The Erosion of Booking.com

Excerpt from Hospitality.today

The OTA built a $170 billion business by controlling what travelers see. That control is fragmenting across a dozen AI platforms — and management is pretending otherwise

Key takeaways

• Booking.com’s real business is selling visibility, not processing bookings. Commissions are just the starting point. Preferred Partner fees, Genius participation, and sponsored placements extract the real margin. Remove interface control, and the margin structure collapses.
• AI platforms are taking control of discovery — and will monetise it themselves. Google, OpenAI, Perplexity, Microsoft, and Amazon are all building agentic travel booking. AI recommendations will still have visibility hierarchies worth monetising. But those platforms will collect the payment, not Booking.com.
• The “partnerships” are capitulation. Booking.com provides inventory; the platforms control discovery and recommendations. Hotel brands connect directly through their CRSs. Independent hotels connect through channel managers and GDS providers. Neither needs Booking.com as the aggregation layer for AI distribution.
• The market hasn’t priced this risk. At 34x earnings, the valuation assumes continued growth and sustained margins — not visibility economics migrating to AI platforms within five years.

The visibility business

Booking.com doesn’t just charge hotels for bookings. It charges them for placement.

Base commissions run 10-25%, with most properties paying around 15%. But that’s just the entry fee. Preferred Partner status costs additional points. Genius program participation requires funding discounts. Sponsored placements cost extra. Mobile-first positioning costs extra. Every pixel of the interface has a price.

The margins reflect this. Booking engines, customer service, and payment processing are valuable but commoditised functions. Controlling what travelers see — and charging suppliers for better placement — is where the exceptional margin lives. Booking.com has built both, but investors have valued it based on the latter.

There’s also a payments layer most travelers never see. Booking.com has shifted aggressively to a “merchant model” — collecting payment upfront, paying hotels later. They earn interest on the float and capture foreign exchange spreads. They pay hotels through Virtual Credit Cards, which cost properties around 3% to process — and Booking.com almost certainly receives rebates on this volume. Merchant revenue now accounts for roughly 60% of total revenue.

In 2024, Booking Holdings spent $7.3 billion on marketing — roughly 31% of revenue. That spend wins when travelers search Google or open booking apps. If they ask AI assistants instead, that journey never reaches Booking.com’s interface. The marketing isn’t misdirected — it’s optimised for a world where travelers actively seek out booking sites.

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