U.S. Markets closed

Booking Holdings CEO Sees Greater Need for Urgency Under New Exec Structure

Dennis Schaal, Skift
Booking Holdings CEO Sees Greater Need for Urgency Under New Exec Structure

From alternative accommodations to its attractions business, and the opportunity presented by the growth in Chinese travelers, Booking Holdings officials are upbeat about the company’s long-term prospects.

And although the company, which calls itself the world’s largest online accommodations business, beat analysts’ expectations on revenue and earnings per share in the second quarter, there were some hiccups along the way.

For example, Booking Holdings, which increased its brand marketing, including TV advertising, 41 percent to $175 million in the second quarter versus the same period in 2018, was disappointed in the results.

Over the last couple of years, Booking Holdings has been making a push to tilt its marketing spend toward brand marketing, as opposed to performance channels such as Google, in a bid to attract more direct traffic to Booking’s sites. The brand marketing spend, though, is still way smaller than performance marketing spend, $175 million versus nearly $1.2 billion in the second quarter.

Come See Booking Holdings CEO Glenn Fogel Speak at Skift Global Forum on Sept. 18 in NYC. Get Tickets Now

CEO Glenn Fogel said Booking.com launched a brand marketing campaign in late February, and he’d like to see it performing better than it has.

“I’m not saying it’s not doing OK,” Fogel said during a question and answer sessions with analysts about the company’s second quarter financial results. “I’m just saying I’d like it to do better. There are certain parts where you look at our brand health metrics that are good, and you look at some that you would like them to be better. As we said, we’re always going to test and learn, and this is just another way that we’re going to do it.”

Chief Financial Officer David Goulden said the company will adjust its marketing spend in the second half of the year to take that into account.

“But while we are encouraged by the continued growth and mixed shift towards our direct channel and by some of the early new visited direct traffic trends we’re seeing from our brand campaigns, the short-term return on our brand spending is running below our expectations,” Goulden said. “As a result, we plan on refining our spending levels on brand marketing in the second half of the year. We remain committed to building our brand.”

Asked by an analyst whether perhaps online travel is more suited for performance marketing — buying keyword in Google, for example, — Fogel said that brand advertising will always be important for any retail brand.

Fogel Wants a Sense of Urgency

Asked what the expectation should be now that he has taken on the role of Booking.com CEO in addition to heading up the parent company, Booking Holdings, Fogel expressed some impatience with how things had been going at the company’s largest brand.

“I want to bring the execution rate faster,” Fogel said. “I want to make things happen quicker. I believe that urgency is important in this business, and I want to come and bring this new holistic system to our customers faster.”

The new holistic system Fogel referred to is “the connected trip,” including making a wider array of payment systems available to customers globally, ramping up the in-destination attractions business, and providing more scale in its rental car and transport business, for example.

Speed and quality of execution is an issue for any business, and have been for both Booking Holdings and its rival Expedia Group. Booking Holdings took a massive writedown after its acquisition of dining platform OpenTable in 2014, and has labored integrating Rentalcars.com offerings into Booking.com. Expedia Group, meanwhile, has struggled taking its 2015 acquisition of HomeAway, recently rebranded to Vrbo, and making its offerings more internationally focused.

Fogel said one of the chief benefits he brings to his new dual role, which came about when then-Booking.com CEO Gillian Tans exited that post in late June, is his broad knowledge and experience in working with all of the company’s brands, which include Booking.com, Kayak, Priceline, Agoda, Rentalcars.com, and OpenTable.

“One of the benefits that I’ve had is being part of bring all the different companies into the group,” Fogel said. “So I know what they do well. I know where our strengths are, and I know how they can work together. And one of the key things is understanding all the senior management and all the different companies and helping us all work together to create this greater system. So that’s one of the biggest reasons.”

For the second quarter, Booking Holdings saw flat net income at $979 million on $3.85 billion in revenue, a 9 percent increase.

With room nights booked jumping 12 percent in the second quarter, Goulden said he expects Booking Holdings to gain market share in the accommodations sector in 2019.

China

Fogel said Booking Holdings is adversely impacted by factors such as the U.S.-China tariff dispute, and strife in Hong Kong, but remains committed to the China market, where the company has some 1,000 employees, for the long term.

“Our point, though, is China is a great opportunity for the long run,” Fogel said. “There’s, in the long run, going to be a lot more Chinese travelers outbound, so it’s important that one doesn’t just pull back because of any sort of short-term blip. We have approximately 1,000 people in China working to make sure we’re providing great service to the Chinese travelers. And we’ll continue to do what is appropriate to build our Chinese business because we do believe that this will be a long-term benefit to our company.”

In other news, Goulden said a new digital services tax in France is expected to adversely impact Booking Holdings earnings by $32 million in 2019.

Come See Booking Holdings CEO Glenn Fogel Speak at Skift Global Forum on Sept. 18 in NYC. Get Tickets Now

“So you saw that France passed the tax, and there are a number of other countries that are lining up to potentially put a similar tax into effect,” Fogel said, adding that the Trump administration has argued that the French tax is unfairly targeting American businesses. “We are, of course, very disappointed to have seen this. We believe companies should pay their fair share of taxes, but we want those taxes to be done equitably and fairly applied to all companies. So what has been applied does not do that.”

Subscribe to Skift newsletters covering the business of travel, restaurants, and wellness.