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COVID’s affect on travel industry affects Booking Holding’s earnings

On Wednesday, Booking Holding’s posted earnings that fell short of projections. Julie Hyman, Myles Udland, Brian Sozzi, and Booking Holdings CEO and President Glenn Fogel discuss what’s next for the company as the country begins to reopen.

Video transcript

MYLES UDLAND: Let's begin with the latest quarterly results out of Booking Holdings. Let's bring in the company's CEO Glenn Fogel to discuss. Glenn, thanks so much for coming on this morning. And I'd love to start with the US market and the trends you guys have seen there. You talked a lot on the call about the strength in the US market. It's about a third of your portfolios, as you guys discussed, but what that maybe says to you about the trajectory of the travel industry could be headed on over the next couple of years.

GLENN FOGEL: Well, thanks for having me. And absolutely, we were very pleased with what we saw in the US. And it really comes down to vaccine distribution. And I see it throughout the world, areas where the vaccine is being distributed quickly, where people are taking those injections, and people then feel that they're safe to travel, and governments relax on any sort of restrictions that naturally leads to more travel.

And you see it in Israel. You see it starting up here in the US wonderfully. And we're just so pleased to see that. And hopefully, it will continue to happen throughout the world. We know, though, it is very slow in, unfortunately, some parts of the world. So we're all hopeful that hopefully it can be picked up in the other parts of the world, too.

JULIE HYMAN: Glenn, it's Julie here. The other parts of the world that you're talking about, I mean, in Asia, you guys did not see improvement. In Europe, the improvement has been slow. And particularly in Europe, you guys-- you have a reliance on that area for your business. So what kind of signs are you looking for? What visibility do you have? What are you seeing so far in the current quarter in terms of bookings there?

GLENN FOGEL: Well, I'm encouraged. And absolutely right, Europe is very important to us. And it was very sad to see how slow some of the rollout programs in some of the countries in Europe where vaccines was happening. But we're very pleased to see it begin to pick up. We see the number of injections accelerating in many parts of Europe. And we know it can be done.

We know, for example, in the UK, a wonderful program really leading the way for Europe. And now we see on the continent it happening, too. So we expect as this continues, people will feel safer. Governments will say, OK, we can allow more travel. And we've seen many governments talking about opening up over the next couple of either weeks or months, depending on what part of Europe. And we really hope-- hope-- that the summer can be salvaged.

BRIAN SOZZI: Glenn, when do you see a full recovery for the travel industry from the pandemic?

GLENN FOGEL: So a year ago, I said it would take years, not quarters, to recover. And I'll stick to that. And now we're one year-- more than one year in. And it's still going to be years before we're fully recovered. The issue really comes down to international travel. We all see domestic travel picking up when it's safe to travel in that country.

But international travel is where we make a lot of money. And that's really very important for the whole industry. And many governments, properly, are concerned about letting people come into their country without being certain that they're safe to come into the country. So it's going to take some time before the whole world is appropriately vaccinated, and everybody feels safe about everybody traveling everywhere the way we used to do pre-COVID.

MYLES UDLAND: You know, Glenn, you guys talked a lot on the call about the booking window, that it had shortened, as people kind of have been making shorter term plans, I guess, kind of contingent plans, if you want to think about it that way. How has that evolved? And where does that-- like, where do you expect that to normalize to? Are we going to be in an environment where people make shorter term plans? Because, you know, I mean, I was making 18 month out plans in January of 2020. I don't see when I'm going to be thinking that way again. How are you guys anticipating those dynamics to change?

GLENN FOGEL: So what we talked about was the average for the entire company. But regionally, things can be different. So for example, in Europe, people aren't looking further out because that's when they think they'll be able to travel further out. And they can't do it so much right now. But overall, we do see shorter because, as you say, people want to just go when they feel comfortable and more certain they can go.

Here's what I think is going to happen, though. People will recognize that things are improving. And they will start wanting to make those longer term plans. And one of the ways they can do it-- and I'm always surprised that people don't do it this way-- is you go to a place like a booking.com, where so much of the inventory is cancelable, no charge. Set up your plans, book it, get it set. And then if something were to change, or you're not comfortable, or it's not open, you just cancel and it's free. It's a free option. I don't understand why people wouldn't do that all the time. But they don't. It's just maybe something in the human psychology. You're just not thinking about it because you think you can't go.

JULIE HYMAN: Let's talk about something else in the human psychology-- the desire to be pampered right now. We were talking about this earlier as we were talking about your earnings when Brian Sozzi said he's ready to go to a hotel where he can be taken care of. There are still, though, a lot of people who want sort of the privacy, particularly now, of an apartment. So talk to me about the mix on your sites of those sort of non-hotel bookings versus hotel bookings and what kind of growth do you expect in each.

GLENN FOGEL: Yeah, it's interesting. When the pandemic first started, I was wondering would people say, I want to go to a home because I feel safe, I'm not near anybody, or would people say, I want to go to a hotel because I figure they have the industrial cleaning, and they'll make sure it's really safe when I go into the room. It turned out that there was a step functional change increase in the interest in the alternative accommodation, so we call it the private home area.

And I think that really came down to a safety issue. So as people still want more safety, they're going to think private home. But as people feel safer, they go back to thinking, I want to be pampered. I don't want to have to do the sheets. I don't want to have to clean. I just want to have a restaurant right downstairs, so I can go to it and not have to cook. So it'll be interesting to see in the future how much of this changes back.

But a couple of data points to think of is, we still sell more hotels than alternative accommodations. So that's the people-- it's not like everybody forgot about a hotel. It really comes down to in the future, how much of a change will it be. And I think because people have tried the alternative accommodations over the last year, it'll still be in their consideration set going forward. So there will still be a lot of interest. Because there are a lot of uses for a private home that are appropriate.

BRIAN SOZZI: Glenn, that's right. That's me. I'm raising my hand. I would want the plush warm towel and the little bottles of shampoo. I'm very much ready. But I do want to ask you about the cost of taking a vacation this summer. The cost of doing business is going up seemingly everywhere. How much more will it cost to take a vacation this year versus those pre-pandemic levels?

GLENN FOGEL: Well, of course, it's always going to depend on where you're going and what qualities. So if you want real pampering, it may be a lot more for you. It really-- and some areas, they are increasing their prices significantly. And in some places, not so much because there's no demand. It's purely a supply-demand issue.

But I will say-- and I still advocate to everybody who asks, I say book now. And I said, if you look at the prices where they are now versus where they were a couple months ago, they are up in general a lot. So I say book it now, go to booking.com, get something that is cancelable. You're no worse off if you decide not to do it. But you will lock in that price today, instead of two months from now, you try and do it, and all of a sudden, the price is much higher.

JULIE HYMAN: Well, in the case of car rental, it would be hard to imagine the prices going a lot higher. We have seen really a skyrocketing in car rental rates. That's one of the specific areas. How is your margin on those kinds of bookings? Has it improved as the rates have improved? And do you expect us to remain at these kind of elevated levels, and for how long?

GLENN FOGEL: Well, there's no doubt. Car rental is really the area where rates have gone up hugely. And I've heard lots of you talking about some anecdotal things where they try to get a car in Hawaii, for example, and they couldn't believe it was more than the hotel and the light. The issue is, of course, again, supply and demand. And the large car rental companies took down their fleet significantly during the crisis. So there just aren't as many cars available.

And so, naturally, the prices are going to go up. We do expect that to eventually come back down. But it's going to take time. Because we know that this industry-- well, the car industry having trouble producing enough cars. So it's going to be a problem for a while. And I advocate if, again, you need a car, start looking for it right now.

MYLES UDLAND: All right, Glenn Fogel, CEO of Booking Holdings. Glenn, really appreciate you taking some time to talk with us this morning. I hope we can stay in touch.

GLENN FOGEL: Thank you very much.