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Two travel giants raised $4 billion to ride out the pandemic. Only one needed it.

12/04/2020| 5:49:40 PM|

While they offer similar services and are global players, the two rivals are stronger in different geographies, which has also shaped the crisis's impact on their business.

For travelers looking to book a flight or hotel room, Booking.com and Expedia.com look a lot alike. Yet the two fared very differently when the coronavirus pandemic shut down travel, thanks to different strategies behind their websites.

Revenue has plunged at both Booking Holdings Inc. and Expedia Group Inc. this year. Each company moved quickly to raise about $4 billion in the spring to navigate the crisis. Expedia ended the third quarter with double the debt it started the year with, while Booking wound up with a bigger cash cushion.

The cash imbalance illustrates how differently the two rivals operated their online travel services. Expedia often collected cash upfront from hotel travelers, and when those customers canceled, the company had to pay them back. By contrast, Booking didn't charge upfront as often for hotel stays, so had less to refund when cancellations occurred.

"If you run out of your cash, it's like if you're a human being and you run out of blood. You're dead," Booking Chief Executive Glenn Fogel said in an interview. Early on in the pandemic, he said, Booking executives started looking at financial models to estimate how much they needed to survive for one or two years with no revenue. Booking sold $4 billion worth of bonds in April.

Though revenue plunged over the summer and the company had to issue some refunds, most of the cash Booking raised in the spring added to its reserves. Booking had $11.2 billion in cash at Sept. 30, about $4 billion more than it did on March 31.

Expedia, which generated about 80% as much revenue as Booking did in 2019, held a smaller cash cushion before the crisis and burned through much of the funds raised in the spring.

Expedia ended the third quarter with about $5.1 billion in cash, roughly what it held in the first quarter -- but significantly more debt. Where Booking's net debt -- or total debt minus cash and cash equivalents -- has decreased by almost half over that time, Expedia's net debt rose by 73%.

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TAGS: Booking | Expedia | Glenn Fogel | Peter Kern
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