Q4 2021 Booking Holdings Inc Earnings Call
Okay.
Welcome to booking Holdings' fourth 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 possession of the private Securities Litigation Reform Act of $19 95.
Forward looking statements are not guaranteed of future performance and are subject to certain risks uncertainties and assumptions that are 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 at least 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' or any sprouts release as well as booking Holdings'. Most recent filings with the Securities and Exchange Commission.
Unless required by law booking holdings undertakes no obligation to update publicly any forward looking statements, whether as a result of new information future events or otherwise.
A copy of booking Holdings' earnings press release, together with an accompanying financial and statistical supplement is available in the for investors section of booking Holdings' website.
Trouble you top of you'd probably thought booking holdings dotcom.
And now I'd like to introduce booking Holdings' speakers for this afternoon.
Glenn Fogel and David Golding go.
Go ahead gentlemen.
Thank you and welcome to booking Holdings' fourth quarter conference call Joy.
I'm joined this afternoon by our CFO David Goldman.
Despite the appearance of the Omicron variant in late November and its rapid spread throughout Europe U S and other parts of the World. We closed out 2021 by delivering fourth quarter revenue and adjusted EBITDA of $3 billion and $940 million, respectively, which were.
We're better than we expected.
Room nights decelerated from down 10% in October compared to 2019 to down 35% in December .
However, I am pleased to say that since December we have seen a meaningful improvement in top line trends with room nights in the first half of February reaching 2019 levels and with gross bookings higher than 2019.
That booking dot com I'm encouraged to see strong gross bookings on our books for the summer period in Western Europe , and North America, both of which are now ahead of where we were at this time in 2019.
Though I note that a high percentage of these bookings are canceled.
2021 was a year in which our hopes for a return to normalcy. We're setback several times first with the Delta variant and then Omar crop. However, we witnessed proof that people have a deep desire to travel when leisure travelers believe it is safe to travel and restrictions are lifted people book travel and we are.
Currently seeing this starting to happen in many parts of the world.
While this is a potentially favorable backdrop for 2022.
We do expect there will still be periods, when COVID-19 negatively impacts travel trends as we move through the current year.
David will provide additional details on our fourth quarter results and what we're seeing so far in the first quarter in his remarks.
As I look back over the last year I am proud of the work we have done under still difficult times to strengthen our core accommodations business by driving benefits to our traveler customers and to our supplier partners.
For our customers, we remain focused on addressing our customers' critical news value choice and convenience.
One of the many ways, we provide value for our customers and partners on booking dot com is through our genius loyalty program.
Our customers are genius loyalty program offers lower prices and other benefits like complimentary breakfast room upgrades and discounted airport taxes.
For our partners, our genius program delivers incremental room nights to properties from our most loyal customers.
Over the last year, we have meaningfully expanded our genius loyalty program at booking dot com by opening the lowest level of genius benefits to any customer who create an account and his login on booking dot Gov.
At the beginning of 2022, we fully launched a third tier of genius for our top customers that made at least 15 bookings in the last two years.
These genius level three members have access to even lower prices and priority customer service support in addition to all of the benefits available to genius levels, one and two.
These improvements to our genius program are indicative of our efforts to move beyond just the transaction and increased our focus on value for the customer with a higher degree of customer focus we aim to increase loyalty frequency spend and our direct relationships with our customers over time.
Over the last year, we've enhanced booking dot com mobile app.
More user friendly and easier to use as I said before the app as a critical platform as it allows us more opportunities to engage directly with travelers. It is also where an increasing number of bookings are happening and ultimately we see it as the center of our connected trip experience in.
In 2021 booking dot com was the number one downloaded app globally. According to a third party research firm.
For 2022, we are increasing our efforts to enhance the app in order to build on the success, we saw over the last year.
In the fourth quarter and for the full year, we saw a consistently higher mix of our customers booking directly with US then in 2019 and our direct mix improved even as we leaned into performance marketing channels. During the year, we will continue to lean into performance marketing channels at appropriate Rois as we look to bring.
More customer demand to our platform during the recovery.
In addition to performance marketing, we will be utilizing brand marketing, particularly in markets, where we're looking to raise consumer awareness of our customer facing brands.
Example of that which I hope all of you saw two weeks ago, or so was booking dot coms first Super Bowl AD and which we reintroduced the booking that yes, Logan to our U S audience.
We had a great year in the U S. In 2021 with strong growth in room night, and very strong growth in gross bookings versus 2019, even though booking dot com was relatively quiet.
<unk> marketing perspective.
We are looking to accelerate the momentum of last year's performance by layering in brand marketing that extends beyond the Super Bowl AD during the rest of the year in order to introduce booking dot com to an even broader audience.
As I mentioned last quarter, we have an ambition to acquire more customers in the medium intent space. We continue to work on strengthening our foundation for digital marketing, including in social channels. However, our spend so far remains relatively small.
For our supply partners, we strive to be a valuable partner to all accommodation types on our platform, which means focusing on bringing incremental demand for properties from the broad audience of potential customers on our platform.
For alternative accommodations are global mix of room nights in 2021 of about 29% was in line with 2019 levels in Europe , where our alternative accommodation offering is more competitive or mix of room nights increased in 2021 by a few percentage points relative to 2019.
We continue to work on improving the competitiveness of our alternative or a combination of offering in the U S market, where we have added targeted supply over the last year and have plans for more additions and improvements to come in 2022.
We closed out the year with $2 4 million hotel and alternative accommodation properties and over $20 million total reported listings on booking dot com, both of which were stable relative to the prior year.
Let me now talk about the progress we have made over the last year and some of our key strategic priorities around payments and the connected trip.
These strategic priorities are interrelated and we believe both will further enhance the strength of our core accommodations business and support its continued growth.
On payments at booking Dot Com, we saw further increase in adoption by our property partners in the U S. In the fourth quarter now with over half of U S. Gross bookings booked at properties that have adopted payments globally about 60% of gross bookings are booked at properties that have adopted payments about.
30% of booking Dot Coms total gross bookings in Q4 were processed through our payment platform, which brings the full year 2021 mix to about 27% compared to about 22% for the full year 2020 and about 15% in 2019.
We will continue our work on positioning booking dot com as an attractive entrusted payment intermediary by providing payment options favored by both travelers and our supplier partners across hotels alternative accommodations cars flight and attractions.
Furthermore, we see booking com's payment platform is a key component of our larger connected trip vision.
On our connected trip vision, we made progress in 2021, as we work to build a robust platform on booking dot com.
This flight platform gives us the ability to engage with potential customers, who choose their flight options early in the discovery process and allows us an opportunity to cross sell our accommodation and other services to be slight bookers.
<unk> also enables us to provide a more complete travel offering to our accommodations customers booking dot com slight platform is now live in 34 countries, which collectively represented about 70% of booking dot coms room nights booked in 2019.
We continue to see that over 25% of bookings flight bookers are entirely new customers to the platform.
All of those new customers and encouraging percentage are attaching an accommodation to their flight booking.
These are positive early signals, which helped demonstrate that our flight offering can drive incremental new customers to us and we can cross sell our accommodations product to them. We will continue our work to further optimize the cross sell opportunity and build on the early positive signals, we're seeing in flex.
In November we announced our intention to acquire E travel I for $1 6 billion euros, and we expect to close the transaction later this year pending regulatory approvals.
Travel is one of the largest flight centric online travel agencies and as a leader in flight booking technology.
They have developed a comprehensive technology platform sourcing complex flight content from a variety of supply providers, which is then distributed to consumer facing sites booking dot com and E. Travel I have been successfully partnering over the last two years with the travel I powering bookings flight product.
Given the strategic importance of flights to our connected trip offering. We believe it is critical to bring E term life flight expertise and technology in house, while also unlocking some of the limitations that exist in our current commercial agreement.
When the deal closes he travel I will continue to operate as an independent company within booking holdings, while further supporting the development of Dot Coms flight platform.
Outside of flight booking dot com has significantly improved the coverage of its attractions product over the last year in part due to the successful integration of third party supply from Viator and amusement we now have bookable attractions available in cities that represent about half of booking dot com accommodation training.
Actions, which is up from about 10% coverage a year ago.
The volume of attractions bookings is still modest we believe that developing a compelling easy to you attractions product will help keep travelers engage with our platform through the trip.
And build loyalty.
We had a very busy end to 2021 and start to 2022, so I'd like to address a few other important recent upticks first I am very excited to welcome the get room team to booking holdings, we closed our $1 two.
Billion dollars acquisition of get room at the end of December and we are well underway with integrating <unk> into priceline.
Help expand price lines current strategic partnerships business.
Get a room is a BTB focused distributor of hotel rooms, primarily servicing leisure demand to about 150 affiliate partners primarily in the North American market.
<unk> business is an important component in channel and our expansion efforts to reach new customers and partners, particularly in key markets such as the U S.
We believe <unk> business can generate attractive returns by providing inventory to affiliate partners without the <unk> business needing to invest significant dollars in brand marketing.
Online performance channels to generate customer demand.
I'm confident that the combined strategic partnership business of Priceline and get a room will improve <unk> distribution for hotel partners, while offering a robust accommodations technology stack for our affiliate partners to help further enhance our offerings in North America.
Second <unk>.
Some of you may have seen the news two weeks ago that booking dot com plans to enter into an expanded strategic partnership with major rail one of our most trusted long term external customer support partners.
As part of this partnership which is still subject to consultation with works Council and regulatory approvals may drill will begin employing most of the customer service representatives that previously worked for booking dot com outside the Netherlands and the UK.
We have been successfully working with major L for six years in order to help meet the evolving seasonal demands of our business and we believe that this expanded partnership will help increase the flexibility and efficiency of our customer service offering going forward.
Finally on our last earnings call in early November .
I discussed the urgency of tackling the global climate crisis, and the importance of our industry coming together to work towards the goal of carbon neutrality by 2050.
Shortly after that earnings call booking dot com launched its travel sustainable program.
As a first of its kind program that features a travel sustainable bed for any property on our platform that has implemented a combination of sustainable practices.
When searching for accommodations travelers can see whether or not a property has been given a travel sustainable badge and can filter search results based on the edge. We believe our greatest influence on sustainable travel through enabling our accommodation partners to showcase their sustainable practices to travelers who are looking for ways.
Travel more sustainably.
Looking forward to talking more about this program and other efforts and commitments related to sustainability. When we publish our 2021 sustainability report and our first climate action plan in March.
In conclusion, we.
We executed well and produced strong results in 2021.
We look ahead to 2022 I am encouraged by the quick rebound in bookings, we have seen so far this year and the level of summer travel on our books.
While we expect to see some volatility in trends as a result of the ongoing effects of Covid I am confident in the continued recovery in travel demand globally. As there is clearly a very strong desire to travel among our leisure bookers.
Of course, we are concerned and are monitoring the situation in eastern Europe , which we recognized could be disruptive to travelers who may be going to that region.
Overall, we believe we are well positioned to continue capturing travel demand and we will continue our work executing against our strategic priorities as I have said before we are 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 with.
More products that generates more earnings after the full recovery and for the long run.
I will now turn the call over to our CFO .
David.
Thank you Glenn and good afternoon.
I'll review our results for the fourth quarter provide some color on the trends we've seen so far in the first quarter, our thoughts on 2022 <unk>.
All growth rates for <unk>, 2021 and 'twenty two 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 onto our results for the fourth quarter.
On our November earnings call, we discussed the improvement in trends that we saw throughout the third quarter driven by Europe , followed by a further improvement in October driven by Asia.
You will recall the trends weakened in Europe towards the end of October driven by driven by a number of countries see recent increases in the delta various infections at that time.
In November we saw a slowdown from October overall trends, mainly by Europe on this slowdown continued to worsen.
December across all regions due to.
Omnicom very concerns.
This resulted in Q4 reported room nights declining.
21% versus Q4, 2019, which was 11% worse than the 10% decline in October , but only a few points worse than the 18% decline in Q3.
December room nights with 35% below 2019.
Moving across the full quarter the slowdown in Q4 versus Q3 was driven primarily by Europe , which declined about 20% versus Q4 2019, while all other regions improved in Q4 versus Q3.
Compared with Q4 2019, the U S continues to have strong growth in the fourth quarter, while Asia was still down considerably and rest of world was down modestly.
As I mentioned, we saw a slowdown across all of our regions in December most meaningfully in Europe and in the U S.
Mobile bookings primarily through our apps represent two thirds of our total room nights in the fourth quarter and full a full year.
Can you to represent an increasing majority of our mobile bookings.
We continue to see greater than 50% of October room nights coming to us through the direct channel Derrick.
Derek channel increase as a percentage of our room nights in the fourth quarter and for the full year relative to 2020 and 2019.
The international mix of our total room nights in Q4 was about 33% in line with Q3 Q.
Q4 International room nights were down.
50% compared to Q4 2019 levels a few points worse.
Decline in Q3.
We continue to see growth in our domestic room nights in the fourth quarter also at a level slightly below Q3.
Timber slowdown was both the international.
Domestic.
Our cancellation rates were up a few percentage points versus 2019 in Q4 and for the full year increased meaningfully in December due to concerns about the Hong Kong bearings.
The booking window in Q4, our booking dot com was much shorter than it was in the fourth quarter of 2019 and contracted further in December as customers focus mainly on the short term travel needs.
Alternative accommodations dot com, the global mix of room nights about 27% in Q4 and about 29% for the full year was in line with 2019 levels.
The global mix was impacted by the underperformance of Europe relative to North America.
Within Europe , our mix of alternative accommodations increase in Q4 by a couple of percentage points.
Full year by a few percentage points relative to 2019.
Gross declined 8% in Q4, which is less than the 21% decline in room nights due to an increase in average daily rates for combinations on a constant currency basis or about 13% versus 2019, and very strong performance of <unk> business.
Accommodation constant currency ADR benefited by about four percentage points from an increased mix of business in North America, which is a higher ADR region.
Decrease in VIX and business in Asia, which has a lower AUR region.
Excluding regional mix effects.
Currency, we're up about 9%.
Rate increases in most of our regions, most notably in Europe , and North America, and especially in higher demand leisure oriented destinations.
Constant currency.
Higher than we expected due in part to continued high rates of a flexible bookings plus generally higher pricing in North America and in Europe .
Airline tickets booked in the fourth quarter were up 116% and for the full year were up 104% versus 2019, driven by very strong growth of Priceline and by flight bookings booking dot com, we're encouraged to see a full year of triple digit growth from our <unk> business, which is a key components of our <unk>.
<unk> connected trip strategy.
Consolidated revenue for the fourth quarter was almost $3 billion down.
Down sequentially, 36% from Q3, 2021, and 11% below Q4 2019.
Q4, 2012 revenue was more than double the $1 2 billion in revenue will be recognized in the fourth quarter of 2020.
Q4 revenue was stronger the expectation due to higher ADR and a shorter booking window.
Revenue was less impacted than bookings from omicron in Q4.
Revenue as a percentage of gross bookings was about 40 basis points below Q4, 2019, which was versus our expectations as a deceleration, but in Q4 more negatively impacts our gross bookings and revenue in the quarter.
Excluding timing impacts our underlying a culmination take rates were about in line with Q4 2019 levels.
Our full year revenue was almost $11 billion, which is 27% below 2019, but improved 61% versus 2020.
Full year revenue as a percentage of gross bookings was 14, 3%, which was lower than 15, 6% in 2019, primarily due to the timing differences between gross bookings and revenue recognition.
The strong revenue results in the fourth quarter helped drive adjusted EBITDA of $940 million, which was 27% below Q4 2019.
Quench Lee Q4, EBITDA was down 55%, which is better than we expected. This was driven primarily by the higher than expected revenue and lower than expected opex more fixed expense categories.
Marketing expense, which is a highly variable expense line decreased 2% versus Q4 2019.
Marketing expense as a percentage of gross bookings increased slightly versus 2019 in line with our expectations.
Marketing ROI is little lower than our expectation.
Impact of cancellations late in the quarter and this was offset by a higher than expected mix of direct business.
Sales and other expenses were 21% higher than Q4 2019 due to a higher volume of merchant gross bookings and higher outsourced call center costs about.
About 30% of booking com's gross bookings were processed through our payments platform in Q4 and about 27% for the full year up from 2% in 2020.
We expected a more fixed expense categories in aggregate to be about in line with Q3 due to lower personnel costs offset by higher.
G&A costs.
Came in 10% lower than Q3 due to yearend finalization of bonus expense accruals as well as lower than expected costs. This means our Q4 personnel expenses do not reflect our run rates going into 2022.
non-GAAP net income.
<unk>.
550.
<unk> $54 million results in non-GAAP EPS of $15 83.
Which was down 32% versus Q4 2019.
Our non-GAAP tax rate of 20% was higher than the 18% in Q4 2019, our full year non-GAAP tax rate of 20% was 1% higher in 2019 due to a high proportion of non deductible tax expenses non non tax deductible expenses in relation to a lower price.
Tax income versus 2019.
On a GAAP basis, we had operating income of $848 million in Q4, we recorded GAAP net income of $618 million in the quarter, which included income tax expense of $198 million.
Now onto our cash and liquidity position.
Ending cash and investment balance of $14 3 billion was down versus our Q3 ending balance of $15 4 billion, primarily driven by the $1 2 billion get a room acquisition, partially offset by positive free cash flow of about $178 million.
Two housekeeping notes about get a room.
This is a closed end of Q4 was not meaningful to Q4 results.
<unk> is that we did not include incremental room nights from get a room in all commentary about January and February is incremental room nights will be included when we release our Q1 actual results.
In early January we start returning capital to shareholders under our remaining authorization.
To date purchased about $500 million.
Assuming that trouble recovery continues we still expect to complete our remaining authorization within the next three years.
Now onto our thoughts for the first quarter and to remind you we will make comparisons with 2019 unless otherwise indicated.
January room nights declined about 22% an improvement from the 35% decline in December as concerns around the Omnicom variant is this improvement was driven primarily by a recovery in cross border travel within the European region and domestic travel in Europe .
We saw room nights trends improving throughout January and continuing into February .
<unk> in the first half of February were about in line with 2019 levels and gross bookings were higher.
First off in February we saw meaningful improvement across all of our regions compared to January .
The U S has strong room night growth versus 2019 in the first half of February while Europe had about 10% growth rest of world was up slightly and Asia was down about 35%.
Our mix of international room might be coming from about 23% in December to over 40% in the first half of February which is the highest international a bit we've seen since the start of Covid as a reminder, our pre Covid international mix was just over 50%.
As I mentioned the improvements we've seen in the first half of February our broad base with large countries in Europe and international travel routes within Europe , driving the largest impact.
The new cross border bookings, we're seeing in Q1 in Europe on average have a longer length of stay and a shorter booking window than comparable bookings in 2019.
As we've seen throughout the pandemic and colors thinking that lifted and traveler confidence increases bookings improve quite quickly.
Given the rapid changes during the first half of Q1, it's difficult to predict how room nights for the remainder of the quarter will develop.
It is encouraging to see the recent improvements we're still in a potentially volatile environments with high token infection rates in some part of the world and geopolitical uncertainty that could impact our business, especially in Europe .
So far in Q1 overall booking window booking dot com has contracted less versus 2019 than it did in Q4, we've seen recent strength in our summer booking trends on our gross bookings for summer are highest anywhere at this time in 2019.
But some of the booking trends are stronger in western Europe with gross bookings for the summer period are up double digits versus 2019 gross bookings for the U. S are also higher than you were at this time in 2019.
Of course, it very high percentage of all bookings for some of our council so things could change rapidly.
Change the income statements, we expect the change in gross bookings in Q1 versus 2019 to be several percentage points benefit from the change in room nights due to an increase in ADR.
Very strong bookings constant currency.
In Q1, so far of increase versus 2019 at a similar rate to Q4.
We expect Q1 revenue as a percentage of gross bookings to be about one half percentage points lower than in Q1 2019 as the booking deceleration in Q4 negatively impacts revenue and negative impacts on revenue and the bogie recovery in Q1 benefits revenue in future.
<unk> is 100% points of difference in revenue as a percentage of gross bookings could be higher.
<unk> trends increased meaningfully from the first half of February , especially if a high percentage of these bookings office space in future quarters.
We expect Boston expenses in Q1 will trend about in line with gross bookings compared to Q1 2019.
We expect sales and other expense in Q1 as a percentage of gross bookings to be about the same as it was in Q4.
We expect a more fixed expenses in aggregate it will be about 15% higher than Q1, and Q4 on a dollar basis due to the impact of seasonal increase in benefit costs.
21 year and personnel related accrual finalization.
And the impact of planned hiring as well as increases in expenses, including some deferral from Q4.
Didn't want to just explain to remind you that Q1 is our seasonally lowest quarter, we expect adjusted EBITDA to be positive, but down sequentially from Q4 significantly more than the sequential declines we saw pre COVID-19 , primarily due to the impact of omicron on Q1 revenues.
As we think about the full year ahead.
About the strong summer bookings, we are seeing so far and we're optimistic about the continued recovery of leisure travel. However, we do expect continued volatility topline trends driven by Covid.
There are other uncertainties on the horizon, including the current geopolitical situation, which could impact travel.
If we look at Russia, and Ukraine combined destination markets.
A very low single digit percentage of our total gross bookings.
All of this makes it very difficult to predict how the topline will progress during the year and how the full year, we will soon announce.
As we think about the recovery of travel in 2022, and the opportunity in front of US we plan to invest in marketing other incentives and improvements and expansion of our products to attract existing and new customers to our platforms and to drive additional loyalty in the future. This also requires investments in people and.
<unk>.
We're excited about the opportunity to expand our business and we believe we can strengthen our position in accommodations and Bill Mudd.
Much more complete travel solution for our customers and partners. We believe this is the right thing to do for higher longer term returns from our business.
With this in mind there are a few factors to consider when thinking about the shape of the P&L for the full year. These fall into four buckets revenue.
Marketing sales and other expenses and a more fixed operating expenses.
Starting with revenue as a percentage of gross bookings, we expect it to be higher in 2022 than it was in 2021, but lower than 2019.
2021, our revenue gross bookings was about 130 basis points lower than 2019, mainly due to timing differences between the recovery of gross bookings and revenue in 2022, we expect the timing to be less of an impact than it was in 2021.
Moving to launching there are a number of factors that come into play we expect the environment to remain competitive, especially as the leisure travel market moves closer towards full recovery.
We intend to remain disciplined in our performance marketing Rois and will continue to invest in developing the medium intent social media channels and Youll see us active in branding in the U S and other major markets.
Our goal continues to be to use our marketing strength to gain share in markets, where we can with reasonable returns, we expect to run initiatives and programs to join.
To attract both existing and new customers to our platforms.
It's difficult to know exactly how these factors will play out across the year, but we expect marketing as a percentage of gross bookings to be a little higher than it was in 2019 and also in 2021.
Of course, an increasing mix helps our marketing efficiency and we believe the investments we're making will result in a higher mix over time.
Turning to sales net of expenses, we expect needs to be up 50 basis points higher than in 2021 as a percentage of gross bookings.
This is mainly from additional payment processing cost, but also impacted by anticipated higher third party customer service expenses, the additional expenses related to payments offset by higher payments related revenue.
The last area is a more fixed operating expenses, which include personnel G&A.
We expect our <unk> expenses to be impacted by higher than average annual wage increases, especially in the products and technology areas and by planned headcount increasing key in key areas, including processing technology and volume related functions, we expect personal expenses to be about 10% higher than in 2021.
We expect the G&A.
Well both grew faster than personnel driven by a number of factors, including digital service taxes, we changed the highway work environment and the investments to enhance our customer and partner facing.
Facing channel systems.
The comments, we made for 2022 do not include anticipated reduction to personnel expense on increases to sales and other expense from the enhanced strategic partnerships with major rail the Glen spoke about we.
We do not anticipate much of an impact on adjusted EBITDA in 2022 from this initiative and we will update you again in May.
Also we expect the acquisition to get a room to have a small positive impact on our P&L in 2022.
As Glenn noted, we expect that the travel acquisition will close later this year, which will result in a minor impact to the P&L in 2022.
So in thinking about the shape of the P&L in 2022. These factors being the revenue recovery will lag the gross bookings recovery in EBITDA recovery will lag revenue recovery.
Some of the lag.
<unk> EBITA versus revenues timing I E. The marketing we spend on bookings, we expect to recover ahead of revenue.
On top of this we plan to make investments in customer acquisition and expanding our product offerings, we mentioned earlier.
Taken together, we expect our EBITDA margins in 2022 to be a few points higher than you were in 2021.
Looking beyond 2022, we continue to remain focused on investing to build a larger faster growing business with more products than we had pre COVID-19 that delivers more EBITDA dollars.
Earnings per share with industry, leading EBITDA margins.
In closing we are confident in our ability to capture demand as the global travel market recovers and to execute against our strategic priorities.
With that let's take your questions and Chris I'll turn the call over to you for Q&A.
Ladies and gentlemen, if you have a question at this time. Please press star and then the number one key on your attach tone telephone when.
Again, you will need to press Star and then the number one key on your attached <unk>.
If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
Please standby we will be comprised the Q&A roster.
Your first question comes from the line of Justin Post Bank of America. Your line is open.
Great. Thank you great to see your bookings.
Back to.
Back to 19 levels I know theres, a lot of thought about what booking looks like.
Travel recovery, so I'm wondering if we could revisit some of the things you are.
Thinking about what the business could look like as far as booking levels and <unk>.
Our margins when we get we get back to normal and I know you've made a couple of acquisitions I'm sure excited about those.
Obviously, you're connected vision trip seems to be on the right direction. So maybe we can revisit how youre thinking about.
The absolute.
The absolute value of bookings and also what the absolute level of EBITDA could look like once you get to a full recovery. Thank you.
I'll, let David handle the handle the margin.
He did say prepared remark I'll, let him.
Say it again.
Justin Let me give you a little bit more color and I appreciate the question. So.
We are focused upon as I say running a business is larger than it was in 2019, it's more diverse product offerings is growing faster than it was in 2019. It has more absolute EBITDA dollars and EPS dollars, that's our focus.
We give you always see some where things go in 2022.
We expect that we can expand.
Beyond 2022.
And we expect that once we all have to normal and not final state.
We'll have industry, leading EBITDA margins, but beyond that we don't want to get too specific about exactly what they're going to be other than our goal is to give more EBIT dollars more EPS all of that growing faster than we were pre COVID-19 .
Great and then the <unk>.
Two acquisitions, you've made one when you've closed and one is still open how are you thinking about those are those.
Areas that are really going to help you save costs or do you think those are actually booking drivers.
But really two different acquisitions, just in while I take them separately. So the gathering one as I. Just described in my prepared remarks is very much adding to what we already have at price slide in our B to B business that helps bring in customers that we wouldn't have gotten through our other marketing programs whether it be.
Pay for performance or brand. These customers are coming from affiliates. There are contracts that get a room had in different technologies, they have that by bringing them and that's going to get us additional business that we wouldn't have gotten otherwise on <unk> that was a different situation, where as I've pointed out many times how important it is for us to have disconnected.
Trip vision fulfilled in one of the critical parts of it is our flight business and we absolutely are very pleased to see not only the.
Growth in our number of flight bookings, but also the fact, the number of new customers getting coming and the number who are been buying an accommodation E travel Iceland powering the booking dot com product for two years, great technology. They do a lot of things that could we create on our own probably but it would take a long time.
Would require us to use the resources that we want to use elsewhere. So by acquiring a travel we're going to bring that technology in house and be able to do things that we couldnt do or just a commercial partner. So I'm looking very forward to having that close and hopefully as we said in the future and then really began to develop a great great comp.
The nation.
Great. Thank you.
Your next question is from the line of.
<unk> <unk> of UBS you May ask your question.
Yeah.
Thanks, guys.
Two if I can first can you give us just an update around how you're thinking about timing for adding some of the value added features to payments that could drive positive contribution.
To the P&L and is it safe to say that even if the past some of that cost.
Some of that margin along to consumers it would likely drive faster growth and therefore revenue even if it wasn't directly revenue margin accretive.
And then the second question would be can you maybe give us some color around the benefits of connected trip beyond incremental revenue from adding new products. So what are you seeing with repeat rates or direct rates among users to adopt multiple products anything you could share there would be great. Thanks.
Sure Lloyd two separate questions.
Let me talk a little bit about.
The payments.
And what we're developing and how its going out and I'll, let David add more to it I'm sure will want to add some more specifics clearly we've talked about this in the past that one of the critical things is enabling a customer to be able to pay in the way they want to pack and enabling the supplier to get paid and the way they want to get paid so right right of way of getting that out in the <unk>.
Market enables us to have more business. Then you go beyond that and you see do it cheaper for our suppliers do it in a way is cheaper than theyre doing it right now the way they are doing their payments the way, they're getting it through our old agency model of the booking dot com and finding a way that we can do that in a way that not only improves their business goes.
Not to pay as much but obviously it will make a little out of that too, but then it goes much more beyond that as the connected trip protector doesn't work. If you don't have payments because we need to put it altogether in one payment that we can then handle on our own and particularly if there is anything goes wrong, we will have to undo it too that's really going to be helpful too.
And then it's not just payments, but it's our Fintech unit, which is the payments people, but doing more things, it's coming in and helping out in flexible type products people want a flexible product they can cancel us creating that on our own is something we'll be doing more so in the future. There are a number of different things. We can do that will absolutely increase.
The ease of use convenience and enable us to make more money out of it and I'll pause there and let Dave do you want to add anything more to that.
So I think when you did a great summary of what.
The interconnectivity between those two.
The new areas.
Timing nothing nothing major in terms of market impact in 2022 was still in building mode for some of those value added products that.
That you mentioned.
Market entry, where you might see any impactful and will be more into 2023 24 timeframe.
Then to the second thing Lloyd in terms of the connected trip step one is to build out the verticals. We didn't have flights a couple years ago on booking dot com at all and as you can tell by the numbers I put out we still have a 100% coverage for all the areas that we do accommodations have to build that out also just some of the technologies that <unk>.
Travel at least have a lots of things we can do to just improve that product I talked a little bit about the attractions product, where we had only 10% coverage last year now we made a lot of good progress to 50, we had to put that all out and then there are other areas ground transportation or other parts of the trip. So we're building out all of the verticals first make sure we had the supply.
Make sure it works well et cetera at the same time, we are beginning as Ive pointed out about the people who will get flights and then buying the combination we are doing some of that cross selling and bringing that out we'll do more and more the goal of course is to make it. So that is so seamless frictionless that people when they are using booking dot com or any kind of travel are doing.
They are finding it easier and offering more value and that value comes from suppliers being willing to chime in to our platform and be able to offer different things that we can then.
Very very scientifically target different customers in a way that gets an incremental customer to that supplier customers happy the suppliers happy we of course make money that will develop the loyalty that will develop the direct business, that's where we're going for and it's the same way in other parts of E E Commerce where people.
Don't shop around they don't look around they go to a one player because they know that's the place where theyre going to get the most easiest to do et cetera, and that's what we're going for it is going to take some time by love the progress that we're making.
And Glenn I would just add to that as well.
When we kind of look at our customer base and not too surprisingly.
Our top customers the ones that kind of spend the most with us.
Most often.
We will likely to use multiple things more likely to use the app and are much more likely to introduce Dr.
So that's the model that we're trying to build upon to build the loyalty that Glenn mentioned, we do have.
Good evidence that that is a trend that we can build on the whole we built value complete travel offering frequency direct linkage via the app the more loyal those customers become.
Alright, thank you.
Alright next question is from the line of Kevin Kopelman of Cowen and company. Your line is now open.
Great. Thanks, a lot.
Follow up on.
The latest recovery trend based on all the data that you have do you have a sense of to what extent the strong booking numbers you saw in the first half of February reflect sustainable levels.
Could see going forward in the coming months as opposed to.
Kind of a short term catch up after the Omar Khan.
Or that you saw in December and to start the year and.
As a follow up to that to what extent are travel restrictions that are still in place in many European countries still hurting booking activity based on the data that you've got thanks.
Hi, Kevin So I think it's very difficult for anybody to have a perfect crystal ball into.
Actually what is driving the good numbers that David talked about the first half of February however.
I think we can all feel fairly certain that there is a tremendous amount of pent up demand for travel for several years people have not been able to travel the way. They wanted to travel savings are up so people have cash.
I hear it.
I hear when I talk to Ceos in the industry of what they're seeing what they're hearing I think everybody feels that people want to travel and I don't think I would just see this as just a little bit of an omicron rebound as what we're seeing I think what we're seeing is people being able to travel restrictions are going down people are feeling safer.
There are some new things coming out that will reduce the friction to need further in Europe . There. So analysis by the EU Council about wanting to.
Suggest getting rid of some of the restrictions those things all help people feel better about travel and of course, though there are parts of the world that are still having problems and eventually those are going to go down to so I feel good about the demand I feel good about the future of travel that being said David May have mentioned it several times there are.
A lot of uncertainty still about how linear this is going to be and I think we have to all look back at the past. Many times, we thought things were out of the Woods and then we went out of the woods and of course, David also mentioned and I mentioned, there are some macro events happening in different parts of the world that can also impact travel. So I think we all have to be cautious but opt.
Domestic here's a thing absolutely do note, though the long run I know in the long run we're going to do well in travel people are going to come back you can't stop that demand.
Human being that wants to travel how fast we can't we can't be certain but I am confident in our future.
Thanks, Glenn and then could you comment on on the travel restriction piece in Europe to what extent.
Are you still seeing restrictions in Europe still limiting some of the activity or is that.
Pretty much up already.
It's not completely done the different countries different countries I look at the list all the time. Some places are letting them out completely UK you are probably aware other places.
And the question is do you need to take a test before you show up or not.
If you are vaccinated, but youre not back say within EU approved vaccination here with <unk> vaccination approval, what's the difference there all of these things, but I think a lot of this stuff is going to be going away.
I hope I hope in other parts of the World also that these restrictions around the world can go down as quickly as possible Australia. For example, letting tourists back in and maybe you saw some of that was happy happy photographs look. The fact is that I do not believe and I've seen a lot of data on this that the restrictions on travel and this comes from W. H O and other.
Fortunately our sources that travel restrictions do not have a significant impact on reducing the amount of infections in countries and therefore, given the social cost financial cost et cetera, a lot of these restrictions should be lifted.
That's great. Thanks, Glenn.
Yes.
Okay.
Chris do you have more questions. Please.
Your next question comes from Doug Anmuth JP.
Line is open.
Thanks for taking the questions one for Glenn and one for David.
Glenn I was just hoping you could talk about the elevated brand strategy in the U S and just how do you approach differs year versus an <unk>.
Previous years.
And then also any comments just framing the broader marketing landscape as you go into stronger recovery and then David.
Unless I missed it was just curious on any financial implications from expanding the customer service partnership with major oil.
<unk>.
So Doug I heard the second part a little bit about the brand more in marketing, but it didnt hit the first part let me answer the brand.
Our general marketing approach in the U S going forward and then give me say it again.
And at the beginning part there.
Clearly.
You saw that we didn't do a lot of brand marketing worst of the pandemic. Obviously is no reason to spend that money and now with a recovery coming were coming back and I'm very pleased with what we saw with our Super Bowl AD.
Very early but I'm pleased with the numbers and what I've seen so far and so we are stepping back into a more normal marketing approach as we did in 2019.
That being said, we're always going to do.
<unk> already done which is look where do we think we're going to get the best return for our marketing dollars and we continue to evaluate whats going to give us the greatest return, but one thing that we haven't changing over time and that is not looking just for the immediate transaction, they're seeing what are we doing tours of building out the long term the loyalty.
People coming back direct and being able to measure where that person came from and what they do after that so we're a little more scientific than that than perhaps we were in the past for the long run, but I'm pleased with that because I think thats, what we need to do to really.
The franchise to increase the value of the company.
The first part was the first part Doug you asked about.
I think you hit the brand strategy.
Pretty well.
The second part I wanted to ask about the customer service partnership expansion and just financial implications.
Yes, sure so Larry.
So let me take that so first of all.
In context, we do.
Polka dot com, so I'll probably be working with.
External service providers for a long period of time, and you may or may not know that when we get to a peak periods. The majority of our customer context and handled by our external partners. So example, typically last summer we had about 75% of this year's context were handled by axial pump. So this is not something new it's just something a little bit more.
Accelerated.
Financial impacts do not expect much in 2022.
Working through that and said through approvals in the closed process, then there'll be a transition period.
For 2023, and 2020 for US is more about <unk>.
Having the ability to have less of the cost increase than in the past, but the cost drivers not really the driver for doing this is really about the ability we have incredible variability workload from peak periods to low periods and to run an in house CST is quite inefficient and also isn't the best employee experience for all workers because.
So.
Exploration peaks and troughs in that Korea development is also restricted because it's a very in house groups. So the bigger factor is really all flexibility, giving a bigger.
Pool of opportunity for all employees and then with that comes some.
Potential cost benefits in the form of a lower increases as we ramp up the volumes.
And I would just add one other thing is we still believe absolutely important so great customer service. This has nothing to do with changing that we're still going to be doing the technology that goes into the customer service process. Our policy all of those things. We are doing that also looking into the future, but we hope to build a very big company. The idea then.
Having to build a very big internal customer service operation is just not the best use of our resources our managerial capabilities.
Is something that is better done by people who are experts in that if you really do it better than we can do it but we can still provide all the great things in the actual customer service to the customer it's definitely a win win.
Great. Thank you Bill.
Our next question from Mark.
Mahaney of Evercore.
Your line is open yes. Thanks, two questions. Please that 9% constant currency ADR growth I think that's the highest I've ever.
I heard you talk about and I guess, if I'm right that maybe that's not surprising given what's happened to overall inflation rates being a decades highs. So when you think about this year. What are you assuming in terms of the sustainability of that maybe I'm, even asking whether inflation is temporary or permanent.
So just just your thoughts on what do you expect to happen with ADR like when you assume when you are running your business. What are your assumptions and then the second thing I want to ask is David when you talk about the ability of booking to grow.
Post the recovery to grow faster than it did in 2019, if that were to actually happen what would be the biggest drivers of that like what would be the greatest things that would cause on the top line the business to grow faster post COVID-19 than it did pre COVID-19 . Thanks a lot.
Yeah.
Sure Mark let me take both those so yes, the 9% constant currency ADR growth was active adjusted for.
For basically genomics right so same same country.
And that is a strong number.
We.
<unk>, 9% growth last year again versus 2019 so.
It is quite possible ADR is going to be at or higher than you were.
In 2000 and.
'twenty one.
I mentioned about the factories, where I mentioned, the fact that was higher than our expectation do you think that the rates would start to tail off a little bit when we got into the Gulf.
The high season, where obviously that was a more.
More supply relative to demand, but the rates continue to hold up and as I mentioned flexible rates are still at a premium.
But just underneath that those are basically just higher pricing, particularly in the less oriented high demand areas remains strong. So we think that's likely to be as.
As high in 'twenty, two as you were in 'twenty, one compared to 2019.
And then in terms of faster growth I mean, there are a number of factors that we do believe.
Got it.
Believe that there's further growth for us in the accommodation business both from a geographic point of view expanding our offering into alternative.
A combination then adding onto that all bank. Following the connected trip what we can do on top of that because the payments because of the fact, we offer a more complete offering.
Thinking about more targeted ways to customize a complete solution for our customers our pricing payments customer service. We think that we are solving today, a relatively small part of the total travel equation and the potential for us to solve more of that is what's going to drive.
Well growth basically create a better product better service.
Coming to us more frequently increasing loyalty. They all work together to provide what we think is a great growth opportunity for us.
Okay. Thank you David.
At this time I would now like to turn the conference back to Glenn Fogel for his concluding remarks, you May proceed.
Thank you.
We're very pleased with 2021, it was a volatile and difficult year, but it showed progress and as always I want to thank our partners our customers our dedicated employees and our shareholders. We appreciate your support as we continue to build on our long term vision for our company.
And good night.
Yes.
Okay.
Thank you and that concludes today's conference. Thank you everyone for participating you may now disconnect.
Yeah.
[music].