The god of stock Buffett, more than 50 years of investment career, annualized income of nearly 20%, 20 years of total income of 40 times, and buy the following bull shares, you will far exceed Buffett.
Twenty years ago, if you had invested in Apple Inc, you would have earned about 100 times today; if you invested in Maotai, you could have earned about 100 times; if you invested in Amazon.Com Inc, you would have earned about 330times today. However, if you invest in Booking (formerly known as Priceline) for 20 years, with the highest growth rate, you can get 360 times higher returns than Yama!

Priceline, which was founded in 1998 and acquired Dutch hotel reservation site Booking in 2005, has seen its shares fall by as much as 23% since it changed its name to Booking in February. However, Booking still has a market capitalization of US $79 billion and remains the number one OTA (Online Travel Agency, online travel company) in the world, equivalent to 5.5 TRIP COM GRP LTD (US $14 billion).

Today, Booking has developed into an online travel giant covering six platforms: Booking.com, Priceline.com, Kayak.com, Agoda.com, Rentalcars.com and Open Table, providing global users with online booking services such as hotels, air tickets, car rental, travel packages and so on.However, the company's revenue comes mainly from Booking.com 's overseas revenue, and according to its 2017 results, 89 per cent of the group's overall gross profit comes from its international business, while the vast majority of its international business comes from Booking.com.

From the industry level, the rapid growth of Booking stock price is inseparable from the development of the entire online travel market. According to data released by the World Tourism Organization (UNWTO), the total number of international tourists around the world has more than doubled in the past 20 years. A research report by Joint Market Research (Allied Market Research) also predicts that the global online travel market will reach $1.09 trillion by 2022. Statistics statistics also show that the global tourism industry is growing substantially every year, and the online tourism industry is growing rapidly. Global online tourism sales are expected to reach $817.5 billion by 2020.

At the same time, Statistics also said that from 2008 to 2016, the number of Internet users booking hotels, air tickets and so on through online travel sites increased from 40.6 million to 64 million. The survey shows that these users are also increasingly dependent on travel review sites, such as travel review sites, and the proportion of American tourists who believe that travel review sites affect their travel choices increased by 10% between 2014 and 2015.

Despite the rapid growth of the online travel market, there are few OTA companies whose share prices are rising. The share price of Expedia, which is also in the online travel market, is far less developed than that of Booking. The two shares were the same in 2007, but there is a big difference a decade later.

Reverse pricing model to win the favor of customers

Although Booking was founded a year or two later than Expedia, it pioneered a C2B business model for online travel and provided an information platform for consumers and businesses. At the same time, Booking also created the "Name Your Own Price" model (customer reverse pricing) and applied for a patent. Under this model, after consumers make quotations for travel projects, hotels, car rentals, and even family financial services, Booking looks for merchants who accept customer quotations to meet customer needs.

This model also enabled Booking to expand rapidly in the online travel market in the early days, attracting a large number of users and enhancing user stickiness, thus maintaining a long-term competitive advantage. After all, consumers maintain a certain sense of novelty and satisfaction with things like "self-pricing". At the same time, this unique business model also effectively integrates a large number of resources to help consumers find satisfactory products quickly and effectively.

Now, however, the C2B business model has become a common business model for OTA, and the "Name Your Own Price" model is highly replicable (such as narrowing the search now). None of these can be the magic weapon of Booking.BookingThe soaring share price stems from its good performance after the acquisition of international business.

Acquisition and expansion of product lines to create OTA giants

Looking back at the acquisition process of Booking, it acquired Active Hotels, a British hotel reservation service, in 2004, and Bookings B.V, a Dutch online hotel reservation service, the following year, then merged into Booking.com and began to enter the European hotel market. In 2007, it acquired Agoda, an online hotel reservation company in Southeast Asia, and entered the Southeast Asian market. In 2010, it acquired TravelJigsaw, a British car rental platform, and then renamed it Rentalcars.com to consolidate its car rental business. The acquisition of travel search engine Kayak.com; in 2012 and the acquisition of restaurant reservation platform OpenTable in 2014 broadens its product line and completes business integration.Consumers' business of eating, drinking, playing and playing covers everything.

In addition to the five major platforms, Booking also acquired Buuteeq, a digital marketing service provided by hotels, Qlika, an advertising marketing company, Woomoo, a prototype design software company, Woomoo, a prototype software company, developed mobile applications for the Agoda website, PriceMatch, a hotel revenue management company, and AS Digitals, an Australian restaurant reservation platform. The most eye-catching is its strategic investment in Trip.com, China's largest online travel website, from 2014 to 2015.

These acquisitions are the development of BookingTo lay the foundation, it can be said that without these acquisitions, there would be no Booking today.According to the "online Travel Industry Analysis report" of CITIC's research department, the stock price gap between Booking and Expedia stems from Booking's acquisition of Booking.com and Agoda.com, which were originally comparable in 2007, but Booking quickly entered the international market after completing the acquisition.

Unique business model with a gross margin of up to 90%

Generally speaking, there are two main business models of OTA, one is Merchant (Wholesale) model, the other is Agency (Agent) model. Under the Merchant model, OTA cooperates with hotels, air tickets and other service providers to obtain goods at a fixed price and then sell them to users to earn the price difference. Under Agency mode, OTA provides a platform for consumers and travel service providers. OTA charges merchants a certain percentage of commission after the transaction is completed. In general, hotels are about 15%, 25%, and air tickets are 3%.

Traditional OTA companies generally adopt the Merchant model, working with hotels, air tickets and other service providers to obtain "inventory" from these suppliers and then sell them to consumers, who pay the service fee in advance. One of the advantages of this model is that it produces rich cash flow, but it also has many disadvantages, such as being unfriendly to consumers, the need for advance payment, refund costs, and so on; at the same time, because the supplier's bargaining space is limited, this model can not create higher profits for suppliers.

In contrast, the Agency model is more popular. On the one hand, consumers pay for the service without paying in advance; at the same time, suppliers can make a bigger profit from this model. After all, there is a price gap between selling the same service to consumers and selling it to OTA.

For OTA, the main cost of the Merchant model comes from procurement, obtaining "inventory" from suppliers. Since it is "inventory", there is a risk that it will not be sold. Compared with the Merchant model, the cost of the Agency model is obviously much lower, which only requires the basic platform maintenance costs.

Among these OTA companies, Trip.com and Expedia mainly adopt the Merchant model. Expedia's Merchant model earns 2-3 times more revenue than Agency, but the gap is narrowing, and nearly 50 per cent of revenue comes from Merchant, according to Expedia's latest earnings report. But Booking is different. Booking's revenue comes from Agency, Merchant, and advertising and other three major sectors. Among them, Agency is the main source of income, accounting for more than 70%.

Booking boldly adopted the Agency model when it expanded on a large scale around the world.According to Futu Research, the commission of Booking is significantly higher than that of its peers.And under the huge user group, it also obviously has the strength to charge high commission. Its order growth rate has been in double digits for a long time, according to Bloomberg.

High order rate and high commission result in Booking's high profit margin. Booking's gross margin has been as high as 90 per cent since 2015 and is even more exaggerated from 2017 to 2018, with gross margins close to 100 per cent, according to Bloomberg.

Summary

Although Booking suffered a fengshui problem and its share price went down all the way after the name change, the capital markets spoke highly of Booking, with Bloomberg targeting a price of $2256.61. And 25 analysts gave "buy" ratings, 12 analysts gave "hold" ratings, and no analysts gave "sell" ratings.

Morgan Stanley is also extremely bullish on Booking, forecasting order growth of 14% and 15% in the fourth quarter despite the general off-season and a significant downward trend in the order rate in the fourth quarter. And based on its estimated price-to-earnings ratio of 19 times 2020 GAAP, and taking into account the expected slowdown in the overall OTA market, Morgan Stanley has a target price of $2120.

However, according to the price-to-earnings ratio given by Bloomberg, the price-to-earnings ratio of Booking is comparable to that of Expedia, and not high among its peers.

If the overall economic environment runs well next year, Booking will continue to maintain a high growth rate, and its share price will probably continue to shine; but we cannot ignore the increasingly competitive OTA market, especially now that Airbnb is developing rapidly, and under its "characteristics" and "low commission rate", more and more hotels have indicated that they want to make changes in the commission rate. Marriott, Hilton, Accor and other high-end hotels are also trying to use various ways to increase the proportion of direct sales and reduce commission fees.

In addition, Booking also said in its financial report that it is facing many potential strong competitors, such as Alphabet Inc-CL C, Apple Inc, BABA, Amazon.Com Inc, etc., who have obvious advantages in resource integration and mobile devices. They should not only maintain their leading edge in the online travel market, but also give full play to the genes of their technology companies, and boldly compare themselves with Alphabet Inc-CL C, Amazon.Com Inc and Microsoft Corp. As for how to play, perhaps investors deserve to pay attention to.