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Massive Breakout Sets Holiday Firm Shares Alight

August 8, 2023

This has the look of a hugely important chart breakout. It is both very powerful, up some $400 in two days, triggered by an excellent set of quarterly results, and coming after nearly a decade of consolidation. This could be the start of a prolonged new uptrend.

The latest results for Q2, 2023 were ahead of expectations and suggestive of accelerating growth.

I am pleased to report that in the second quarter, we continue to see robust leisure travel demand, which helped drive the strong results we are announcing today. The 268 million room nights booked in the second quarter increased by 9pc year over year, and gross bookings of $39.7bn grew 15pc year over year and was the highest quarterly gross bookings ever.

Both room nights and gross bookings came in ahead of our previous expectations as a result of the favorable demand environment. Revenue growth of 27pc in Q2 also nicely outperformed our expectations. The strong top-line results in the quarter, combined with better-than-expected marketing efficiency, helped drive our Q2 adjusted EBITDA to about $1.8bn, which is an increase of 64pc versus Q2 last year and meaningfully exceeded our prior growth expectations of about 35pc. Looking at the month of July, we have seen an acceleration in year-over-year room night growth relative to the 9pc growth we reported for Q2.

Glenn Fogel, CEO, Bookings.com. Q2 2023, 3 August 2023

As always what I am looking for are signs of an important ‘something new’.

There are some exciting things happening at Booking.com.

We are seeing progress and momentum across several important initiatives, which will help strengthen our business over the long term. These initiatives include: Advancing our connected trip vision; further integrating AI technology into our offerings; continuing to grow alternative accommodations; and building more direct relationships with our travel bookers. Starting with the connected trip. This is our long-term vision to make looking and experiencing travel easier, more personal, more enjoyable, while delivering better value to our traveler customers and supplier partners.

Glenn Fogel, CEO, Bookings.com. Q2 2023, 3 August 2023

BKNG and Generative AI

Many of BKNG’s innovations are built around generative AI.

We’ve always envisioned the connected trip as having AI technology at its centre. Across our company, we have a long history with investing in AI technology and incorporating it into our platforms in order to optimize interactions with both our travelers and partners. This is an area where we believe we are well-positioned, given we have built strong teams of AI experts and gained valuable experience from using AI extensively for years. In addition to the many current applications for AI on our platforms, we believe that we can build an even more compelling and differentiated offering for our bookers.

We leverage AI technology to deliver a more personalized booking experience, a connected trip that would be more responsible to our bookers’ needs and help manage different aspects of their trips. Generative AI may play an important role in delivering the connected trip experience to our bookers and our teams have been hard at work to integrate this exciting technology into our offerings in innovative ways. For example, in early July, Priceline unveiled its 2023 summer release. which delivered over 40 new booking tools and upgrades, including Penny.

Penny is Priceline’s generative AI travel assistant. Priceline has currently positioned Penny at the end of the funnel on the checkout page, where Penny can answer travel-related questions that a customer may have when they reached the checkout page. Penny is built on Priceline’s own proprietary technology and data and also leverages large language model technology to power its conversational capabilities. The combination of these technologies allows for innovations like the ability to make a booking directly in the chat interface.

The Priceline team is rapidly gaining insights on booker questions, concerns and behavior is Penny continues to interact with customers. The plan is to further enhance penny over time by leveraging these valuable learnings. Around the same time, as Priceline summer release, Booking.com launched its own AI trip planner, which began rolling out on the mobile app in the U.S. to Genius customers.

In contrast to Penny, the AI trip planner sits toward the top of the funnel, where travelers are in the discovery and planning processes for their trips. Built upon the foundation of Booking.com’s existing machine learning models that recommend accommodation options to millions of travelers on the platform every day, the AI trip planner is also partially powered by large language mall technology to create a conversational experience for people to start their planning processes. The AI trip planner advances planning by providing travelers with a rich visual list of destinations and properties, including Booking.com’s live pricing information with deep links to view more details on the options. From the chat interface of the AI trip planner, bookers can tap on any recommended accommodation they’re interested in and then complete the reservation.

Accretive to our approach here is to marry our own proprietary data and machine learning models with degenerative AI technology. This allows us to provide a conversational interface with the traveler while leveraging our own recommendation engine to provide accurate detail and real-time information on the property recommendations. Like Priceline, the Booking.com team is already gaining valuable insights from the interactions with bookers even though the trip planner is in beta and is still currently in a relatively limited rollout. While we are excited by these new advances at Booking.com and Priceline, it is, of course, still very early days, and we have much more to learn about how customers will ultimately want to interact with this new technology.

Glenn Fogel, CEO, Bookings.com. Q2 2023, 3 August 2023

It’s Airbnb-type business is growing fast.

Alternative accommodation room nights grew faster than our traditional hotel category at about 11pc year over year for the second quarter and represented about 34pc of Booking.com’s total room nights, which is 2 percentage points higher than in Q2 2022. This is a new all-time high mix of our total room nights.

Glenn Fogel, CEO, Bookings.com. Q2 2023, 3 August 2023

It is also engaging directly with the final customer, which helps build customer loyalty.

About 48pc of our room nights were booked through our apps in the second quarter, which is about 6 percentage points higher than in Q2 2022, an acceleration in the mix shift compared to Q1 and all-time high in terms of mix of bookings coming from our mobile apps. We will continue our efforts to enhance the app experience to build on the recent success we have seen here.

Glenn Fogel, CEO, Bookings.com. Q2 2023, 3 August 2023

BKNG is an International Business.

We were pleased to have 9pc room night growth in Q2, which was a few percentage points better than our expectations. Looking at our year-over-year room night growth by region in the second quarter, Asia was up over 40pc. Rest of the world was up low double digits. Europe was up a couple of points and the U.S. was down slightly. It’s helpful to remember that the U.S. was very strong last Q2 and stronger than Q1 and Q3 versus 2019 due to a rebound from Omicron. Compared to 2019, our Q2 global room night growth was 26pc, which was in line with Q1.

Glenn Fogel, CEO, Bookings.com. Q2 2023, 3 August 2023.

BKNG is using its success to reward shareholders with an aggressive share buyback programme.

In the first half of the year, we repurchased $5.1bn of our shares, which represented 5pc and of our year-end 2022 share count. The repurchases so far this year take our combined authorization down to $19bn from the $24bn we discussed earlier in the year.

We remain comfortable with our ability to complete the full $24bn of share repurchases within four years from when we started the program at the beginning of this year, assuming no major downturn in the travel environment.

Glenn Fogel, CEO, Bookings.com. Q2 2023, 3 August 2023

After discussing all the things BKNG is doing with generative AI and the uncertainties involved with implementing such a new and powerful technology, Fogel ended by saying:

I think that will help us have an advantage over many other companies that may not have the scale and expertise, the — basically the capital to put into what could be a very, very exciting future for us.

Glenn Fogel, CEO, Bookings.com. Q2 2023, 3 August 2023

It may not yet add up to an obvious ‘something new’ but it is close and suggests that the company is at an early stage of a process of dramatic change and has both the data and the global footprint for exciting things to happen.

An interesting possibility is that in the new world of robots, generative AI and work from home people may start to travel more.

However, there’s a new thing that has come in, and that is the idea of people not going to offices as much and then they’re also traveling more. So they’re using this Monday and Friday where they’re traveling more for these longer weekends, etc., or perhaps a whole week, etc. And I think that’s going to make for more uncertainty see what that is. What that may end up doing is evening out travel throughout the year more where people are able to use time in areas that used to be shoulder season, but now people are using more, which helps spread out the travel more.

Glenn Fogel, CEO, Bookings.com. Q2 2023, 3 August 2023

Strategy – Looking for that Special Magic

What we have with BKNG is a spectacular chart breakout and some excellent fundamentals as the global travel market recovers from Covid and widespread lockdowns.

Candidates for ‘something new’ are the impact of generative AI on a company which already has the data and the footprint and the possibility that the holiday market is changing with people taking more holidays throughout the year and even working while on holiday.

Whatever is happening BKNG looks ideally placed to take advantage and the shares look overdue for a serious share split.

Share Recommendations

Booking.com. BKNG. Buy @ $3184

I am booked for a family holiday in France later in August. Meanwhile I did a crazy thing. I played badminton for the first time in 60 years and insanely overdid it. I even won one of the matches but boy am I paying for it. I have developed something called, very appropriately, ‘screaming sciatica’, the physio touches you and you scream.

I have been going up the ladder of painkillers with my doctor but since none of them work I have given up on them. I am not sure I want to take something so strong that it would work. I am now lying on the floor, not right now, with my legs up doing pelvic floor exercises and dreaming of my future as a member of the UK’s Olympic badminton team, or perhaps not.

Too much sitting is a risk factor for sciatica, particularly for ancianos like me, so I am going to have to change my way of life a bit. We will have to see how things develop.

When I’m sitting down I feel fine, as though I could run the 100m in 10 seconds but when I stand up and try to move – owwww! My wife is telling me I must stop groaning but I’m not good with pain. Child birth; don’t even think about it.

More on Kamikaze Investing

I was explaining Kamikaze investing to the lovely lady who looks after me at IG. I don’t think she is planning to do it herself any time soon but she could see how phenomenally powerful it could be. It takes some nerve though; you need to believe but if you do and it works the results could be sensational.

I think of St Peter, a true believer who still ended up denying Christ; that is how hard it is and I realise that may be an unfortunate analogy but it helps you get the idea. Like poor archbishop Cranmer in the reign of the Tudor Catholic queen, ‘Bloody Mary’, who recanted his protestant religion and they burned him anyhow. He should have stuck to his guns and told his oppressors to go to Hell where hopefully they did go. Obviously it is not quite like that but it is testing.

What Kamikaze is all about is building a large position fast so that if your share does perform your gains compound at an incredible rate. It is flat out investing like you would not believe.

I have discovered that on request you can have three spread betting accounts and three CFD accounts. This means you can play the Kamikaze game with six shares, one in each account.

The advantage of doing this is that each account is treated separately for margin purposes which is important for Kamikaze investing.

If your profits start to run into taxable territory in any of your CFD accounts you have the option of selling up and recreating the position in one of your spread betting accounts so you run two shares there instead of one.

This would free up the CFD account to start Kamikaze with another share.

Even More Insane Kamikaze

I realise there is an even more insane version of Kamikaze where you (a) invest to the max (equity times five) and then when the margin calls start coming you add money on every margin call. As soon as the shares go up again you invest to the max (five times new equity) and so on. This is Lewis Hamilton driving flat out while out of his brain on cocaine.

Imagine doing that for a year. You will never sleep again!

I know it needs to be fun. We mustn’t go mad.

Just for the record if there was an official from the regulatory authorities looking over my shoulder I know he would be tearing his hair out and wanting me to add warnings in a huge font, in red capitals and he would be right. This is for play money, not for your savings but I am sure you realise that and won’t be stupid. I probably will be but that’s me. I am such a thrill seeker.

The main thing to remember is that you should be almost entirely risking profits, not your own money; that is what makes it a game.

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