For example, Booking Holdings (BKNG, Financial)—one of the largest marketplaces for accommodation bookings in the world—is negatively exposed to travel restrictions due to COVID-19, but we believe it is well positioned to weather this downturn. Booking is in a very strong financial position, with close to no net debt, access to additional liquidity, and a very low fixed cost structure. Unlike other companies within the travel industry (e.g., cruise ships, hotels), Booking does not own or lease operating assets but rather serves as an online marketplace and thus has a more flexible operating model. Over half of its operating expenses are variable (primarily marketing expenses), which the company can scale back with the drop in volume.
Given Booking does not own any hotel assets, it has extremely limited exposure to failure of the third-party hotel operators who list on the company’s platforms. In a recovery period, Booking may benefit significantly as hotels seek to rapidly fill vacant rooms and thus provide Booking with a large percentage of their inventory as has happened in past industry cycles. Moreover, over 20% of the company’s 2019 volumes came from alternative accommodations such as home vacation rentals, which positions the company well for future industry growth beyond traditional hotel accommodations.
From Dodge & Cox's Stock Fund first-quarter 2020 commentary.
