Thoughts on Booking Holdings ($BKNG)
The stock sold off roughly 20% from its mid-2025 highs on fears that agentic AI will disrupt Booking’s business model. The thinking has been that travelers would be able to use agentic AI to book and pay for trips as opposed to relying on the likes of Booking or Expedia. The stock is now trading at 16x forward earnings—a moderate level for the quality of Booking’s business in my opinion.
I agree that the booking process itself will soon include AI agents. Some of us remember two or so decades ago adding internet bookings to in-person or phone conversations with travel agents. Likewise, we’ll also be seeing agentic AI play a role in booking our travel sometime soon.
That said, a complete disruption of Booking’s business model is unlikely. For one, the complexity of managing vendor relationships, customer service, and payments remains high and is unlikely to be solved by agentic AI any time soon, if ever.
Booking has relationships with over four million properties, including 750K hotels, with 75% of its total room/nights booked in Europe and Asia. While the U.S. hotel industry is managed via well-known brands (Marriott, Hilton, etc.), hotels in Europe are mostly independently owned and often lack the marketing and sales budgets deployed by U.S. brands to attract travelers. Booking essentially performs the marketing function for many of those independent properties.
It is also a merchant of record in its fast-growing merchant business where Booking buys and sells room inventory as opposed to collecting agency commissions. Large tech companies have been hesitant to act as merchants of record because of the liability associated with each booking, along with charge disputes, compliance requirements, and VAT/tax collections.
Booking also manages roughly 100 payment methods, including region- and country-specific digital wallets and bank transfer systems, with payments conducted in more than 50 currencies. Credit cards are also used but account for only a portion of the total payment traffic.
Getting a foothold in the travel payments space is a challenge. Some years ago, Google incorporated a ‘book on Google’ option on its Google Flights site to let users enter payment details without leaving the site. Google phased out the feature in March of 2023 due to low user adoption, with travelers preferring airlines’ direct customer support and the ability to earn loyalty points.
Customer service is an important element of Booking’s value proposition. When travelers run into issues with hotel bookings or payments, they call Booking for resolution. Booking’s customer service helps with outreach to property owners, facilitates problem resolution, and assists with finding alternatives when rooms are overbooked. Booking’s Genius loyalty program creates incentives to come back to the platform and, similarly to airlines’ reward systems, has tiered benefits.
What role will AI ultimately play in travel booking and management? It’s hard to predict the exact way the value chain will evolve but I think that Booking will continue to be an important part of it going forward. It’s more likely that AI, be it in the form of third-party agents or Booking’s own agentic AI capabilities, will follow legacy travel websites and Google search in directing customer traffic to Booking’s core travel management function rather than undermining its value proposition.