Q3 2021 Booking Holdings Inc Earnings Call

[music].

Okay.

Good day, and thank you for standing by and welcome to booking Holdings' third quarter 2021 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 of 1995 of.

These forward looking statements are not guaranteed of future performance and are subject to certain risks uncertainties and assumptions.

Difficult to predict.

Therefore actual results may differ materially from those expressed implied or forecasted in any such forward looking statements.

Expressions of future goals or expectations, and similar expressions, reflecting something other than historical fact are intended to identify forward looking statements.

For a list of factors that could cause booking holdings' actual results to differ materially from those described in the forward looking statements. Please refer to the safe Harbor statements at the end of booking Holdings' earnings press release as well as booking Holdings' most recent filings with.

With the Securities and Exchange Commission.

Unless required by law booking holdings undertakes no obligation to update publicly and forward looking statements, whether as a result of new information future events or otherwise.

A copy of the booking Holdings' earnings press release, together with accompanying financial and statistical supplement is available in the for investors section of booking Holdings' website, that's triple W. Dot booking holdings Dot com.

And now I'd like to introduce booking Holdings' speakers for this afternoon, Glenn Fogel and David Goldman.

And I will turn the call over to Glenn Fogel CEO. Please go ahead Sir.

Thank you and welcome to booking Holdings third quarter Conference call I'm joined this afternoon by our CFO.

David go.

I am pleased to be reporting strong results to date for our peak travel season.

Compared with 2019, Q3 room nights were down 18%, which was an improvement from the 22% decline. We previously reported for the month of July and the 26% decline in Q2.

Since July was primarily driven by stronger room night trends in Europe.

In the United States room night growth in Q3 was strong but lower than Q2.

Can you sort of room night declines in Q3.

In line with Q2 and remained down significantly versus 2019.

International travel, which is important to our business drove the overall sequential improvement room night trends from Q2, Q3, Nevertheless, our international room nights remains significantly depressed versus 2019.

Q3, consolidated revenue of $4 $7 billion.

Well, it's more than double the amount of revenue in Q2.

The third quarter was also our most profitable quarter since Q3, 2019 with $2 $1 billion of adjusted EBITDA.

45% adjusted EBITDA margin.

Moving into the fourth quarter, we have seen a further improvement in our room night trends in October including early signs of a pick up in room night trends in Asia.

Recently, rising Covid case count in many countries, including several important new European countries adds to the uncertainty around how November and December trends will progress David will provide additional details on our third quarter results and what we are seeing so far in the fourth.

Quarter in his remarks.

The improvement in trends, we saw in the third quarter and so far in the fourth quarter following the negative.

The negative impact from the Delta in July August once again demonstrates the resilience of leisure travelers, who are looking to travel when it is safe to do so and restrictions are lifted.

We're confident that we're on the path to the eventual strong recovery in travel demand globally.

And as the global recovery continues.

We're making progress strengthening our core accommodation business to support its long term growth.

As I've said before the strength of our core business comes from driving benefits to our traveler customers and our supplier partners alike.

Our customers, we are aiming to create a superior booking experience and build stronger relationships, which we believe is accomplished by addressing our customers' critical needs value choice and ease of use we continue to see bookings dot com pre pandemic customers coming back and booking with us well.

Also attracting new customers importantly, we see our top customers from before the pandemic, we are turning to us at a meaningfully higher frequency than other customers.

Providing attractive prices on accommodations is a key component of offering value for our customers.

Worked closely with our supply partners to increase participation in our targeted rate programs to ensure that compelling prices are available to our customers.

Our genius loyalty program at booking Dot Com is a great example of a program or hundreds of thousands of our property partners are participating to offer lower rates and other benefits such as complimentary breakfast room upgrades and just kind of an airport taxes to our large customer base.

In addition to offering lower rates on accommodations, we have recently extended lower rates on our rental cars to our genius customers.

This is just one example of the way we continue to innovate and add value for our genius members.

With about two thirds of our room nights booked on mobile devices and the majority of those booked through the App.

Is critical that we provide our customers with a positive booking experience on our apps.

It's an important platform as it allows us more opportunities to engage directly with travelers and ultimately we see it as the center of our connected trip experience in the third quarter bookings Dotcom was once again the number one downloaded OTT app globally. According to a third party research firm.

Also in the third quarter, we surpassed 100 million monthly active users for the first time.

The recent growth of bookings Dot com is encouraging and we are working hard to continue to build on this success.

In the third quarter, we saw a higher mix of our customers booking directly with us than in the third quarter of 2019.

Our direct mix improved even as we leaned into performance marketing channels during our peak travel season.

While we will continue to invest in performance marketing.

We will also look to expand the diversity of our marketing and customer acquisition channels as we aim to drive incremental traffic to our platform and increase consumer awareness of our brands.

With our ambition to acquire more customers in the medium intense space, we've made progress in strengthening our foundations for digital marketing, including social channels, though our spend so far has been small.

We're increasingly confident in the potential for these channels and as we see positive results, we expect to raise our level of participation there.

Remaining.

And investing effectively across marketing channels is made even more important by the opportunity to acquire bookers, who are new to online booking channels.

Like many industries during the pandemic has seen a meaningful shift from offline to online. According to third party data and this has increased our addressable market.

For our supply partners, we are focused on brain incremental demand their properties from the broad audience of potential customers on our platform.

Sure.

600, small and medium hotel <unk> in Europe conducted earlier this year, 85% of respondents agreed.

Online platforms, alright cost efficient way to increase the reach of their hotel and source more diverse yes, we agree with this statement and believe it applies more broadly.

We're working with a small and medium hotel Europe for an alternative a combination or a large global hotel chain, we strive to be a valuable partner to all accommodation types on our platform.

With our chain Hotel partners, we are continuing to see increased engagement relative to 2019 levels, which shows up in higher levels of participation in our programs that enable them to differentiate and promote themselves on our platform.

Well, our alternative accommodations the global mix of room nights in Q3 of about 30% was up slightly from Q3 2019.

This increase in alternative or a combination of share of our fiscal quarter was less than it was in Q2.

As we saw a greater sequential improvement in demand for hotel room nights in Europe from Q2 to Q3.

Our property count of about $2 4 million and reported listings of over $28 million on bookings Dot com remained stable relative to the prior quarter.

Let me talk more about some of our key strategic priorities.

Payments and the connected trip.

Both of which we believe will further enhance the strength of our core accommodations business and support its continued growth.

Turning to payments at booking Dot com.

Last quarter, we spoke about the organization of all of our payments initiatives and efforts within a new Fintech unit bookings Dot com <unk>.

Recently established Fintech enables booking dot com to having dedicated focus on enhancing payments in our core business for both customers and partners as well as monetizing our overall transaction flows via new payments related products and services.

Adoption of our payment solutions by our supply partners in both the U S and Europe continues to grow.

Adoption in the U S has seen significant increases recently driven by the additions of some major hotel chains in the second and third quarters, which we will look to build on in the fourth quarter.

In Europe more customers are choosing to pay using booking com's payment platform with finalizing their bookings as an attractive and localized options are provided.

This is a result.

The third of bookings Dot Coms total gross bookings in Q3 being processed through our peanut platform, which is up about 22% for the full year 2020.

The Fintech unit is also driving continued payments innovation to ensure that growth is sustained into the future.

This includes offering a low cost payout choices to our suppliers as well as partnering with third parties to provide payment solutions short buckets, such as buy now pay later.

We believe these efforts helped position bookings outcome as an attractive and trusted payment intermediary for all parties on our platform.

And our connected trip vision, we've been focused this year on a needling travelers to book the major elements of their trip one place booking dot com.

We continue to work on scaling up a robust flight platform and booking dot com, which will give us the ability to engage with flight bookers early in their travel journey.

Allow us an opportunity to cross sell all of our accommodation and other services to these brokers.

Bookings dot com select product is now live in 27 countries.

Total company Air tickets in the third quarter was up 131% versus Q3, 2019, primarily driven by strength at price slides, but also helped by booking dot com site, offering which continues to meaningfully exceed our expectations.

While it remains early days for bookings white product.

Seeing that over 25% of bookings flight bookers are entirely new customers with these new customers. We are seeing an encouraging attach rate of accommodation bookings. However, there is more work to be done to further optimize the cross sell opportunity.

The early signals help demonstrate those get a flight often can drive incremental new customers to the platform to which we can cross sell our accommodation product.

Give me a test initiatives targeting these new flight customers, including for example, encouraging account creation activate genius status and in some cases offering additional incentives for them to book the combinations. We remain focused on continuing to test and innovate in order to build on the early successes, we're seeing with <unk>.

<unk> at booking Dot com.

Also continuing to run tests using offerings from our verticals like legal costs and taxes.

Before closing I do want to note that as world leaders assembled this week in Glasgow, because a cop 26 summit.

Cussing, the urgency of tackling the global climate crisis.

Cannot overstate the importance for our industry to come together to work for the goal of carbon neutrality by 2050.

<unk> Carbonite H is a major challenge for the entire industry.

Following this challenge requires the commitment of all stakeholders.

I am proud to say that our company booking holdings is committed to addressing this challenge.

Recently, we recently released a report that we.

Commission with DIY Parkman looks into what will it take to get the accommodation industry, specifically to a carbon neutral future.

Big Tech task data shows is achievable and bookings dot com, we are working on making it easier for travelers to fine tune sustainable accommodation options with booking their travel.

We're working with our accommodation supply partners by sharing insights.

Insights and best practices to enhance sustainability initiatives at the property level of course, there is much more that must be done.

We believe that we are taking important steps to contribute to a more sustainable future for our industry.

Finally, we plan on publishing a booking holdings.

Transition plan early 'twenty, two 2022, which will speak more about at that time.

In conclusion.

We executed well and produced strong results in our peak travel season, which is a credit to the hard work and support provided by the many teams across our company.

Courage by the signs of recovery, we are seeing in many parts of the world and I'm confident that we're on the path to an eventual strong recovery in travel demand globally.

We continue with our important work to strengthen our companys position and execute against our strategic priorities.

As I have said before we were thinking about our business beyond just getting back to 2019 levels of demand and we are focused on building a larger and faster growing business that generates more earnings after the full recovery and for the long run.

I'll now turn the call over to our CFO, David Goldberg David.

David.

Alright, David is dialing back in I think.

Yes, I'm back in Glenn sorry, how do you just finished.

Yes, Hi, Justin.

Alright, perfect. Thank you I was cut off on back in again. So thank you grant and good afternoon I'll review our results for the third quarter and provide some color on the trends we've seen so far in the fourth quarter to avoid the comparison to the pandemic impacted periods in 2020, all growth rates are relative to comparable period in 2019.

Less otherwise indicated information regarding reconciliation of non-GAAP results to GAAP results can be found in our earnings release now onto our results for the third quarter.

On our last earnings call, we discussed the improvement in trends that we saw throughout the second quarter driven by the U S and Europe, followed by a boss pull back in July.

After our earnings call. We saw our overall trends improved in August and continued to get better in September which resulted in Q3 reported remarks declining 18% versus Q3, 2019, which was ahead of the 26% decline in Q2 and the 22% decline in July.

Timber was the strongest month in the third quarter, we remind declining.

14% about the same level as June.

The improvements in the Q3 room night decline versus Q2, driven primarily by Europe, which benefited from strong cross border travel within the region.

In Q3 room nights in Europe were down mid single digits versus 2019, we'd remind trends improving in August. This July September where similar to August you will recall the room night growth pulled back from June into July in Europe due to concerns over the Delta variants.

Rest of World also improved from Q2 to Q3.

In the U S.

Q2 to Q3, however, the U S still have strong growth in the quarter and remained our strongest performing major country in Q3.

Within the U S. We saw a meaningful slowdown in August from the very strong growth. We experienced in July followed by a recovery to strong growth in September.

The slowdown in the U S in August with due to concerns about with Delta variance.

Here's your room night declined in Q3 rebound in line with Q2 room nights in Asia, we're still down significantly from 2019 levels.

Mobile bookings primarily through our apps represent about two thirds of our total room nights are absent to represent an increasing percentage of all mobile bookings in Q3 as Glenn mentioned, we achieved an important milestone in the use of our app bookings dot com, surpassing 100 million monthly active users.

We're also pleased to see the number of unique customers bookings.

In the quarter grow strongly compared with Q3 2019.

Our direct channel as a percentage of our room nights year on year relative to Q3 2019 increased.

Well enough room nights remained downloads at 2019, we saw no sequential improvements international trends with the international mix of our room nights, increasing to about 33% in Q3 for about 25% in Q2 and about 15% in Q1.

Most of this improvement in international room nights came from bookings with travel within Europe.

We continue to see double digit growth in domestic room nights in Q3.

Lightly lower level than in Q2.

International travel in the quarter was driver of improvements in overall room night trends from Q2 Q3. However, it is not.

Room nights were down almost 50% compared with Q3 2019 levels.

Our cancellation rate was slightly above Q3, 2019 levels. However translation rates improved in the quarter and September was slightly better than 2019 for the month.

<unk> of our 2000, and our Q3 2021 bookings maybe flexible cancellation policies remain significantly higher than in Q3 2019.

The booking window booking dot com remain shorter than it was in the third quarter of 2019 and contracted more than it did in Q2, we saw a high mix of near term bookings during our peak summer season.

<unk> had a shorter booking window in Q3 than in Q3 2019.

For alternative accommodations the.

The global mix of room nights in Q3 of about 30% was up slightly from Q3 2019.

The increase in makes ulta combinations in the quarter was less than it was in Q2 as we saw a great a greater sequential improvement in demand for hotel room nights in Europe from Q2 to Q3.

Our alternative accommodation room nights in Europe grew slightly in August and September versus 2019 and for the quarter were about in line with Q3 2019.

We believe we benefited from the strength of our portfolio in Europe, where we can respond to solid demand for alternative accommodations and on improving demand for hotels.

Gross bookings declined 6% in Q.

Q3, which is less.

Klein in room nights due to the increase in average day rates for combinations of about 10% versus 2019 on a constant currency basis and also due to a couple of points of benefit change the changes in FX rates and strong performance in our flight business.

Our accommodations constant currency ADR benefited by just over five percentage points for an increased mix of business in North America, which is the high ADR region and a decrease of <unk> Asia, which is a low AUR region.

Regional mix effects constant currency.

Just 4% driven mainly by rate increases in Europe, and North America across many destination types with notable strength in beach oriented leisure destinations.

Airline tickets booked in the third quarter were up 131% versus 2019, driven by very strong growth of Priceline by flight bookings bookings Dot com, we're encouraged to see another quarter of triple digit growth from our <unk> business, which are key components of our multi pronged connected trip strategy.

Consolidated revenue for the third quarter was $4 7 billion, which was 7% below Q3, 2019 and was more than double the amount of revenue in Q2, 2021, a far greater sequential improvement in 2019.

Our Q3 revenue as a percentage of gross bookings was about in line with Q3, 2019, which was in line with our expectations.

We experienced even more revenue seasonality in Q3 2021, the normal due to the concentration stays in Q3 from bookings made in the quarter and also for bookings.

When customers could poker combinations, but could not state due to restrictions and other COVID-19 related concerns.

Our strong topline performance, we just the strong top line performance resulted in adjusted EBITDA of <unk> $1 billion in the third quarter, which was 15% below Q3 2019.

Marketing expense, which is a highly variable expense item.

Decreased 3% versus Q3, 2019 marketing expense declined by a few points less in gross bookings due to slightly lower ROI can pay channels of invested into capturing demand during the peak travel season.

Sales to other expenses in Q3 was significantly higher than they were in Q2 on a dollar basis due to higher volume of merchant gross bookings, which increased as a percentage of our total gross bookings in the third quarter.

Our bookings Dot com, we announced our gross bookings processed through our payments platform in Q3 with over $6 billion, which was almost one third of polka dot coms business up from about a quarter in Q2.

A more fixed expense categories in Q3 in aggregate came in 3% lower than Q2 as the $136 million of personnel expense in the second quarter related to our decision to repay the government aid was mostly offset by an increase from Q2 to Q3 bonus accruals and digital service tax expense.

Both of which are crude proportional to revenue.

Our non-GAAP EPS was $37 70 down 17% versus Q3 2019.

Non-GAAP net income of $1 6 billion reflects a non-GAAP tax rate of 21%, which is higher than the 19% in Q3 2019 due to a higher proportion of non tax deductible expenses in relation to lower pre tax income versus 2019.

On a GAAP basis, we had operating income of $2 billion. In Q3, we recorded GAAP net income of $769 million in the quarter, which includes a $1 billion pretax unrealized loss on our equity investments primarily related to our investors.

Would you buy Asia, although the region from all of the region remains down considerably visit 2019 <unk>.

The improved in Asia was led by domestic travel within many countries was driven by improving vaccination progress and governments Asia restrictions on travel.

Room night growth in the us improve little from September to October.

A strong October rest.

The rest of the World also improved little in October I was that close 2019 levels.

Mmm declines in Europe, we're about the same in October as they were in September but weaken towards the end of the month.

This resulted in oval room night declines.

And the last week of October and the average for the month.

Slow down at the end of October and Europe was driven by a number of countries that scene recent increases in code infections, including Germany, Russia and Italy.

Giving them go ahead and send around Covid, it's difficult to predict how room nights in November December will compare with a 10% reduction b saw in October.

Looking forward to November December the rising tapes case counts across many important western European countries and across much of eastern Europe as well as a soft the winter season in the northern Hemisphere, which in 2020 contributed to an increase in Covid cases create unpredictable <unk>.

Also prepandemic contribution Asia to total room nights with highest in November and December and Asia is still a least recovered region.

On a more positive note since the U S announced in late September plants East travel restrictions in November International travels with vaccinated, we've seen a significant improvement room nights books by Europeans traveled to the U S as well as the reverse.

Also we are pleased to see more gross bookings on the books for the Christmas New year period than we saw this time in 2019 and the U S in Western Europe.

Change the income statements. We expect Q4 gross bookings declined by a few points left the room nights driven by higher reported adr's in flight bookings versus 2019.

We expect less of an increase in 80 asking to fall in Q3, which lesser benefit from from regional mix of the Asia region compatriot cover but also you too low occupancy rates after the peak travel season.

We expect Q for revenue to decline Morgan gross bookings to do a couple of factors.

First is it used the short whoopi window in Q3, a lower percentage of two three bookings a normal will stay into for.

The second is usual expectation that the booking window will contact less in queue for they did in Q3, resulting in more bookings made and a quarter are expected to check in and future quarters.

As a result, we expect our revenue as a percentage of gross bookings to be bold, 1% below Q4 2019. This also means we expect people revenue to have a greater sequential.

Decrease from two three that we saw in 2019, and we expect queue for revenue to declined more in depth in Q3.

We expect Q4 marquee expense as a percentage of gross bookings increased slightly versus 2019, as we expect to invest a caffeine demand and increasingly worse during the continue global recovery traveled in that.

We expect Q for sales and other expenses.

We expect queue for sale Oh expenses to be lonely were in Q3 due to the law merchant transaction volumes. However, we expect sales are expensive the fourth quarter to be higher than in Q4, 2019 due to higher merchant volumes of mix.

We expect a more fixed expense courage in queue for an aggregate to be back in line with Q3 on adult basis.

We expect Q4 EBITDA to be positive, which is largely by the highest but driven largely by the highest the normal seasonal decrease in revenue, we expect a much greater seasonal sequential decrease in EBITDA from Q3 to queue for the normal.

In conclusion, we are pleased with our recovery and the top line in Q3, which led to strong financial results for the corner. The financial strength. We saw in Q3 was held by the concentration of stays in the quarter, which lead to some differences in the comparison of Q4 to Q3 relative to what we see in prior years.

October 9th trends improved relative to September driven by some encouraging transit Asia. However, recently, the rising cage counts across Europe increasingly uncertainty about how trends will progress in November and December and closing with confidence in our ability to captain demand as a global recovery continues and execute again.

Strategic projects with that I will now take your questions and Eli showed over <unk> over the line questions.

Thank you.

Reminder, to our audio attendee to ask a question you will need to press star one on your telephone.

Hockey fan.

To withdraw your question.

Dressed in Japan.

The standby, but oh, well, we can probably kunayev.

[laughter].

The first question is from the line of Justin.

Of America. Your line is now.

Great. Thank you for taking my question, great to see Europe, recovering, which room nights down down 10% versus 19.

Glenn maybe you can go through what what needs to happen from here to get a 12 19, what what area is still need to come back trying to imagine it's Asia.

Thoughts on that and then and David maybe you could talk about core business margins versus 19, let's ignore payments and check your trip for now, but how are you thinking of the puts and takes on the core business versus 19. Thank you.

Hi, Justin.

So I don't think it's a very hard answer really what we need what we need is obviously I'm more of a recovery against this pandemic cause that quickly what's driving the the problem in many industries are particularly for US we've talked about this a few times we talked about.

Yeah, our business has done well with international an international generally has been hard hit, albeit we are seeing some better things, but that's a long haul is still a problem. Yes, we're seeing some numbers coming up in Asia, Great I Love. It. The fact that people are getting more vaccinated in Asia, that's great. The fact that.

Maxine to being distributed more broadly getting around that's great. The fact that the pharmaceutical companies are coming up with new ways to combat against this terrible virus with pills now that can help to help people, who who accorded but ended up being hopefully healthier Quaker all good things, but what we need really is for.

Everyone, who can get a vaccine to please go out and get that vaccine, if you're a medically able to and your cable or getting it. Please get that will help she said in recovery for not only the travel industry, but the entire world and that's what we hope will happen. Obviously, we're doing everything we can so we're prepared when that day comes which it will.

Well, we can't say when but we know it will come and we're preparing by doing all the things that David and I have been talking about preparing with our partners and getting our marketing prepared and do it all the steps that you know we've been doing to make sure that when travel comes back to above 2019, and we're getting to share we wanted to get it.

David you want to add Ah you can answer the second question and answer mine too.

Yeah she'll die <unk> wrapping it was great I just do we got it all.

So I'll be relatively quick on the court and takes in the Coke the core combination business, our underlying take rates have been solid and obviously the Ah reported to take take rates are a function of timing. So that continues to go well for us I hope you get to 2000 back 2090 level there'll be some info.

He should refresher on the personnel line everybody knows there's a walk to check that went out there and we had two or three years with is that merit increases in other expenses and.

Increases in our cost base of course, we did take expenses out, but there are variable expenses. So they so they will come back with some efficiency overtime, but there'll be some pressure on the on the person that line, but there are other things are in the army and the model that we can use to offset that pressure.

We can get.

Extra economies of scale as the business grows beyond 2019 levels on both the fixed costs and on the variable costs side as well other opportunities in a direct mix, which of course is very important and of course, a key elements and this will go out in the <unk> oval rois and on the fourth marquee side, where we saw.

Some increases in the first offer yeah, we saw some small compression in the second half of this year. So those marks to very variable very dynamic when we pleased with how we're doing those markets.

The last thing I want to leave you with on that topic is that within a cool business. There's always a trade off between growth market share unprofitability statistics that we see opportunities, we leaving in we want to try and drive market share increases, where we think that we can that will pressure the business in the short term I was leading into making that investment but also the.

Investment in marketing and other areas, where basic basically the leading indicated relative to two revenue uhm. So they will we do believe that there are opportunities for the gang set in a corporation through this the recovery on beyond so that would be an additional factor and that makes them. How we think about the long term business module and accommodations.

<unk>.

Great. Thank you.

Your next question is from my cousin couple man.

Go in and company your line is now.

Great. Thanks, so much hoping to dig into ads bench friends, a little bit so I spend it's going up a little how much of that is smoking and getting more aggressive as demand picks up person I'm more competitive overall add environment, and then compared to 2019 at the distribution.

Brandon performance changed meaningfully and lastly, can you give us an update on the kind of merchandising and promotion some of the merchandise expression tests that you've done.

Over the past couple of quarters. Thanks.

So David wanting to take the first two without the AD competitiveness and I think it's a brand question and I will talk with you about some of the merchandising.

Exactly thank you, let's do that so can if you remember we on the on the last point, we said that we expect it to see some reduction in Rois in Q3 versus 2019 at actually Euroize came out very much where we expect them to actually our diet makes it slightly better than we expected in Q3 and that's why.

That was less of a compression and the difference between gross bookings are marking that we actually expected in Q3. So that's positive it really somebody that we I'd say that was more what we did because we expected that to be the outcome of course. These mawkish all dynamic in his recovery continues normal place will come back.

The marketplace. The basically what happened in Q3 was very much in line with what we told you a call to go what happened.

The mix and between brands and the performance has not materially change if you recall back in 2019, we have a.

90% for around 90% of all marketing spend walls and force marching we all looking to move it up to move the brand spend up a little bit.

Over time, but of course, Brian has been very much shut down in 2020, and 20 twenties now coming back on and that 2021. So we're not in a very different position to wherever you were in 2019, but we do see don't choose for your continued to trend a little bit more towards brands and which might go on at the <unk> based on the market opportunities.

Glen talked about and then go downtown Hello, It used for about a third of them yeah.

Yeah. So Kevin obviously merchandise is very important reason why we built out in continue to build out our payments platform at <unk> Dot com is making sure that we're able to compete and provide great value to our customers and what's really important is not doing just out of our own pocket, but working with our partners coming up.

Put the right time to the right consumer the right offer and helping them. Our supply partners also provide some of that it was he added value. So for example, we may do flashes you may help or you've seen some hope you've gotten some I hope he actually book some of them. That's an example, one of the things for example, with somebody who's getting an accommodation and we're.

I'd like to offer that either lower cost or even free sometimes why it just right from the airport to the hotel and they're all different variations. So if we can do wish to different verticals and coming up with the best combination trying to do as much as we can with our suppliers money, but sometimes using our own to to come up but it really isn't an attractive offer so the consumer noticed.

So that when it come to our site and they're getting the best diet cause value really is one of the key strategic objectives for us always to be providing that.

Thanks, I think David really helpful.

Your next question is from Deepak and with humanity.

Research your line.

Thanks. This is zack on for Detox. Thanks for taking my questions first of all the pent up demand obviously, it's been a nice tailwind that your business over or just general travel demand over the last few quarters. Just curious how are you thinking about whether there's another leg to run on on the level of pent up demand all Asia still kind of depressed.

He noted and cross border restrictions are kind of evening. So as we look into next year. How are you guys thinking about the level of on the phone and then second when we kind of dig a little further into the current trends.

Is there any kind of reversal in terms of urban versus suburban or shorthair versus longer term state if they could call out. Thanks.

Zac, so just to make sure I understood. Your first part of your question you just asked me a little bit about how we're going to get the demand that's coming in the future too I have that correct.

Just I guess like understanding whether.

Level of pent up demand that you guys kind of expecting as he and move into next year, given where they're still current travel restrictions, especially on the cross border South Asia. Okay for me if the pressure as we look into next year should we see another white kind of books here I got it I got it Okay. Why don't you that first happening I'll, let David say, whatever where what we feel we can disclose regarding any.

Any of the trends regarding different different parts of the business. So we absolutely no fears huge pent up demand by cause anytime there's any government, let's go restriction receive immediate immediate hum.

Hum.

Amanda So for example, the announcement the November 8th opening for people to come to the U S. Immediately we saw demand in the UK when they changed a restriction immediate demand. So we know it's there.

Lately you know how much we don't have a way to quantify it but we do know if you look at particularly in the U S. When you look at what People's savings rates are right now.

Have been able to save a lot of money during the span dammit and they want to spend it and one of the things people have not been able to do as much. They wanted to go travel. So I believe there is a significant amount of demand there just waiting to <unk> to come out but of course you'd have to we have to have these restrictions for the long haul international trial.

It will open up and we also we know that it's important that we always provide the best Guy so that when they do travel they come to us and they don't know what you can say about you know suburban local.

For what you can say.

Yeah, Zac Q3 saw a strong recovery across the strawberries I've got that that we talked about so I'd say that there's still a bias towards a more <unk> I'll go oriented activity, particularly beach oranges property did very well in the faux amongst us at all.

Yeah, but we do see some recovery into the cities as well I mean, I think that we all know anecdotally. If you want to book a hotel room nine in the city, it's becoming increasingly hard. So we are seeing recovery across the board all those still Ah more oriented towards the outdoor beach for leisure locations.

Great. Thank you.

Alright. Your next question is from.

Oh, honey and the Evercore ice your line is now open.

Thanks, three quick ones. Please any impact at all from idea Fay Secondly, those 100 million my mobile App M. A use do you have enough history to know if those are they act materially different are they more or less profitable are they more or less loyal then more or less likely to <unk>.

First then the users that you had coming at you from other platforms and then third please the rolling out of the air products to more market you haven't in 21 markets you rolled out some good statistics here about 25% of the customers are new and there was something you said about add on sales of you could just repeat what that was but it all sounds like that's a that's a really good product condition. So I guess.

The action question is why aren't well how long will it take you to roll it out fully across all markets given how positive it's been so far.

Thanks, Mark why don't I take let me do the air. The question first then I'll talk a little bit about idea Bay and all that David what he wants to say about our app and and I'm not sure how I'll, let him be the street, she wants to be or not about what we could we see insurance profitability et cetera, So you're absolutely right about the air business.

Very exciting for us of course and would we worked on it it's interesting because I have been to have noticed that in the first quarter call. In 2020 Justice things started going very bad for the whole world. We were talking about the just starting out in the air business at <unk> Dot com the fourth.

Quarter, 2019, and I mentioned about we're striving to get to that 50% coverage of booking dot com customers and I was looking forward to hopefully doing that for 2020.

And of course that didn't quite happen exactly what I wanted but the question and it wasn't from you Mark who is another analyst who asked not well why not 100% and I said well is the 15th so much if I Wanna get to that year I was hoping of course, we want to get to 100 per cent and that still is the same thing. Yes. We're 27 countries of course, we're gonna get to every single country that anybody we currently.

Deal with we want to be able to provide them with an air ticket, but it takes time, it's not something you just flip a switch you have to actually go through regulations to get licensing and all sorts of things. So we're rolling it out as we can as we should and and we will get to 100 per day. Some point no I do want to point out that we are at that over that 50 per cent none.

Right now so I am pleased to where we are with that I also want to say, though it's still so early we're not doing big marketing yeah real big market. There are a lot of opportunities to get a much higher number of people coming to this air products and the reason that we like and my only the 25 per cent of new cosmetics course, fantastic, but is that attachment right.

Which I haven't given a number but I'm pleased with where we are with that right now and again, that's something we have not optimized yeah. There's a lot of opportunity there to optimize that and get an even higher attach Marie and that's part of the overall vision of being able to bring new customers in some different vertical different ways than we've done in the past week.

Primarily pay for performance marketing and be able to bring a lot more customer and as we talked a little bit earlier, yeah previous answer about being able to provide them with a lot more value.

And your first question about IBSA, but these privacy related changes they only impact a small part of our marketing and it's obviously not unique to our company. We know that I'm very common for this and as we know as you know most of our marketing primaries to pay marking channels like P. P C a matter and that.

It's not gonna be directly impacted by any of these kinds of changes.

Focus is always the first party data, we want a level that in a marketing any of these changes to privacy like the idea if anything it. This does not really impact us I I think you would know yeah. We we chose not to show us the App track an opt in back in April 20 equals 21 this year April.

Well the idea of a specific decided not to do that and of course, you've seen a result. Since then so I I really don't think this is a big deal for us very proud of the team in our whole market things they will be able to work and come up with I would say privacy oriented ways to continue to be able to market with good tracking in our lives.

David I think you and number two with you about the must be acting in your best removal Yep I've got number two I'm Mark while I can't tell you it'd be kind of watch very carefully.

How all different types of Dart, usually responds I'd always see more dark we can get the better on the more those direct customers returned dark the bed is still on there are three types of sorry crosses the diet customer using the app sorry customers. It comes with on the mobile web dot customers, who comes with on desktop and perhaps not too surprising.

<unk> the dark customers on the measured by the Magic I just talked about are almost Laurel <unk>.

Alright customers. So it's it's a good thing we won't get for all of that and a lot of our marketing that we do these agencies oriented uhm I'd say you can download our new app because it's sticky.

Thank you Glenn Thank you David.

Next we have Eric Sheridan Goldman Sachs. Your line is now.

Thanks, So much particularly the question what would come after the comments you talked about a little bit earlier about the dynamics around hotel room night growth with traditional hotel supply room night growth versus alternative accommodations curious what your view is on how the landscape on both the supply and the demand side might evolve as we move into a postponed.

<unk> World and aimed towards summer of 2022, and how you think about making investments on supply to match up the way in which there might be a more normalized travel environment and twenty-two. Thanks so much.

Thank you Uhm I'll I'll give my first time at all it David can always add like so we swear before the pandemic a increase in the alternative accommodations business as it became a large or a larger share of the total accommodations business and it was going on a pretty steady rate going up and can NAMIC happens and.

You'll get a step change as people desire safety being away from crowds and they go there and now we've seen for ourselves. We seem you know people like new hotels and that I think the longterm trend, though will <unk> will continue and I think a few five years in the future I think ultra accommodations will be a higher sure does that means of course for us is.

We've talked about this in the past how important is that when you go out make sure we get the best supply we can get in that is working hard on that and make sure that the people who own these property see us as a platform that they want to use this first in their mind that this is a great way to fill up their properties and that suddenly we are working on absolutely the demand side similar.

Go to Europe, and we talked about the past and so where can I get a villa in the south of France people will say I think polka dot com is a great place. He went to the U as in you said, Hey, I need a vacation place the ski they may not take a look into account first we gotta get that awareness up and I've talked about that in the past and that's something we have to do also.

But one of the truly great things about booking dot com is we offer more of both nobody all first you put together hotels and alternative combinations you put that together, where the wanted to have both of those and I really believe that's a superior way for somebody to decide what they're going to choose in terms of accommodation and we see this in our data.

See people will come they look first start looking at one time and then they end up looking at another time and are able to compare and contrast, both of them see the reviews on both look at the prices on both what are they going to get from one what are they going to get from the other that's why we believe we have a superior offering to the consumer and I do believe though that is something that absolutely is gonna continue.

But on the other side you will see the hotel, they're making some moves themselves and they're coming up with ways to offer a better offering providing some of the benefits of an alternative accommodation two of the December particularly so they are prepared if people work in a new way in the future and want to have both the benefits of the hotel.

But perhaps what room were more services that you can get in transit.

Make sure you have good Wifi place you can do your work at and that some nice see also the hotels are definitely could be getting into that space. David I don't know if you want to say anything more to that.

Think I'm scared to I just point out that.

T O appointment does that strength not bouncing boat clearly contributed to having a strong Q3, because we saw strong demand in elephant to continue that we saw sequentially a much bigger increase would be 22223 hotels that we could we could off the boat.

Thanks, so much for the color.

Alright next we have Stephen <unk> of could squeeze your line is now open.

Okay. Thank you so much so Glen I think in the past we've talked about your payments product's, helping to expand your time by.

Boarding those users who may not necessarily be using credit cards and instead on my payment services.

You know given the overall I guess, you know depressed state of travel in Asia, maybe much of that fatty old lock is thrown in front of us, but you know are you seeing evidence in other regions of the world that this is helping to bring it that incremental user and also just.

Arising ability for you guys to merchandise as you do more of a connector tripper opens up a greater opportunity for you guys to run promos and change prices and hence no Fletcher.

Fletcher gross margins up and down to drive growth on top of what has always been you know the more of a performance marketing driven growth. So is there still a pretty material gap in R. O Y from doing one versus the other at this point in <unk> in terms of what you perceive.

Alright, so I'm talking about the first one about our payments all that day would talk about rois on our merchandising approach and an hour doing that so you're absolutely right. If somebody doesn't have the ability to pay for something because they don't have the appropriate payment method, then they're not gonna be able to buy from that person or that company like us. So we always have to do that so.

If you are in southeast Asia, and let's say somebody is using most of the big grab a partner of ours and these and grab pay well if we're not able to use grab pay for the hotel, taking the money and from the consumer that person's not gonna use us they're gonna use somebody else. We have obviously grab pay that part of working on that or if you look at other ways people.

Who say they go and look it's not their fever, they could use it another way they still decide not to use there's nothing else. We have seen which is really interesting is that just having more ways to accept payments seems to increase conversion, sometimes I don't know why I can't give you a science I just need that this is oh, that's interesting the other side is making sure.

Sure we're paying the supply of the way they want to get some money because sometimes they tell you can also I don't want to get it the way you're doing it with a virtual credit card or I don't want to get it in terms of the bank transfer so I Wanna get it some other way so we've got to be able to do that can that improves our relationship with our suppliers it particularly approves it with the supplier when the method that we can get.

The money to them is cheaper than the met that they are currently using that's a great thing, where we can do that as another value add to that hotel or any other type of supplier lots of ways that we're gonna do that and they're all other things were working at the Fintech part of our business that we're just starting out you know we talked last time about setting up that unit.

Learn of opportunities there and we talked about how 2019, we did over $100 billion worth of gross bookings and our idea is to let's find ways that we can monetize that better and let's find ways. We can fight value to both consumers and suppliers David I don't know if you want to all go about our lives and how we're doing the merchandise.

Sure. So I'm glad you said payments is increasingly becoming of the core value proposition. We all grew up looking dot com in particular, it's about cause I'm partners. So it's no longer just kind of we think I'll add add on it really is solving problems for both of them and cost effective way and risk reduction wise.

So they couldn't do as efficiently themselves. So I just watch my it's growing so rapidly and say Oh, well mixed now you're right. The monthly on payments we can.

Participate in in merchandising of course, the the most the most efficient way to to get right to do so so great great, which Glen talks about fair amount in his points, but if we need to participate over and above the source of your driving.

Drawing promotional Taghi particular, usually in particular market, we can with the parents platform and we now have enough experience under our belt instrumentation around that that we can treat that as you mentioned as you Mark the investment and look at look at it in a very similar way to the way we look at I'll spend and the performance child for for example.

Compare rois bongos decided what the right mix is so correct with payments, becoming a bigger piece of I'll take a position, where we can where we need to what we think it makes sense. We can look I'm virtue dicing through a strong R Y lens, how we can be quiet proactive.

In that area and compared directly with other forms of spending a marketing.

Can I get.

Next we have dog N.

J P. Morgan you a line is now.

Thanks for taking my questions I, just wanted to ask about social advertising in the dollars. There are still small, but just curious what gives you the confidence in and not working to the point of potentially adding some real dollars. There. It's an area you've you've tried before so just curious kind of what's different now and then.

And secondly, David if you could just walk through those four Q sequential revenue dynamics again, and if there's something that's particularly different as opposed to just the normal seasonality. Thanks.

Hi, Doug so yeah, so absolutely small numbers right now and I I think I said that in my my prepared remarks. These are small small numbers right now, but obviously there are a huge number of potential customers score in those areas, where we want to reach out to make sure they're aware of us they're coming to us.

Oh, it's it's a place that we're not gonna ignore now we are going to have to come up with the right method the right way to a present.

The way, we're gonna send our brand and be able to get them to come to us and that means we've got to be able to measure how are we getting a literature or not and I don't want to give too much interested in details how we're doing what we're doing but I'm feeling good about how we're building it up and we see the right returns on white our lives because we are always very conscious of spending that advertising money the right way.

Then we will scale up and spend more money and that's a nice at and appeared remarks I I feel good about where we are now cause it's a great thing about our business our company. The way. We think is we're not dogmatic. We don't think just because we thought at first this would be great that then we absolutely. We're gonna do it experiment put money to work see the results.

Test and they will learn.

Great. We're gonna put more money if not we'll come up with another way that's how we built this company that's what we'll do it in the future and David I think there's a question for you there.

Yeah Duck, let me back to claim that re explain that whole sees out the thing cause. This is quite important then we can explain it.

High level. So Q3 was very strong it was almost artificially strong for revenue for you because you got two things on that can be healthy at first of all remember Laura bookings in Q1 Q2 that were normally stay in Q1. Two two stayed in Q3. So he got that benefit compared to the normal Q3 on top of that and the cool water more.

Bookings in Q3, the normal state and cute so because booking window also Shaw. So Q3 got talked up two ways from Q1, two two and in Q3. So now what you think of cute fall and you'll know <unk> against a very chopped up Q Q3, and some of that pop up in Q3 directly impacts cute.

Oh, so cute borgess impacted by complaining is a strong Q3, but thanks, so much to three bookings that normally would thank you for state in Q3. So you know if you like a double double factor driving the comparison between Q3 and Q4 also we believe the bulky window, we'll stop expanding Q4, so Mulder bookings <unk>.

Well actually leak out of the queue fall then did in Q3 relatively so you've got these two faxes kind of driving a very unusual comparison between two three in queue call. So a fair amount more sequential revenue decline, it's old timey on all mechanics to think of it as a cue for comparing a cute three on steroids.

And some other reason why Q3 was on steroids will directly impact you fall. So that's what's going on.

Got it very helpful. Thanks for the clarity there.

And that concludes the Q&A session I will now turn to call them back to Glen sound good for clothing.

Besides you so in closing.

One repeat what I said at the close of last quarter's earnings call and reiterate our strong belief that our industries full recovery will be hastened by everyone, who can get a vaccine going out and getting it.

<unk> all people, who are approved for a medically able to be vaccinated do their part to make our society safer and we urge all great advice to get a booster to go get one and there's always I want to thank our partners customers dedicated employees and our shareholders. We appreciate your <unk>.

Support as we continue to build a long term vision for our company. Thank you and please be safe Goodnight.

This concludes today's conference call. Thank you all for your participation you may now disconnect.

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