Summary of the Core Content
Booking Holdings, the world's largest online travel agency (OTA), has been promoting its “Connected Travel” strategy for seven years with the goal of creating a “one-stop, seamless travel experience” that covers everything from flights and hotels to transportation and activities, with automatic adjustments in case of issues. However, it has yet to develop a mature product that appeals to consumers. On the surface, its business seems diverse, including accommodations, flights, and car rentals, but in reality, these services are largely disconnected from each other. For example, if a flight is canceled, customer service for the flight does not handle hotel arrangements, and customers have to deal with the hotel directly. The company is mainly facing three major obstacles:
1. Lack of control over flight bookings: Booking cannot take full control of flight booking processes, as it outsources this part to Etraveli (operated under the Gotogate brand). A bid to acquire Etraveli was rejected by the European Union due to anti-monopoly concerns in 2023. This means that if there are issues with a flight booked through Booking, Booking cannot take full responsibility and may shift the blame to Etraveli.
2. Incompatible business models: The company’s traditional “agency model” (where payments go directly to service providers) has been replaced by a “merchant model,” where all payments are collected by Booking before being distributed to partners. While the payment system has improved (with the merchant model accounting for 70% of revenues), underlying conflicts remain unresolved, such as whether suppliers are willing to allow Booking to collect fees on their behalf and how responsibilities should be allocated.
3. EU regulations: The European Union’s “Packaged Tourism Directive” requires travel platforms to assume greater responsibility when selling combined services. Booking, being a low-cost company, is wary of taking on such risks, as it could result in significant financial losses if millions of users experience issues.
The Seven-Year Strategy: An Appeal in Theory, a Reality of Disconnection
Booking’s vision of “Connected Travel” sounds appealing: you book a flight and hotel, and the platform automatically adjusts the hotel check-in time or transportation arrangements if there is a flight delay. In reality, however:
- Surface-level success: Booking.com has expanded beyond just accommodations; its flight business competes with leading OTAs, and it also does well in car rental and activity booking through cross-selling with hotels.
- Actual disconnection: Each service operates as an independent system. For instance, if a flight is canceled, you have to contact the hotel directly for a refund or change, as Booking’s customer service does not coordinate these arrangements.
In contrast, Expedia successfully launched a combined flight and hotel booking service in 2001, showing that Booking has mostly focused on rhetoric rather than actionable progress over the past seven years.
The Three Major Barriers to Strategic Implementation
1. **Lack of control over flight bookings:** Not having control over flight bookings prevents Booking from managing the entire travel experience effectively.
2. **Incompatible business models:** The transition to a new payment model has created conflicts regarding fee distribution and responsibility allocation among partners.
3. **EU regulations:** EU laws require greater accountability for combined travel services, which poses a significant risk for Booking due to its low-profit margin.
The Rise of AI: Competing with and Outperforming the Strategy
AI-powered agents (such as ChatGPT plugins) are changing the game:
- Competing for users: Instead of searching through Booking’s website, users can simply ask an AI assistant to book a trip for them.
- Overwhelming advantage: The automated adjustment of travel plans (e.g., switching hotels due to flight delays) is something AI agents can do naturally, potentially rendering Booking’s efforts ineffective.
A Crossroads: Risk or Conservatism?
Booking faces a critical decision:
1. Take a risk and implement the strategy: By assuming full responsibility for combined travel services and integrating data across its businesses, it can create a seamless experience. However, this will require significant investment and pose significant risks.
2. Be cautious and maintain the status quo: By keeping each service independent, Booking can avoid direct responsibilities. However, users may increasingly turn to AI assistants, potentially reducing Booking’s role from a leading travel provider to a mere supplier.
The strategy that has been on hold for seven years is now being forced into action by the advancements in AI technology. Any further delay could result in Booking losing its position as a dominant player in the travel industry.
This analysis is written in plain language, making it accessible to non-financial professionals.