BKNG

AI will crush the interface layer (search + metasearch), but travel’s real moat is the execution layer: merchant-of-record complexity, fraud, refunds, FX, compliance, and 24/7 service. Q4 confirmed Booking is becoming travel’s transaction infrastructure: merchant mix hit ~70% (up from 50% two years ago) while agency revenue declined. The key risk isn’t disruption, it’s toll extraction: if AI agents become demand routers, Booking may stay essential but pay a new “Google tax” to the dominant interface.

Booking Holdings is a dominant, highly profitable compounder that continues to strengthen its lead and remains brilliantly positioned for sustained growth in the decade ahead. The company continues to outgrow its peers, such as Airbnb and Expedia, steadily expanding its moat, improving profitability, and gaining market share in every major region. Booking is not getting disrupted by Airbnb in the slightest. Instead, it continues to gain market share. The company has brilliant financials, growing its revenue at a low-to-mid-teens rate, and has improved its EBITDA margin sequentially in every single quarter over the last three years. It now generates over $8 billion in FCF annually at a 38% FCF margin, and nearly all of this cash is returned to shareholders.

The online market for travelling and accommodation is recovering, and Booking Holdings, as a leader in the OTA market, is set to benefit. The company has a strong market share, particularly in Europe, and a network effect that acts as a barrier to entry. Booking has a history of significant share buybacks, returning a large portion of its cash from operations to shareholders. The company also has optionality through its offerings of flights, car rentals, and other travel-related services. The valuation appears attractive, with a potential IRR of around 15.8% based on conservative EBITDA estimates.