# Booking Holdings Inc. (BKNG) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Booking Holdings Inc.'s 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1075531/000107553125000010/bkng-20241231.htm
Accession: 0001075531-25-000010
Filing date: 2025-02-20
Report date: 2024-12-31
Extracted from Item 7 to the first post-MD&A boundary after HTML sanitization.
Confidence: high

Company profile: /company/BKNG/
All MD&A years: /company/BKNG/mda/
Previous year: /company/BKNG/mda/fy2023/ (FY 2023)
Next year: /company/BKNG/mda/fy2025/ (FY 2025)

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our Consolidated Financial Statements and accompanying notes.

We evaluate certain operating and financial measures on both an as-reported and constant-currency basis. We calculate constant currency based on the predominant transactional currency in each country, converting our current year results in currencies other than U.S. Dollars using the corresponding prior year monthly average exchange rates.

Overview

Our mission is to make it easier for everyone to experience the world. We aim to provide consumers with a best-in-class experience offering the travel choices they want, with tailored planning, payment, language, and other options, seamlessly connecting them with our travel service provider partners. We offer these services through five primary consumer-facing brands: Booking.com, Priceline, Agoda, KAYAK, and OpenTable. See Notes 1 and 17 to our Consolidated Financial Statements for information on our operating segments and revenue by geographic area.

We derive substantially all of our revenues from enabling consumers to make travel service reservations. We also earn revenues from advertising services, restaurant reservation and management services, travel-related insurance offerings, and other services.

Trends

Our global room nights in 2024 increased 9% year-over-year driven primarily by healthy travel demand in Europe and Asia. We saw the booking window expand in 2024 compared to 2023, which benefited year-over-year room night growth.

Our global room nights in the fourth quarter of 2024 were 13% higher than the fourth quarter of 2023 which was negatively impacted by the Israel-Hamas war. When excluding room nights from bookers in Israel in each comparable period, our overall room nights in the fourth quarter of 2024 increased 12% year-over-year. When excluding room nights from bookers in Israel in each comparable period, our overall room nights for the full year 2024 increased 9% year-over-year.

Quarterly Room Nights and Change versus the prior year

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Full Year Room Nights and Change versus the prior year

The cancellation rate in 2024 was in line with the prior year. Because we recognize revenues from bookings when the traveler checks in, our reported revenues are not at risk of being reversed due to cancellations. Increases in cancellation rates can negatively impact our marketing efficiency as a result of incurring performance marketing expenses at the time a booking is made even though that booking could be canceled in the future if it was booked under a flexible cancellation policy.

In 2024, our global average daily rates ("ADRs") on a constant currency basis were about in line with the prior year. Our global ADRs were negatively impacted by a higher mix of room nights from Asia, which is a lower ADR region. Excluding the changes in regional mix, our global ADRs on a constant currency basis increased year-over-year by about 1%. It is difficult to predict what the trend in industry ADRs will be in the future.

We focus on relentless innovation to grow our business by providing a best-in-class user experience with intuitive, easy-to-use online platforms that aim to exceed the expectations of consumers. We have a long-term strategy to create an ideal traveler experience, offering our customers relevant options and connections at the times and in the language they want them, making trips booked with us seamless, easy, and valuable. We refer to this as the "Connected Trip." The goal of our Connected Trip vision is to offer a differentiated and personalized online travel planning, booking, payment, and in-trip experience for each trip, enhanced by a robust loyalty program that provides value to travelers and partners across all trips. We believe these efforts will help improve traveler loyalty, frequency, and mix of direct bookings over time. We believe these improvements will benefit revenue growth and marketing efficiency in the future, however, to the extent our non-accommodation services have lower margins and increase as a percentage of our total business, our operating margins may be negatively affected.

Our mobile app is an important platform for experiencing the Connected Trip since the app travels with the traveler. The mix of our room nights booked on a mobile app in 2024 was a low-fifties percentage, up from a high-forties percentage in 2023. The significant majority of room nights booked on our mobile apps are direct, and we continue to see favorable repeat direct booking behavior from consumers in our mobile apps, which allow us more opportunities to engage directly with consumers. The revenues earned on a transaction on a mobile app may be less than a typical desktop transaction as we see different consumer purchasing patterns across devices. For example, accommodation reservations made on a mobile app typically are for shorter lengths of stay and have lower accommodation ADRs.

As part of our strategy to provide more payment options to consumers and travel service providers, increase the number and variety of our accommodations, and enable our long-term Connected Trip strategy, Booking.com increasingly processes transactions on a merchant basis, where it facilitates payments from travelers for the services provided. This allows Booking.com to process transactions for travel service providers and to increase its ability to offer secure and flexible transaction terms to consumers, such as the form and timing of payment. We believe that expanding these types of service offerings will benefit consumers and travel service providers, as well as our gross bookings, room night, and earnings growth rates. However, this results in additional expenses for personnel, payment processing, chargebacks (including those related to fraud), and other expenses related to these transactions, which are recorded in "Personnel" expenses and "Sales and other expenses" in our Consolidated Statements of Operations, as well as associated incremental revenues (e.g., payment card rebates), which are recorded in "Merchant revenues." To the extent more of our business is generated on a merchant basis, we incur a greater level of these merchant-related expenses, which negatively impacts our operating margins despite increases in associated incremental revenues. In 2024, the incremental revenues from facilitating payments were greater than the associated incremental variable expenses. The mix of our total gross bookings generated on a merchant basis was 63% in 2024, an increase from 54% in 2023.

We have established widely-used and recognized brands through marketing and promotional campaigns. Our total marketing expenses, which are comprised of performance and brand marketing expenses that are substantially variable in nature, were $7.3 billion in 2024, up 7% versus 2023 as a result of the year-over-year growth in travel demand and our efforts to invest in marketing. Our performance marketing expenses, which represent a substantial majority of our marketing expenses, are primarily related to the use of online search engines (primarily Google), affiliate marketing, meta-search, and social media channels to generate traffic to our platforms. Our brand marketing expenses are primarily related to costs associated with producing and airing digital branding and television advertising.

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Marketing efficiency, expressed as marketing expenses as a percentage of gross bookings, and performance marketing returns on investment ("ROIs") are impacted by a number of factors that are in some cases outside of our control. Such factors include ADRs, costs per click, cancellation rates, foreign currency exchange rates, our ability to convert paid traffic to booking customers, and the timing and effectiveness of our brand marketing campaigns. In recent years, we observed periods of stable or increasing ROIs. Although it is difficult to predict how ROIs will change in the future, ROIs could be negatively impacted by increased levels of competition and other factors. When evaluating our performance marketing spend, we typically consider several factors for each channel, such as the customer experience on the advertising platform, the incremental traffic we receive, and anticipated repeat rates. Marketing efficiency can also be impacted by the extent to which consumers come directly to our platforms for bookings. The mix of our total room nights booked by consumers coming directly to our platforms was a mid-fifties percentage in 2024, and was a higher percentage of room nights if we exclude the room nights booked through affiliate programs (i.e., business-to-business). Both of these percentages increased year-over-year, which benefited our marketing efficiency versus 2023. See Part I, Item 1A, Risk Factors - "We face risks relating to our marketing efforts" and "We are dependent on travel service providers, restaurants, search platforms, and other third parties."

Booking.com had approximately 4.0 million total properties on its website at December 31, 2024, representing an increase from approximately 3.4 million total properties at December 31, 2023. At December 31, 2024, the total properties on Booking.com's website consisted of approximately 3.5 million alternative accommodation properties (including homes, apartments, and other unique places to stay) and approximately 500,000 hotels, motels, and resorts.

The mix of Booking.com's room nights booked for alternative accommodation properties in 2024 was approximately 35%, up versus approximately 33% in 2023. We have observed a longer-term trend of an increasing mix of room nights booked for alternative accommodation properties as consumer demand for these types of properties has grown, and as we have increased the number and variety of these properties on Booking.com. We may experience lower profit margins due to additional costs, such as increased customer service or certain partner related costs, related to offering alternative accommodations. As our alternative accommodation business has grown, these different characteristics have negatively impacted our profit margins and this trend may continue.

Although we believe that providing an extensive collection of properties, excellent customer service, and an intuitive, easy-to-use consumer experience are important factors influencing a consumer's decision to make a reservation, for many consumers, the price of the travel service is the primary factor determining whether to book. Discounting and couponing (i.e., merchandising) occurs across the major regions in which we operate, particularly in Asia. In some cases, our competitors are willing to make little or no profit on a transaction or offer travel services at a loss in order to gain market share. As a result, it is important to offer travel services at a competitive price, whether through discounts, coupons, closed-user group rates or loyalty programs, increased flexibility in cancellation policies, or otherwise. These initiatives have resulted and, in the future, may result in lower ADRs and lower revenues as a percentage of gross bookings.

Over the long term, we intend to continue to invest in marketing and promotion, technology, and personnel, as well as exploring strategic alternatives such as acquisitions, within parameters consistent with efforts to improve long-term operating results. To create room for these investments, we intend to continue to look for ways to optimize our expenses.

In November 2024, we announced our intention to implement certain organizational changes, including modernizing processes and systems, initiating an expected workforce reduction, optimizing procurement, and seeking real estate savings (the "Transformation Program"). We believe it is important to make these organizational changes in order to drive further expense efficiency, create room for reinvestment in projects and initiatives that will support the growth of our business over the long run, and further improve our organizational agility. We expect the Transformation Program to ultimately deliver about $400 to $450 million in annual run rate savings over the next three years as compared to our 2024 expense base. We are in the early stages of this program and we expect the majority of the run rate savings to be achieved after 2025. We expect that restructuring costs and accelerated investments related to the Transformation Program will be incurred in the next two to three years and are estimated to be, in the aggregate, approximately one times the expected annual run rate savings.

Many taxing authorities seek to increase tax revenues and have targeted large multinational technology companies in these efforts. Many jurisdictions have implemented or are considering the adoption of a digital services tax or similar tax that imposes a tax on revenues earned from digital advertisements or the use of online platforms, even when there is no physical presence in the jurisdiction. Rates for these taxes range from 1.5% to 10% of revenues deemed generated in the jurisdiction. We record the applicable digital services taxes in "Sales and other expenses" in the Consolidated Statements of Operations. For more information, see Part I, Item 1A, Risk Factors - "We may have exposure to additional tax liabilities."

Increased regulatory focus on large technology companies could result in increased compliance costs or otherwise adversely affect our business. For example, the European Commission designated the Company as a gatekeeper under the Digital Markets Act in 2024 and Booking.com as a "Very Large Online Platform" under the Digital Services Act in 2023. As a result of these designations, we are subject to additional rules and regulations that may not be applicable to our competitors. For more information, see Part I, Item 1A, Risk Factors - "Our business is subject to various competition, consumer protection, and online commerce laws and regulations around the world, and as the size of our business grows, scrutiny of our business by legislators and regulators in these areas may intensify" and Note 16 to our Consolidated Financial Statements.

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Our businesses outside of the U.S. represent a substantial majority of our financial results, but because we report our results in U.S. Dollars, we face exposure to movements in foreign currency exchange rates as the financial results and the financial condition of our businesses outside of the U.S. are translated from local currency (principally Euros and British Pounds Sterling) into U.S. Dollars. See Note 17 to our Consolidated Financial Statements for information related to revenues by geographic area. As a result of movements in foreign currency exchange rates, both the absolute amounts of and percentage changes in our foreign-currency-denominated net assets, gross bookings, revenues, operating expenses, and net income as expressed in U.S. Dollars are affected. Our total revenues increased by approximately 11% in 2024 as compared to 2023, but without the impact of changes in foreign currency exchange rates our total revenues increased year-over-year on a constant-currency basis by approximately 12%. Since our expenses are generally denominated in foreign currencies on a basis similar to our revenues, our operating margins have not been significantly impacted by currency fluctuations.

We generally enter into derivative instruments to minimize the impact of foreign currency exchange rate fluctuations, such as foreign currency exchange derivative contracts to hedge our exposure to the impact of movements in foreign currency exchange rates on our transactional balances denominated in currencies other than the functional currency. See Note 6 to our Consolidated Financial Statements for additional information. We designate certain portions of the aggregate principal value of our Euro-denominated debt as a hedge of the foreign currency exposure of the net investment in certain Euro functional currency subsidiaries. Foreign currency transaction gains or losses on the Euro-denominated debt that is not designated as a hedging instrument for accounting purposes are recognized in "Other income (expense), net" in the Consolidated Statements of Operations (see Notes 12 and 18 to our Consolidated Financial Statements). Such foreign currency transaction gains or losses are dependent on the amount of net assets of the Euro functional currency subsidiaries, the amount of the Euro-denominated debt that is designated as a hedge, and fluctuations in foreign currency exchange rates. For more information, see Part I, Item 1A, Risk Factors - "We are exposed to fluctuations in foreign currency exchange rates."

Outlook

For the first quarter of 2025, we expect:

•the year-over-year growth in room nights will be between 5% and 7%;

•the year-over-year growth in gross bookings will be between 5% and 7%;

•the year-over-year growth in revenues will be between 2% and 4%; and

•operating income will be lower than the first quarter of 2024, due in part to the negative impact from the shift in Easter timing versus last year, as well as the negative impact from year-over-year changes in foreign currency exchange rates. Excluding these impacts, we expect operating income will be slightly higher than the first quarter of 2024.

For the full year 2025, we expect:

•the year-over-year growth in gross bookings will be in a mid single digit percentage range;

•the year-over-year growth in revenues will be in a mid single digit percentage range; and

•operating income will be higher than in 2024.

Critical Accounting Estimates

Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Our significant accounting policies and estimates are more fully described in Note 2 to our Consolidated Financial Statements. Certain of our accounting estimates are important to our financial position and results of operations and require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. We use our judgment to determine the appropriate assumptions to be used in the determination of certain estimates and evaluate our estimates on an ongoing basis. Estimates are based on historical experience, terms of existing contracts, our observance of trends in the travel industry, and on other assumptions that we believe to be reasonable under the circumstances. Our actual results may differ from these estimates under different assumptions or conditions. Matters that involve significant estimates and judgments of management include the valuation of investments in private entities, income taxes, and contingencies.

Valuation of Investments in Private Entities

See Notes 2, 5, and 6 to our Consolidated Financial Statements for additional information related to the investments in private entities and information on fair value measurements, including the three levels of inputs to the valuation techniques used to measure fair value. When inputs that are observable, either directly or indirectly (observable market data), are available at the measurement date and are not significantly adjusted using unobservable inputs, the observable inputs would be classified as Level 2 inputs. When little or no market data is available, the fair value of these investments are measured using unobservable inputs ("Level 3 inputs").

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Our investments measured using Level 3 inputs primarily consist of investments in privately-held entities that were classified as either debt securities or equity securities without readily determinable fair values. Fair values of privately held securities are estimated using a variety of valuation methodologies, including both market and income approaches. We use valuation techniques appropriate for the type of investment and the information available about the investee as of the valuation date to determine fair value. Recent financing transactions in the investee are generally considered the best indication of the enterprise value and therefore used as a basis to estimate fair value. However, based on a number of factors, such as the proximity to the valuation date or the volume or other terms of these financing transactions, we may also use other valuation techniques to supplement this data, including the income approach. When a financing transaction occurs and represents fair value, we also use the calibration process, as appropriate, when estimating fair value on subsequent measurement dates. Calibration is the process of using observed transactions in the investee company's own instruments to ensure that the valuation techniques that will be employed to value the investee company investment on subsequent measurement dates begin with assumptions that are consistent with the original observed transaction as well as any more recent observed transactions in the instruments issued by the investee company.

Our investments in equity securities of private entities at December 31, 2024 and 2023, includes $51 million originally invested in Yanolja Co., Ltd. ("Yanolja"). Certain observable transactions subsequent to our original investment resulted in an adjusted carrying value of $306 million for the investment as of December 31, 2021. As of June 30, 2023 and 2022, we evaluated our investment in Yanolja for impairment using a combination of the market approach and the income approach in estimating the fair value of our investment as of those dates, and recognized impairment charges of $24 million and $184 million during the years ended December 31, 2023 and 2022, respectively (see Note 6 to our Consolidated Financial Statements). The carrying value of our investment in Yanolja was $98 million as of December 31, 2024 and 2023, respectively.

The market approach estimates value using prices and other relevant information generated by market transactions involving identical or comparable companies. The income approach estimates value based on the expectation of future cash flows that a company will generate. These future cash flows are discounted to their present values using a discount rate based on a company's weighted-average cost of capital adjusted to reflect the risks inherent in its cash flows. The key unobservable inputs and ranges used for the June 2023 impairment evaluation include the weighted average cost of capital of 10.5%-14.5% and a terminal earnings before interest, taxes, depreciation, and amortization ("EBITDA") multiple of 14x-16x. The key unobservable inputs and ranges used for the June 2022 impairment evaluation include, for the market approach, percentage decrease in the calibrated EBITDA multiple (36%) and for the income approach, the weighted average cost of capital of 10%-14% and the terminal EBITDA multiple of 14x-16x. Significant changes in any of these inputs would result in significantly different fair value measurements. A change in the assumption used for EBITDA multiples would result in a directionally similar change in the fair value and a change in the assumption used for weighted average cost of capital would result in a directionally opposite change in the fair value.

The determination of the fair values of investments where we are a minority shareholder and have access to limited information from the investee reflects numerous assumptions that are subject to various risks and uncertainties, including regarding the investee's expected growth rates and operating margin, as well as other matters outside of our control, such as discount rates and market comparables. It requires significant judgments and estimates and actual results could be materially different than those judgments and estimates utilized in the fair value estimate. Future events and changing market conditions may lead us to re-evaluate the assumptions reflected in the valuation, which may result in a need to recognize additional impairment charges.

Income Taxes

We determine our tax expense based on income and statutory tax rates applicable in the jurisdictions in which we operate. Due to the complex and dynamic nature of tax legislation, significant judgment is required in computing our tax expense and determining our tax positions. The U.S. Tax Cuts and Jobs Act (the "Tax Act") enacted in December 2017 made significant changes to U.S. federal tax law, including a one-time deemed repatriation tax imposed on accumulated unremitted international earnings, to be paid over eight years. We do not intend to indefinitely reinvest our international earnings that were subject to U.S. taxation pursuant to the mandatory deemed repatriation or subject to U.S. taxation as global intangible low-taxed income ("GILTI").

We regularly review our deferred tax assets for recoverability considering historical profitability, projected future taxable income, the expected timing of the reversals of temporary differences, and tax planning strategies and record valuation allowances as required.

We are subject to ongoing tax examinations and assessments, and face challenges regarding the amount of taxes due from time to time. These challenges include questions regarding the timing and amount of deductions on our tax returns. Although we believe that our tax filing positions are reasonable and comply with applicable law, we regularly review our tax filing positions, especially in light of tax law or business practice changes, and we may change our positions or determine that previous positions should be amended, either of which could result in changes to our tax liabilities. The final determination of tax audits or tax disputes may be different from what is reflected in our historical income tax provisions and accruals.

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The evaluation of tax positions and recognition of income tax benefits require significant judgment and we consult with external tax and legal counsel as appropriate. We consider the technical merits of our tax positions along with the applicable tax statutes, related interpretations and precedents, and our expectation of the outcome of proceedings (or negotiations) with tax authorities. We recognize liabilities when we believe that uncertain positions may not be fully sustained upon audit by the tax authorities, including any related appeals or litigation processes. Liabilities recognized for uncertain tax positions are based on a two-step approach for recognition and measurement. First, we evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained based on its technical merits. Second, we measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. Interest and penalties attributable to uncertain tax positions, if any, are recognized as a component of income tax expense. The tax benefits ultimately realized by us may be different than what is recorded in the financial statements due to future events such as our settling a matter with tax authorities or our success in sustaining our tax positions.

See Notes 15 and 16 to our Consolidated Financial Statements for additional information.

Contingencies

Loss contingencies (other than income tax-related contingencies disclosed above) arise from actual or possible claims and assessments and pending or threatened litigation that may be brought against us. Based on our assessment of loss contingencies at each balance sheet date, a loss is recorded in the financial statements if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. If the amount of the loss cannot be reasonably estimated, we disclose information about the contingency in the financial statements. We also disclose information in our financial statements about reasonably possible loss contingencies.

The determination of whether a loss is probable and whether the amount of the loss can be reasonably estimated requires significant judgment and evaluation of all the underlying facts and circumstances including judgments about the potential actions of third-party claimants, regulatory authorities, and courts. Claims, assessments, and litigations involve significant uncertainties such as the complexity of the facts, the legal theories involved, the nature of the claims, the judgment of the courts, the applicable methodology for determining potential damages, and, in the case of class actions, whether a class action can be certified and the extent to which members of a class would or would not file a claim.

On a quarterly basis, we update our analysis and estimates considering available information, including the impact of negotiations, settlements, rulings, and advice of legal counsel. Changes in our assessment of whether a loss is probable, our estimate of the loss, or our determination of whether the amount of loss can be reasonably estimated could have a material impact on our results of operations and financial position. Changes in our assumptions regarding a particular matter or the effectiveness of our strategies related to legal and other proceedings could also have a material impact on our results of operations and financial position. For all loss contingencies, until a matter is finally resolved, there may be an exposure to loss in excess of the liability accrued for the matter and such amounts could be material.

See Note 16 to our Consolidated Financial Statements for additional information regarding certain contingencies.

Recent Accounting Pronouncements

See Note 2 to our Consolidated Financial Statements, which is incorporated into this Item 7 by reference.

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Results of Operations

Year Ended December 31, 2024 compared to Year Ended December 31, 2023

Operating and Statistical Metrics 

Our financial results are driven by certain operating metrics that encompass the booking and other business activity generated by our travel and travel-related services. Reservations of room nights, rental car days, and airline tickets capture the volume of units booked through our online travel companies' ("OTC") brands by our customers. Gross bookings is an operating and statistical metric that captures the total dollar value, generally inclusive of taxes and fees, of all travel services booked through our OTC brands by our customers, net of cancellations. Our non-OTC brands (KAYAK and OpenTable) have different business metrics from those of our OTC brands, so search queries through KAYAK and restaurant reservations through OpenTable do not contribute to our gross bookings.

Room nights, rental car days, and airline tickets reserved through our services for the years ended December 31, 2024 and 2023 were as follows:

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[["","","Year Ended December 31,","","Increase (Decrease)"],["(in millions)","","2024","","2023"],["Room nights","","1,144","","1049","","9.1","%"],["Rental car days","","83","","74","","12.3","%"],["Airline tickets","","49","","36","","38.1","%"]]
[[/GREPCENT_TABLE]]

Room nights reserved through our services increased in 2024 compared to 2023, driven primarily by increased travel demand in Europe and Asia. Rental car days reserved through our services increased in 2024 compared to 2023, driven primarily by year-over-year growth in rental car days reserved on Booking.com. Airline tickets reserved through our services increased in 2024 compared to 2023, driven primarily by the expansion of flight offerings at Booking.com and Agoda.

Gross bookings resulting from reservations of room nights, rental car days, and airline tickets made through our merchant and agency categories for the years ended December 31, 2024 and 2023 were as follows (numbers may not total due to rounding): 

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,","","Increase (Decrease)"],["(in millions)","","2024","","2023"],["Merchant gross bookings","","$","104,182","","","$","81,721","","","27.5","%"],["Agency gross bookings","","61,398","","","68,906","","","(10.9)","%"],["Total gross bookings","","$","165,580","","","$","150,627","","","9.9","%"]]
[[/GREPCENT_TABLE]]

Merchant gross bookings increased and agency gross bookings decreased in 2024 compared to 2023, due primarily to the ongoing shift from agency to merchant bookings at Booking.com. The year-over-year increase in merchant gross bookings in 2024 was also due to strong growth in gross bookings from merchant accommodation reservation services at Agoda and merchant flight reservation services at Booking.com and Agoda.

The year-over-year increase in total gross bookings in 2024 was due primarily to the increase in room nights and the positive impact from year-over-year growth in flight gross bookings, partially offset by a negative impact of foreign exchange rate fluctuations.

Flight gross bookings increased 28% year-over-year in 2024, due to airline ticket growth, partially offset by lower airline ticket prices. Rental car gross bookings increased 7% year-over-year in 2024, due primarily to rental car days growth, partially offset by lower average daily car rental prices.

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Revenues

Online travel reservation services

Substantially all of our revenues are generated by providing online travel reservation services, which facilitate online travel purchases by travelers from travel service providers.

Revenues from online travel reservation services are classified into two categories:

•Merchant. Merchant revenues are derived from travel-related transactions where we facilitate payments from travelers for the services provided, generally at the time of booking. These include transactions where travelers book accommodation, rental car, airline reservations, and other travel related services. The majority of our merchant revenues are from Booking.com's accommodation reservations. Merchant revenues include:

◦travel reservation commissions and transaction net revenues (i.e., the amount charged to travelers, including the contra-revenue impact of merchandising, less the amount owed to travel service providers) in connection with our merchant reservation services;

◦revenues from facilitating payments, such as credit card processing rebates and customer processing fees; and

◦ancillary fees, including travel-related insurance revenues.

•Agency. Agency revenues are derived from travel-related transactions where we do not facilitate payments from travelers for the services provided. Agency revenues consist almost entirely of travel reservation commissions from our accommodation, rental car, and airline reservation services. Substantially all of our agency revenues are from Booking.com's accommodation reservations.

Advertising and other revenues

Advertising and other revenues are derived primarily from:

•revenues earned by KAYAK for (a) sending referrals to OTCs and travel service providers and (b) advertising placements on its platforms; and

•revenues earned by OpenTable for (a) restaurant reservation services (fees paid by restaurants for diners seated through OpenTable's online reservation service) and (b) subscription fees for restaurant management services.

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,","","Increase (Decrease)"],["(in millions)","","2024","","2023"],["Merchant revenues","","$","14,142","","","$","10,936","","","29.3","%"],["Agency revenues","","8,524","","","9,414","","","(9.5)","%"],["Advertising and other revenues","","1,073","","","1,015","","","5.7","%"],["Total revenues","","$","23,739","","","$","21,365","","","11.1","%"],["% of Total gross bookings","","14.3","%","","14.2","%"]]
[[/GREPCENT_TABLE]]

Merchant revenues increased while agency revenues decreased in 2024 compared to 2023 due primarily to the ongoing shift from agency to merchant revenues at Booking.com. The year-over-year increase in merchant revenues in 2024 was also due to strong growth in revenues from merchant accommodation reservation services at Agoda. Advertising and other revenues increased in 2024 compared to 2023 due to growth in advertising revenues at Booking.com and growth at OpenTable.

Total revenues as a percentage of gross bookings was 14.3% in 2024, up from 14.2% in 2023 due to an increase in revenues related to facilitating payments, mostly offset by an increase in the mix of flight gross bookings, which have lower revenues as a percentage of gross bookings.

Operating Expenses

Marketing Expenses

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,","","Increase (Decrease)"],["(in millions)","","2024","","2023"],["Marketing expenses","","$","7,278","","","$","6,773","","","7.5","%"],["% of Total gross bookings","","4.4","%","","4.5","%"],["% of Total revenues","","30.7","%","","31.7","%"]]
[[/GREPCENT_TABLE]]

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Marketing expenses consist primarily of the costs of:

•search engine keyword purchases;

•affiliate programs;

•referrals from meta-search websites;

•other performance-based marketing, including social media marketing; and

•offline and online brand marketing.

Our marketing expenses, which are substantially variable in nature, increased year-over-year in 2024, to help drive additional gross bookings and revenues. Marketing expenses as a percentage of total gross bookings in 2024 were lower than in 2023 due to an increase in the share of room nights booked by consumers coming directly to our platforms, lower brand marketing expenses, and higher performance marketing ROIs, partially offset by increased spend in social media channels.

Sales and Other Expenses

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,","","Increase (Decrease)"],["(in millions)","","2024","","2023"],["Sales and other expenses","","$","3,120","","","$","2,744","","","13.7","%"],["% of Total gross bookings","","1.9","%","","1.8","%"],["% of Total revenues","","13.1","%","","12.8","%"]]
[[/GREPCENT_TABLE]]

Sales and other expenses consist primarily of:

•credit card and other payment processing fees associated with merchant transactions;

•fees paid to third parties that provide call center and other customer services;

•digital services taxes and other similar taxes;

•chargeback provisions and fraud prevention expenses associated with merchant transactions;

•provisions for expected credit losses, mostly related to accommodation commission receivables; and

•customer relations costs.

Sales and other expenses, which are substantially variable in nature, increased year-over-year in 2024 due primarily to an increase in merchant transaction costs of $242 million and an increase in digital services taxes and other similar taxes of $74 million. Merchant transactions increased year-over-year in 2024 due primarily to the ongoing shift from agency to merchant transactions at Booking.com. Digital services taxes and other similar taxes in 2024 were impacted by an accrual of $17 million related to Canadian digital services taxes related to the years ended December 31, 2023 and 2022 that were enacted in 2024 with retrospective effect. Sales and other expenses as a percentage of total revenues in 2024 were higher than in 2023 due primarily to the impact of increased merchant transactions, which grew faster than total revenue.

Personnel

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,","","Increase (Decrease)"],["(in millions)","","2024","","2023"],["Personnel","","$","3,354","","","$","3,294","","","1.8","%"],["% of Total revenues","","14.1","%","","15.4","%"]]
[[/GREPCENT_TABLE]]

Personnel expenses consist primarily of:

•salaries, bonuses, and stock-based compensation;

•employee health and other benefits; and

•payroll taxes.

Personnel expenses increased year-over-year in 2024 due to increases in salary expense of $163 million, as well as increases in employee health and other benefits expense and stock-based compensation expense. The year-over-year increase in personnel expenses in 2024 was partially offset by an accrual of $276 million related to the Netherlands pension fund matter in 2023. The year-over-year increase in personnel expenses was impacted by a 3% increase in employee headcount from approximately 23,600 as of December 31, 2023 to 24,300 as of December 31, 2024.

35

General and Administrative

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,","","Increase (Decrease)"],["(in millions)","","2024","","2023"],["General and administrative","","$","1,036","","","$","1,555","","","(33.4)","%"],["% of Total revenues","","4.4","%","","7.3","%"]]
[[/GREPCENT_TABLE]]

General and administrative expenses consist primarily of:

•fees for certain outside professionals;

•occupancy and office expenses;

•personnel-related expenses such as travel, relocation, recruiting, and training expenses; and

•certain travel transaction taxes.

General and administrative expenses decreased year-over-year in 2024 due to the accrual of a loss of $530 million related to a draft decision by the Spanish competition authority in 2023, which was subsequently reduced by $78 million in 2024 when the decision was finalized. In addition, the year-over-year decrease in general and administrative expenses in 2024 was due to the termination fee of $90 million related to the acquisition agreement for the Etraveli Group in 2023 as well as the settlement of certain indirect tax matters of $62 million in 2023. The year-over-year decrease in general and administrative expenses in 2024 was partially offset by additional expenses of $337 million related to the settlement agreement with the Italian Tax Authorities in 2024.

Information Technology

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,","","Increase (Decrease)"],["(in millions)","","2024","","2023"],["Information technology","","$","771","","","$","655","","","17.8","%"],["% of Total revenues","","3.2","%","","3.1","%"]]
[[/GREPCENT_TABLE]]

Information technology expenses consist primarily of:

•software license and system maintenance fees;

•cloud computing costs and outsourced data center costs;

•payments to contractors; and

•data communications and other expenses associated with operating our services.

Information technology expenses increased year-over-year in 2024 due to an increase in expenses related to cloud computing costs and outsourced data center costs, as well as software license and system maintenance fees.

Depreciation and Amortization

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,","","Increase (Decrease)"],["(in millions)","","2024","","2023"],["Depreciation and amortization","","$","591","","","$","504","","","17.3","%"],["% of Total revenues","","2.5","%","","2.4","%"]]
[[/GREPCENT_TABLE]]

Depreciation and amortization expenses consist of:

•amortization of intangible assets with determinable lives;

•amortization of internally-developed and purchased software;

•depreciation of computer equipment; and

•depreciation of leasehold improvements, furniture and fixtures, and office equipment.

Depreciation and amortization expenses increased year-over-year in 2024 due primarily to increased depreciation of computer equipment, as well as amortization expense related to internally-developed and purchased software.

36

Transformation Costs

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,","","Increase (Decrease)"],["(in millions)","","2024","","2023"],["Transformation costs","","$","34","","","$","\u2014","","","*"],["% of Total revenues","","0.1","%","","\u2014%"]]
[[/GREPCENT_TABLE]]

* Not meaningful

See "–Trends" above for additional information on the Transformation Program that we announced in November 2024. For the year ended December 31, 2024, the program related costs, which primarily consist of professional fees, are recorded in "Transformation costs" in the Consolidated Statement of Operations. See Note 20 to our Consolidated Financial Statements.

Other Operating Expenses

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,","","Increase (Decrease)"],["(in millions)","","2024","","2023"],["Other operating expenses","","$","\u2014","","","$","5","","","*"]]
[[/GREPCENT_TABLE]]

* Not meaningful

Interest Expense and Interest and Dividend Income

The following table presents the changes in interest expense and interest and dividend income for the years ended December 31, 2024 and 2023:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,","","Increase (Decrease)"],["(in millions)","","2024","","2023"],["Interest expense","","$","(1,295)","","","$","(897)","","","44.3","%"],["Interest and dividend income","","1,114","","","1,020","","","9.2","%"]]
[[/GREPCENT_TABLE]]

Interest expense increased for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to the amortization of debt discount related to convertible senior notes due May 2025 (see Note 12 to our Consolidated Financial Statements) and the senior notes issued in 2023 and 2024. Interest and dividend income increased for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to higher money market fund investment balances.

Other Income (Expense), Net

The following table sets forth the composition of "Other income (expense), net" for the years ended December 31, 2024 and 2023:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in millions)","","2024","","2023"],["Foreign currency transaction gains (losses)","","$","383","","","$","(348)"],["Net gains (losses) on equity securities","","63","","","(131)"],["Loss related to the conversion option on convertible senior notes","","(517)","","","\u2014"],["Other","","(11)","","","2"],["Other income (expense), net","","$","(82)","","","$","(477)"]]
[[/GREPCENT_TABLE]]

Foreign currency transaction gains (losses) for the year ended December 31, 2024 includes gains of $526 million related to our Euro-denominated debt and accrued interest that were not designated as net investment hedges and losses of $156 million on derivative contracts. Foreign currency transaction gains (losses) for the year ended December 31, 2023 includes losses of $163 million related to our Euro-denominated debt and accrued interest that were not designated as net investment hedges and losses of $106 million on derivative contracts.

See Notes 5 and 6 to our Consolidated Financial Statements for additional information related to net gains (losses) on equity securities.

See Note 12 to our Consolidated Financial Statements for additional information on the loss related to the conversion option on convertible senior notes.

37

Income Taxes

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,","","Increase (Decrease)"],["(in millions)","","2024","","2023"],["Income tax expense","","$","1,410","","","$","1,192","","","18.3","%"],["% of Income before income taxes","","19.3","%","","21.8","%"]]
[[/GREPCENT_TABLE]]

Our 2024 effective tax rate differs from the U.S. federal statutory tax rate of 21%, primarily due to the benefit of the Netherlands Innovation Box Tax (as defined below) and a reduction to the Company's 2018 federal one-time deemed repatriation liability, pursuant to the U.S. Tax Cuts and Jobs Act ("Tax Act"), resulting from a recent U.S. Tax Court decision in Varian Medical Systems, Inc. vs. Commissioner, partially offset by higher international tax rates, non-deductible expenses related to the convertible senior notes and certain other non-deductible expenses, unrecognized tax benefits, and U.S. federal tax associated with the Company's international earnings. Our 2023 effective tax rate differs from the U.S. federal statutory tax rate of 21%, primarily due to higher international tax rates, non-deductible fines, certain other non-deductible expenses, and U.S. federal tax associated with the Company's international earnings, partially offset by the benefit of the Netherlands Innovation Box Tax.

Our effective tax rate was lower for the year ended December 31, 2024, compared to the year ended December 31, 2023, primarily due to a reduction to the Company's 2018 federal one-time deemed repatriation liability, pursuant to the Tax Act, resulting from a recent U.S. Tax Court decision in Varian Medical Systems, Inc. vs. Commissioner, and lower non-deductible fines, partially offset by higher unrecognized tax benefits, non-deductible expenses related to the convertible senior notes, and a decrease in the benefit of the Netherlands Innovation Box Tax.

Under Dutch corporate income tax law, income generated from qualifying innovative activities is taxed at a rate of 9% ("Netherlands Innovation Box Tax") rather than the Dutch statutory rate of 25.8%. A portion of Booking.com's earnings during the years ended December 31, 2024 and 2023 qualified for Innovation Box Tax treatment, which had a significant beneficial impact on our effective tax rates for these periods. For more information, see Part I, Item 1A, Risk Factors - "We may not be able to maintain our 'Innovation Box Tax' benefit."

Results of Operations

Year Ended December 31, 2023 compared to Year Ended December 31, 2022

    For a comparison of our results of operations for the fiscal years ended December 31, 2023 and 2022, see Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 22, 2024.

38

Liquidity and Capital Resources

Our primary source of funds for operations is the cash flow that we generate from operations. We use our cash for a variety of needs, including ongoing investments in our business, share repurchases, dividends, repayment of debt, and capital expenditures. Our continued access to sources of liquidity depends on multiple factors. See Part I, Item 1A, Risk Factors - "Our liquidity, credit ratings, and ongoing access to capital could be materially and negatively affected by global financial conditions and events." Our financial results and prospects are almost entirely dependent on facilitating the sale of travel-related services. Marketing expenses and personnel expenses are the most significant operating expenses for our business. See our Consolidated Statements of Operations and "Trends" and "Results of Operations" above for additional information on marketing expenses and personnel expenses, including stock-based compensation expenses.

We believe that our existing cash balances, liquid resources, and access to capital markets will be sufficient to fund our operating activities, capital expenditures, and other obligations through at least the next twelve months.

Cash, cash equivalents, and investments

At December 31, 2024, we had $16.7 billion in cash, cash equivalents, and investments, of which approximately $9.6 billion is held by our international subsidiaries. Cash, cash equivalents, and long-term investments held by our international subsidiaries are denominated primarily in Euros, U.S. Dollars, and British Pounds Sterling. Our investment policy seeks to preserve capital and maintain sufficient liquidity to meet operational and other needs of the business. See Notes 5 and 6 to our Consolidated Financial Statements for additional information.

Deferred merchant bookings

Deferred merchant bookings of $4.0 billion at December 31, 2024 includes cash payments received from travelers in advance of us completing our performance obligations and are comprised principally of amounts estimated to be payable to travel service providers as well as our estimated future revenues for our commission or margin and fees. The amounts are mostly subject to refunds for cancellations.

Debt

Our revolving credit facility extends a revolving line of credit up to $2 billion to us. We are in compliance with the maximum leverage ratio covenant under the facility, which is a condition to our ability to borrow.

In 2024, we issued senior notes with varying maturities for aggregate cash proceeds of $4.8 billion. The proceeds from the issuance of these senior notes are available for general corporate purposes, including to repurchase shares of our common stock and to redeem or repay outstanding indebtedness. During the year ended December 31, 2024, we paid $1.1 billion on the maturity of the Senior Notes due September 2024.

As of November 1, 2024, holders of our convertible senior notes due in May 2025 ("May 2025 Notes") are entitled to repayment of the principal amount of the notes in cash, and if they exercise their option to convert, the note holders are entitled to cash payment for the conversion premium, which is the conversion value in excess of the principal amount, settled at maturity. During the year ended December 31, 2024, we paid $198 million in aggregate upon the conversion of the May 2025 Notes at the note holders' option.

The total outstanding senior notes at December 31, 2024 had cumulative interest to maturity (based on coupon interest rates) of $4.5 billion, with $546 million payable within the next twelve months.

See Note 12 to our Consolidated Financial Statements for additional information related to our debt arrangements, including principal amounts, interest rates, and maturity dates.

Share repurchases and dividends

See Note 13 to our Consolidated Financial Statements for additional information related to our stock repurchases, authorization limits, and excise taxes. During the year ended December 31, 2024, we repurchased shares of our common stock for an aggregate cost of $6.5 billion, including $345 million to repurchase shares of our common stock withheld to satisfy employee withholding tax obligations related to stock-based compensation. As of December 31, 2024, we recorded an estimated excise tax liability of $56 million for share repurchases in 2024. During the year ended December 31, 2024, we remitted excise taxes of $96 million for our share repurchases in 2023. We expect to complete the share repurchases under the remaining authorization of $7.7 billion of the program authorized by our Board of Directors ("the Board") in 2023 by the end of 2026, assuming no major downturn in the travel market. In January 2025, our Board authorized a program to repurchase up to an additional $20 billion of our common stock.

During the year ended December 31, 2024, we paid cash dividends of $1.2 billion. In February 2025, the Board declared a cash dividend of $9.60 per share of common stock, payable on March 31, 2025 to stockholders of record as of the close of business on March 7, 2025.

39

Commitments, contingencies, and other

At December 31, 2024, we had, in the aggregate, $986 million of non-cancellable purchase obligations individually greater than $10 million, of which $208 million is payable within the next twelve months. Such purchase obligations relate to agreements to purchase goods and services that are enforceable and legally binding, that specify all significant terms, including the quantities to be purchased, price provisions, and the approximate timing of the transaction.

At December 31, 2024, we had lease obligations of $756 million, of which $169 million is payable within the next twelve months. See Note 10 to our Consolidated Financial Statements for additional information.

At December 31, 2024, we had a remaining transition tax liability of $487 million as a result of the Tax Act, which included $257 million reported as "Long-term U.S. transition tax liability" and $230 million included in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheet. This liability will be paid over the next two years. Due to a recent U.S. Tax Court decision in Varian Medical Systems, Inc. vs. Commissioner, a portion of our total transition tax liability may be refunded. In accordance with the Tax Act, generally, future repatriation of our international cash will not be subject to a U.S. federal income tax liability as a dividend, but will be subject to U.S. state income taxes and international withholding taxes, which have been accrued by us.

See Note 16 to our Consolidated Financial Statements for information related to the $650 million standby letters of credit and bank guarantees issued on our behalf at December 31, 2024.

See Note 16 to our Consolidated Financial Statements and Part I, Item IA, Risk Factors - "We may have exposure to additional tax liabilities." for information related to certain tax assessments and other tax matters.

See Note 16 to our Consolidated Financial Statements and Part I, Item IA, Risk Factors - "Our business is subject to various competition, consumer protection, and online commerce laws and regulations around the world, and as the size of our business grows, scrutiny of our business by legislators and regulators in these areas may intensify" for information related to certain regulatory matters, and our other contingent liabilities.

See "–Trends" above for information on the Transformation Program that we announced in November 2024 to implement certain organizational changes, including the estimated annual run rate savings and restructuring costs and accelerated investments required for the program.

40

Cash Flow Analysis

Year Ended December 31, 2024 compared to Year Ended December 31, 2023

See our Consolidated Statements of Cash Flows for additional information related to our cash flows.

The following table summarizes our cash flows for the years ended December 31, 2024 and 2023:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["(in millions)","","2024","","2023"],["Net cash provided by operating activities","","$","8,323","","","$","7,344"],["Net cash provided by investing activities","","129","","","1,486"],["Net cash used in financing activities","","(4,204)","","","(8,909)"]]
[[/GREPCENT_TABLE]]

Net cash provided by operating activities for the year ended December 31, 2024 resulted from net income of $5.9 billion, a favorable net impact from adjustments for non-cash and other items of $2.1 billion, and a favorable net change in working capital and other assets and liabilities of $367 million. Non-cash and other items were principally associated with the loss related to the conversion option on convertible senior notes, stock-based compensation expense, depreciation and amortization, unrealized foreign currency transaction gains related to Euro-denominated debt, provision for expected credit losses and chargebacks, and operating lease amortization. For the year ended December 31, 2024, deferred merchant bookings and other current liabilities increased by $1.4 billion and accounts receivable increased by $506 million, primarily due to higher business volumes, partially offset by faster accounts receivable collections in 2024. Merchant revenues increased while agency revenues decreased for the year ended December 31, 2024 compared to the year ended December 31, 2023 due to the ongoing shift from agency to merchant revenues at Booking.com.

Net cash provided by operating activities for the year ended December 31, 2023 resulted from net income of $4.3 billion, a favorable net impact from adjustments for non-cash and other items of $1.3 billion, and a favorable net change in working capital and other assets and liabilities of $1.7 billion. Non-cash and other items were principally associated with stock-based compensation expense, depreciation and amortization, deferred income tax benefit, provision for expected credit losses and chargebacks, unrealized foreign currency transaction losses related to Euro-denominated debt, and operating lease amortization. For the year ended December 31, 2023, deferred merchant bookings and other current liabilities increased by $2.7 billion and accounts receivable increased by $1.3 billion, primarily due to increases in business volumes. During the year ended December 31, 2023, the Company accrued a loss of $530 million related to a draft decision by the Spanish competition authority and a loss of $276 million related to the Netherlands pension fund matter. The related liabilities are included in "Accrued expenses and other current liabilities" in the Consolidated Balance Sheet as of December 31, 2023. See Note 16 to our Consolidated Financial Statements for additional information.

Net cash provided by investing activities for the year ended December 31, 2024 resulted mainly from proceeds from the maturity of investments of $590 million, partially offset with additions to property and equipment of $429 million. Net cash provided by investing activities for the year ended December 31, 2023 principally resulted from proceeds from the sale and maturity of investments of $1.8 billion, partially offset with additions to property and equipment of $345 million.

Net cash used in financing activities for the year ended December 31, 2024 resulted mainly from payments for the repurchase of common stock of $6.5 billion, payments on the maturity and conversion of debt of $1.3 billion, and dividends of $1.2 billion, partially offset with proceeds from the issuance of long-term debt of $4.8 billion. Net cash used in financing activities for the year ended December 31, 2023 principally resulted from payments for the repurchase of common stock of $10.4 billion and payment on the maturity of debt of $500 million, partially offset with proceeds from the issuance of long-term debt of $1.9 billion.

Year Ended December 31, 2023 compared to Year Ended December 31, 2022

    For a comparison of our cash flow activities for the fiscal years ended December 31, 2023 and 2022, see Cash Flow Analysis in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 22, 2024.