Booking Holdings shifts revenue model as merchant bookings surge to $8.2B
The online travel giant's first-quarter filings reveal a fundamental change in how it collects and holds hotel payments, with merchant arrangements now representing nearly 67% of total revenue.
Booking Holdings has accelerated its transition away from traditional commission structures, with merchant revenue climbing to $3.70 billion in the first quarter of 2026, according to the company's quarterly financial disclosure. The figure represents a 26.7% year-over-year increase and marks a decisive shift in how the platform processes hotel payments.
Under the traditional agency model, guests settle payments directly with properties, which then remit commissions to Booking after checkout. The merchant model reverses this flow: Booking captures credit card details, holds funds throughout the stay, and later distributes payouts to hotels with fees already deducted. Agency revenue, by contrast, declined 2.3% to $1.53 billion during the same period.
Merchant transactions now account for approximately 72% of all bookings processed across Booking Holdings' portfolio, a five-percentage-point jump in twelve months. The arrangement's share of total revenue climbed from 61.3% a year earlier to 66.8% in the most recent quarter, underscoring what financial observers characterize as the phasing out of legacy payment structures.
The company's balance sheet shows deferred merchant bookings — funds collected from travelers before obligations to properties are fulfilled — reached $8.2 billion at the end of March, up from $6.9 billion the previous year. During an April earnings call, Booking's chief financial officer indicated that roughly $1.9 billion of the quarter's $3.1 billion in free cash flow originated from working capital changes tied to this growing balance.
The timing implications for hotel operators center on cash flow cycles. Properties receive payouts days or weeks after guest checkout, creating a gap during which revenue sits in Booking's accounts rather than hotel operating budgets. This lag peaks during high-season periods when properties simultaneously face elevated payroll, seasonal staffing costs, and supplier payment deadlines.
Processing fees associated with merchant bookings reportedly range from 1.1% to 3.1% depending on payout method and geography, covering payment processor costs and card network interchange, though Booking does not publish a standardized rate schedule in partner documentation.