Booking Holdings (NASDAQ: BKNG) emerges as an under-the-radar AI pick with the potential for significant growth in the travel industry.
In the world of artificial intelligence (AI), Microsoft has long been the dominant player. However, there is an emerging contender that investors should keep an eye on – Booking Holdings. While the company may not immediately come to mind when thinking about AI, its strategic focus on leveraging AI technology to enhance its travel platform has the potential to propel its stock to new heights. This article explores how AI can revolutionize the travel industry and why Booking Holdings is a stock worth considering.
AI’s Impact on the Travel Platform:
Booking Holdings operates as a platform that enables travelers to find flights, hotels, rental cars, and more. Traditionally, users would book each aspect of their trip separately. However, Booking’s management envisions a “connected trip” where users can book their entire travel itinerary on a single platform. To achieve this vision, the company has invested in developing its own AI-powered travel agent.
The Power of AI in Booking’s Strategy:
By training its AI to perform the tasks of a travel agent, Booking aims to streamline the booking process and encourage users to book all aspects of their travel on its platform. This strategic move not only enhances the user experience but also allows Booking to process customers’ payments, resulting in improved cash flow. The company’s focus on AI technology has already shown promising results, with free-cash-flow growth outpacing revenue growth over the past five years.
The Potential for Continued Growth:
Booking’s AI-driven approach has the potential to drive further revenue growth. As of 2023, merchant revenue, generated through payment processing, has surpassed agency revenue for the first time. However, merchant revenue currently accounts for only 51% of total revenue, leaving ample room for growth. Additionally, if Booking’s AI travel agent proves effective, it could incentivize users to book all their travel arrangements on the platform, further boosting revenue.
The Long-Term Benefits:
As Booking continues to leverage AI technology, its cash-flow growth is expected to outpace the market, potentially leading to market-beating returns. The company’s commitment to providing a seamless and comprehensive travel experience positions it well for success in the evolving travel industry.
While Microsoft often dominates discussions around AI, Booking Holdings presents an intriguing investment opportunity in the AI space. By harnessing the power of AI to create a connected trip experience, Booking is well-positioned to capitalize on the growing demand for streamlined travel platforms. With its focus on enhancing the user experience, improving cash flow, and driving revenue growth, Booking Holdings stands out as an under-the-radar AI stock poised for a bull run. Investors should consider adding Booking Holdings to their portfolios to benefit from the potential long-term growth of AI in the travel industry.