Booking Holdings’ chief financial officer says the biggest AI spenders may not know the return on their investments, but his company is already seeing internal benefits from using the technology.
“I even think that the hyperscalers that spend hundreds of billions on the development of their large language models, they don’t really know what is going to be the ROI,” Ewout Steenbergen said Thursday at the Fortune AIQ Summit at the New York Stock Exchange. “They have maybe some assumptions and some hypothesis, but the whole point is, you don’t want to fall behind.”
Steenbergen told Fortune senior writer Sheryl Estrada that the uncertainty among hyperscalers can be an advantage for companies that use models rather than build them—provided they control costs. “The returns will be there for those processes that are being redesigned end to end,” he said, “but you also have to make sure that those costs on the other hand are not going out of control.”
Booking, which owns Booking.com, Agoda, Priceline, and OpenTable, is telling investors AI will make travel easier for customers and reduce marketing costs. Customer-facing benefits remain small: on the company’s Q2 call in August Steenbergen said referrals from large language models, paid and unpaid, were under 1% of total room nights. The clearer gains have been internal so far.
Watching the token bill
After two years of experimentation, Steenbergen said Booking is entering a phase of rebuilding processes “from a white sheet.” Customer service was the first area to be redesigned. Bookings are up at a high-single-digit rate while customer service costs are slightly down, he said, meaning the cost per booking has fallen “by a lot.” Customer satisfaction also rose. Booking’s roughly 9,000 engineers are getting about 30% more code into production, counting only merge requests that pass testing and quality control.
To keep AI spending in check, Booking uses what Steenbergen calls “effective model cost routing”—assigning basic or open-source models to simple tasks and routing complex tasks to more expensive models. Engineering groups are measured on total IT cost per merge request, which combines human and AI-token costs. Token spending can increase as long as the cost of each merge request reaching production declines.
“The hotel is still the hotel”
Steenbergen said AI will change how people plan and book travel, not the nature of travel itself. “I think fundamentally the way … travel will happen in the future is not going to change with AI, but what is going to change is the experience for travelers,” he said. “The hotel is still the hotel, and the airline is still the airline, and the rental car is still the rental car.”
Travelers visit about five platforms on average before booking, he said. AI could reduce that research and help manage disruptions—Booking calls that concept the “connected trip.”
About one-third of Booking’s customers arrive via paid channels such as search, social media, and metasearch sites, and the company spends $8 billion to $9 billion a year on those channels, Steenbergen said. Booking runs constant A/B tests and large optimization models to allocate that spending. The other two-thirds come directly, and the company is building AI features into its apps to retain them.
Booking’s customer-facing AI tools show modest early gains: users take slightly less time to book, convert at somewhat higher rates, and cancel a bit less often. “It’s very early stage, so it’s not a lot of data,” he said.
From transactional to high-frequency
Steenbergen said the bigger opportunity with AI is growth rather than cost savings. Asked about trip bundles, he said Booking is “more transactional” today and AI could make it “a much more high-frequency business.” He gave the example of proactively recommending itinerary changes when weather affects plans or suggesting activities that match a traveler’s interests to increase loyalty and brand value.
Early signs in Q2 back some of this: connected trip transactions—where travelers book more than one travel vertical for the same trip—grew at a low-double-digit rate at Booking.com. Merchant bookings reached about 73% of gross bookings, and Level 2 and Level 3 Genius members made up more than 30% of active customers.
Steenbergen said he uses AI personally at work. He described having an “AI coach” and two agents: a “strategic thought partner” that helps with board presentations and strategy, and a “critical equity research agent” that helps prepare for earnings calls. “No one knows this,” he said. “If I have to learn, and I have a coach, it’s very normal. Everyone has to learn.”
For this story, Fortune journalists used generative AI as a research tool. An editor verified the accuracy of the information before publishing.
This story was originally featured on Fortune.com.
Source: fortune.com
