Q4 2020 Booking Holdings Inc Earnings Call
[music].
Welcome to booking holdings for acquired there's no thoughts on shiny conference call booking holdings would like to remind everyone that this call may contain forward looking statements, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act with 99 five vs.
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<unk> earnings press release, as well as booking Holdings', most recent filings with the securities and exchange, finishing on.
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Site Www Dot booking holdings dotcom.
And now I would like to introduce booking holdings speaker for this afternoon, Glenn Fogel and David Golding go ahead gentlemen.
Thank you and welcome to booking holdings fourth quarter Conference call I'm joined this afternoon by our CFO David Gould.
Despite the traveling Bart Scott continues to be very challenging.
We closed out 2012 by delivering fourth quarter results that were a bit better than the expectations, we talked about on our last earnings call.
David will provide more detail on our fourth quarter results in his remarks.
On my time, I will first briefly reflect on our execution during the extremely difficult year of 2020.
And then I will share our thoughts on strategic priorities for 2021 and beyond.
Without a doubt 2020 presents the biggest disruption to modern global travel the world has ever seen.
On our results for full year 2020 were down substantially from 2019.
Travelers still booked 355 million room nights through our platforms during 2020.
And we remain profitable by generating approximately $880 million and adjusted EBITDA.
Delivering these results during this unprecedented and unpredictable year is a credit to our teams relentless efforts to provide the best volume surface to our traveler customers and to our supply partners, while all the time on meaning where do we focus on operating efficiently.
When we spoke to you on on earnings call in May of 2020, we outlined a series of plans that would help us navigate through the COVID-19 crisis.
First we said we would stabilize the business from the immediate shock of the crisis.
Second we said we would optimize the business for the expected decrease in travel demand over the next few years.
And third we said, we would position the business to be able to capture travel demand when it returns.
Based on our accomplishments in 2020, I can confidently say that we executed well against these plans.
In the beginning of the crisis, we successfully stabilized the business by taking several immediate steps, including Cui.
Quickly closing offices and smoothly transitioning to a distributed work environment to protect the health and safety of our employees, which was and continues to be a top priority.
Working closely with travelers and supply partners to process the unprecedented level of travel changes on cancellations.
And bolstering liquidity and preserving cash by halting stock buybacks cutting nonessential costs and raising over $4 billion in capital through a debt offering.
And we began the process and have almost entirely completed our work to optimize the business for the decrease in travel demand through the restructuring actions, we've taken on each of our brands across the company.
As a result of these actions our 2020 year end head count decreased approximately 23% versus 2019, primarily volume related positions.
We expect these reductions to result in annualized cost savings of about $370 million in personnel expenses with about $110 million of savings recognized in 2020.
Well our work is never done in terms of finding opportunities for cost efficiencies. We believe the head count reductions needed to optimize the business for the current demand environment are now generally behind us.
Finally, we believe we have positioned the business well for when travel demand returns.
We continue to make progress against our key strategic priorities during 2020.
This progress has continued as we've moved into 2021.
We remain active in performance marketing channels and are being agile and adapting our approach to this very uncertain environment.
And we will leverage our learnings from the past year to continue to capture demand in these performance channels at appropriate rois.
In addition, our marketing teams have been working hard to do that.
All campaigns and messaging, we will deploy when we believe the time is right to encourage people to travel once again and use our services.
But as we think ahead about 2021, there is considerable uncertainty regarding the exact shape and timing of the recovery for travel.
The rate of recovery will depend heavily on the rate of new Covid, 19 cases, including new potentially more transmissible and more dangerous variants and on the timing of effective and broad based vaccine distribution, which we believe will be a key step in helping people feel safe to travel again.
We are trucking early signs are encouraging summer booking trends in western Europe, primarily the UK and Germany relative to what we're seeing globally. Although in each case gross booking levels are still below where we were at the same point in time in 2019.
Well seeing green shoots of a summer booking season passes.
Certain whether these trends will continue.
We will see this summer bookings strength expand as the other countries and regions and of course, what are these advanced bookings will turn into stayed room nights or will be canceled.
What would be most helpful would be continued government action around the world to accelerate vaccine distribution, while providing direct and indirect support to the entire travel and hospitality industry.
Additionally, international travel remains extremely depressed and recovery will not be possible until government restrictions on international travel are listed were modified to travelers who can show. They are safe travelers are allowed to travel free.
As you know on inter.
International business has been a great advantage for us historically, and we expect it will be in the future, but we anticipate this to be a longer recovery.
Yeah.
We know that people have a very strong desire to travel we saw this firsthand in 2020, when we witnessed a strong improvement in our booking trends from the lows on April through the peak summer travel season, driven in part by pent up demand as people came out of Lockdowns.
Travel that was booked last year was much more domestic oriented than in prior years as many people adapted to the restricted travel environment still found a way to take a trip.
With many travel restrictions now in place around the World. We believe there is once again, a high level of pent up demand for travel.
When this demand will be fully unlocked is of course difficult to predict and will depend on vaccination rates and other factors.
Timing of the pickup in travel demand is beyond our control. We are focused on things, we can control primarily better positioning our business by continuing to invest and execute against our key strategic priorities, including expanding the payment platform at booking dot com.
Building out our connected trip capabilities and growing our market share in the United States.
Our integrated payment platform at booking Dot com provides payment options favored by both travelers and our supplier partners across hotels alternative accommodations cars flight and attractions.
Is strategically important as it enables merchandising capabilities that we haven't had access to historically at booking dot com, but we expect to utilize selectively in the future to help drive growth. In addition, this payment platform is foundational for needle our connected trip strategy.
We continue to make progress expanding the payment platform with approximately 22% of booking dot coms gross bookings in 2020 processed on the platform. This.
This is up from approximately 15% in 2019 and was less than 4% back in 2017. So this is a dramatic shift in a large scale business.
We are optimistic about recent improvements in our booking dotcom U S payment platform, which will enable increased utilization of payments in this critical market.
We expect to see a higher percentage of booking com's gross bookings processed on the payment platform in 2021 as compared to 2020 and expect these increases to continue beyond 2021.
Our connected trip vision as a multi part of offering including accommodations flight ground transportation and attractions and dining connected by our seamless payment network and ultimately supported by personalized intelligence to provide a frictionless experience for our bookers all the way from the initial book.
To experiencing their trip.
Building towards this vision, because we believe the connected trip will drive increased loyalty and frequency and will enhance the growth of our accommodation business to additional customer acquisition and merchandising opportunities.
Developing a robust flight product booking dot com remains an important strategic component of the connected trip is it gives us the ability to engage with flight bookers early in their travel journey and allows us an opportunity to cross sell our accommodations on other products to those bunkers in the coming years, we expect flights will rep.
Present, an increasing mix of our overall business, which will help drive incremental revenue and EBITDA dollars.
As mentioned in the past growing our share of the U S travel market remains a key strategic priority for our company as the U S is one of the largest travel markets in the world and we have historically under indexed there.
We are taking several steps to increase our competitiveness in the U S market and our focus on making sure we are offering great value to our customers improving our payments platform to enable bundling and merchandising opportunities increasing overall consumer awareness of our booking dot com to marketing and expand.
On our alternative accommodation supply.
Well, we have built a large and competitive alternative accommodations business globally. We believe we have a significant opportunity for improvement in the United States, which will involve product improvements supply acquisition and raising consumer awareness of this type of inventory on booking dot com.
Continuing to invest and execute against the three strategic priorities is what was capturing demand there's travel recovers will be our focus in 2021.
We believe successful implementation of these priorities is key to achieving higher growth rates, increasing market share and essentially building a larger business with higher earnings than we had prior to COVID-19 weeks.
We expect this larger business to have a higher mix of merchant transactions and non of combination products.
All of which will negatively impact our EBITDA margin rates, but we expect it to continue to lead the travel industry in this metric.
Finally, I wanted to address the European Commission's initial proposal from the digital marketing and digital Services Act released in December.
The European Commission has proposed regulations came to keeping markets fair and open which is an ambition that we support.
At the present time it is not known for certain what the ultimate rules will be how they might be applied but what the impact will be on us and other market participants we are engaged with stakeholders to work towards regulation that tackle the legitimate problems of the large gatekeepers and the digital economy of which we believe.
We are not what we do.
Update you on any area during future calls.
In conclusion.
There are still tough days ahead of us and everyone in the travel industry.
Covid case counts remain high and the wider global distribution of vaccines are still too slow.
Sure.
I am more confident than ever in our long term future and we will at some point see a strong recovery in travel demand.
<unk> believes that our company is very well positioned to capture this demand as it comes back.
On the meantime, we will focus on what we can control, namely investing in our business and executing against our strategic priorities to ensure we exit this crisis on our strong sources, which will enable us to build a larger and faster growing business for the long run.
I will now turn the call over to our CFO David Goldberg.
Thank you Glenn and good afternoon.
Ill review, our operating results for the fourth quarter provide some color on the trends we've seen so far on the first quarter and then discuss on expectations for 2021, and our longer term operating model.
To avoid the comparison to the initial spread on the pandemic in 2020, all growth rates for 2020, and 2021 are relative to the comparable period in 2019, unless otherwise indicated.
Information regarding reconciliation of non-GAAP results to GAAP results can be found in our earnings release now on to the results for the fourth quarter.
On all of them the earnings call. We discussed the trends we saw throughout the quarter and into early November including the year on year decline, maybe 40 revised worsening for about 43% in the third quarter to about 8% in October and then third deteriorating to about 70% over the seven days leading up to on November.
Call driven by rising Covid case, count on many European countries and governments beginning to respond with impositions on travel restrictions.
As a reminder reported room nights include the impact of cancellations.
The worst of the trends we saw in early November improves on resulting in a reported room nights declined 60% for the full quarter.
Member proved to be the low point for the quarter.
The decline in room night growth rates versus Q3 were driven by Europe, where growth rates decline quite considerably.
Looking across the other regions North America with so much Q3 on Asia on the rest of the world both improved compared to Q3.
North America was the strongest region in Q4 with a significantly lower year on year decline the room nights on the other regions.
Mobile bookings, particularly through our apps continues to gain share in the fourth quarter represented over two thirds of our total room nights in Q4 on about two thirds of 2020.
We continue just we also continue to seek rate increases percentage of our total room nights come to us through the direct channel.
Domestic room nights, representing about 85% of our reported room nights in Q4 up significantly versus 2019, which was just below 50%.
Our cancellation rates continued to be up year over year in the fourth quarter and also increased versus Q3.
We continue to monitor other changes in booking dot com customer booking behavior. So it makes for customers booking alternative accommodations in Q4 was slightly lower than Q4 2019, while the full year was up slightly versus 2019.
On a decline therefore mix of alternative accommodations in Q4 was due to the underperformance of the European region, which is where we have our highest mix of alternative accommodations that makes it alternative accommodation continues to increase year over year with Europe in Q4.
Bookings at Commvault Central coordination represented about 30% of its reported room nights for the full year 2020.
The booking window contracted versus 2019 in the fourth quarter on about the same rate that we saw in the third quarter as customers continued to focus maybe on the short term travel needs.
Gross bookings declined six 5% in Q4, which is a great decline in reported room nights due to the average day rates for accommodations decreasing about 15% year over year on a constant currency basis.
Consolidated revenue for the fourth quarter, $1 2 billion and decreased 63% year over year.
As we expected revenue in the quarter was less negatively impacted gross bookings Huston.
The fact that revenue benefited from seconds in Q4 from bookings, we received and the relatively strong third quarter.
Our full year revenue was also significantly less impact on gross bookings driven by the differences in the timing between fees and revenue would you recognize it checking primarily related to 2019 bookings the check in in Q1 2020.
As a result of these factors our full year revenue as a percentage of growth bookings with 19, 2%, which is significantly higher than the 15, 6% in 2019 and 2018.
Total revenue as a percentage of gross bookings in 2020 to be in line with 2019 revenue would it be more than $1 billion low up for the full year.
The difference between 15, 6% and 92% is almost entirely explained by this timing difference.
The 63% reduction in revenue resulted in adjusted EBITDA loss of $38 million in the fourth quarter.
While we significantly reduced our variable expense line like marketing sales and other more fixed expenses decreased to a lesser extent in Q4.
As Glenn mentioned, we are almost entirely completed our restructuring actions reduced personnel expenses to align our cost structure with the new demand environments.
Savings recognized in our personnel expense line related to these actions was about $70 million in Q4.
On a $10 million for the full year.
We recorded charges of $74 million and $149 million related to these actions and the restructuring on other exit cost line for Q4 on a full year respectively.
Marketing expense, which are highly variable expense line decreased 61% year over year, you saw a significant reduction in demand in the pay channels. In addition, we substantially reduced our brand marketing spend in response to the travel demand environments.
Sales and other expenses decreased 45% year over year, primarily due to reduction in expenses associated with payments transactions, partially offset by a mix shift in customer service to outsource call centers.
Personnel expenses decreased 13% year over year.
Primarily due to the restructuring actions I mentioned previously.
G&A expenses decreased 36% year over year, largely driven by reduced discretionary spend in such areas as Chile, lower indirect taxes on low office expenses due to employees working remotely.
Information technology expenses were up 1% you have you on the fourth quarter due to investments in software license fees license to cyber security and privacy software.
Finally, we broken out restructuring charges separately and operating expenses in the P&L.
These restructuring charges are included in our non-GAAP.
Results.
We recorded a non-GAAP net loss of $23 million in the quarter.
Our full year non-GAAP tax rate of 42% with meaningfully higher throughout 2019 tax rate of 19% due to the greater impact on non tax deductible expenses on a log based on earnings as well on the geographical distribution of earnings and losses on.
Our Q4 non-GAAP tax rate was driven by a change in our full year tax provision falling faster than expected pre tax results in the fourth quarter.
On a GAAP basis, we had an operating loss of $153 million in Q4, we recorded a GAAP net loss of $165 million in the quarter as the benefit from an unrealized $553 million pre tax gain on our equity investments primarily related to our investment in metro was offset by income tax expenses of $410 million.
$98 million of interest expense of $61 million of FX Remeasurement losses, our eurobond.
Excluding the unrealized gains on the related losses from our non-GAAP results.
The $410 million of income tax expenses is primarily due to the discrete tax expense related to the metro on unrealized gain on the change in our full year tax provision following the better than expected results in the fourth quarter.
Our full year GAAP tax rate of 19% with meaningfully higher 2019 tax rate of 18% due to the reasons mentioned from non-GAAP tax rate with the non deductible goodwill impairment charge driving additional significant impact.
Now onto our cash on liquidity position.
Q4, ending cash and investment balance decreased to $14 8 billion from our September ending balance of $14 9 billion.
Due to operating cash flow largely offset by the unrealized gain on our long term investments.
We had $557 million operating cash outflow in the quarter driven primarily by changes in working capital, which represented a use of cash of about $400 million in the quarter as well as the net loss reported in the quarter.
Change in working capital driven by seasonal effects are amplified by the slowdown in bookings from Q3.
We will continue to focus on maintaining a strong liquidity position given the high level of uncertainty created by the Covid pandemic and consistent with our comments last quarter, we've halted repurchase our stock on will not initiate repurchase until we have better visibility into the shape and timing of a recovery.
Now on low cost for the first quarter and to remind you we will make comparisons with 2019 unless otherwise indicated.
That continues to be considerable uncertainty about the shape and timing of the recovery for travel which means we're unable to provide detailed guidance at this time.
Giant room night declines were slightly worse in Q4, driven by the increasing spread of COVID-19, including the new strains with associated additional travel restrictions.
However, I'll get on.
The middle of January we saw an improvement in room night decline driven by domestic travel bookings in most parts of the world.
And we've seen this improvement continued into February.
In recent weeks some regions have improved back of pulp the domestic room night growth.
While difficult to predict with accuracy, if the domestic room night trends don't change to improve she won't room night declines could be a few percentage points better than Q4.
To give you a snapshot of what we're seeing reasonably good about declines of last seven days, we're about 50%.
In Q1, the overall booking window is contracted versus 2019, although to a lesser extent that we saw in the fourth quarter.
Western Europe in January we saw an expansion of the booking window versus 2019 on we've seen this expansion continued into February as the share of our bookings, including those just on travel has increased.
Glenn noted in Western Europe, particularly in the UK and Germany, we have recently seen strongest on our booking trends relative to what we're seeing globally and in these countries gross bookings for the summer period, all in 25% of where they were the same time in 2019.
The stronger booking trends in Western Europe are currently being offset by weaker near term booking trends in the region due to the extensive travel restrictions I mean, we remind you that the significant majority of its summer bookings are comparable.
We're also encouraged to see that some countries on making notable progress on vaccinations, including Israel, UAE and the U K.
They weren't vaccinations are broadly available on when travel restrictions are lifted people will return to travel.
So what's happened recently in Israel with vaccination rates are the highest in the world on after the National Lockdown Israel was he's on February 7th we quickly saw domestic bookings returned to solid double digit growth versus the same period in 2019.
Turning to the income statement on I said, we expect fewer room nights.
We won't provide declines could be a few percentage points better than Q4, we expect Q1 gross bookings decline a few percentage points more the room nights due to continued pressure on local currency and yards.
We expect Q on revenue declined slightly more than gross bookings assuming bookings continued to improve for the rest of the quarter.
We expect marketing expense in Q1 will decline at the same level as gross bookings.
We expect sales on expenses in Q1 will be similar to what they were in Q4 on a dollar basis.
Some variability based upon where Q1 volume plan.
We expect to close the deal expenses in Q1 will be slightly higher than they were in Q4 on a dollar basis, primarily due to increased SBC expenses and seasonal increases in benefit costs.
Offset by a higher amount of savings in Q1 related to the restructuring actions. We've taken we expect the almost a full run rate from a personal restructuring will be realized in Q1.
We expect G&A expenses in Q1 will be about the same as you were in Q4 on adult basis, we expect that expenses will be higher than they were in Q4 on dollar basis, primarily due to increased investments in security data privacy and some operational system announcements.
We are currently we currently estimate the remaining restructuring charges related to auction into booking dot com will be about $40 million on them.
We expect record more than half of these remaining charges in the first quarter about half of the $40 million relates to personnel related actions on the other half relates to real estate.
Given what we just explained and remind you Q1 is our seasonally lowest revenue quarter. We expect to report a great EBITDA loss in Q1 down in Q4.
For the full year 2021, I want to briefly walk you through some factors that we expect will impact on top line operating margins for the year.
We expect the environment to travel improve during 2021, but the shape and timing of that recovery remains uncertain. We expect occupancy rates to remain below where they were pre COVID-19, putting continued negative pressure on ADR, which will result in a gross bookings being lower than on room nights.
I don't know what that Elliot on our revenue was less negative impact on gross bookings in 2020 due to timing factors, which benefited our 2020 revenue by more than $1 billion.
The opposite Dummitt, obviously timing will happen when we experience acceleration in bookings, which lead to our gross bookings recovering faster than revenue.
Said another way.
If we see this acceleration in 2021 there'll be more bookings made in 2021 total checking in 2022 and there were bookings by 2020 that checked it in 2021.
This timing factor could have a meaningful impact on our revenue on a substantial gross bookings, but exactly how meaningful this impact will be dependent on how quickly our room nights on gross bookings accelerate in 2021.
Usually as differences in the timing of bookings versus checking we also expect deleverage on marketing spend in 2021 as we incur the majority of on marketing spend it at the time of booking.
The most significant expense items itself other payment processing costs and outsourced customer service expenses, we expect sales and all that to be lower in 2021 and 2019, the reduction will be smaller on the reduction in revenue.
If you go on to help you think about all less variable expenses to 'twenty 'twenty, one on how they'll most likely come back with 2019.
We expect G&A to be down double digits versus 2019, because by Kenny Austin occupancy expenses with some variability from DST taxes nuance are enacted during the year.
Personnel expenses are likely to be quite similar to 2019 on a dollar basis.
You understand it better there are a few factors that contribute towards this.
Personnel expense run rate immediately before Covid hit was about $200 million higher than 2019 actual personnel expenses.
Less than half of this which is the annualized <unk> of people expense during 2019.
And the rest with some people expanding the business in the first quarter of 2020.
Our restructuring actions will reduce head count expenses by approximately $370 million the impact of these two together will be to reduce personnel expenses by $170 million versus 2019.
As we continue to invest in the business, we expect 2021 youre on head count to be a little higher than at the end of the end of 2020 with a mix shift towards profit and technical positions. This will add about $100 million in personnel expense in 2021.
And finally SBC is expected to be higher than 2019 due to due to a few factors, including the modification of some stock awards in Q1 2021 on the issuance of stock options in 2020.
Finally, <unk> expenses in 2021 will be higher than in 2019 due to investments in security privacy and operational system enhancements to support our connected trip strategy.
As we think beyond 2021, we're looking forward to being a larger business with more diverse offerings and we're more earnings than we have prior to Covid. We're also focused on the potential for higher growth on market share.
We continue to believe if we use in the quarter.
Before Howard tends to pre COVID-19 levels.
And when considering the shape of the business that time I'd like to draw your attention to two factors.
The first is a mix shift within the business the.
The continued growth of payments on the growth of flights and other connected vehicles will add revenue on EBITDA, but at much lower margin rates than traditional accommodations.
Payments will add to revenue.
<unk> expenses in sales and other plus some additional personnel on the other expenses flights.
Vehicles will add to bookings and revenue.
But on lower take rates down on accommodations on will also require added personnel.
Other expenses as the business scales.
The second is personnel.
The restructuring actions, we took in 2020 with mainly in volume related functions, including customer service and credit collection.
This means that as volumes grow beyond the levels. We are expecting 2021 will need to add expenses back the business as.
As we've mentioned before we'll look to do this and cost efficient ways, but the work will come back.
We think it is important to include these considerations when thinking about the future shape of the business.
Glenn said, we expect to continue to have industry, leading EBITDA margin rates, albeit most likely at levels below those in 2019.
In conclusion, we remain focused on what we can control and continue to execute against our strategic projects. We now more confident than ever the foods actions will emerge in this crisis in a stronger position will now take your questions embraced I'll turn it over to you open the line for questions.
Thank you as a reminder to ask a question you want me to grasp on then the number one on your telephone tag on.
On your question Please press <unk>.
Your first question comes from the line of Lloyd Walmsley from Deutsche Bank. Your line is open.
Thanks for the questions I guess a couple first just following up on on those last comments you made David on margins I guess.
Obviously, a lot of the a lot of the reductions you've seen as you said Ben kind of variable related to business are there is there anything that youre kind of just learning to do better more efficiently.
It might result in kind of.
Better.
Cost line items as a percentage of revenue coming out of this on the other side.
And then I guess the second one I was.
Curious if you guys expect any impact to your performance marketing spend efficacy from kind of upcoming changes in Apple's iOS 14 that may impact re targeting.
Anything you guys expect there thanks.
Yeah, why don't I take the first one on then Glenn if you want to take a start on the second one so on the efficiency side.
Always looking for ways to become more efficient within the business as I mentioned, we have reduced these variable costs the tune of about $370 million.
As they come back we will look more efficient ways of getting that worked on the web.
Come back it won't come back this year, we placed you rightsize our sell through what we think will be through 2021, but as volumes extend beyond what we think 2021 is likely to bring those costs will come back. So we will look at more efficient ways to do some of those variable.
The races in terms of location technology.
We do have an inside or whether we deploy more partner resources et cetera.
We also continue to look at how we can drive efficiency in our fixed cost part of the business that has not been a major focus for the last 12 months. The major focus been surviving Covid I think we've done a good job on that but we do continue to kind of look at our costs across all personnel base across all real estate across our technology portfolios across.
Things like procurement.
<unk> continues to drive efficiencies within the business. So when we get to a more normalized environment not somebody else. We can also take a look at driving as well.
And Lloyd.
Your questions are good one because we continue to see changes not only by companies like Apple, making changes as you just mentioned, but Google doing differences in government certainly talking about laws and regulations about cookies and all sorts of things that impact different ways that people do marketing in particular performance marketing.
And different things and that can impact our companies certainly in the short term and we're all just looking and trying to evaluate what do we think this on me for any one of these things.
But the thing that I would really focus on is that change can also be good. We believe that we have some of the best marketing people in the world in terms of digital marketing. So when changes happen. We can make adjustments. We can make changes we can do things faster and better than we have so much data to test with that we believe we can actually come out of these things sometimes.
Rock than we were in the past so right now there is something I can say in terms of impact are not accepted so far as.
Just say, we've been adapting and changing as this world of digital market has been changing for 20 years and we've kept on top of it and so on.
I am so confident that we will be able to make any adjustments we need to make for the future.
Alright, thank you.
Thank you and your next question comes from the line of Justin Post from Bank of America. Your line is open.
Great. Thank you a couple of questions first Airbnb success has been hard to Miss but just wondering how you think about your market share within.
Within Europe, and your position with larger hosts maybe than smaller individual hosts and what that means on a recovery and then secondly, Glenn would love to hear about your thoughts on suppliers, obviously, a lot of pain in the travel industry. How can you help suppliers in the recovery and do you think youll be getting.
More promotional activity from suppliers, maybe better take rate. So anything we can think about on that front. Thank you.
Sure. So in regards to the home and more alternative accommodations, we like to call on Europe, I don't think we've talked much about regional exact.
Sure and I'm, not going to hear but I certainly.
You talked a little bit how Europe is our strong hold on that area were better they are in the home area other areas, but throughout the world.
I think I can say to you that we are better on things that are less single property. We always wanted to increase the single property because we know that's an area where we can improve cost. So that is an issue right now.
<unk>, there certainly was a bit of a shift for some people that they wanted to be isolated away from other people. So certainly there was more demand in the past for the single home area that showed up much more on the U S for I'll say that in Europe, because Europe, we do have.
A greater amount of our home supply is the sale property than say in the U S bookings there we're going to continue to focus on and I do believe right now in the environment. There is that is a great product to have up on the shelf that being said in the future. We will see how much that may change or things go back more towards they used to be.
Where there is a different split between homes and hotels.
To your second question about relationship with hotel suppliers, obviously, we're doing everything we can help our partners and that's coming up with new ways to come up with promotions that they wanted to do telling them. When we think there are spots on demand that they can come up with Jim and types of closed user group.
Price if they can help get them more demand coming out with ways that they can put together things in content in terms of safety and health so that a travel as it looks on our site. She is their hotel as soon as that is a safe place to go do all different things with them to try and improve.
Their business is very difficult right now as you know, though because let's face it unless as she had demand that you can have the greatest content in the world, but people don't field trials.
But we're not going to travel, but we're going to continue to do that I do believe in terms of relationships certainly as a distributor when there is less demand we are more valuable as a partner to them in a time when there is very very high occupancy rates any hotels, well I don't need the distributor nearly as much.
When they don't have as much occupancy rates then they start looking for demand and we have the benefit of being the largest platform for hotel demand in the world. So we have a place for them to come and get some more of that incremental demand and we're continuing to work with them to make sure. They do their best to get it.
Great. Thank you.
Okay.
Thank you on your next question comes from the line of Kevin Kopelman from Cowen Your line is open.
Great. Thanks, a lot I just had some follow ups on your comments about gaining market share in the U S can.
Can you talk more about.
Yeah.
On your focus there do you consider it an increasing.
Priority for the company compared to the past year or two.
And on the marketing side of that that you mentioned do you anticipate being focused more on brand our performance marketing.
Well, let me let me start with the first one Kevin we absolutely have.
Are you going to focus more on the U S. It's always been a pause so don't get me wrong in that area, but certainly we've made a couple of changing share focusing more specifically in the U S. Yes.
Scaled the company over many many years, we had a very global approach and we try not to make changes solely for any particular market really believing that scaling. This business can inhibit the same what's the best way to achieve a very very large global share of the business that being said, we've come to a state where we recognize that.
There continue to be under index in the U S and maybe we need to make some changes there, which we are doing and I think that we will make some progress on that.
In terms of whether we're going to do on brand performance marketing I'm not going to give away. The playbook here I will say, though we absolutely are doing the things I talked about in my prepared remarks insurance, obviously, we do want to increase awareness, we obviously want to increase.
The total amount of supply increase our ultra is a combination do all the things that are necessary to make sure. We're getting our share of the business that we believe we should be getting.
Got it that's great and then just a quick clarification on that.
The statistics you gave about the past week being down 50% is that a year on year year over year numbers and if youre looking at 2020.
Those numbers are affected by the initial COVID-19 waves at all.
Kevin.
Everything is on.
Oh two years number.
Okay perfect.
I gave you was because that way you can make a direct comparison with how things are doing relative to the dollar.
In Q4 continued the trend line you can do the math yourself to figure out what it might have on your day on Korea.
Number everything was perfect in the regional numbers that you gave or was that based on where the accommodation is located or where the customer is located.
We gave you a regional flavor or color that is typically based upon where the customers located it's a book, it's a booker region view.
Perfect. Okay. Thank you so much.
Thank you next up we have Eric Sheridan from UBS. Your line is open.
Thank you so much maybe two if I can following up on the comments you've made around brand and maybe some of the changes we'll see in digital advertising, whether it be first party data third party data how important do you see the concept just sort of a widening your brand with consumer maybe even building greater depth in loyalty and rewards program.
Going forward, especially if you're aiming against sort of a wider revenue pool and a wider product set love to get your thoughts there Glenn and where the world has begun to open up a little bit where you have some exposure can you give us a little bit of a sense of how you've sort of the piece of leaning back in to marketing channels and that deleverage that may be.
You guys are calling out as things get better just so we could better understand a little bit of a timing mismatch there. Thanks so much.
So Barry loyalty.
Loyalty is.
Sure thing because it really touched on something that we talk about a lot is bringing people home direct to us and we've talked about this numerous times on how we believe getting people to come back to us directly as a critical part of our strategy going forward is certainly one of the ways. We do that is by providing.
Our loyalty version, which is our genius program at booking Com, which really does we believe it gives some real value to consumers and that's something that we're going to continue on because in the end because an awful lot of money as we know to get a new customer it's cheaper to keep we're going to keep on doing all the things we can keep people coming back direct.
And Youre right about first cookie first part.
These third party all these different ways that we worry about how we're going to get people to come in the future certainly important to get new customers, but also real important to keep them coming back in regards to your second question.
One of the things I mentioned on <unk>.
Certainly the world is right now and one of the things you're trying always to do is make sure you are spending money to match the car.
Revenue growth.
You pay the money upfront person books, but because so much of the business. Nowadays is being done on things that are cancer ball you don't know when change happens all of a sudden money spent it does.
It ended up any increase.
Revenue you thought it was on your ROI on some very different so we have to look at this very carefully and we are approaching it in a cautious way on the.
The other hand, we don't want to be slow to the increase in demand and something we look at all the data very very closely that's about the best I can say is that.
How we're handling it right now we can't give you anything more than because we don't know what the future is going to be quite yet.
And then Glenn just a little on Eric.
Eric Eric just to give you a little bit more color to the answer.
The deleverage you mentioned in 2021 on performance marketing is not us calling rois per se, it's to do with the timing that I talked about whether in fact, we expect to basically spend money in 2021 for low revenue that will revenue in 2022 on that phenomenon is what will drive the deleveraging in 2021, we talked about.
Full force marketing just to clarify.
Understood. Thanks, Thanks for all the color.
Thank you next up we have Doug Anmuth from Jpmorgan. Your line is open.
Great. Thanks for taking the questions Glenn just as travelers are coming back to the platform and some of them for the first time, perhaps in several months or a year I'm. Just curious what you think youll see thats most significant in terms of how the product has changed or the experience has changed as it connected trip or.
Or something else and then secondly, just wanted to get your view on.
The subscription based programs that we're seeing across the space.
For travelers.
Sure.
Sure. So one of the things that somebody may not have seen before and we talked about on last quarter's booking dotcom selling flights. For example, that's a great thing in the past we did know now they come back they'll look they saw flights, which is a great thing. Another thing that we continue to build out our attractions area not a lot of people are actually buying attractions right.
But we haven't stopped getting more and more places in more and more content. So that when people do come back they'll have attraction that they can buy from us and what they obviously see with visa waiver combined it is putting things together on the way we're trying to create value for our consumers. So I think that's part of it we're really still on the very very early.
So this journey, but it is something that is pretty excited to see it build out and seeing those people are buying flight sucks. It was actually on a subscriptions model that people are beginning to explore such I don't really have a lot of comments on that it's something that people are doing SaaS, all we'll see how it plays out.
David do you have anything you want to say on that low.
No no for the Congress see how they play out.
Our model the way Robert.
Is the model we think is.
Certainly very attractive and has been successful for us in the mid <unk>.
You say well, what schwab and these other spaces.
Okay. Thank you.
Yeah.
Thank you. Your next up we have now good cash from tourists Churros Securities. Your line is up on.
Yeah, Hi, Thanks, a lot.
I just wanted to ask a question on on on on Air bookings. So.
Air tickets so the number was positive.
And this kind of free environment I think that's pretty impressive maybe are there any insights you can share in terms of the.
Neither of those who might be seeing on integrating their.
Tickets on your booking com site in Europe.
And then the other question I had was just on the.
Attractions and experiences.
And with the increased selection that you are driving is it mostly through partnerships.
Now you are signing up on.
Direct relationships, how should we be thinking about that.
So in terms of air bookings in the car.
On a little muddled muddled at the end so I don't cover completely David you heard it better.
Still out there, but yes, we were pleased to see that positive number there.
Things to point out as I, just talked about low <unk>.
On the past, we didn't have air tickets coming from booking dot com and from and also by the way our Goto brand also sales air tickets too.
And of course has been selling air tickets since the start of the company is more than two decades ago. So it's easier when you add two more of our brands selling air tickets and haven't done it in the past to have a positive number and I want to point out. This is very early and these are very very very small numbers. So it's it's pleasant.
To see but I wouldnt take too much except that we are on our journey.
In regards to attractions for booking dot com such yes. These are coming from third party.
Our suppliers, we are partnering with them they give us the inventories on the commercial relationships.
Pleased with that.
On the way to go forward again.
One can be anything or.
And you can decide which ones you want to do first but it's a lot you can't be everything so it's a lot easier when you wanted to do a lot more things to partner with other people for things for people who've already setup.
Things you need to get some pretty pleased about that again I'll be even more pleased where people actually are back to traveling to start buying attractions for David on or if I missed anything on the air tickets are sold.
Thank you Glenn.
Thank you.
Okay.
Thank you next free.
Stephen Ju from Credit Suisse. Your line is open.
Thank you so Glenn.
20% of bookings running through your own payment rails suggest that it's now 70% of your merchant bookings. So it seems like you are pretty close to full adoption. There. So is this primarily for alternative accommodations or flights or are.
Are you seeing that higher platform usage because of other use cases, whether it's.
Non credit card users or otherwise and I guess.
Over the coming months as you start more formally entering.
Cover your face, it's probably going to feel like Youre working on at a hyper growth startup so.
With that in mind I mean, you spent the last year restructuring and reducing head count so.
Wanted to get your latest thinking on whether you feel like you are properly resource at this time or do you feel like you can spin.
Spin off higher wing and bump resources very quickly.
So let me start with the second one on I'll turn it over to David in terms of payments Okay.
The counter to that in terms of people we've talked about this we've been total restructuring I think we both said in our prepared remarks, we are satisfied with where we are right now, but we also made the very important point, how much of the restructuring dealt with.
Jobs that related to volume and that as volume comes back we need to bring people in to help cover it but hopefully in a much more efficient way over time, so I think in terms of being on hyper startup yes, we're on.
Well, it's growing incredibly hard.
And trying to get as much progress, we count on our strategic vision, because we know that the travelers aren't going to come back on we want to get ahead of that as fast as we can so we can give them the greatest value inventory days.
Different types of ways to travel as soon as we can I don't see any major changes in 2021, but we'll see how fast business comes back we will see what happens in 2022 on we'll see the rate of progress in all of our strategic driven.
Different things, we're working on and I'll, let Dave talk about the payments platform.
Yeah on payments, let me clarify because I wasn't quite sure what yourself on but let me kind of clarify where we are on payments and the evolution of payments app booking dot com. So.
As we said in the room.
In the prepared remarks, the percentage of our gross bookings processed on the payment platform at booking Dot Com was 22% last year, that's up meaningfully from the 15% in 2019 that still means that the vast majority of bookings on not being processed via our payment transaction that is still in the agency model. So we expect that.
Payment adoption to continue to increase above the 22% this year and beyond.
Payments is really super important for us for a number of reasons, because we think we can deliver benefits to our customers on our partners across all the different channels hotels alternative accommodations flights attractions et cetera. It's also very important to enable merchandising, which will use select honestly, it's based in certain markets and it's also fundamental to.
Enabling the connected trip, where we want to have everything be repaid in one place.
Give me an update on where we offer them an income statement point of view relative to the evolution of payments are pleased to say that a.
Payments on booking Dot com was approximately breakeven in 2020, we said that in prior years, we are still making some day investment in the platform.
Post upon still stands out but expect to stay in that breakeven level as we scale and grow the payments platform from here, obviously, some potential amount of differences you're on your out but we all know out of a breakeven situation on that payment platform, which is an update from where we were before.
Thank you.
Thank you. Your next question comes from the line of Maria Lee from Barclays. Your line is open.
Great. Thanks for taking the questions two on alternatives.
So I believe you mentioned on the <unk>.
Segment had a healthy profit margin throughout 2019, so as we look forward to 2021 and beyond.
How should we think about how quickly you can close the gap between the alternative accommodation margin compared to hotels.
And secondly, you guys now that you are trying to fix the single hunk supply in the U S.
How would you describe the strategy there mostly.
On your own sales force or is it through acquisitions.
So they actually go a little together those two questions because one of the things I believe why we didn't have that healthy.
Healthy profit as you pointed out was perhaps because we didn't have as much on what makes them a single home property Casino home property does cost more for the company because you do end up with more contacts is just by nature is not as professionally run.
I end up with more costs so.
We do though know that it is a product that people want and we need to have and we need to have more of it and thats absolutely correct.
The great thing about this though is there is a trend towards more professionalism and all but single home property, where the person in the past may have gone on to our platform and just signed up on their own and tried to orchestrate all by themselves. What you are seeing in the industry is more and more people who want are weighted.
Out there single properties going to different people, who will do it for them.
All the elements of it and those people who are running these kind of we won't call on channel managers that they are like a channel net assets.
They are able to bring these different single property owners and put them onto this site that then is able to direct that to provide that supply to us or to somebody else. The great thing about it is these people are much more professionally and they are more easy to deal with they are able to understand the right things you need to do.
So because of that professionalization of the industry I believe we will be able to pick up more of the single home properties.
After that we had to in the past.
As you know we don't we don't we don't comment on future M&A activity.
That's helpful. Thank you.
Thank you on our last question comes from the line of Jason Bazinet from Citi. Your line is open.
Hey, I just had two questions. If I posit that COVID-19 is going to cause alternative to be larger than otherwise would be.
Cause business travel will be structurally lower than otherwise would be what is the implications for your business as you move to connected trip and payments in a more forceful way can you just do you mind, just expanding on that a bit.
So we'll go to hypothetical.
That may have a better let's just say what I really think.
So people, who perhaps in the past never would've thought of using an alternative accommodations.
Last summer they did use it or they looked at it or something and now it is in the consideration set.
Going forward what has happened is now there is a much larger amount of supply.
For any travelers going to look at and what that means any individual supplier in the market places now facing more competition.
As a distributor I talked about low earlier why that is beneficial to the distributor.
Our business, which is so great because we have both a great amount of the home product that will turn on the combination and we're one of the largest people at the hotels. So we don't have discrete thing, whereas the consumer when they come they can come to one place us and Theyre able to compare and contrast, all different types of all the different prices.
Understand all the different continents reviews being left people previously stayed there that gives a great great benefit. So I am pleased with the way that's happening and I will go back what will happen how much will the mix be of home in the future vs Hotel I don't know I don't think anybody can really get.
Over many years, we've seen the trend going more and more people interested in alternative accommodations. The pandemic step function up higher I don't know if thats now going to be a pause maybe a dip down or continue upward I don't know, but from my point of view. It is not that relevant in the sense that we provide zone and we're going to keep getting both so for me.
On a pretty good about it.
And on the enterprise side P to be travel.
Well.
Any travel.
I don't think there's a lot to talk about that David.
I didn't hear exactly what the question was that you did.
So can you just clarify.
My question can you just repeat it.
Yeah. The question was if it's COVID-19 causes a structural shift in b to B travel how does that influence sort of your focus on payments and focus on the connected trip is it. Good is it bad does it have no bearing on your level of investment and enthusiasm around those two long term initiatives.
When you say be the be travel business.
This travel business strength has got it okay. Okay got it.
<unk> been saying for a long time, I think that it's going to be a while before corporate travel picks up the same way at leisure.
It's going to take longer and as a share of total travel it may never get back.
Each case, yes, eventually because businesses will continue to grow in the industry, obviously with people travel eventually business travel will be larger in absolute measure than in the past, but it may always be smaller share.
We don't really know yet, but sort of the trends that are going to go that way what that does to certain.
Hi, Edr hotels that cater to the business traveler and they'll have to make some share.
They're not going to get those as many of those high ADR customers anymore, and they need to get more leisure travelers well, we have a higher percentage of leisure travelers and business travelers. We are again that point, where people can come and get that leisure demand. So again, it's another thing why I feel good about on a long future Super.
Thank you.
Yeah.
Okay.
All the time that they have for today and I will turn the call over back to our CEO, Mr. Glenn Fogel for any closing remarks.
Thank you.
So in closing.
Wanted to note that.
It's been a little more than a year since the pandemic began.
And we have sadly lost 500000 mothers fathers brothers and sisters grandparents.
And so tragically children in the United States on level.
And globally.
More than two 4 million lives have been lost our hearts go out to all who more.
I also want to reiterate my deepest console condolences to the family and friends of Arnie Sorenson as well as to the entire Marriott organization.
He left a profound mark on the travel industry and will be greatly missed.
So sad you will not see the recovery in the industry.
He dedicated his life to it.
In the travel industry will recover and we are working so very hard to bring travel back as fast as we can.
So on one end by giving one last thank you to our partners our customers and most of all to our dedicated employees who throughout the horrible year of 2020 rose to the challenge.
And got us to where we are today well positioned for a better tomorrow.
Please be safe.
Hi.
Thank you so much ladies and gentlemen that does concludes today's conference call. Thank all for joining you may now disconnect.
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