Booking Holdings, owner of Booking.com, Kayak.com and Open Table, among others, claims marketing efficiency was a key driver for its profit growth as the business reported its second quarter financial results.
The travel booking company’s revenues grew 27% in the quarter, outperforming expectations, while its adjusted EBITDA grew 64% compared with the same period last year, to reach $1.8bn (£1.4bn).
This was driven by “better than expected marketing efficiency”, Booking’s CEO Glenn Fogel said overnight.
In total, the business booked 268 million room nights in the second quarter, a 9% increase year-on-year, while its gross bookings of $39.7bn (£31bn) represent a 15% uplift on last year’s Q2 figures.
‘Every dollar should be performing’: Booking.com’s CMO on the false distinction between brand and performanceThese figures are the highest quarterly gross bookings ever for the business, which has been eyeing up mass reach with its marketing through its ‘Somewhere, Anywhere’ campaign featuring Hollywood actor Melissa McCarthy.
Booking’s marketing spend grew 4% year-on-year in Q2, while the marketing expenses as a percentage of gross bookings was “about 50 basis points lower” than the same period last year. Booking spent “around $1.8bn” on marketing in Q2, a figure Fogel calls “a large amount”, hence why the business is ramping up its efficiency focus.
Fogel explained the 50 basis points decrease was because of “higher ROIs” in its paid channels, and “a higher mix of direct business”.
Focusing on ROI
In response to the business’s strong results, it is updating its full year guidance. Booking Holdings now expects gross booking to grow “slightly over” 20% year-on-year, instead of the mid-teens it previously forecast.
The company also predicts its full-year marketing and merchandising spend will be lower than in 2022: “The improvement in our expectation is driven primarily by higher ROIs in our paid channels,” said Fogel.
“Performance marketing ROIs increased year-over-year due in part to our ongoing efforts to improve the efficiency of our marketing spend,” he added.
This ties in to what Booking.com’s CMO Arjan Dijk, who doesn’t believe brands should be split by brand vs performance, told Marketing Week last month: “Every dollar should be performing.”
Marketers almost twice as likely to focus purely on brand over performanceLooking ahead to Q3, Booking expects its marketing expenses as a percentage of gross bookings to be lower than last year.
The business did “a little bit more optimisation than [it] expected” when it came to its marketing spend last quarter, Fogel said on a call with investors today (4 August).
He added that the business is “consistently testing” its marketing spend, meaning the business is “always looking for ways to optimise channels and approaches”. Fogel added this is all part of Booking’s “ongoing journey to make marketing spend efficient”.
Plus, as more and more companies move towards employing artificial intelligence in their practices, Booking.com is leaning on generative AI to help it deliver its ongoing ‘connected trip’ strategy, which it hopes will allow travellers to book all aspects of a trip, from travel to accommodation, in one place.
“We’ve always envisioned the connected trip as having AI technology at its centre,” said Fogel.
He added: “Generative AI may play an important role in delivering that connected trip experience to our bookers, and our teams have been hard at work to integrate this exciting technology into our offerings in innovative ways,” which include marrying its proprietary data and machine learning models with the generative AI tech.
Fogel believes the current travel experience is “much more complicated, fragmented and frustrating to travellers than it should be”, and he hopes the business’s “connected trip vision will greatly improve it via technology”.