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Booking Shares Slip on Weak Guidance Linked to Coronavirus

Olivia Carville

(Bloomberg) -- Booking Holdings Inc. gave a bleak outlook for the first quarter due to the spreading coronavirus that’s put a damper on global travel.The Norwalk, Connecticut-based online travel operator said room nights booked would drop 5% to 10% in the first quarter. Analysts were looking for an increase of 5%, having already lowered their expectations from earlier projections of 8% growth in mid-January. The company also said revenue would decline as much as 7% in the current period from a year earlier.

“The coronavirus has had a significant and negative impact across our business during the first quarter,” the company said in a statement Wednesday.

Booking has seen an increase in cancellations, a reduction in new bookings and pressure on average daily rates from the virus, the company’s Chief Financial Officer David Goulden said on the earnings call. “As you will know, it’s not possible to predict where and to what degree outbreaks of the coronavirus will disrupt travel patterns,” he added. Booking expects growth declines will continue through March.

The Covid-19 virus, which is on track to becoming a pandemic, sent the stock market tumbling 6% over two days earlier this week, and the travel sector is among those worst affected. Airlines have halted flights, hundreds of hotels have been shuttered and tourism reports estimate billions of dollars in visitor spending will be lost this year. The virus was first reported in China, but has since spread across Asia and into Europe and the Middle East. Its scale and spread has already dwarfed the SARS outbreak and health officials in the U.S. are bracing for an outbreak at home. Booking shares have dropped 19% this year and rival Expedia Group Inc., which has less direct exposure to China, has shed about 6%. Booking slid 2.4% in extended trading after the report.

China is by far the world’s largest source of travel, with more international departures than any other country, said Nicholas Wyatt, head of research and analysis for travel and tourism at GlobalData. “This is an extremely difficult thing to put a number on because we don’t know how long it’s going to go on for, how long restrictions will be in place for or how long it will take for consumer confidence to return,” Wyatt said.

More than 20% of Booking’s room nights were generated in the Asia-Pacific region last year, according to Cowen & Co. Kevin Kopelman, an analyst at the firm, said he expects “the whole year to be impacted.”

But it’s not just China. Booking is also “heavily exposed to travel disruptions in Europe, where it has a room-night exposure of over 50%, while in China it’s about 15%,” through its partnership with and ownership of Agoda, according to Bloomberg Intelligence analyst Rik Stevens.

A recent report from consulting firm Tourism Economics estimates the U.S. will lose 1.6 million visitors from China as a result of the coronavirus, a 28% drop for 2020.

In the fourth quarter, before the virus erupted, Booking did better than expected. The company, formerly known as Priceline, reported revenue of $3.34 billion, topping the $3.27 billion analysts were projecting. Room nights booked grew by 12% in the period, the company said in a statement, compared with the average analyst projection for an increase of of 9.47%. Profit excluding some costs was $23.30 a share, also better than forecasts.

Aside from the virus, Booking is also being squeezed by Alphabet Inc.’s Google and home-share startup Airbnb Inc.Last year, Google redesigned its hotel search function which pushed online travel companies down in search results and means they are no longer getting as many free clicks from travelers. Earlier this month, Expedia Chairman Barry Diller said Google was an “existential” threat to online travel agents. Airbnb also is a formidable competitor as the dominant player in the alternative accommodation market, forcing Booking to pumping resources into its vacation rentals segment to keep up. This is the fastest growing part of its business and now makes up 20% of total revenue. Booking, which is most well-known in Europe, has been running brand campaigns in the U.S. to drive customers toward its non-hotel listings.

(Updates with CFO comments in fourth paragraph)

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