I came across a post that claims that the gross booking of Booking Holdings grew by 40% annually since 2020. While this is technically true, it started from a low base. That's why it is important to normalize numbers and at the same time, not expect the future to look like the past.
Booking Holdings expects long-term gross booking to grow by 8% annually. Is this realistic?
We can't just come up with numbers.
One thing we can be sure is that travel will be growing faster than the world GDP since people tend to travel more as they get richer. We can also be sure that online travel will grow even faster.
The world GDP is expected to grow 3-3.5% annually with travel expected at 5%. I believe that 6% for online travel is a reasonable estimate. This is prevailing tailwind. Booking Holdings doesn't have to do much to capture this 6% growth. We cannot say the same for competitors such as AirBnB and Expedia who are more US-focused.
The additional 2pp can come from the actions taken by the business.
For example, increasing direct and mobile app bookings (now at mid 60%'s and high 50%'s) respectively. This means that Booking Holdings doesn't have to spend that much on marketing, which goes to Google.
However, looking at the numbers, about 4.5% of gross booking is spent on marketing and this has been the case for years. It means that Booking Holdings can still grow outside of its ecosystem of apps and websites.
This makes the 8% gross booking growth rate feasible.
But the most beautiful thing about Booking Holdings is its merchant "float" that it can use to repurchase shares. That's a story for another day.