- Booking.com is particularly strong in Europe, where chain hotels are less dominant.
- BKNG benefits from economies of scale in its investments in technology, national advertising, and customer loyalty programs.
- The acquisition of Booking.com by Priceline.com is amongst the most successful and value creating M&A transactions of all time.
The following segment was excerpted from this fund letter .
Booking Holdings Inc. ( BKNG )
Booking Holdings was formerly Priceline.com but has changed its name to reflect that source of most of its revenue: Booking.com.
Booking.com is the largest online travel agency ((OTA)) in the world, connecting travelers and hotels. The company has over 2.3 million properties in 220 countries on its site, along with photos, reviews and details about the amenities offered by each property. The accommodations offered range from hotels, motels, homes & apartments, hostels, and bed & breakfasts.
The company occupies a dominant position in the travel booking funnel and collects revenue from hotel reservations booked through its site. Booking.com is particularly strong in Europe, where chain hotels are less dominant and smaller independent hotels rely on it to fill their rooms.
In addition to Booking.com, the company owns agoda.com, priceline.com, rentalcars.com, OpenTable and the KAYAK flight search engine. Hotel bookings account for most of the revenue, but the company also offers car rental reservations, flights, vacation packages, cruises, tours, airport taxis, etc.
The company benefits from economies of scale in its investments in technology, national advertising, and customer loyalty programs.
The business also has enormous network effects, as consumers are most likely to use a booking platform with the most properties, broadest availability of reviews and strong customer service. This in turn drives hotels to make their room inventory available on booking.com, which drives most of the reservation traffic for many boutique hotels, thus reinforces the network effect.
Of note, is that Booking.com operates two models: the agency model, where the company simply acts as an agent for a hotel and collects a fee, and the merchant model, under which Booking.com buys the room-night from the hotel, but then retains the ability to optimize the pricing on the room.
Also of note is the fact that the acquisition of Booking.com by Priceline.com is amongst the most successful and value creating M&A transactions of all time.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
For further details see:
LRT Capital - Booking Holdings: Reaping Benefits Of An Enormous Network