NORWALK, CT—In the second quarter, Booking Holdings Inc. saw revenue decline 84% versus last year and experienced its first quarterly EBITDA loss since 2001. However, as the quarter progressed, it also saw encouraging domestic booking trends.
“We felt the full impact of COVID-19 during the second quarter, with reported room nights, which includes the impact of cancellations, declining 87% year-over-year,” said Glenn Fogel, CEO/president of Booking Holdings. “Newly booked room nights, excluding the impact of cancellations, declined 68% in the quarter. The high cancellation rate of pre-COVID bookings, which we witnessed in March and April, combined with the overall weak travel demand environment, significantly impacted our revenue and EBITDA this quarter. Revenue declined 84% versus last year, and we recorded an adjusted EBITDA loss of $376 million, the first time we have produced a quarterly EBITDA loss since 2001.”
Fogel noted that the greatest negative impact came in April when newly booked room nights declined more than 85% year-over-year. “After April, room night trends have steadily improved with newly booked room nights in July declining about 35% year-over-year,” he said. “The improved booking trends were primarily driven by domestic travel, with international trends seeing much more limited improvement.”
July saw slightly positive year-over-year growth for overall domestic newly booked room nights. “Though, of course, there are many countries that still have negative year-over-year growth rates,” Fogel said. “While almost all of our global markets showed improvement through the quarter, Europe and the United States had the highest contribution to the improved domestic booking trends.”
David Goulden, EVP/CFO, added, “Domestic room night declines improved steadily in Europe, North America, and across Asia. However, we saw less improvement in the domestic declines in South America, the Middle East and Africa.”
Fogel said that a high percentage of new bookings have been made with flexible cancellation policies and may be canceled in the future.
Some trends became obvious during the initial reopening phase. “In line with our growth in domestic travel, we are seeing that bookers are choosing to stay closer to home, and are more interested in less urban areas than pre-COVID,” Fogel said. “We also see that our customers are booking more alternative accommodations than in the past, which often have the benefit of reduced potential interaction with other travelers.”
In Q2, alternative accommodations represented about 40% of all new bookings in the quarter for Booking.com.
“While we are pleased to see signs of recovery in domestic travel, we want to emphasize that it is impossible to tell how the coming months will unfold,” Fogel stressed. “Unfortunately, many areas of the world continue to have very high infection rates. And in some regions, they are dealing with new outbreaks after having significantly lowered their infection rates. As a result, after a period of relatively steady improvement in many geographies, in recent weeks, we are seeing these growth rates worsen in some countries.”
In the past weeks, Booking Holdings has witnessed a plateauing or deterioration of new booking trends in several places that have seen increasing outbreaks of COVID-19 cases, including Spain, Belgium, Australia, Japan, Vietnam, Taiwan and the U.S.
“We’ve also seen an associated increase in cancellation rates in many of these places,” Goulden said. “These recent trends are a reminder we’re still in the very early days of a fragile recovery that will likely be uneven for some time to come.”
Looking at the third quarter, Goulden said, “We expect gross bookings in the third quarter will decline year-over-year by several percentage points more than our reported room nights due to negative pressure on local currency ADRs. And we expect revenue declines for the quarter will be roughly in line with what we see in gross bookings.
“We currently expect adjusted EBITDA will be positive in the third quarter, given the trends we’re seeing in our business so far through July, as well as the fact that Q3 is our seasonally strongest quarter,” he added. “This expectation is based on the assumption we do not see a meaningful increase in travel restrictions or shelter-in-place rules, or a decrease in consumer willingness to travel as a result of continued or increased core outbreaks in the quarter.”
“We continue to believe that in order to recover to pre-COVID levels, we will need to have a vaccine or effective treatment, which will take time to produce and distribute globally at the scale needed,” Fogel added. “We believe it will be years and not quarters before the travel market returns to pre-COVID volumes.”