For most investors, how much a stock’s price changes over time is important. This factor can impact your investment portfolio as well as help you compare investment results across sectors and industries.
FOMO, or the fear of missing out, also plays a role in investing, particularly with tech giants and popular consumer-facing stocks.
What if you’d invested in Booking Holdings (BKNG) ten years ago? It may not have been easy to hold on to BKNG for all that time, but if you did, how much would your investment be worth today?
Booking Holdings’ Business In-Depth
With that in mind, let’s take a look at Booking Holdings’ main business drivers.
Norwalk, Connecticut-based Booking Holdings Inc. is one of the largest online travel companies in the world. The company’s travel-related offerings cover hotel rooms, airline tickets, rental cars, vacation packages, cruises, “things to do” at customer destinations and travel insurance.
The company has agreements with hotels, airlines companies, cruise ships, transport companies and vacation providers, which enable it to accept bookings on their behalf. Information on these offerings and customer reviews are available on the company’s owned or operated websites, thus helping customers take informed decisions.
Services in the U.S. are provided through the Booking Holdings.com website. The company employs two marketing strategies in the U.S.—“price-disclosed” and “name your own price” or “opaque”.
International revenues are generated through Booking.com and Agoda. Booking.com is older and therefore, has more patrons. Agoda is an Asian company acquired in 2007. Booking Holdings’s investment in Chinese travel company Ctrip facilitates the use of each other’s inventories in China and the U.S.
International results are comprised of revenues from rentalcars.com and Kayak. While rentalcars.com allows it to take rental car reservations, Kayak enables comparative shopping of Booking Holdings inventories. The acquisition of OpenTable that has allowed it to expand into restaurant reservations space, also contributes to the international revenues.
Booking Holdings distributes its services through merchant (33.7% of 2021 total revenues) and agency channels (60.8% of 2021 revenues). It also generates around 5.5% of 2021 revenues through advertisements on its websites, classified as the Advertising & Other category.
The agency model is more lucrative for the company. It generates revenues from travel-related transactions which include travel reservation commissions, GDS reservation booking fees and certain travel insurance fees.
Merchant model revenues are also derived from travel-related transactions which include ancillary fees, credit card processing rebates, customer processing fees along with the ones included in agency model.
Advertising & Other revenues are generated from KAYAK and Open Table.
Bottom Line
Anyone can invest, but building a successful investment portfolio takes a combination of a few things: research, patience, and a little bit of risk. So, if you had invested in Booking Holdings a decade ago, you’re probably feeling pretty good about your investment today.
According to our calculations, a $1000 investment made in January 2013 would be worth $3,254.79, or a gain of 225.48%, as of January 5, 2023, and this return excludes dividends but includes price increases.
In comparison, the S&P 500 gained 162.74% and the price of gold went up 7.62% over the same time frame.
Looking ahead, analysts are expecting more upside for BKNG.
Booking Holdings is benefiting from substantial improvement in its booking trends owing to increasing travel demand. A surge in repeat customers is creating growth in the company’s active customers. Further, the company is experiencing growth in rental car, airline ticket units and booked room nights, which is a positive. Strong growth across the agency, merchant, and advertising and other businesses is contributing well. We expect growth across these businesses to continue in the days ahead. Our estimates suggest agency, merchant, and advertising and other revenues to see a year-over-year rise of 34.9%, 86.1% and 55.8%, respectively in 2022. Yet, headwinds related to the coronavirus pandemic and macroeconomic uncertainties continue to remain overhangs. Further, intensifying competition in the online travel booking space remains a concern.
Shares have gained 7.92% over the past four weeks and there have been 1 higher earnings estimate revisions for fiscal 2022 compared to none lower. The consensus estimate has moved up as well.
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