Booking Holdings is the company the controls six main brands that comprise Booking.com, priceline.com, KAYAK, agoda.com, Rentalcars.com, and OpenTable. Over 76% of the company revenues in 2017 came primarily via travel reservations commisions and travel insurance fees. Almost 17% came from merchant fees, and the remaining revenues came from advertising earned via KAYAK. As a distributionstrategy, the company spent over $4.5 billion in performance-based and brand advertising.
priceline.com: a hotel, rental car, airline ticket and vacation package reservation service in the US
KAYAK: a meta-search service to search and compare travel itineraries and prices
agoda.com: an accommodation reservation service primarily focused on the Asia-Pacific region
Rentalcars.com: a worldwide rental car reservation service
OpenTable: a provider of restaurant reservation and information services to consumers
How does Booking make money?
The three primary sources of income are broken down in three main segments:
agency
merchant
Advertising and other revenues
Agency revenues
Those comprise revenues derived from travel-related transactions where Booking doesn’t facilitate payments for the travel services provided. It can be broken down in:
travel reservation commissions;
certain GDS reservation booking fees
certain travel insurance fees
Merchant revenues
Those are revenues derived from services where Booking does facilitate payments for the travel services provided.
Advertising and other revenues
Those comprise revenues from:
KAYAK for sending referrals to travel service providers and advertising placements
OpenTable for reservation fees, and subscription fees
priceline.com for advertising on its websites
Booking.com’s BookingSuite branded accommodation marketing and business analytics services
The Booking business strategy
Booking focuses on a few key strategies to accomplish its mission:
leverage on a large inventory of options and low prices
creating a frictionless user experience to book travel destinations
enable business partners to track their success via insight tools and platforms
keep investing in enhancing the consumer experience
partner up with travel service providers and restaurants
How does Booking acquire traffic to be monetized? The key is performance-based and brand advertising
Traffic acquisition is the key ingredient for any digital business. Also, tech giants like Google and Facebook need to focus their efforts in keeping the traffic acquisition cost stable over time to be able to monetize their pages and sites at a margin which is high enough to generate a sustainable business model.
Booking Holding has managed so far to do that via two main channels:
TAC stands for traffic acquisition cost, and that is the rate to which Google has to spend resources on the percentage of its revenues to acquire traffic. Indeed, the TAC Rate shows Google percentage of revenues spent toward acquiring traffic toward its pages, and it points out the traffic Google acquires from its network members. In 2017 Google recorded a TAC rate on Network Members of 71.9% while the Google Properties TAX Rate was 11.6%.
If we look at Booking Holding numbers, you can notice how the company spent in 2017 33.3% of its gross profit in performance advertising:
In 2017 Booking spent $4.1 billion in performance advertising channels generate a significant amount of traffic to Booking Holding websites. Those expenses primarily comprise
Brand advertising spending was $392 million in 2017. Those expenses primarily consist of television advertising, online video advertising, and online display advertising.
Google is coming: Will Google threaten Booking business model?
Over the years Booking has been able to keep growing thanks to its expansion, acquisition of other brands, and its ability to create a sticky platform for its users. At the same time, most of the traffic that goes toward its sites comes from performance-based advertising, and a good chunk of it is paid traffic via Google.
As Google enters more and more into travel-related services (see Google Flights), it becomes harder for Booking to keep a competitive business model able to continue gaining traction. Therefore, Google does represent a threat for Booking sustainability in its businessmodel.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
