Booking Shares Fall as Forecast Misses Estimates on Spending

(Bloomberg) -- Booking Holdings Inc. shares tumbled after it gave a forecast for profit in the current period that missed analysts’ estimates as the company spends more on marketing and advertising for its home-rental listings.

Earnings excluding some costs will be $10.90 to $11.20 a share in the first quarter, the company said Wednesday in a statement. Analysts projected $12.88 on average, according to data compiled by Bloomberg. The shares fell more than 9 percent in extended trading.

Booking’s fourth-quarter results beat Wall Street projections, however, as gross travel bookings rose 9 percent. Earnings per share, excluding some costs, for the period ending Dec. 31 increased to $22.49, above the $19.39 average of analysts’ estimates. The online travel giant reported revenue of $3.21 billion for the fourth quarter, slightly lower than the $3.22 billion projected by analysts.

Chief Executive Officer Glenn Fogel said that while the company met many financial and strategic goals in 2018, he is “excited about the investments we are making in 2019 as we position the company for long-term growth.” On a conference call with analysts, Fogel said Booking would boost investments in branding and customer acquisition programs.

Booking released a fresh brand campaign in the U.S. earlier this week in an attempt to drive customers toward its short-term home rental, or non-hotel, accommodations. The company started sending postcards that offer discounts to customers who visit the site.

“We have this great product. We need to make more customers aware of it,” Fogel said.

The increased spending will reduce Bookings earnings before interest, tax, depreciation and amortization in the first half of 2019, executives said on the call. But the investments are crucial for Booking to “drive more and better” brand awareness, Fogel said.

Formerly known as Priceline, Norwalk, Connecticut-based Booking hit a milestone in the third quarter of 200 million room nights booked. That slipped to 171 million room nights in the fourth quarter. Booking had seen its room nights increase as it pushed more alternative accommodations, or non-hotel properties like private apartments and vacation rentals, which is the fastest-growing part of the market.

For the first time, Booking disclosed the revenue of its alternative accommodation business, recording $2.8 billion in 2018, representing 20 percent of the company’s total annual revenue.

But that part of the travel market is also rife with competition. Booking and rival Expedia Group, Inc. have been playing catch-up in the short-term home rental market dominated by Airbnb Inc. As the two travel titans have started prying holiday-goers away from Airbnb by offering private apartments and vacation homes for rent, Airbnb has fought back by vowing to elbow its way into flights and tourism.

Shares of other travel sites, such as Expedia Inc. and TripAdvisor Inc., also fell following Booking’s report.

To contact the reporter on this story: Olivia Carville in New York at ocarville1@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Molly Schuetz, Andrew Pollack

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