VALUATION HIGHLIGHTS

1. Merchant Bookings constitute 71% of the Trefis price estimate for Booking Holdings Inc.'s stock.
2. Agency constitutes 26% of the Trefis price estimate for Booking Holdings Inc.'s stock.

WHAT HAS CHANGED?

1. Booking Holdings Q4 2025 Snapshot

Booking Holdings Inc. reported a solid Q4 2025, with revenue increasing 16% year over year to approximately $6.35 billion, ahead of consensus estimates near $6.2 billion. Adjusted EPS came in at $48.80 versus expectations of roughly $46 to $47, while GAAP net income rose about 34% to $1.4 billion. Gross bookings grew 16% to around $43 billion, and room nights increased 9% to approximately 285 million. Adjusted EBITDA climbed about 19% to roughly $2.2 billion, reflecting modest margin expansion even as marketing expense increased as a percentage of gross bookings.

2. Outlook

Management expects to generate $500 million to $550 million in incremental savings in 2026, which will be reinvested into strategic priorities such as generative AI, expansion in key markets, growth of advertising and fintech offerings, and enhancements to its Connected Trip vision. These reinvestments are expected to contribute roughly $400 million in incremental revenue in 2026, with a net impact of about $300 million to adjusted EBITDA after accounting for reinvestment costs. Over the full year, the company plans to target gross bookings and revenue growth faster than its long-term ambition (about 8% CAGR), with adjusted EPS growth roughly aligned with its long-term target of around mid-teens on a constant currency basis. Management also reiterated that adjusted EBITDA margins are expected to modestly expand in 2026, supported by efficiency gains and disciplined expense management, even as it balances elevated investment levels.

3. 25-for-1 stock split

Booking Holdings also announced a historic 25-for-1 forward stock split, the first in the company’s history, designed to significantly lower its nominal per-share price and potentially broaden the investor base. The split was approved by the board as part of the broader earnings release and will be effected on April 2, 2026, with shareholders of record as of March 6, 2026, receiving 24 additional shares for each share held. Trading on a split-adjusted basis is expected to begin at market open on April 6, 2026. The announcement was paired with a modest 9.4% increase in the quarterly dividend to $10.50 per share, underscoring a commitment to returning capital to shareholders.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Agency Bookings

Agency Gross Bookings: We currently forecast Booking Holdings' Agency gross bookings to increase from $56 billion in 2025 to about 75 billion by the end of our forecast period. There could be around a 5% downside to the Trefis price estimate if the gross booking were to grow to $59 billion over our forecast horizon.

Take Rate on Agency Bookings: We currently forecast the take rate (revenue as a percentage of the gross booking) to increase from 14.2% in 2025 to nearly 15% by the end of the forecast period. There could be a 5% downside if the take rate lowers to around 12% during our forecast period.

BUSINESS SUMMARY

Booking Holdings is the largest online travel company in the world (in terms of gross bookings). It provides its customers with a broad range of travel services, which include bookings for hotel stays, airline tickets, car rentals, restaurant reservations, cruises, and vacation packages via its online travel portals: www.bookingholdings.com, www.booking.com, www.priceline.com, www.agoda.com, www.kayak.com, and www.opentable.com, among others. Its websites connect travelers with suppliers of different travel products such as hotels, airlines, cruises, and car rental companies.

In the U.S., it enables its customers to purchase a full range of travel services under the traditional price disclosed model (in which it earns a commission) or lets them bid for services at discounted prices under the 'Name Your Own Price' model, where it earns the difference between the price an individual is willing to pay and the price charged by the travel service provider (hotel, airlines, etc).

SOURCES OF VALUE

We believe that International Business and Hotel Bookings are the main sources of value for Booking Holdings -

1. High Growth in the Online Travel Industry Outside the U.S. (International Business)
• With the acquisition of Booking.com and Agoda, Booking Holdings has been focusing on developing its international operations. BKNG's total revenues from its businesses outside of the U.S. increased from $9.5 billion in 2021 to $24.3 billion in 2025. That makes it 90% of the total business in 2025.
• The rising income levels and expanding middle class, combined with high population growth rates in emerging economies such as China, India, and South-East Asia are expected to contribute to an increasing number of people traveling to and from these regions.
• The extremely competitive online travel industry in the U.S. has led to lower revenue margins and high promotional spending, thereby eroding operating margins in the industry.
• The Internet is expected to become increasingly integral to the travel planning process due to increasing worldwide online penetration, particularly given the capability that the Internet provides travelers to refine searches, compare destinations, and view real-time pricing. With internet penetration currently estimated at 70% globally (~94% in North America, ~90% in Europe, ~85% in Latin America, and ~73% in the Asia Pacific), BKNG has the potential to grow in all these markets.
• The lack of standardization in travel services outside the U.S., along with a fragmented lodging industry in Europe and Asia Pacific, leaves much scope for premium pricing. Hence, Booking Holdings stands to make higher revenue margins from its international business.

KEY TRENDS

The following factors determine the fate of the online travel industry:

1. Macroeconomic Environment
• Due to the discretionary nature of leisure travel, the online travel service providers, which earn revenue in the proportion (and as a percentage of) travel bookings, depend entirely on the macroeconomic conditions (employment levels, inflation rates, etc). Corporate travel is, in fact, one of the indicators of economic activity and is influenced the most by the ongoing macroeconomic conditions. During a recessionary period, both corporate and leisure travel plummets. Amid rising unemployment and declining disposable income levels, consumers cut back on their travel plans first before making adjustments to other expenses.
• Advertising, which constitutes a significant source of revenue for online travel service providers, too, depends on the level of business activity. During recessionary times, businesses cut back on media and advertising spending and this translates into lower online advertising revenue for travel portals such as expedia.com, priceline.com, etc.
2. Foreign Exchange
• Leisure travelers, unlike corporations, do not hedge themselves against foreign exchange fluctuations. Hence, spot foreign exchange rates determine the demand for international travel among consumers. In times of adverse foreign exchange rate movements (such as a depreciating dollar), international travel becomes dearer, and the same hotel booking and air tickets cost more dollars, thereby discouraging travel bookings.
• Travel Service Providers, such as Booking Holdings, earn revenues from international bookings in foreign currencies, incur most operating expenses in dollars, and report the earnings in dollars. Thus, any adverse foreign exchange movement could erode profits. Since an increasing proportion of bookings are coming from the less penetrated emerging economies, the exposure to foreign exchange is only expected to increase in the future.
3. Fuel Prices
• Rising fuel prices have the immediate impact of increasing airfares, which discourages travel. This not only impacts Air Ticket bookings but reduced travel also negatively impacts hotel bookings and destination services such as car rentals and cruises. A decline in overall bookings impacts travel service providers' revenues.
• With a rise in fuel prices, airlines are no longer able to offer significant discounts on bulk bookings to travel agents such as BKNG. The result is that the revenue margins earned by travel service providers (under the Merchant model) take a hit. The lower revenue margins translate into lower profit margins for the travel service providers.
4. Impact of Unforeseen Events on the Travel Industry
• Events that are beyond the control of any travel services provider, and can critically impact travel, including terrorist attacks, unusual weather patterns, natural disasters such as hurricanes, tsunamis, volcanic eruptions, travel-related health concerns such as COVID-19, Influenza H1N1, avian bird flu, SARS, etc, political unrest, and other unpredictable events. Unlike other industries, such events have a very significant impact on travel bookings and consequently on the revenues of travel service providers.
5. Airline Industry
• Fuel expenses constitute the single largest cost head for airlines, making them vulnerable to hikes in crude oil prices. To reduce vulnerability to fuel price volatility, many airlines engage in fuel price hedging.
• Demand for flights is highly correlated to global economic growth. Thus, a decline in economic growth, or recession, reduces demand for flights, impacting passenger traffic for airlines. On the contrary, steady growth in the global or U.S. economy, grows demand for air travel, allowing airlines to raise their airfares, occupancy rates, and profits.
• Many airlines are figuring out ways to grow their top lines through ancillary means such as baggage fees, access to onboard WiFi/food/drinks, etc. Accordingly, airlines are investing to enhance their product offerings including in-flight WiFi and other entertainment options, improved lounge facilities, and extra legroom seats.
• During the past decade, low-cost carriers such as Southwest and JetBlue have gained significant market share in the U.S. Looking ahead, we believe these low-cost carriers to continue to grow their market share, as their lower fares attract passenger traffic.
• The U.S. airline industry has seen many mergers and acquisitions in the last decade including the five big combinations of US Airways and America West, Delta and Northwest, United and Continental, Southwest and AirTran, and American and US Airways. A more consolidated industry has worked to improve the profits of all airlines. Fewer players in the market have made it easier for those remaining airlines to add capacity with restraint. Before this consolidation in the airline industry, individual airlines were adding capacity at higher rates in an attempt to grow their market shares. This rapid capacity addition resulted in an oversupply of seats, reducing the margin and profits of all carriers. Going forward, we believe as long as airlines add capacity with discipline, the industry will remain profitable overall.


6. Hotels and Lodging Industry
• Hotel Bookings offer a markedly higher Revenue Margin (Revenue earned by the travel service provider as a percentage of the size of booking) at over 19% compared to Air Ticket bookings (~3%), Cruises and Car Rentals (~9%).
• The hotel market in Europe and Asia is much more fragmented with smaller, independent lodgings compared to the U.S., where the hotel market is dominated by large hotel chains. Hotel chains are more likely to offer online bookings through their own websites, while online travel agencies such as Expedia are more appealing to small, independent hotels outside the U.S. Also, travel agencies stand to make higher revenue margins from independent budget hotels under their merchant business model. Hence, expansion into hotels in Asia and Eastern Europe presents a growth opportunity for U.S.-based online travel service providers.
7. Online travel services is a highly competitive niche segment within the travel industry
• Competition in the U.S. online travel industry remains intense, and traditional online travel companies are creating new promotions and consumer value features in an effort to gain a competitive advantage over competitors.
• Since consumers are now increasingly hunting for bargains and discounts, Traffic obtained through online advertising has increased as a percentage of total demand, since the same consumer visits several websites before making a purchase. This increased shopping behavior has reduced advertising efficiency and effectiveness as traffic obtained through online advertising becomes less likely to result in a purchase on the website. Therefore, online advertising expenses have increased at a faster rate than gross profit, a trend that is expected to continue.
8. Threat from Online Search Engines
• Large, established Internet search engines, with substantial resources and expertise in developing online commerce and facilitating Internet traffic, are creating and intend to further create inroads into online travel, both in the U.S. and internationally.
• Google has steadily deepened its travel ecosystem through products such as Google Flights and Google Hotels, building on its earlier acquisition of ITA Software. These tools allow users to search and compare flights and hotels directly within Google’s interface, reducing reliance on online travel agencies such as Expedia Group and Booking Holdings. Google has also continued integrating travel discovery features across Maps and Search, further embedding travel planning within its broader ecosystem.
• Microsoft, through Bing and AI-driven search capabilities, continues to enhance travel-related search and price comparison features, leveraging its scale in enterprise AI and partnerships to improve travel discovery tools. Meta-search and AI-powered answer engines can aggregate airfare and hotel inventory across suppliers and intermediaries, increasingly competing for high-intent traffic that historically flowed to online travel platforms.
• More recently, generative AI integrations across major platforms, including search-driven trip planning tools and conversational booking interfaces, represent an incremental competitive dynamic. As large technology firms embed travel planning directly into search and AI assistants, online travel agencies face the risk of higher customer acquisition costs and reduced direct traffic share over time.