Booking Holdings Inc. (BKNG) Q3 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary reveals strong financial performance, continued product development, and strategic market expansion, particularly in Asia. The integration with OpenAI and AI-driven tools show promising early results in improving customer satisfaction and conversion rates. Despite competitive pressures, the company remains optimistic about its strategies and growth potential. The Q&A session highlights effective risk management and a focus on innovation. Overall, the positive elements outweigh any concerns, suggesting a likely stock price increase in the short term.

Key Financial Performance

Room Nights 323 million, an 8% year-over-year increase. Growth driven by healthy demand across 4 major regions, particularly in the U.S. due to stronger outbound travel and B2B business momentum.

Gross Bookings $50 billion, up 14% year-over-year. Growth exceeded expectations due to better-than-expected room night growth and higher accommodation ADRs.

Revenue $9 billion, up 13% year-over-year. Growth driven by strong gross bookings and increased revenue from payments.

Adjusted EBITDA $4.2 billion, up 15% year-over-year. Growth attributed to stronger revenue growth and operational efficiencies.

Adjusted Earnings Per Share (EPS) $99.50, up 19% year-over-year. Growth supported by a 4% lower average share count and strong adjusted EBITDA performance.

Flight Tickets 17 million tickets booked, up 32% year-over-year. Growth driven by expansion of flight offerings at Booking.com and Agoda.

Attractions Tickets booked grew nearly 90% year-over-year. Growth from a relatively smaller base, driven by expansion in attractions vertical.

Alternative Accommodations Listings grew to over 8.6 million, up approximately 10% year-over-year. Double-digit room night growth driven by customer demand across all regions.

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Operating Highlights

Connected Trip vision: Advancing the planning, booking, and traveling journey to be simpler, more personalized, and less frictional. Investments in expanding verticals like accommodations, flights, rental cars, and attractions. Enhanced home screen for dynamic adaptation to traveler searches. New partnerships with Ryanair and Southwest Airlines. Connected Trip transactions grew mid-20% year-over-year.

AI-powered tools: Launched AI-powered chatbot at Agoda for hotel-specific answers. KAYAK introduced AI Mode for smarter contextual results. Booking.com integrated natural language search capabilities for travel planning. AI tools like Smart Messenger and Auto-Reply enhance partner-to-guest communication.

Genius loyalty program: Expanded globally with over 850,000 partners. Genius Levels 2 and 3 accounted for mid-50% of room nights. Personalized benefits like discounts and perks. Increased customer retention and partner satisfaction.

Alternative accommodations: Listings grew to over 8.6 million, up 10% year-over-year. Double-digit room night growth. Alternative accommodations represent 36% of total room nights.

Asia market expansion: Asia remains a key growth driver with double-digit room night growth. Complementary strengths of Agoda and Booking.com to serve local and outbound travelers. Industry growth in Asia expected to remain in high single digits.

U.S. market growth: Room night growth accelerated to high single digits. Stronger outbound travel and B2B business momentum. U.S. growth outpaced the broader accommodations industry.

Financial performance: Gross bookings up 14%, revenue up 13%, and adjusted EBITDA up 15% year-over-year. Adjusted EPS grew 19%. Transformation program enabled $450 million in annual run rate savings.

Direct channel growth: B2C direct mix increased to mid-60% range. Mobile app mix of room nights in mid-50% range. Genius loyalty program contributed to higher direct booking rates.

AI and Gen AI integration: Disciplined approach to AI for enhancing traveler and partner experiences. Partnerships with OpenAI, Google, Amazon, and Salesforce. AI tools improving personalization, conversion, and partner communication.

Transformation program: Achieved $450 million in annual run rate savings. Expected to deliver $500-$550 million in total run rate savings. Reinvesting savings into strategic priorities for long-term growth.

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Risk or Challenges

Geopolitical Developments: The company acknowledges operating in a period of rapid change driven by geopolitical developments, which could impact travel demand and operations in certain regions.

Macroeconomic Uncertainty: Macroeconomic uncertainty is highlighted as a factor that could influence consumer discretionary spending, particularly in the U.S., where slightly lower ADRs and shorter lengths of stay were observed.

U.S. Travel Demand: Softer demand in certain inbound travel corridors to the U.S. and indications of cautious discretionary spending by U.S. consumers could impact growth.

Regulatory and Compliance Risks: The company operates in multiple jurisdictions, which may expose it to regulatory and compliance risks, though specific examples were not detailed in the transcript.

Technological Innovation: While advances in AI are seen as an opportunity, the rapid pace of technological innovation could pose challenges in maintaining competitive advantage and effectively integrating new technologies.

Supply Chain and Partner Risks: Dependence on supply partners, including airlines and accommodations, could pose risks if partnerships or supply chains are disrupted.

Currency Exchange Rates: Fluctuations in foreign exchange rates have a material impact on reported growth rates, as noted in the financial results.

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Guidance & Outlook

Fourth Quarter Room Night Growth: Expected to be between 4% and 6%, with growth moderating from the third quarter due to a less extended booking window.

Fourth Quarter Gross Bookings: Expected to increase between 11% and 13%, including about 2 percentage points of positive impact from higher flight ticket growth.

Fourth Quarter Revenue Growth: Expected to be between 10% and 12%, lower than gross bookings growth due to a higher mix of flight bookings.

Fourth Quarter Adjusted EBITDA: Expected to be between $2 billion and $2.1 billion, representing about 14% growth at the high end.

Full Year 2025 Room Nights: Expected to be up about 7%.

Full Year 2025 Gross Bookings: Expected to be up about 11% to 12%.

Full Year 2025 Revenue: Expected to be up about 12%.

Full Year 2025 Adjusted EBITDA: Expected to be up about 17% to 18%, with adjusted EBITDA margins expanding by about 180 basis points.

Full Year 2025 Adjusted EPS: Expected to be up slightly more than 20%.

Asia Market Growth: Expected to remain in the high single digits over the next several years, with the company aiming to grow faster than the market.

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Shareholder Return Plan

Dividends: During the third quarter, we paid about $300 million in dividends.

Share Repurchase: We conducted approximately $700 million in share repurchases during the third quarter.

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Key Q&A

Q:Can you discuss your U.S. acceleration in Q3, particularly your B2B and B2C initiatives?

A:The U.S. acceleration in Q3 was driven by both B2B and B2C initiatives. The company has been winning contracts in the B2B space and is working on creating efficiencies by integrating different B2B units globally. In the B2C area, long-term efforts to improve the product and brand awareness, such as advertising during baseball games, have contributed to growth. Additionally, the direct channel in the U.S. has seen significant growth due to investments in products, supply, marketing, and brand.

Q:What is your thought process regarding the app integration with OpenAI, and what are the early results?

A:The integration with OpenAI is in its early stages, and the company is pleased to be part of the first wave of apps. The focus is on exploring how travelers begin their discovery and providing value in transaction fulfillment. While traditional search volumes are still growing, leads from large language models are small but increasing. Early signals show faster search, better conversion, lower cancellation rates, and higher customer satisfaction.

Q:How do you address the risk of hotels partnering directly with generative search players, bypassing platforms like yours?

A:The company acknowledges that some hotels may partner directly with generative search players, but it does not see this as a significant threat. The focus remains on providing value to customers through trust, better offers, and programs like Genius, which incentivize customers to book through the platform. The company believes its ability to deliver incremental demand to partners and value to travelers will mitigate this risk.

Q:Can you elaborate on your social media marketing efforts and their impact?

A:Social media marketing is a growing area of investment, with spending in the hundreds of millions. While it remains a smaller percentage of total marketing spend, the company is focused on measuring incremental ROIs and diversifying across multiple platforms. Returns have been improving, and the company continues to experiment and invest in this channel.

Q:What are your strategies and performance in Asia?

A:The company is seeing strong growth in Asia, supported by two brands with different strategies: Agoda focuses on localization, while Booking.com leverages its global reach. Investments in product, marketing, and supply are driving growth. Asia is viewed as a critical market for long-term growth due to its high GDP growth and increasing travel demand.

Q:How are you adapting your strategy to attract the 30-35% of traffic that is not direct?

A:The strategy involves improving brand awareness and product offerings to attract more direct traffic. The company is investing in advertising and brand-building efforts, particularly in areas like the U.S. where brand awareness is lower. The focus is on providing value to customers and making them aware of the platform's offerings.

Q:What impact are your AI-driven tools having on metrics like cancellation rates and conversion rates?

A:AI-driven tools are improving conversion rates by making it easier for customers to find what they need. Cancellation rates are also decreasing as customers are more satisfied with their bookings. Customer service costs have decreased year-over-year despite volume growth, indicating higher efficiency and customer satisfaction.

Q:What is driving your growth in the U.S. OTA industry, and how do you view the economic environment?

A:Growth in the U.S. OTA industry is driven by improved brand awareness, better service, and a focus on consumer travel. The company serves a wide range of economic strata, benefiting from both high-end and budget-conscious travelers. The focus remains on executing well and improving the customer experience.

Q:How do you see the Connected Trip evolving, and what are the implications for bookings and revenue?

A:The Connected Trip is currently driving growth in other verticals like flights and attractions. Over time, the goal is to create an intelligent, personalized travel experience using generative AI. This could lead to more frequent app usage, better customer engagement, and higher revenue. The company expects gross bookings to grow faster than room nights over time.

Q:Do you foresee increased competitive intensity in the travel industry over the next 2-3 years?

A:The travel industry has always been highly competitive, and new challenges like AI and competitors from Asia are emerging. However, the company views AI as an opportunity to enhance its offerings and leverage its scale and data. The focus remains on improving services and maintaining a competitive edge through innovation and execution.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the economic impact of bookings shifting from direct traffic or Google to OpenAI. They also did not elaborate on which social media platforms are performing better or provide detailed strategies for addressing competitive threats from new entrants.

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Earnings Word Cloud

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