With Growth Slowing, Acquisitions Are Key to Booking Holdings' Future
Booking Holdings (NASDAQ: BKNG) -- formerly Priceline Group -- just turned in one of its most sluggish performances since the dot.com bubble popped at the turn of the millennium. A strong U.S. dollar was a big reason revenue fell 3% during the first quarter of 2019, but even excluding currency exchange effects yielded a mere 3% year-over-year increase. Not exactly an encouraging number for what is supposed to be a high-growth internet enterprise.
A slower rate of increase is not so unexpected, though, as Booking is now a huge company and the global leader in online travel accommodations. After many years of double-digit expansion, the company has indicated that building a single service to handle all legs of a trip will keep the growth engine firing. Acquisitions could be the key to making that happen.
A return to what worked before
Booking isn't new to the world of acquisitions. When it was still known as the Priceline Group, the internet company scooped up quite a few rivals and nurtured them into global travel leaders. One is now the company's namesake -- Booking.com -- which it took over in 2005 when it was the hotel reservation leader in Europe at the time. Now Booking.com is the world's largest site for finding a place to sleep.
Booking did it again in 2007 when it scooped up Agoda.com, another leader in global accommodations and one of the top travel sites in Asia. The trend has continued over the years, with Booking targeting and taking over fast-expanding start-ups and other disruptors in the world of online travel.
Sopping up the new and unique
It's clear that Booking has never deviated from its strategy of making acquisitions, but those takeovers have gotten smaller over the years -- especially relative to Booking's massive size. These small subsidiaries are unlikely to move the needle by themselves, especially considering the more than $14 billion in sales Booking brought in over the last trailing 12 months. Nevertheless, CEO Glenn Fogel alluded to acquisitions playing a key role in his company's strategy during the first-quarter conference call. Is a big deal in the works, or will it be more smaller buyouts? We'll have to wait and see, but Fogel did offer this information:
Big or small, what Booking is really looking for when it targets a competitor is technology or a service it doesn't already have. The idea is to build out a connected vacation experience, a single-stop for all traveler needs. Others are racing to the same conclusion. Google parent Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) recently launched a new revamped Google Trips -- which combines Google Flights, hotel search, events, and attractions -- to handle all aspects of a vacation. American Express (NYSE: AXP) also announced it is purchasing restaurant reservation booking and customer relationship management platform Resy. That's a direct move against Booking Holdings' subsidiary OpenTable and its Venga addition.
As for the recent revenue decline at Booking Holdings, management thinks it will be transitory, with a return to growth expected in quarter two. Still, sales are slowing -- at least for the time being -- and the growing arms race to capture travelers' loyalty would indicate the path forward won't be easy. At least Booking is helping lead the charge toward a more connected vacation experience.
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