Booking Holdings: How the Travel Giant Is Preparing for AI Disruption

Booking Holdings (BKNG -0.30%) held its fourth-quarter 2024 earnings call on February 20, 2025, marking CEO Glenn Fogel's 25th year with the company. During the call, the travel giant shared impressive financial results and expressed optimism about adapting to the changes brought by artificial intelligence (AI) in the travel sector. Below are the key takeaways for long-term investors.

1. Strong Financial Performance

Booking Holdings exceeded its financial growth targets, showcasing effective execution in the travel industry.

The company's gross bookings reached $166 billion for the year, representing a 10% increase compared to 2023. Revenue climbed to $24 billion, reflecting an 11% year-over-year growth. Notably, the adjusted EBITDA rose over $8 billion, marking a 17% increase.

-- Glenn Fogel, CEO

Furthermore, the company increased its profit margins while actively investing in strategic initiatives. The adjusted EBITDA margins improved by 170 basis points to 35%, surpassing initial management expectations. For 2025, the company forecasts continued momentum with at least 8% revenue growth and 15% earnings growth on a constant-currency basis, indicating strong competitive positioning.

2. Proactive AI Strategy

To address AI disruption, Booking Holdings is pursuing a dual strategy of building proprietary technologies alongside collaborations with leading AI firms.

According to Fogel, AI-powered services, including a specialized travel agent, will enhance personalized travel experiences. The company is already utilizing AI to improve operational efficiency in customer service, which has helped manage costs despite rising payment processing volumes. By blending internal AI capabilities with partnerships, Booking aims to safeguard its market position amid evolving consumer preferences. Management identifies its travel expertise, proprietary data, and established customer trust as significant advantages in a future driven by AI.

3. Transition to Merchant Platform

Booking.com is rapidly shifting from a traditional agency model to a merchant platform, which is creating new revenue streams and improving customer experiences.

The merchant gross bookings mix accounted for 59% of total gross bookings in 2024, up approximately 9 percentage points year-over-year, exceeding initial expectations.

-- Glenn Fogel, CEO

By managing the payment process, rather than merely connecting travelers with accommodations, Booking can provide bundled travel options, flexible payment methods, and a more integrated booking experience. Although merchant transactions are currently contributing limited profit, this segment holds substantial growth potential as financial technology (fintech) capabilities advance.

4. Growth in Alternative Accommodations

The company is witnessing robust growth in the vacation rental market, with alternative accommodations outpacing traditional hotel bookings.

As of Q4, Booking.com listed 7.9 million alternative accommodations, an 8% increase year-over-year. This growth in listings enhances traveler choices, contributing to a 19% rise in alternative accommodations room nights in the fourth quarter.

-- Glenn Fogel, CEO

This growth accelerated from a previous quarter's rate of 14%. Management credits the ability to showcase both traditional and alternative accommodations for this success, allowing travelers to easily compare options. The strategy is resonating well with consumers, driving growth across all global regions.

5. Balanced Growth and Efficiency Initiatives

Booking Holdings announced a comprehensive efficiency program while still investing in key growth initiatives.

Management estimates that the transformation costs over the next two to three years will match the anticipated annual savings. The 2025 guidance incorporates approximately $150 million in cost savings from this program.

-- Ewout Steenbergen, CFO

When fully implemented, the transformation plan is expected to yield annual cost savings of $400 million to $450 million. Instead of merely focusing on improving profit margins, the company intends to reinvest about $170 million into strategic priorities, including AI technology, connected travel initiatives, and expanded fintech capabilities. This balanced approach reflects management's commitment to immediate profitability while also securing long-term sustainable growth.

Looking Forward

Leadership at Booking Holdings projected confidence in the company's strategic path, with CEO Glenn Fogel emphasizing the importance of adaptability and the enduring desirability of travel experiences. With enhanced payment capabilities, swift growth in alternative accommodations, and strategic AI investments, the company is well-positioned for the future.

Management remains devoted to advancing its connected trip vision, expanding merchant and fintech capabilities, improving its loyalty program, and using AI to enhance customer experiences and operational efficiency. As Fogel stated, "I am confident in our company's position and ability to leverage generative AI technology to deliver an even better offering for our travelers and partners."

Travel, Earnings, AI, Growth, Investments