules and regulations are in development. So the potential impact is difficult to estimate at this time. There have been questions and speculations that Booking.com maybe one of the designated gatekeepers, which we firmly believe would be incorrect for a number of reasons. The principal reason is that the accommodations market in Europe is very open and very competitive. Consumers have multiple online and offline choices to book accommodations and accommodation providers have multiple online and offline channels for our customers.
“To put this into perspective, Booking.com booked about 7% of all potentially bookable accommodation room nights across all properties on our platform globally in 2019. Across Europe, that number was about 11%.”
Looking to the long term, Fogel said that the platform remained focused on its “vision of the connected trips, seamless multi-product offering, which we believe will ultimately improve the customer experience on our platform, and drive enhanced loyalty and frequency over time”.
At the end of the quarter the OTA had cash and investments of $14.9bn.
Insight: The second quarter saw Glenn Fogel crowing about how much the hotel sector needed Booking, now that it was after the less-minted leisure traveller. We heard none of that this time around, as the long, dark winter started to make its presence felt with a dramatic drop off in room nights as the new lockdowns kicked in.
The OTA is now busy on two fronts; reminding consumers that it was able to offer that which they most desire - refundable bookings - and seeing off the European Commission. The EC told Booking off last year for some of its trading practices and the relationship does not appear to have warmed up since then.
The company went in hard on how few nights it actually accounted for - hey, why not try booking direct? - but Booking.com has almost 68% of the European OTA market, according to Statista. This is unfortunate at the minute, with more hotels doing better in the US. The OTA will hope it’s not unfortunate in terms of any shackles the EC may place on it.