Booking Holdings Q2 beat estimates as merchant platform hits 73% of bookings. CEO Fogel says AI helps but the company is focused on payment and settlement infrastructure.
Booking Holdings handily beat second-quarter estimates Tuesday, posting revenue of roughly $7.35 billion, up 8% from a year earlier and above the $7.19 billion consensus. Gross bookings rose 9% to about $51 billion, while room nights increased 5%. The company said travel demand stayed resilient despite geopolitical uncertainty and continued disruption in the Middle East.
“We remain focused on what we can control–building better experiences for travelers, creating greater value for our partners, and strengthening our business for the long term,” CEO Glenn Fogel said on the earnings call. “Despite continued geopolitical and macroeconomic uncertainty during the second quarter, the underlying desire to travel remained resilient, and we are pleased with our results.”
The headline earnings beat drew attention, but the strategic shift underneath may matter more for the stock. Merchant gross bookings accounted for roughly 73% of total gross bookings during the quarter, up four percentage points from a year earlier. That means Booking Holdings is handling more of the transaction directly–settling payments, managing refunds, handling currency conversion–rather than just passing a reservation to a supplier.
Management described payments as the “glue” connecting the company’s travel products. The logic is straightforward: a consistent checkout experience across Booking.com, Priceline, Agoda, KAYAK and OpenTable generates more margin dollars per booking and gives the company greater control over the customer relationship. The merchant model also lets Booking embed loyalty benefits and merchandising offers across multiple travel categories, creating a network effect that pure search intermediaries cannot match.
That network effect is already visible in the connected-trip strategy. Transactions containing more than one travel category–a hotel plus a rental car, for example–grew in the low double digits during the quarter and expanded more than twice as fast as Booking.com’s overall transaction volume. The company wants to coordinate the entire journey, not just the room reservation.
AI is playing a supporting role, but not the one the market might assume. Generative AI can recommend a hotel or assemble an itinerary. It cannot independently guarantee inventory, calculate cancellation terms, authenticate a customer, manage currency conversion or settle funds with multiple suppliers. Booking Holdings is deploying AI on the infrastructure side instead. Voice AI now handles the majority of eligible inbound traveler calls. Customer-service cost per booking is declining at a double-digit rate while satisfaction remains high, management said. The company is also building tools that help accommodation providers respond to guests, improve property content and operate more efficiently.
AI is lowering customer-service costs and improving supplier communications. It is also reducing transaction friction, but the company’s real edge is in the commercial plumbing that generative AI cannot replicate.
The Genius loyalty program strengthens that dynamic. Higher-tier members represented more than 30% of active customers and generated a high-50% share of room nights during the quarter. They also returned more frequently and booked through direct channels at higher rates than non-Genius travelers. Loyalty, payments, and supplier connectivity are reinforcing one another.
Booking Holdings maintained its full-year expectation for high-single-digit revenue growth and low- to mid-teens adjusted earnings growth. The company’s bet is that AI will change where travelers start their search, but that the transaction itself–the payment, the settlement, the dispute resolution–will remain the moat.
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