Booking Sees Recovery After Reporting Record Sales Decline

(Bloomberg) -- Booking Holdings Inc. beat Wall Street’s subdued expectations and gave a positive outlook for the current period, sending the shares 5% higher in extended trading.

The Norwalk, Connecticut-based company said revenue fell a record 84% in the second quarter from a year earlier to $630 million. That was the lowest in a decade and shows how the Covid-19 pandemic has gutted the travel industry.

However, analysts expected worse, with an average sales estimate of $569.4 million, according to data compiled by Bloomberg. And newly booked room nights were down 35% in July from a year earlier, an improvement from the 85% year-over-year decline in April.

“We faced a challenging second quarter and continue to face challenges due to the impact of the Covid-19 pandemic on travel demand,” Chief Executive Officer Glenn Fogel said in a statement. “However, we have witnessed improvement in booking trends since April, which is encouraging.”

Alternative accommodation, or vacation rentals, is seeing growth, Fogel said on a conference call with analysts Thursday. This part of the business represented about 40% of all new bookings in the second quarter, he noted. Demand has been driven by “staycations,” with travelers taking advantage of work-from-home policies to head to a beach house for a long weekend.

Despite the uptick, Fogel reiterated that the travel industry will not fully recover without a vaccine. New outbreaks of Covid-19 in places such as Australia, Spain and some states in the U.S. threaten to spark another wave of cancellations. It will be “years and not quarters” before the market returns to pre-Covid levels, the CEO said.

To cut costs, the online travel agent is eliminating 25% of workers at its main Booking.com business. Delivering the news in a video call with staff, Fogel said the past five months represented “the largest social and economic crisis of our lifetime.”

The Covid-19 pandemic shut down most of the world over the past few months, all but eliminating global travel. Business trips have been replaced with video conferences and vacations have been canceled, forcing airlines to ground flights and hotels to close. Airbnb Inc. and TripAdvisor Inc. also eliminated a quarter of their workforce and last week, Expedia Group Inc. reported a similar revenue decline in the second quarter.

There have been some nascent signs of a bounce back in the industry. Airbnb and Expedia have seen an increase in demand for domestic stays as some economies start to reopen. But Booking may take longer to show improvement because it is more exposed to Europe, which accounts for more than half its revenue, Cowen & Co. analyst Kevin Kopelman wrote in a note before the results. The continent was shut down more completely and has been slower to reopen.

Booking, which runs five major travel brands including Kayak and Priceline, had previously signaled that second-quarter results would suffer the full force of the coronavirus since global lockdowns only went into effect near the tail-end of the first quarter. Net income was $122 million, or $2.97 a share, in the period, down more than 80% from a year earlier.

Shares have fallen about 15% this year, while the S&P 500 Index is up about 3%.

(Updates with comments from conference call throughout)

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