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

Booking Holdings (BKNG) held its fourth-quarter earnings call for 2024 on February 20, 2025, led by CEO Glenn Fogel, who celebrated his 25th anniversary with the company. During the call, the travel industry leader reported strong financial results and expressed optimism about how the company is adapting to the AI disruption transforming the travel sector.

1. Strong Financial Performance

Booking Holdings reported better-than-expected financial metrics, indicating effective execution in the travel market. The company's gross bookings for the entire year reached $166 billion, representing a 10% increase from 2023, while revenue increased by 11% to $24 billion. Additionally, adjusted EBITDA climbed to over $8 billion, marking a 17% year-over-year growth.

Fogel noted, "We achieved these impressive results while simultaneously expanding our profit margins and investing in key initiatives. Our adjusted EBITDA margins grew by 170 basis points to 35%, surpassing our initial expectations for the year." Looking ahead, Booking management anticipates at least 8% revenue growth and 15% earnings growth for 2025 on a constant-currency basis, reflecting confidence in their competitive position.

2. Embracing AI Through a Dual Strategy

Booking is actively approaching the AI revolution by developing its in-house capabilities and partnering with leading AI organizations. Fogel emphasized, "We believe AI-powered features, like a travel-specific agent, will enhance and personalize the travel experience for users. We are enthusiastic about collaborating with top generative AI companies on their developments."

AI is already being utilized by Booking to enhance operational efficiency, particularly in customer service, allowing for stable costs despite higher payment processing volumes. By fusing internal AI innovations with strategic partnerships, Booking aims to safeguard its market position as consumer booking preferences continue to evolve. Management recognizes their substantial travel expertise, proprietary data, and established customer trust as key advantages in an AI-driven future.

3. Shifting to a Merchant Platform

Booking.com is rapidly transitioning from a traditional agency model to a merchant platform, opening up new revenue opportunities and improving the customer experience. The share of merchant gross bookings at Booking.com rose to 59% in 2024, showing a notable increase of approximately 9 percentage points compared to the previous year.

Fogel explained, "This shift allows us to manage the payment process more effectively, enabling us to bundle various travel services, provide flexible payment options, and create a smoother booking experience. While our merchant transactions currently yield incremental profits, this represents just a fraction of total adjusted EBITDA, indicating tremendous growth potential as our fintech capabilities advance."

4. Growth in Alternative Accommodations

Booking is seeing significant growth in the vacation rental market, which is outpacing traditional hotel bookings. The number of alternative accommodations listed on Booking.com reached 7.9 million by the end of Q4, an increase of about 8% from the previous year. This broad selection translates into 19% growth in alternative accommodations bookings for the fourth quarter, showing a rise from a 14% growth rate in the prior quarter.

Fogel noted, "Our ability to present both traditional and alternative accommodations together is resonating with consumers, as we see growth across all global regions in this vital market segment."

5. Balancing Efficiency and Growth Investments

Booking announced a detailed efficiency program while continuing to invest in growth initiatives. CFO Ewout Steenbergen mentioned, "We estimate the transformation costs over the next two to three years will match our expected annual savings. Our 2025 guidance includes about $150 million in cost savings from this program."

The transformation is expected to yield $400 million to $450 million in annual running cost savings upon completion. Rather than solely focusing on improving margins, Booking intends to reinvest roughly $170 million into key initiatives, including AI capabilities, connected trip projects, and expanded fintech services, which demonstrates management's commitment to both short-term profitability and sustainable long-term growth.

Outlook

Leadership at Booking Holdings shows confidence in the company’s strategic path forward. CEO Glenn Fogel highlighted the importance of adaptability and the enduring appeal of travel experiences. With improved payment systems, rising alternative accommodation growth, and strategic AI investments, Booking appears well-equipped to face industry challenges.

Management continues to focus on implementing their connected trip vision, enhancing merchant and fintech capabilities, advancing their loyalty program, and utilizing AI to improve both customer experience and operational efficiency. As Fogel stated, "I am optimistic about our company’s position and its ability to leverage generative AI technology to enhance our offerings for travelers and partners."

Travel, AI, Earnings, Growth, Technology