Booking Holdings, the parent company behind Booking.com, Priceline and Kayak, has seen its latest results hit by a U.S. investigation. On November 3, the online travel giant said it saw a fall in third-quarter revenue despite an increase in bookings, as it took a large hit from the investigation.
The company took $900 million from third-quarter revenue in connection with an investigation by the U.S. Federal Trade Commission (FTC). It also set aside an additional $100 million in provisions related to the investigation.
This means that we are not seeing the final payment for the fine or settlement, as the company has stressed that there has been no agreement reached with the regulator and discussions are still ongoing.
Focus of the U.S. Investigation
The investigation relates to a business relationship between Priceline and a third-party booking site. The regulator is looking into allegations that some hotel listings could cause confusion for customers thinking they are booking directly with hotels. It also relates to price display, customer service and invoicing.
The third-party booking site Guest Reservations is alleged to have used room availability from hotels via Priceline. Some customers have also complained about unexpected extra charges. However, there has been no final judgement from the court.
Strong Underlying Demand Masked by Regulatory Charge
Despite the hit from the U.S. investigation, the company’s underlying metrics show growth. Total overnight stays grew 7% year-on-year to 345 million. Gross booking volume increased 10% to around $54.5 billion.
Despite reported revenues falling 1%, the company saw an increase in adjusted revenues of 9% to around $9.8 billion. Net profit edged down about 1 percent to $2.72 billion, after taking a fall of $8.89 billion. Excluding the $900 million as a result of the U.S. investigation.
Whilst the company’s core business is growing, the investigation has really hit the numbers. Investors will be keeping an eye on the legal developments in the coming months.
Broader Headwinds and Outlook
The FTC investigation is not the only challenge facing the company. There are signs the global travel industry is slowing down, particularly international travel. High airfares, geopolitical issues in the Middle East and some tourist cities in Europe have caused some unrest.
It is expected that overnight stays will grow by between 1-3% in the fourth quarter and gross booking volume will grow by 2-4%. This means that the strong growth seen in the third quarter will slow. The main thing to watch going forward will be the result of the U.S. investigation.
