Booking: What to look for in the stock's decline

Booking may have exceeded market expectations, but its share price is being battered because analysts believe the figures show the first signs of a slowdown. As the world's leading online travel agency, the group is on the front line of the doubts surrounding global tourism and US demand.

With a 40% rise in the share price since the beginning of January 2024, the stock is now falling despite resilient results in the face of market uncertainty. As part of a cyclical sector, investors are doubly harsh in the face of uncertainty.

Solid results, but a worrying momentum

• Adjusted earnings per share: $24.81, 41.2% above analysts' expectations.
  
  
• Adjusted EBITDA: $1.09bn, 27.8% above consensus.
  
  
• Operating margin: 22.3%, up 5 points year-on-year.
  
  
• 319 million room nights, up 7.4% from 2023. Last year, the increase was 9%, and 13% last quarter.
  
  

However, these robust figures have not stopped investors from asking questions.

Signals being closely monitored

Two indicators are particularly noteworthy: the number of overnight stays and the average revenue per room.

The first is in line with forecasts, which is almost disappointing: in 2024, Booking had accustomed the market to doing better, with an average 3% increase. Fears are focused on the United States, where stays are getting shorter and last-minute bookings are on the rise—signs of growing caution amongst  travelers.

As for revenue per room, growth is slowing: +1% this quarter, compared with +5% on average over the last two years.

Less profitable marketing

Another indicator to watch is marketing expenditure, which accounts for 37% of revenue. This is a metric that investors like to use to monitor traveler behavior.

Booking admits that return on investment has fallen below average. Although the group is maintaining its marketing profitability targets for the year, analysts are concerned.

2025: caution is the watchword

In their statements, executives are adopting a measured tone, reflecting reduced visibility.

• For the coming quarter, growth in room nights is expected between 4% and 6%, one point lower than the previous consensus.
  
  
• The group is also lowering its revenue per room forecast to between 5% and 8%, down from 8% to 9% previously.
  
  

Results remain solid, but the mood is tense. After Hilton lowered its 2025 forecasts yesterday, followed by the director of Dubai airport who deemed it impossible to make predictions for the financial year 2024, it is now Booking's turn to temper expectations. The market, meanwhile, is becoming less tolerant.