.Analysis of Revenues
Difficulty: Advanced
Revenue Recognition Accounting Policy
Agency Revenues
Agency revenues are derived from travel-related transactions where Booking Holdings does not facilitate payments for the travel services provided. Agency revenues consist primarily of accommodation reservation commissions, as well as certain global distribution system ("GDS") reservation booking fees and certain travel insurance fees, and are reported at the net amounts received, without any associated cost of revenues. Such revenues are primarily recognized by Booking Holdings when the customer's travel is completed.
Merchant Revenues
Merchant revenues are derived from services where Booking Holdings facilitates payments for the travel services provided. Name Your Own Price® travel reservation services are presented in the income statement on a gross basis so merchant revenue and cost of revenues include the reservation price to the customer and the cost charged by the service provider, respectively. For all other merchant transactions, Booking Holdings presents merchant revenue on a net basis in the income statement.
Merchant revenue also includes ancillary fees, including damage excess waiver fees and certain travel insurance fees and certain GDS reservation booking fees, customer processing fees associated with merchant reservation services at priceline.com and agoda.com and are generally recognized by Booking Holdings when the customer completes his/her travel.
Merchant Retail Services: Merchant revenues for Booking Holdings' merchant retail services are derived from transactions where customers book accommodation reservations or rental car reservations from travel service providers at disclosed rates which are subject to contractual arrangements. Booking Holdings charges the customer at the time of booking and any amounts owed to the travel service provider along with Booking Holdings' deferred revenue are included in deferred merchant bookings. Reservations are generally refundable upon cancellation, subject to cancellation penalties in certain cases. Merchant revenue and the cost charged by the travel service provider for priceline.com, agoda.com and Rentalcars.com are recognized when the customer completes the travel. Revenue for Booking.com's merchant transactions is comprised of accommodation reservation commissions which are recognized when the customer completes the travel.
Merchant Opaque Services: Booking Holdings describes priceline.com's Name Your Own Price® and Express Deals® travel services as "opaque" because certain elements of the service, including the identity of the travel service provider, are not disclosed to the consumer prior to making a reservation. Name Your Own Price® services connect consumers that are willing to accept a level of flexibility regarding their travel itinerary with travel service providers that are willing to accept a lower price in order to sell their excess capacity without disrupting their existing distribution channels or retail pricing structures. Name Your Own Price® services use a pricing system that allows consumers to "bid" the price they are prepared to pay when submitting an offer for a particular travel service. Booking Holdings accesses databases in which participating travel service providers file secure discounted rates, not generally available to the public, to determine whether it can fulfill the consumer's offer. Booking Holdings selects the travel service provider and determines the price it will accept from the consumer. Express Deals® allows consumers to select hotel, rental car and airline ticket reservations with the price and certain other information regarding amenities disclosed prior to making the reservation. Booking Holdings recognizes revenues and costs for these services when it confirms the customer's non-refundable offer. In circumstances where Booking Holdings makes certain customer concessions, Booking Holdings accrues for such estimated losses.
Pursuant to the terms of Booking Holdings' retail and opaque merchant services, its travel service providers are permitted to bill Booking Holdings for the underlying cost of the service during a specified period of time. In the event that Booking Holdings is not billed by the travel provider within the specified time period, Booking Holdings reduces its cost by the unbilled amounts.
Advertising and Other Revenues
Advertising and other revenues are primarily earned by KAYAK and OpenTable and to a lesser extent by priceline.com for advertising placements on its website and Booking.com's BookingSuite branded accommodation marketing and business analytics services. KAYAK earns advertising revenue primarily by sending referrals to OTCs and travel service providers and from advertising placements on its websites and mobile apps. Revenue related to referrals is earned when a customer clicks on a referral placement or upon completion of the travel. Revenue for advertising placements is earned based upon when a customer clicks on an advertisement or when KAYAK displays an advertisement. OpenTable earns reservation fees when diners are seated through its online restaurant reservation service and subscription fees for restaurant management services on a straight-line basis over the contractual period that the service is provided.
Source: Booking Holdings Inc., Annual Report
Revenues as Reported
Booking Holdings Inc., Income Statement, Revenues
USD $ in thousands
Source: Booking Holdings Inc. Annual Reports
| Item | Description | The company |
|---|---|---|
| Revenues | Aggregate revenue recognized during the period (derived from goods sold, services rendered, insurance premiums, or other activities that constitute an entity's earning process). For financial services companies, also includes investment and interest income, and sales and trading gains. | Booking Holdings Inc.'s revenues increased from 2015 to 2016 and from 2016 to 2017. |
