Booking Holdings (BKNG, Financial) is a provider of online travel services, including airline tickets, hotels, rental cars, cruises and vacation packages along with restaurant reservations. The company conducts its operations via several brands, including Priceline.com, Booking.com, KAYAK and OpenTable, among others. In our view, Booking is a high-quality company that maintains a healthy market share, strong brands and scale advantages in the online travel agency industry. Booking benefits from an increasingly powerful network effect, an overall transition to booking travel online and a generational spending shift that appears to favor “experiences” over “material possessions.” The company enjoys broad geographic reach and, unlike its peers, it derives a large majority of its profits from Europe, where it focuses on lodging. Contrary to the U.S., European lodging supply is mostly owned and operated by independent hoteliers who rely on Booking to match excess inventory with demand. Only about 40% of global travel and leisure tourism arrangements are now conducted online, with a historical growth rate of one to two percentage points per year. We think this provides Booking with ample potential to increase its market share of total global accommodations (which is currently estimated to be 10%). During the quarter, Booking’s share price fell in conjunction with several other travel-related companies due to concerns about the spreading coronavirus. We initiated a position during the quarter as the decline in valuation led to an attractive risk-reward proposition.
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David Herro and Bill Nygren Comment on Booking Holdings
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