Booking and Airbnb have $22 billion in cash — how will they use it?

Big four online travel companies had about $34 billion in cash and equivalents on their books at the end of 2022 – and that’s significantly more liquid eateries than they had at the end of pre-Covid 2019.

Share buybacks, which increase shareholder values, are definitely high on the agenda in 2023 for most of these companies, although these transactions became a flashpoint due to all the layoffs they carried out before and during the height of the pandemic. Investor Warren Buffet has a different view on share buybacks.

But beyond the share buybacks, Booking Holdings, Airbnb, Trip.com Group and Expedia Group, among other online travel companies, have significant cash on the books for merger and acquisition activity and other investments in growth and technology.

Booking Holdings had the largest rainy-day fund at $12.2 billion at the end of last year, and added $1.4 billion to its stockpile this month by completing the sale of its stake in China’s delivery app and hotel aggregator Meituan. Airbnb was cash-rich with $9.6 billion, Trip.com Group had $8.7 billion when it last reported its cash coffers as of Sept. 30, and Expedia Group coveted $4.1 billion. (See attached diagram.)

Travel companies online Cash and cash equivalents as of 31 December 2022 versus 2019

Source: Financial records

* The chart shows Trip.com Group’s cash and cash equivalents as at 30 September 2022; the company will report annual results in a week.

What will Booking Holdings, Airbnb, Trip.com Group and Expedia Group, among others, do with their wealth?

Booking Holdings Eyes eTraveli Group Acquisition

With $12.2 billion in cash and cash equivalents on its books at the end of last year, and $1.4 billion added to its cash cushion this month from the Meituan share sale, Booking Holdings has plenty of strategic options.

Mergers and acquisitions – one in particular – are definitely on Booking Holdings’ agenda in 2023 if it can get the regulatory go-ahead in Europe. In November 2021, the company announced its intention to buy its aviation technology partner, Sweden’s Etraveli Group, for around $1.7 billion, but the European Commission is still reviewing the deal. By all accounts, subsidiary Booking.com’s several-year-old airline business, which is available in more than 50 countries, is going strong, and the acquisition will advance its so-called connected travel strategy.

Buyback of shares is a booking priority. It has $3.9 billion remaining on a $15 billion share buyback authorization, and after that intends to go ahead with another $20 billion go-ahead from the board.

“We expect to complete the share buybacks under a cumulative authorization of $24 billion over the next four years, assuming travel continues to recover and grow from here,” CFO David Goulden told analysts last week.

This leaves plenty of room for further acquisitions, which can of course also be financed in a combination of cash and shares. Booking has made many small technology acquisitions over the years, so this type of deal, in addition to paying down debt, always has potential.

With Booking apparently making progress in its bid to gain market share in the US, a potential deal to buy app-only and flight-oriented Hopper, with its young customer base and $5 billion valuation as of a year ago, would not be an original idea for Booking’s management. But Booking is already poised to strengthen its airline business with the pending acquisition of eTraveli Group, so it has enough on its plate.

CEO Glenn Fogel knows that sometimes the best deal is no deal, as mergers and acquisitions tend to be complicated and risky.

Airbnb will share buybacks and eye-buying opportunities

Airbnb co-founder and CEO Brian Chesky said in February that the company is “starting to really ramp up” its experiences business, which it downplayed during the height of the pandemic. But don’t expect a major acquisition by a company like Viator, owned by Tripadvisor, or GetYourGuide because their approach conflicts with Airbnb’s host-driven tour scenario.

With nearly $10 billion in cash hanging around, a less tech-oriented tour and activity transaction, or perhaps something in the luxury sector, could be a possibility. There are several property management companies that could be for sale, but Airbnb, being primarily a booking site, is in a much more lucrative business than the labor-intensive property management sector.

“Acquisitions of tours, activities and experiences like GetYourGuide or Klook are unlikely for Airbnb,” said Pranavi Agarwal of Skift Research. “Airbnb Experiences, unlike its competitors, is more focused on unique locally hosted peer-to-peer local experiences versus the more commercialized business of selling tickets to major attractions. The focus will be on incorporating experiences into their existing rental accommodation product with all host-oriented .”

Airbnb Chief Financial Officer David Stephenson told analysts during the company’s fourth-quarter earnings call in mid-February that the company would likely buy back more of its shares in early 2023, but mentioned the potential for acquisitions.

“Buybacks are likely to be the main use of cash this year, with half a billion dollars of their $2 billion buyback program (which was announced in August 2022) remaining to be executed,” Agarwal said. “But Airbnb is still very much a growth company, with a vision to expand into new verticals outside of short-term rentals, such as experiences, hotels and long-term stays. While investors can expect future buyback programs, I think we can certainly expect management to pursue M&A opportunities in these new segments, especially experiences.”

Airbnb, which recorded its first full year of positive net income ($1.9 billion) in 2022, has been disciplined to focus on its core short-term rental business since early 2020, when it stopped investing in its experiences and hotel businesses, such as . It may be cautious about casting a much wider net in 2023.

“We have $500 million left on the existing repurchase authorization and we expect that to be executed early in the year,” Stephenson said. “But obviously we’re also in — still in growth mode — like we’re using this balance sheet to make sure we can invest in growth for the business in the future. Obviously have enough cash for potential M&A opportunities, which may exist. And so in that extent to which we can return stock and cash to shareholders through share buybacks, which will be our primary vehicle as you would expect this year.”

Trip.com Group had $8.7 billion in cash

Like its peers, Trip.com Group may conduct some share buybacks in 2023, eyeing potential acquisitions given its $8.7 billion in cash on hand at the end of September.

Trip.com Group presented opportunities in the Middle East during the Skift Global Forum East in Dubai in December, and has big ambitions in the region. It is conceivable to take on a local player in the Middle East to spearhead growth, but will undoubtedly be heavily focused on reviving existing operations when China recovers from Covid-19 in 2023.

Will Expedia Group be too busy to make deals?

Expedia Group has been busy eliminating or downplaying brands in its portfolio in recent years as it tries to simplify operations, so major M&A activity is unlikely to be a high priority this year. But never say never, as they say.

In addition, the company has two major initiatives in the works for 2023: It must transition its Vrbo vacation rental unit to Expedia’s technology platform, and it plans to launch a new loyalty program that includes its major brands later this year. Why mess up the works with a big acquisition?

Expedia Group CFO Julie Whalen told analysts last week that the company plans to continue “opportunistically” buying back its shares in 2023.

Expedia Group had $4.1 billion in cash and cash equivalents at the end of 2022. It was the only company of the four we looked at that had less cash on hand at the end of 2023 than in 2019.

“This liquidity, combined with our strong free cash flow levels enabled us to maximize the return of capital to shareholders during the quarter by further accelerating our share repurchases to approximately $350 million or 3.7 million shares in the fourth quarter,” said Whalen. “This resulted in approximately $500 million and 5.2 million shares being repurchased since the end of September 2022. Even after these repurchases, we enter 2023 with large amounts of shares remaining under our existing authorization for future repurchases of approximately 18 million stock.”

Tripadvisor as an under the radar acquirer?

Tripadvisor made plans in early 2022 to potentially spin off its tours and activities brand, Viator, but those plans were apparently shelved as market conditions worsened, and in the meantime the company hired a new CEO, Matt Goldberg, who started there in July.

Goldberg has not fully articulated his plans, but one veteran investor said he would not rule out Tripadvisor pursuing a rollout strategy and trying to buy Berlin’s GetYourGuide to lead Tripadvisor’s tours and activities business.

Viator was the fastest-growing unit of Tripadvisor’s business last year, generating 171 percent more revenue in 2022 than it did in 2019. While GetYourGuide has raised $886 million in funding, it’s likely a smaller business than Viator, according to Crunchbase. and would be affordable for Tripadvisor, especially if GetYourGuide shareholders retained shares in the business after the merger, the investor maintained. Tripadvisor had $1 billion in cash and equivalents at the end of 2022.

He admitted that it would probably be a downer for GetYourGuide to pull it off. However, there is no indication that GetYourGuide is in anything other than growth mode, which casts doubt on this scenario.

Buyer or seller? Of course, it is not excluded that Tripadvisor itself could be acquired in 2023.

Photo Credit: Major online travel agencies have plenty of cash on hand in 2023.