Monik Kotecha
Insync Funds Management defies the gloom around COVID-19 and travel/tourism by retaining its holding in booking.com.
“Insync believes that bookings.com (as a major player) will get a huge share of the reservations traffic when people begin again to book and travel locally, then overseas,” said Monik Kotecha, CIO at Insync.
- Travel is still a global megatrend but clearly in the short term the industry is directly in the cross hairs of this crisis. We believe the megatrend will strongly reassert itself but obviously certain sub-segments will be structurally impacted for a long time, such as the cruise industry, whilst others will come out stronger, such as the online travel agents.
- Booking Holdings is the leading global online travel agency responsible for sending hotels nearly 850 million nightly hotel room reservations last year. They have 40% profit margins (we only invest in very profitable businesses here at Insync). The management team are intensely ROIC focused and if there is not demand for hotel rooms, which there will certainly not be this year, they will slash ad spending more or less dollar for dollar with revenue declines.
- They have a rock-solid balance sheet with $6 billion of cash on their balance sheet and $2 billion available on their already in place borrowing facility. Airbnb on the other hand, their most aggressive competitor, is barely breakeven. Airbnb may make it through but will come out the other side having been dealt a huge setback in their battle against Booking. Financially strong companies, such as Booking Holdings, come out of crisis with an even stronger competitive advantage.
- Even if external travel takes 12 months to recover, domestic travel will recommence much earlier and Booking is well positioned.
- There are reports of small online and offline travel agencies going out of business. Many hotels will also go bankrupt, but humans love to travel, and travel will return. When it does, hotels are going to be desperate to fill rooms and Booking is the #1 channel for hotels to source reservations. In a world in which hotels have been severely damaged economically by the crisis as people slowly regain comfort that it is safe to travel, Booking’s unmatched ability to source customers and deliver them to hotels on a commission basis will be more valuable than ever.
By Monik Kotecha, CIO