Booking Predicts Decrease in Room Reservations Due to Middle-East Conflict

Booking Holdings Inc., the parent company of popular travel brands Kayak and Priceline, is bracing for a slowdown in room-night reservations in the current quarter due to escalating tensions in the Middle East. The company announced that it expects growth of 4% to 6% in room-night bookings, falling short of analysts’ expectations of a 7.4% increase. Additionally, gross travel bookings, which include taxes and fees, are projected to rise by 3% to 5%, missing Wall Street’s estimates of 7.9% growth.

Chief Executive Officer Glenn Fogel explained, “As we look ahead to the second quarter, room night growth compared to last year will benefit from the shift in Easter timing. However, we expect that this will be offset by less expansion of the booking window and an increased impact from the geopolitical situation in the Middle East. We believe this will result in some deceleration in room night growth compared with the first quarter.”

Booking Holdings, based in Norwalk, Connecticut, has a significant presence in Europe and the Middle East compared to its competitors like Expedia Group Inc. The company generates 89% of its total revenue from non-US travel, with the Middle East, including countries like Turkey and Egypt, accounting for about 7% of global room nights. Israel alone represented approximately 1% of global room nights prior to the recent conflict.

Following a series of strong quarters reflecting a post-pandemic travel surge, online travel companies like Booking, Expedia, and Airbnb have cautioned that replicating the exceptional performance seen in early 2023 will be challenging. Thursday’s results from Booking are seen as a barometer for the global travel industry, as the company owns various properties across the sector, including flight aggregator Kayak, rentalcars.com, and restaurant reservation site OpenTable.

Despite the tempered outlook for the current quarter, Booking reported a positive first-quarter performance with healthy demand in Europe and minimal impact from the Israel-Hamas conflict. Room nights booked for the three months ending March 31 grew by 8.5% to 297 million, surpassing analyst expectations. Gross travel bookings reached $43.5 billion, higher than the projected $42.2 billion.

The company’s adjusted earnings before interest, depreciation, and amortization were $898 million, exceeding Wall Street’s expectations. Adjusted earnings per share were $20.39, compared to analysts’ estimate of $13.94. Booking’s board also declared a cash dividend of $8.75 per share payable on June 28.

Following the earnings release, Booking’s shares initially rose by 7.3% in late trading but retreated after the cautious outlook was shared during the analyst call. The stock has seen a 26% increase over the past year, outperforming the S&P 500 Index.

The global travel recovery has been uneven, with growth in the US stagnating while demand in Europe and Asia Pacific markets remains resilient. Expedia, which also reported its results on Thursday, fell short of analysts’ expectations with first-quarter gross bookings of $30.2 billion. The company cited slower-than-anticipated recovery in its vacation rental business Vrbo, leading to a downward revision of its full-year sales guidance.

In conclusion, the travel industry is facing challenges as geopolitical tensions impact booking trends, but companies like Booking Holdings are adapting to navigate through uncertain times and continue serving travelers worldwide.