Q3 2022 Booking Holdings Inc Earnings Call
[music].
Welcome to booking holdings third quarter 2022 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. These forward looking statement.
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.
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 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.
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, Www dot booking holdings Dot com and now I'd like to introduce booking Holdings' speakers for this after.
Glenn Fogel and David Goulden. Please go ahead gentlemen.
Thank you and welcome to booking holdings third quarter Conference call.
Joining us afternoon by our CFO David Gould.
I am encouraged by the strong results we're reporting today.
The record level of travel during our peak summer season.
In the third quarter, our customers booked 240 million room nights, a little under a quarter of a $1 billion room nights, which was 8% higher than in Q3 2019.
We saw an improvement in room night growth during the third quarter from 4% growth in July to 10% growth in both August and September relative to the comparable months in 2019.
We note that the warranty claim continues and as you know we suspended our operations in Russia and Belarus. Shortly after the work yet.
If we exclude the suspended areas as well as Ukraine, our room night growth for the quarter would have been 11%.
We are pleased that all of our major regions improved in August and September versus July and room nights in Asia surpassed 2019 levels for the first time in September .
In the U S. Both our Priceline and booking dot com brands continues to execute well and Kim.
So our room night growth of almost 30% in the third quarter versus the third quarter of 2019.
We continue to see very strong accommodation ADR growth, which helped drive a 27% increase in global gross bookings in the third quarter or 41% on a constant currency basis versus Q3 2019.
Despite the strong pricing environment, we have not seen evidence of our customers trading down to lower hotel star ratings or reducing the length of their trips.
We took another important step in our company's recovery from a profitability perspective, with the third quarter being the first time that adjusted EBITDA surpassed pre pandemic levels.
In fact, the third quarter was our highest revenue and adjusted EBITDA quarter ever.
Our Q3 revenue and adjusted EBITDA were 20% and 7% higher than Q3 2019.
34% and 25% on a constant currency basis.
More recently, we have seen the resiliency and the level of demand from travelers with room night growth improving slightly from September levels to about 12% growth estimated for the month of October versus October 2008, 2019.
Gross bookings in October are estimated to be about 30% or just over 45% on a constant currency basis.
Great improvement in October was primarily driven by the continued recovery in Asia as well as a slight improvement in Europe .
As we take an early look at demand is it 2023, <unk> dot com, we see strong growth in gross bookings on the books for travel that will take place in the first quarter of next year.
Note that a high percentage of these bookings are <unk>.
Interestingly, we have strong numbers on our books for early 2023, despite the booking window being sure than it was at this point in 2019.
David will provide further details on our results and on the recent trends we have been saying.
While there is a variety of concern around the macroeconomic environment and uncertainty around the.
Consumer spending we believe the sustained level of demand we have seen through October helps demonstrate our consumers strong desire to travel.
We believe our solid operating results substantial liquidity and strong free cash flow position us well to navigate potential near term economic uncertainty, while we continue our work of tracking customers and partners to our platform and making progress on our key strategic priorities of payments and the connector.
Tradition.
Given our confidence in the positioning of our business the positive long term outlook for trial and our strong balance sheet. We have stepped up the pace of our share repurchases since we initiated the program at the start of the year.
With the $4 2 billion in repurchases for the first three quarters of this year, we have reduced our share count by 5% relative to our ending share count last year.
We remain focused on building a better experience for our customers and addressing their needs value choice and convenience.
We continue to focus on our customers, we aimed to increase loyalty frequency spend.
Direct relationships over time.
We are encouraged to see our unique customers are booking dot com.
2019 levels in the third quarter, which was driven by strong growth in reactivated customers, who had not made a booking it over a year as well as growth in repeat customers.
Our mix of customers booking directly on our platforms reached its highest third quarter level.
Our goal over time is to further increase our direct mix through several initiatives, including continued efforts to enhance the benefits of our genius loyalty program.
Further building out our connected trip vision to increase engagement with our customers and driving more of our customers to download download and utilize the mobile app.
The mobile App is an important platform as it allows us more opportunities to engage directly with travelers and ultimately we see as the center of our connected trip vision.
About 45% of our room nights were booked through our apps in the third quarter, which is just over 10 percentage points higher than in 2019.
<unk> Dot com remains the number one downloaded ot at globally. According to third party research firm.
And we are seeing increasing levels of downloads in the U S.
We will continue our efforts to enhance the app experience to build on the recent success we are seeing here.
When thinking about addressing our customers' need for value.
Elite providing attractive prices on accommodations is very important.
As has always been the case, our first priority as we think about providing attractive prices is to source competitive rates from our supply partners.
Do this by working closely with our supply partners to get the best prices possible and increased 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 where hundreds of thousands of our property partners are participating to offer lower rates and other benefits to travelers in ways that meet our property partners specific revenue needs.
In addition to sourcing competitive rates directly from our partners. We have built up our ability to selectively offered discounts and incentives at <unk> dot com over the last few years.
Visibility to merchandise is another lever that we can now pull as we look to deliver value to our customers to more competitive pricing.
We believe this competitive tool helps us attract and retain customers and drive improved conversion.
Our platform.
Importantly, we take a disciplined approach to merchandising by very closely monitoring the incremental return on investment on that spend and we can adjust the level of our spend according to our desired return objectives.
We have been pleased with the level of incremental return we are seeing this year for merchandising and we'll continue to selectively utilize this tool going forward.
For our supply partners, we strive to be a valuable partner all accommodation types on our platform by delivering incremental demand and developing products and features to help support their businesses.
Alternative accommodation room nights booking dot com grew about 11% versus 2019.
About 30% of booking dot com total realized in Q3.
We have continued to make progress with our alternative accommodation offering by increasing our supply base of properties, which has grown by about 300000 since the end of 2021 and has increased in each of our major regions around the world over that time period.
We aim to build on this growth in our alternative accommodation supply base by improving our product offering to our supplier partners globally with a continued focus on the U S market.
Let me now talk about the progress we have made in our HR related strategic priorities of payments and the connected trip vision.
On payments, 40% of booking dot coms gross bookings were processed through our payment platform in the third quarter, which once again is our highest quarterly level ever.
We believe bookings accounts payment services drive benefits for both our travelers and our supplier partners across hotels alternative accommodations cars flight and attractions.
Furthermore, we believe that booking dot counts payment platform helps deliver a more seamless and frictionless booking experience, which are important elements of our larger connected tradition.
Unconnected trip on a long term vision is to make booking and experiencing travel easier more personal and more enjoyable, while delivering better value to our customers and supplier partners.
We are expanding our offering into travel verticals other than the combinations and then we will work to make relevant travel components together to provide a more seamless flexible consumer experience as a result of this initiative. We believe over time, we will drive increases in customer engagement share of spend and loyalty to our platform we can.
And to make progress on building the foundations of the connector vision, including our work to integrate ground transportation options and further developed our flight offering on booking dot com.
This flight offering gives us the ability to engage with potential customers who choose their options early in the discovery process and over 20% of all of our flight bookings globally are new to <unk> Dot com.
There is much more work to do as we strive to give our customers the best possible trip experience, but we're pleased with the early results we've seen so far.
In conclusion.
I am encouraged by our strong third quarter results and the sustained levels of travel demand we are seeing into the fall.
Early next year.
We continue to make progress in several key areas, including engagement with our App. The genius program, our alternative accommodation offering payments booking dot com and building towards our connected trip vision I believe these initiatives will help us deliver a better offering and experience for our customers and our partners.
While there continues to be uncertainty around the near term macroeconomic environment.
We are confident.
In the long term growth of travel and the opportunities ahead for our company.
I will now turn the call over to our CFO David <unk>.
Thank you Glenn and good afternoon, I will review our results for the third quarter and provide some color on the trends we're seeing so far in the fourth quarter all growth rates for 2022 are relative to the comparable period in 2019, unless otherwise indicated.
From Asian regarding reconciliation of non-GAAP results to GAAP results can be found earnings release now.
Now onto our results for the third quarter.
In the third quarter, we were encouraged to see remind growth improved to 10% in both August and September up from the 4% room night growth. We previously reported for the month of July .
All regions improved in August and September relative to July .
For the full third quarter Global room night growth was 8% with Europe up high single digits.
S up almost 30% rest of world up over 10% Asia down mid single digits is September was the first month of room night growth in Asia versus 2019, as the delayed recovery continues in that region.
Our mobile apps represented about 45% of our Q3 total room nights and increasing slightly over 40% in the second quarter.
Total mobile bookings represented over 60% of our total room nights in the third quarter also an increase from the second quarter.
In the third quarter, we continued to see an increasing mix of our total room nights coming to us through our direct channel versus 2019, and also versus Q3 2019 and also versus Q3 2021.
The international mix of our total room nights in Q3 was about 45% in line with Q2.
Our cubic cancellation rates continues to be below 2019 levels as they were in Q2.
In Q3, the bogie window, a booking dot com remained shorter than in 2019 similar to what we saw in the second quarter of 2022.
This booking window expanded meaningfully versus the third quarter of 2021, where we saw a higher mix of initial bookings due to the COVID-19 Delta variant way.
For all surgical durations that booking dot com, our room night growth rate was 11% in Q3 versus 2019 on the global mix of alternative accommodations was about 30%, which is slightly higher than Q3 2019.
Q3 global mix was about in line with 2021.
Q3, gross bookings increased 27% versus 2019 or 41% on a constant currency basis, the 27% increase in gross bookings was 19 percentage points better than the 8% room nights increase juice at 28% higher.
Accommodation constant currency.
And also due to four points from strong flat slight growth bookings across the group, partially offset by a 14% points of negative impact from FX movements.
Our accommodation constant currency ADR.
Benefited by about two percentage points from regional mix and about 26 percentage points from rate increases across all of our regions, most notably in Europe and North America.
Despite the high ADR in the third quarter, we have not seen a change in the mix of wholesale star rating being booked or changes in length of stay that could indicate the consumers are trending down we'll continue to watch the ties closely.
Airline tickets booked in the third quarter were up about 235% versus a small base in 2019 and up 45% versus 2021, driven by the continued expansion of booking com's flight offering.
Revenue for the third quarter with over $6 billion, which was up 20% versus 2019 and up about 34% on a constant currency basis.
As a percentage of gross bookings was about 110 basis points below Q3, 2019 due to a number of factors, including investments in merchandising, which are consistent with our prior commentary about the opportunities for us to lead into a recovering travel market in 2022 and also due to an increase in the mix of flights the slow recovery.
Advertising and other revenues, which have no associated gross bookings and some negative impact from FX rates.
<unk> take rates were down more of an expectation of being down about 70 basis points, primarily due to timing differences between gross bookings and revenue recognition driven by the improved bookings in Q3, some of which relates to travel in future quarters.
Our underlying acceleration take rates were about in line with Q3 2019 levels.
Marketing expense, which are highly variable expense items increased 27% versus Q3 2019 market.
Marketing expense as a percentage of gross bookings was about in line with Q3, 2019, which was better than our expectations, mainly due to higher than expected mix as expected our marketing Rois will Laura in Q3, 2019, which was in line with our strategy to lead into a recurring travel market in the queue.
Peak season.
Sales and other expenses as a percentage of gross bookings were up about 40 basis points compared to Q3, 2021, which was in line with expectations about 40% of booking com's gross bookings were processed through our payments platform in Q3 up from almost one third in Q3 2021.
Our fixed expenses in aggregate were better than our expectations up 17% versus Q3, 2021, primarily due to slower than expected ramp until it expenses and lower than expected personnel expenses.
Adjusted EBITDA was $2 7 billion in the third quarter, which was better than our expectations and about 7% above 2019.
What have been about 25% above 2019 on a constant currency basis.
non-GAAP net income of $2 1 billion results in non-GAAP earnings per share about $53 per share, which was up 17% versus Q3 2019.
On a GAAP basis, we had operating income of $2 $6 billion. In Q3, we recorded GAAP net income of $1 $7 billion in the quarter, which includes a 336 million unrealized loss on our equity investments primarily related to <unk> as well as 125 million expense related to an ongoing French tax matter.
Now onto our cash illiquidity position.
Q3, ending cash and investment balance of $11 8 billion was down versus our Q2 ending balance of $14 2 billion, primarily driven by about $2 billion in share repurchases in Q3, as well as the unrealized losses on equity investments.
<unk> share purchases in Q3 with a step up from the $1 3 billion in Q2, as we increase the pace of our repurchases given the pullback in our share price in October we repurchased another $595 million with our shares which brings our year to date repurchase up to about $4 8 billion.
On our remaining outstanding authorization to about $5 6 billion.
As Len mentioned, we've reduced our share count by about 5% at the end of last year.
Over the last five years, we've reduced our share count by 20% despite suspending our share buyback activity for 21 months during the COVID-19 pandemic.
We had negative $95 million and free cash flow for the third quarter, our earnings for the quarter were offset by about a $2 billion decrease.
Third emerging booking belts following the peak travel season in Europe , and North America.
Now onto recent trends on our thoughts for the fourth quarter.
We estimate the October room nights increased about 12% versus 2019, a slight improvement from the 10% growth in September driven primarily by the continued recovery in Asia as well as a slight improvement in Europe .
In October all regions were about 2019 levels.
U S was up almost 35% rest of world was up high teens in both Asia and Europe were up high single digits.
ADR growth has remained around Q3 levels and we estimate gross bookings were up about 30% in October which includes negative impacts from FX pressures, we estimate the constant currency gross bookings were up just over 45% in October .
While there continues to be uncertainty in the near term our comments for the quarter maintenance assumption. So room night growth for the full quarter will be about 10% above 2019, which is in line with levels growth we've seen over the last three months.
10% room night growth in Q4 versus 2019 would also be an acceleration on a year on year basis from 31% growth in Q3, 2022 versus Q3, 2021% to 39% growth in Q4, 'twenty two versus the Q4 'twenty one.
We expect the strength that we.
We've seen in recent months generally continue for the remainder of the fourth quarter as well as continued growth in flight bookings, we expect about a 15% difference between the level of room night growth and gross booking growth less than 19% gap in Q3 due to more FX pressure in Q4, we expect FX to pressure gross bookings growth versus.
2019 by about 18% in Q4.
We expect Q4 revenue as a percentage of gross bookings to be about 120 basis points lower than Q4 2019.
Investments in merchandising and increase in mix of price and negative impact from timing differences between gross bookings and revenue recognition.
We expect Q4 marketing expense as a percentage of gross bookings to be a bit higher than in Q4 2019, as we expect to continue to invest in capturing demand and increasing awareness drove the continued global recovery of travel demand.
We expect Q4 sales our expenses as a percentage of gross bookings to be about 40 basis points higher than Q4, 2021 due to higher merchant gross bookings mix and higher third party call center costs, including the impact of our partnership with major L.
We expect a more fixed expenses in aggregate will be about 20% higher than in Q4, 2021 with personnel G&A and IC each up similar percentage year on year.
So you're always into account, we expect Q4 adjusted EBITDA to be over $1 1 billion. If it were not for the impacts of FX. We expect Q4, adjusted EBITDA to be above Q4 2019.
We are maintaining our full year adjusted EBITDA margin commentary and still expect EBITDA margin for 2022 should be a few points higher than 2021.
Not for the impact of timing or expectations for the full year, just EBITDA margins will be higher by another few points.
For the full year, we expect our revenue as a percentage of gross bookings, we just over 14% lower than our prior expectations for mid 40% range due primarily to timing differences between gross bookings or revenue recognition driven by stronger bookings than previously expected. So it relates to travel expected to occur.
In 2023.
Compared to the 15, 6% take rates in 2019, they expect to take rate in 2022 includes almost a full point.
Impact from timing about 40 basis points from a slower recovery in advertising and other revenue, which have no associated gross bookings and about 30 basis points from an increased mix of flights.
The benefit to take rates in 2022 from increased revenues associated with payments is offset by our increased investments in merchandising each of which impacts our reported take rates by about 1% in 2022 compared with about half a percent each in 2019. These change in payment revenue.
<unk> merchant cost versus 2019 are mainly a booking dot com.
Looking for the winter months, the booking window continues to be shorter than it was in 2019, which means that we would expect low levels a future stage already on our books.
Given this we are pleased that the gross bookings we have already received our booking dot com for state in Q1 up about 25% in euros versus the same time in 2019 of course, we note the high percentage of these bookings are cancel.
While this represents a relatively small percentage of the total revenue. We recorded in Q1, we think it's a helpful early data point to share.
In closing, we're pleased with our Q3 results and the trends that we're seeing into Q4 and early into 2023, we remain confident that our strategic projects the right ones and will enable us to provide better services for our customers and partners. We will now move to Q&A facility can you. Please open the lines. Thank you Les.
Ladies and gentlemen, if you would like to ask a question. Please slowly press star followed by one on your Touchtone phone you will then hear a sweet home prompt acknowledging your request and if you would like to withdraw from the question queue. Please press star followed by two and if you're using a speaker phone it will need to please lift the handset before pressing any keith.
Please go ahead and press Star one now if you have a question.
And your first question will be from Lloyd Wamsley UBS. Please go ahead.
Alright. Thank you two if I can first it sounds like youre not seeing any consumer weakness right now but are there any actions you're thinking about taking.
Approaches to costs to batten down the hatches ahead of what could be a tough year from a macro standpoint, maybe help us think about fixed cost growth.
Marketing posture for next year.
And then second one would just be can you give us an update on payments monetization and profitability I. Appreciate some of the added disclosure you gave us this quarter, but maybe.
Maybe where are we in the rollout of FX translation and how should we think about impact of that on take rates and profitability maybe over the next year or so thanks a lot.
Hi, Lloyd why don't I take the first one and I'll, let David talk about payments will then add anything he wants in terms of fixed cost going forward.
Obviously, we are very pleased with third quarter and we are very pleased what we're seeing albeit in small numbers into the first quarter, David just talked about that 25% on the books in Europe in euros like to see that.
Your question is.
Is there anything we're seeing from consumer sentiment or.
Spanish macro that maybe inhibiting growth or may hurt in the future and something thats very hard to know is what's the counter factual and we're doing well managing LOE to be in all these terrible things that we read in the newspapers had not been happening how much better would it be I can't measure that I don't know, but I do know, though is that we are seeing good numbers.
And we're pleased with where we are we know that we've been through bad times in the past and we're able to do very well we've made adjustments when we've had two I've been now in this company for 23 years, almost and we've had some recession that we have some real disasters and we have managed this company extremely well.
Hearing it through some very stormy weather, so being able to adjust so many of our expenses are variable. So we can adjust very quickly and we adjust automatically almost as volumes change, but I'm feeling good right now, albeit.
World can change anytime and I'll, let David now talking was thinking about specifically fixed expenses and also about payments.
Yes, Thank you Glenn.
Collins is about two thirds of our expenses are variable, which is of course very important starting point. We of course do look at the fixed statements cost very carefully, but just a couple of them.
On tax and then also just to clarify the 25% is actually a booking dot com global number not just Europe as Scott throughout the whole whole of business.
So I think Glenn said, what we need to say about the expense side.
We will we have.
An agenda to move what we really wont consider enhancing our products and services and obviously that requires continued investment and movement towards but as important the payments of the connected trip.
Relative to the payments platform of course, we're pleased with the progress we did give you some additional.
Commentary Lloyd as you mentioned, so you get a feel for what the revenues off will payments now also you've got a feel for what the corresponding expenses off and sales in order to offset those revenues because as we said this year, we're running the payments platform.
At about breakeven when you look at revenues and you subtract the sales on the other expenses.
What I'd also tell you is that relative to 2019 payments as having about a half a basis points or about half a point impact on our EBITDA margins as that mix of revenue has increased our breakeven oriented mix of revenue has increased our cost.
Back in 2019, we actually wounds.
Our breakeven by the combined impact of where we were where we are now is about a half a point of headwind on our margins, but of course, it giving us additional capabilities.
Going forward, our roadmap has not changed so we do expect to turn to profitability.
The combination of payments platform, the combination of revenues less sales and lower expenses in 2023.
We all.
Our rolling out FX and those services on a market by market basis and of course testing them as we always do before we continue to push them further.
Have an exciting roadmap, it's a multi year roadmap of payments. So don't expect anything to change very rapidly in the course of 12 months. It will be of course of multiple years.
If you look at the associated we can provide crop business today in terms of reducing friction for customers and bookers and that we can look at how the payments can really help underpin. The fact that chip in the future. We're very encouraged and excited about it I think with the additional disclosure. We gave you today will be kind of a more constructive dialogue on how it's doing going forward against those benchmarks.
Alright, thank you.
Thank you next question will be from Brian Nowak at Morgan Stanley . Please go ahead.
Great. Thanks for taking my questions I have two.
I appreciate the color on the U S. Almost growing 30% I guess a question on the U S. As youre sort of looking at the different regions of the globe from a profitability perspective.
Can you just help us understand where you are at this point from the U S. From a profit contribution perspective or is it still sort of very much in investment mode to drive growth and how do you think about the path to making that a more a more profit or a more profitable region for the company and the second one I'm going to mispronounce it.
Measure element measure else I apologize David can you just how does how do we think about the puts and takes a potential tailwind of that arrangement into 2023 to the P&L.
Okay, Brian against the reverse.
So.
Major rail you're pretty close.
Basically from a P&L point of view this year, just maybe moving around geography, because obviously, we're going through a transition phase I think you mentioned that about $25 million of personnel expense quarter about $6 million of G&A expense a quarter.
Move out of those lines respective into cells and other and ourselves in June June 1st essentially.
Starting in Q3 Q4, you see the full impact of that as.
As we mentioned.
I think the major at all.
<unk> does have some cost benefits to it but really most of that flexibility, it's about our ability to flex up and flex down quickly.
Sponsor different market needs.
Languages, so over the longer term compared to continuing to build out ourselves the OSM cost benefits.
And Youll start occurring in 2023, we haven't quantified that yet we'll think about whether it makes sense to try and quantify them at all for you next year, but again not the primary driver so im not saying Theres no cost benefits.
Why is that partially why we would sell.
<unk> says Apache is working exceptionally well.
We just completed the summer period and talk US specific results were also solid under the new regime, because we did keep some folks ourselves.
On the U S of course, we are growing so we're investing.
No big surprises, we haven't broken out what contribution margins all regions. We don't plan to do that but obviously, we're investing in the U S to grow a position, which is continuing to increase and as that increases over time, we'll be able to deliver higher profitability from it.
Anyway, just pleased with what we're doing and the.
The U S.
It's a market where people do make money and we do choose just maybe not the same rate as the box.
Investing in points of headwind.
Thanks, David.
Thank you.
Next question will be from Kevin Kopelman at Cowen. Please go ahead.
Thanks, a lot.
Just a follow up on the marketing expense could you characterize how you see the competitive environment right now on advertising channels.
Over Q3 and quarter to date.
Earlier in the year and maybe also compared to 2019.
Why don't I get one I just mentioned in general and then if David wants to say the specific.
Marketing for travel is always extremely competitive it's never not competitive no matter what channel you're spending your money it's competitive.
Always trying to make the right judgments how much money to spend what we think the ROI is going to be looking to for the long view in terms of what this does in terms of our overall building the franchise I can't give you specifics in terms of up and downs.
David can talk about percentages of amount of marketing spend we have been doing versus gross bookings over over the last couple of years, but again the market is never less competitive it's always competitive and I think we have performed very very well.
Godless.
Okay.
Sure.
Yeah.
Go ahead please.
Second question.
Just a kind of a separate follow up on an investment levels.
Can you talk about just how head count has been trending in kind of what your what are you doing now in terms of hiring and any color on how that looks over the next year.
Sure.
Finish upon a great point on the market environment.
Remember that we did say the rois with a lower this last quarter Q3, as we expected we targeted lower rois that we chose to drive ourselves.
Continued to lead into the recovery also remember rois were actually higher in the first half than they were in 2019. So.
You have to kind of look at it in that context.
Investment levels.
<unk>.
<unk> continued.
Continue to be I would say, we continue to one invest in the business, but of course, we do recognize some of that.
The macro factor.
To pull back.
Strategic from what we want to do.
We have a short term slowdown but of course, we all looking at.
How many people, we added where we add them to make sure we item against the things rebounded most both business as you would expect us to do.
Great. Thanks, David Thanks, Glenn.
Thank you next question will be from Mark Mahaney at epic.
Please go ahead.
Okay. Thanks, two questions. Please can you just talk about how you have been able to drive up that mobile app usage, It's obviously got great benefits for the business model, but.
How have you been able to do it and just.
I know you'd like to get it higher how much higher what's realistic for how much higher it could get and then if you could please double click on the flight business and.
Where are you now in terms of rolling that out into how many markets how broadly.
Used is it how high is the awareness of the product just talk about what the growth path is just for those slides product. Thank you very much.
Hi, Marc Thanks, So you're very right about the importance of mobile app.
Say that every single prepared remarks.
We do I always mentioned is an important part of our platform.
How we are doing is by creating a great experience for the people who are using it.
I agree with what Youre trying to get somebody uses provide a great experience will come back until the people et cetera, we're not necessarily doing anything really different than anyone else does but just doing it well in terms of when what would be the top level for it that's hard to say because.
The people who create these mobile devices continue to approve upon it and people find it more advantageous to use that versus their desktops, it's hard to say, but it could be an extremely high number that people go to the mobile device now our job is to make sure people use our app and Doug could you just mobile web search where we have to pay which is one of the key things we mentioned.
And I think over <unk>.
60% of our business was going mobile.
45% so at the App. So obviously wanted to make anybody is using a mobile device, we want them to use the app has had a direct them.
Regarding flights.
No.
Countries I haven't done that recently, it's an awful lot, but some of the areas. It's a relatively low amount because there's very little awareness.
For example, I'll give you an extreme example, I know we brought on Pakistan not that long ago, not a lot of flights yet in Pakistan, but.
Getting out there the key thing for US again is creating a better experience and I'll be honest with you. Our flight product is not yet what I would say as good as it should be continue to improve upon it makes it better than it's been in the past providing the features that some other of our competitors offer up to consumers that we don't do yet that we want to offer.
So theres a lot of upside left in this I think a tremendous amount of upside in it and the numbers are still while we like the growth rate is still relatively small.
Thank you Glenn.
Thank you next question will be from Justin Post of Bank of America Merrill Lynch. Please go ahead, great. One for Glenn obviously merchandising I think you've called out a one point headwind payments might be offsetting but can you explain why you think thats a good good thing to do is it training. The consumer is just something you have to comp next.
Year, why do you like that that aspect of the business and then maybe for David assuming we don't have a real unusual year for travel as you think about the unwind of the timing differences and the added marketing spend this year, how do we think about those kind of unwinding next year and then maybe lastly, if you want.
Colin anything about out about one Q I remember I think we had a real COVID-19 slow start to the quarter and then bookings really accelerated in March if theres anything unusual in Q1, we should be thinking about thank you.
Okay, So I'll talk a little bit about merchandising.
A couple of things.
First thing is so merchandising is can be an investment that we're making a way to bring in customers retain customers or ways that we feel are necessary to be competitive against other other.
So that's it we're not paying for that breakfast a free breakfast. So once a week do and lots of levers to Cleveland. That's one of the things. We think is so important is making sure that we are providing the most competitive offer it out in the space.
<unk> being able to use all of our investments in the right way at the right time to get the right return.
There's a lot of data to see where is it has to be put out.
David though with the other two are questions.
Yeah. Thanks Lynn in terms of just what he's bored on the timing side mentioned the timing is costing us about coin to take right. This year.
We think we got most of that back next year, maybe at 100 per cent of it. Therefore, you for some time of impact, but yeah. It's really a function of what the growth rates looked like going into a going out of the year, but assume we got most of that back on the marketing ambition dining beside combined you, that's where would we be living in this.
This year sure.
Really take advantage of a recovering from a marketplace, we certainly won't be deleveraging of those lines for the next year.
But we want to see you can't really want the market looks logins and how 'bout recovery there is less you'll forget with sort of a <unk>.
Recovering you have a few things that have not yet going back to the way. They were before so we'll look at exactly what the right level of investment is and if you feel that we continued to gain share, which we believe we game issue. We believe we changed it last year at community Shegging outlet you had that we may you know maintain those levels for awhile. So we get back to a more normal login.
Growth rates and we will give you more think keep on where we all that spectrum, what we get together in February once you've completed all applying processed it yet and we've got a bit more visibility into into next year and then finally on your Q1 question. Yeah Q1 last year was was was unusual <unk> was really having an impact.
Well.
We'll have to see exactly what happened so just bear instead of out there. This year. We wanted to give you that staff about 25% more gross bookings on the books for next year has the same type of the 19th of the first quarter of 2020 as a as a way to understand the book is building quite an iced tea for 41, obviously, there's a lot of ground to happen between now and then it's still.
That's a relatively small percentage of what we'll do is totally <unk> revenue. We think it's a as opposed to staff and it's just that we gave out a couple of of actually for the last two quarters. When the number was like 15% for growth not 25% in both cases the revenue for the for the quarter wound up being a fan of higher than indicated.
As those books built now again don't forget I've told you about your number just to be clear with the 25 per cent.
Great. Thank you. Thank you so much.
Thank you next question would be some dog M S.
J P. Morgan. Please go ahead.
Thanks for taking questions I have to I know you indicated that you're not cheap hotel tray down or shortening of trips I. Just wanted to clarify is that the case across all geographies and and do you have any more relative stability in the U S versus other regions and then secondly, how should we think about.
80, or a growth I know you said it continues to be strong busy look into twenty-three just factors around F X and any relevant mixed factors and like for like potential pressures as well. Thanks.
<unk> I'll start with the hotel trading down stars or Wednesday, I have not seen anything cause any sort of geographical area that would make anything stand out differently, we're saying people who want to travel.
A significant amount of savings over this COVID-19 period, and they want to travel and some are even yale traveling longer let them stay and enjoying it regardless of what the economic situation is so weird I'm not seeing anything David.
<unk> checking that where he would talk about what we're saying for adr's going for my for weeks at school Gonna say publicly.
Yeah on the mix on the tray down Douglas as you mentioned.
We're not saying that in Europe to be perfect quick last with sometimes people are asking the question, but we don't see global either so it just not not factor, but particularly it's also not packed in Europe , either on the $80, obviously there'll be tastefully and intellectual <unk> currency cause it's <unk>.
Exactly how exchange rate's gonna move on us we.
We're not ready so the 28 coins of constant currency makes me starting Q3, and we saw go completely roughly same level than to October was 26 points from from rates and only two percentage points from mixed so as.
<unk> <unk> <unk>.
Concierge to rebound will lose some lose at two points. It makes it you've been most most running right now the fact that agent at a low it makes it it used to be so that will go away, but obviously one of the most what we're saying is a race driven and as we talk to our property partners. They continue to be so.
Facing the same expense pressure inflation pressure that many people with a huge <unk> utility energy labor et cetera. So we will see how the environment develop so we have no other color on that to give at this point. So I will update you again, when we get to February if we see anything differently.
Okay. Thank you both.
Thank you next question will be some Eric Sheridan at Goldman Sachs. Please go ahead.
Thanks for taking my question, maybe a few if I can on the alternative accommodation space, where you made some interesting comments here. When you think about supply growth. So is there any areas of either geographic focus or mix or types of properties or types of duration of stays.
Greater levels of target for supply growth that you look out into twenty-three and beyond in terms of alternative accommodations is there any color also you can give us on as you have more of that type of supply to show that the consumer what's at my duty either traffic conversion Roy on the platform is you have a wider array of inventory to show the consumer and the last piece.
Would be is there any element of either mix or sides of the business, you're sort of thinking about in terms of striking the right balance between traditional inventory and alternative accommodation inventory over the longterm typecast.
Sorry basic concept for US has always been more better more supply is better and it's always the consumer's choice on what they want to stay where they wanted to stay there watching it at home Avila compartment or hotel. That's it. So in terms of overall, we do need to continue working hard at getting more so.
<unk> many times in the past about our need for the single property. The home specifically that we need to build like talk geography, I'm always talked about we need to build the U S. Even better and one of the things is creating a better onboarding experience for people who own these properties improving the payment.
For these people coming up with ways that you feel better about having to be state in their property with an insurance type property, there's something that we have been working on that we brought out and we're gonna continue to roll things out down the road to make it better for the owners and the manager. So these properties to be willing to put it up on our platform now.
I believe the and this is what we've seen over many many years just as we bring more and more supply and that will help us build the business and I I absolutely think that this is something that is not sounds good requires some rocket science or some great thing they can't be invented people are doing this we just maybe.
Continue to work on it put people to work great the things necessary and we were wrong. This out I'll see if he's taking longer than I would like but.
Pleased with where we are and I think some of the numbers that we've talked about are are encouraging.
That's fun.
Thank you next question will be <unk> Securities. Please go ahead.
Yeah. Thanks, a lot then I think you mentioned you see opportunities to.
The experience and the mobile App can you give me examples of what kind of things that he could see there.
And then I don't know if you guys updated on the mixed up.
Cross border with any stash that it would be pretty Hudson.
Oh, <unk> urban or cost per I'll, let him do that but in terms of the app.
Right off the bat that I think is at three and again I look at as a traveler I, saying what am I missing why am I not getting this something as simple as you know we have attractions and we're building that up right now, but well in any destination well I need to have things being popping up on my screen from our App tell.
Be great things to do maybe the discount or skipped a line things that will make somebody say gee using booking dot com for this travel experience is much better because I'm getting so much more than I can go through so many different example, that's the great thing about the mobile App is in people handling their pocketbook when their pocket with.
Carrying with them and that gives us the connection to be able to provide them with better service better things to do better value and that's why it's such an important part of this connected tradition.
David I don't know if there's.
Was there any steps.
No stance on urban knows say that historically urban is yeah, we've had a a heavier weights it makes it.
<unk>. So as recovery continues people go back to back to cities and other locations that usually is is a positive note noticed that some mix on cross border.
We did tell you that would back up to 45% of all bookings out as their quota international that down for a little over 50 on a pre pandemic basis. So there's still some decent recovery flip that too. We have this thing something to go watch back to anywhere.
Got it. Thank you again, thank you David.
Thank you next question will be some Lee alright at Deutsche Bank. Please go ahead.
Great. Thanks to our margins margins, if I could what did you think of that emergency beyond this year, how does the strength and direct the natural things impact. The way you think about the long term margin profile the business, particularly with some of your growth initiatives like flights, having lower margin than your court could direct into Boston. These headwinds in the four months.
And then you think about the ship margins, perhaps next year health at all should we be thinking about you know APAC being potentially a source of premium growth impact the overall market profile and 2020th right. Thanks, So much.
Yeah, we have <unk> I'm gonna try avoid talking to a drive 23 three margin today, that's really a conversation for for next February but maybe longer to place to have that you can't reach out what we're thinking I'd say that the 23 three poetry for both of them. So I.
As we said the Austrasia here is to build a better cross the best service, our customers and partners.
So they'll come back to us more frequently Ah more directly and obviously author mix is super important darn. It makes is sighs heavily too frequency and to people, who do more with the people who bought by multiple things from us a much more likely to come back to us directly in the all through through a pay channels. So.
Yes of course, the awesome head waiting to our login profile because of a business exchanging change you from almost a pure combination business, having high makes the payments behind makes apply to those of course are lower March visit we've had that conversation before but the most important thing we can do to kind of keep them on the margins.
And a strong position is to continue to drive that mix of dark up and that will impact all parts of the business, but as I said before will be industry, leading profitability margins because of that mixed factors, we do not.
How about we believe that made it to the module will be a little bit lower than they were 2019, but we'll have faster growing business with more EBITDA more a shed it's growing fast at the top and bottom line, we think that the most important thing.
Great. Thank you.
Thank you next question will be <unk> at Barclays. Please go ahead.
Great. Thanks for taking a question. The first one was on Goodnight Guy in the fourth quarter.
10% or 2019, I guess can you talk a little bit more about waste on October did the trans within the month, you know get worse than.
In mind, just trying to tie at 10 per cent versed at fault in October thanks.
So yeah sure.
There's 10% roommate guide, it's it's it's a temporary remind it's really framework. We give you four four Q for this'll, a lot of volatility and also you can <unk> predict exactly okay, what's gonna happen to ruin Heights in November and December given tobacco out there, but what we did was it look we grew.
We'd be great 10 increased.
Increased up to 12, it's a nice round numbers account paying all of poetry too.
Q for to explain to you what the shape of the P&L might be indicated that there was a slowdown in the end of October in fact room night growth was fairly linear 12% throughout the entire amongst all of October . So it's more of a framework that it is a hard guy, but it will give you a number to kind of think about when building, you'll you'll models, but it's.
Not reflective of anything we're seeing in October .
Slowing down or speeding up it's just a way to think about the shape of the income statement, how things might look thank you for.
Great. That's helpful. And then just one on alternative combination.
Nation as a percentage of total it's around 30% a slightly higher than 13 19, I guess are there any low hang food or opportunity to head to kind of increase this percentage over the next couple of years.
Well, yeah, I mean, we could easily increase that if we didn't do so well in hotel.
You know, it's one of those things, where we think of this holistically, we Wanna get more booking as I mentioned earlier. This is really a case, where the consumer makes the decision not us we've been one of the great advantages of our platform is that we offer all the different types of accommodations and we have seen the data where people come to our site and the first thing they're looking at maybe one time.
But the combination, let's say hotel they ended up booking with home because they saw that in the search results and they were going back and forth looking around.
<unk> something that we're very pleased to have that ability to offer up all the types of accommodations to the customer. So I don't see anything to try it artificially try and drive more people to the alternative accommodation necessarily other thing that's going to increase the value of the company I think providing the customer with what they want.
What they need what they think is best for them, it's really the right way being consumer centric and really driving that is the best way to build a company.
Alright, thank you.
Thank you.
Your last question will be some Stevens you I've credit <unk>. Please go ahead.
Okay. Thank you so much so Glenn your unit growth commentary in the U S was actually very interesting. So can you talk about the relative size of your user base for booking dot com and the U S versus say priceline and presumably as booking continues to grow do you.
Think it's necessary to support both brands longer term and if he wants to take one step out in zoom out more globally. There was always a sharper line in the sand between the consumer experience I'm booking and <unk>. So do you think as you do more merchandising connected trips.
Should we be thinking about a unified Bryan position under booking dot com. Thanks.
Yeah. So let me talk in general about why we have different brands, we have different brands because they offer a different user experience <unk> different things that they are aiming to do different strategies, we really really totally understand the issue of army, causing excess costs are there ways to save money by doing.
Things that are not duplicative. So we are we understand that we are working all the time looking at those things that we can try and improve upon but at this time I do not see any any reason I'd want to separate out and say well. We're gonna eliminate one of these are just go under one brand.
Competitors have done that and to me that may be their strategy, Australia, just continue with the differentiation among these brands and giving you the build them out the way they're doing them in terms of the actual numbers U S for priceline versus booking I don't believe November disclose anything of that nature. So I think we're just sit tight.
With that and keep going the way we are.
Thank you.
Thank you at this time I would like to turn to call back over to Mister <unk>. Please go ahead.
Thank you and I want to thank our partners our customers are dedicated employees and our shareholders. We appreciate your support as we continue to build on the long term vision for the company. Thank you everyone and Goodnight.
Thank you Sir.
It isn't gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask that you. Please disconnect your lines.
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