Q2 2023 Booking Holdings Inc Earnings Call
Welcome to booking Holdings' second quarter 2023 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 statements are not guarantees of future performance and are.
Subject to certain risks uncertainties and assumptions that are difficult to predict therefore actual results may differ materially from the expressed implied or forecasted in such forward looking statements.
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<unk> 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 for investors section of booking Holdings' website www.
Booking holdings Dot com and now I'd like to introduce booking Holdings' speakers for this afternoon, Glenn Fogel and David Goldman go ahead gentlemen.
Thank you and welcome to booking Holdings' second quarter Conference call I'm joined this afternoon by our CFO David Gordon.
I am pleased to report that in the second quarter, we continued to see robust leisure travel demand, which helped drive the strong results we are announcing today.
268 million room nights booked in the second quarter.
<unk> by 9% year over year, and gross bookings of $39 $7 billion grew 15% year over year and was the highest quarterly gross bookings ever.
The room nights and gross bookings came in ahead of our previous expectations. As a result of the favorable demand environment revenue growth of 27% in Q2 also nicely outperformed our expectations.
The strong top line results in the quarter combined with better than expected marketing efficiency helped drive our Q2 adjusted EBITDA to about $1 8 billion.
Which is an increase of 64% versus Q2 last year and meaningfully exceeded our prior growth expectations of about 35%.
Looking at the month of July we have seen an acceleration in year over year room night growth relative to the 9% growth we reported for Q2.
We estimate July room nights increased by about 20% year over year benefiting from the easier comparison to July 2022.
Overall, we have been very pleased to see our strong performance in the first half of the year, which has benefited from the continued strength and resiliency of overall travel demand.
Our solid start to the year combined with what we currently believe will be a new all time high for a Q3 summer travel period results and improved outlook for the full year, which David will discuss in detail in his comments.
While the near term results and outlook are encouraging we remain focused on what is important for the business for the long term, which means making the necessary investments to strengthen and grow our enterprise while simultaneously remaining cost conscious we are seeing progress and momentum across several important initiatives, which will help.
Strengthen our business over the long term.
These initiatives include advancing our connected trip vision further integrating AI technology into our offerings.
Continuing to grow alternative accommodations and building more direct relationships with our travel bookers.
Starting with the connected trip.
This is our long term vision to make smoking and experiencing travel easier more personal more enjoyable, while delivering better value to our traveler customers and supplier partners to be clear. This is not a discrete product we will introduced at some point in the future.
This is a meaningfully enhanced way for a broker to experienced and utilized booking dot com.
Over time, you will see incremental improvement and enhancements to our platform can move us another step closer to this long term vision and importantly, this approach allows us to realize the benefits while we are building towards that future state.
We believe that the current travel expert interest much more complicated fragmented and frustrating travelers and it should be and eventually our connected trip vision will greatly improve via technology.
Looking at the other side of the travel marketplace. We believe that our supplier partners will also benefit greatly from the connected trip as it will provide more opportunities to personalize and merchandise their offerings.
We continue to build out our collective vision and have much more work to do but we're pleased with the progress we have made so far and expect it to ultimately result in increased customer and supplier engagement with our platform.
We've always envisioned the connected trip is having AI technology at its center.
Across our company, we have a long history with investing in AI technology and incorporating it into our platforms in order to optimize interactions with both our travelers and partners there.
This is an area, where we believe we are well positioned given we have built strong teams of AI experts and gained valuable experience from using AI extensively for years.
In addition to the many current application for AI on our platforms. We believe that we can build an even more compelling and differentiated offering for our bookers, we leverage AI technology to deliver a more personalized booking experience a connected trip that would be more responsive to our brokers needs and help manage different aspects of their trip.
Yes.
Generative AI may play an important role in delivering the connected trip experience to our brokers and our teams have been hard at work to integrate this exciting technology into our offerings and innovative ways. For example in early July Priceline unveil its 2023 summer release, which delivered over 40 new.
Booking tools and upgrades, including Penny.
<unk> is price lines generative AI travel assistant Priceline has currently positioned at the end of the final on the checkout page, where penni can answered travel related questions that a customer may have when they reached the checkout page.
Penny is built on price lines own proprietary technology and data and also Leverages large language model technology to power its conversational capabilities.
The combination of these technologies allows for innovations like the ability to make a booking directly in the chat interface.
<unk> team is rapidly gaining insights on poker questions concerns and behavior is penny continues to interact with customers. The plan is to further enhance pany overtime.
Leveraging these valuable learnings.
Around the same time as Priceline summer release booking dot com launched its own AI trip planner, which began rolling out on the mobile app in the U S to genius customers in contrast to penny.
AI trip planner sits towards the top of the funnel where travelers are in the discovery and planning processes for their trips.
Upon the foundation of booking dot com existing machine learning models that recommend accommodation options to millions of travelers on the platform every day. The AI trip planner is also partially powered by large language mall technology to create a conversational experience for people to start their planning processes.
The AI trip planner advanced planning by providing travelers with a rich visual list of destinations and properties, including booking Dotcoms lie pricing information, we keep links to view more details on the options from a chat interface trip planner bookers can tap on any recommended a combi.
At Asian, they're interested in and then complete the reservation.
Critical to our approach here is to marry our own proprietary data and machine learning models with regenerative AI technology. This allows us to provide the conversational interface with the traveler, while leveraging our own recommendation engine to provide accurate detailed and real time information on the property recommendations.
Like Priceline the booking dot com team is already gaining valuable insights from the interactions with bookers, even though the trip planners in beta and is still currently in a relatively limited rollout.
While we are excited by these new advancements in booking Don Colleran Priceline is of course still very early days and we have much more to learn about how customers will ultimately want to interact with this new technology.
In addition, we mentioned last quarter that <unk> like kayak or expiring AIG plug ins and we will continue to examine all areas of our company to ensure we are taking advantage of AI created efficiencies. We are confident in our company's ability to benefit from AI development and improve our products for our customers given our many.
Years' experience and AI are travel related data and connections to our supply partners and our human and financial capital.
Across our businesses, we have two equally important customers, our travelers and our supply partners with each representing one side of our marketplace for our supply partners, we strive to be a trusted and valuable partner for all accommodation types on our platform and we look to add value for our partners by delivering in.
<unk> demand and developing products and features to help support their businesses.
One area of focus for us on the supply side continues to be our alternative accommodation offering at booking dot com.
Alternative accommodation room nights grew faster than our traditional hotel category at about 11% year over year for the second quarter and represented about 34% of booking Dot Com total room nights, which is two percentage points higher than in Q2 2022. This is a new all.
Time high mix of our total room nights were pleased to see continued momentum in terms of alternative accommodation supply growth both globally and in the U S with global listings, reaching about $7 million by the end of the second quarter, which is about 8% higher than Q2 last year.
We aim to build on this progress by continuing to improve the product for our supplier partners and travelers, particularly in the U S.
For our travelers we remain focused on building a better experience that leads to increased loyalty frequency spend and direct relationships overtime.
In the second quarter, our mix of customers booking directly on our platforms continue to increase year over year, we see a very high level of direct bookings in the mobile App, which is an important platform as it allows us more opportunities to engage directly with travelers and we believe will result in increased traveler loyalty.
<unk>.
About 48% of our room nights were booked through our apps through the second quarter, which is about six percentage points higher than in Q2, 2022, and acceleration and the mix shift compared to Q1 and an all time high in terms of mix of bookings coming from our mobile apps, we will continue our efforts to enhance the <unk>.
<unk> experience to build on the recent success, we are seeing here.
In conclusion I am.
Encouraged by the strength of travel demand so far this year and science.
<unk> to be a record summer travel season.
Our teams continue to innovate and execute well against our key strategic priorities, which helps us position our business well for the long term, we remain focused on delivering a better offering and experience for our customers. Both our supply partners and our travelers alike. We are as confident as ever in the long term growth of travel and the opera.
<unk> ahead for our company.
I will now turn the call over to our CFO David Goldberg.
Thank you Glenn and good afternoon.
I'll review our results for the second quarter as well as our thoughts for Q3 and for the full year.
All growth rates for 2023 are on year over year basis, unless otherwise indicated we will be making some references to the comparable periods in 2019, but we think these are helpful.
Formation regarding reconciliation of non-GAAP results to GAAP results can be found in our earnings release, we will post our prepared remarks to the booking holdings Investor Relations website. After the conclusion.
Now onto our second quarter results.
Against the tough year over year comparisons in the second quarter due to the strong rebound in travel after omicron in Q2 last year. We were pleased to have delivered 9% room night growth in Q2, which was a few percentage points better than our expectations.
Our year over year room night growth by region second quarter Asia was up over 40% rest of world was up low double digits. Europe was a couple of points on the U S was down slightly it's helpful to remember that the U S with very strong last few too and stronger than Q1, and Q3 versus 2019 due to.
Rebound from Microsoft.
Compared to 2019, our Q2 global room night growth was 26%, which was in line with Q1 for a second.
Second quarter, all our major regions grew at a similar rate versus 2019.
In Q2, the booking window booking dot com expanded further versus 2019 than it did in Q1 Q2 booking window booking dot com also expanded versus 2022.
As Glenn mentioned, our mobile apps represented 40.
8% of our total room nights in the quarter, which was about six percentage points higher in the second quarter of 2022.
We continue to see an increased mix of our room nights coming to us through the direct channel.
Darn channel increased as a percentage of our room nights in the second quarter relative to second quarter of 2022.
For the first time since the onset of the pandemic in Q2, we saw the international mix of our room nights fully recover to 2019 levels.
Our cancellation rates in the second quarter were higher than Q2, 2022, or the second quarter of 2022 benefited from the strong recovery in new bookings following the relaxation of travel restrictions in many parts of the world postponement crop.
Cancellation rates in the second quarter continued to be below 2019 levels.
For alternative accommodations are booking dot com, our Q2 room night growth was about 11%.
And the global mix of all surgical and Asia about 34%, which was higher than about 2% in Q2 2022.
Versus 2019 alternative accommodation room night growth was about 38%.
Q2, gross bookings increased 15% year over year or 16% on a constant currency basis.
15% increase in gross bookings was six points higher than the 9% room night increased due to 5% higher accommodation constant currency.
Also due to a couple of points from flight bookings, partially offset by a one percentage point negative impact from FX movements.
Our accommodation constant currency.
Were negatively impacted by regional mix due to a higher mix of room nights from Asia.
Lower mix of room nights in the U S. Excluding regional mix constant currency ADR.
About nine percentage points year over year.
Despite the higher ADR in the second quarter, we have not seen a change in the mix of hotels already deep holes or changes in length of stay that would indicate that consumers are trading down we continue to watch these dynamics closely.
Airline tickets booked in the second quarter were up about 8% year over year, driven by the continued expansion of booking dotcom site offering.
Revenue for the second quarter came in nicely ahead of our expectations, increasing 27% year over year.
Or about 28% on a constant currency basis.
Q2 revenue as a percentage of gross bookings was about 130 basis points above last year, which was in line with our expectations. Our underlying accommodation take rates continue to be in line with 2019 levels.
Marketing expense, which is a highly variable expense line increased 4% year over year.
Marketing expense as a percentage of gross bookings was about 50 basis points lower than Q2, 2022 due to higher rois in our pay channels and a higher mix of direct business performance marketing rois decreased year over year due in part to our ongoing efforts to improve the efficiency of our marketing spend.
Marketing merchandising combined as a percentage of gross bookings in Q2 was about 60 basis points lower than last year, which is better than our expectation.
Relative to expectation this was primarily due to better ROI pay channels as well as lower than expected merchandising spend which was impacted by the booking window being more expanded than we expected in the quarter, which will push merchandize expense into future periods at the time revenue is recognized.
Sales and other expenses as a percentage of gross bookings were up about 30 basis points compared to last year a bit better.
Our expectation.
About 48% of booking com's gross bookings were processed through our payments platform in Q2.
From about 38% in Q2 2022.
A more fixed expenses in aggregate were up.
Up 20% year over year, which was below our expectations due to lower expenses in the quarter, including some impact from the phasing of spend into late in the year.
We continue to manage a more fixed expenses very carefully.
Adjusted EBITDA was $1 8 billion in the second quarter, which was up 64% year over year.
And what is being up 70% on a constant currency basis.
EBITDA was well above our expectation due to stronger topline the efficiencies in marketing merchandising and lower than expected expenses.
Our adjusted EBITDA margins increased by about seven percentage points versus Q2 2022.
non-GAAP net income of $1 $4 billion in the second quarter resulted in non-GAAP earnings per share of $37 62 per share, which was up 97% year over year.
Our average share count in second quarter was 9% below Q2, 2022, and 15% below Q2 2019.
On a GAAP basis, we had net income of $1 3 billion.
In the quarter.
Now onto our cash and liquidity position, our Q2, ending cash and investment balance of $15 7 million.
Was up versus our Q1 ending balance of 53 billion.
Due to the $1 $9 billion debt issuances in May 2023, and the $1 6 billion of free cash flow generated in the second quarter offset by $3 1 billion in share repurchases, we completed in the quarter.
In the first half of the year, we repurchased $5 1 billion shares which represented 5% of our year end 2022 share counts.
Posted so far this year take a combined organization down to $19 billion from the 24 billion, we discussed earlier in the year.
We remain comfortable with our ability to complete the full $24 billion share repurchase within four years. When we started the program at the beginning of this year, assuming no major downturn in the travel environments.
Now onto all thoughts for the third quarter of 2023.
In July we saw year over year room night growth of about 20% up from 9% in Q2.
Looking across our major regions in July we saw Asia up about 45%.
Rest of world up over 20% Europe up mid teens in the U S up mid single digits when.
When comparing versus 2019 July room night growth was in a similar range to the 26% growth in Q2.
<unk> was our most recovered region with growth over 30% versus 2019.
Our comments for the third quarter and make the assumption that room night growth will be up low double digits year on year, assuming some moderation in growth from July June parts of harder prior year Comparables in August and September you'll recall from our commentary on the third quarter of 2020 to a room night growth versus.
2019 was 4% in <unk>.
July 2022, and 10% in August and September 2022.
In addition, we expect that juicy expanding booking window in the first half of the year stay in Q3, so there'll be fewer last minute bookings for stays in the rest of Q3.
We expect Q3 gross bookings to grow about seven points faster room night on a year on year basis due to a few points from continued flight bookings growth on a few points of positive impact from FX movements. We.
We expect a combination constant currency.
To be about in line with Q3 2022, including a couple of points of pressure from the changes in regional mix.
We expect Q3 revenue as a percentage of gross bookings to be around 19% slightly above last year due to a more positive impact from timing in part due to the expanding booking window in the first half of this year and from increased revenue from payments, we expect you to do.
We expect these will be partially offset by a higher mix of flights and increased merchandising spend some which is related to bookings we received earlier in the year.
We expect Q3 marketing expense as a percentage of gross bookings to be lower than last year.
We expect marketing and merchandising combined as a percentage of gross bookings in Q3 to be slightly lower than last year.
We expect Q3 sales and other expenses as a percentage of gross bookings to be about 20 basis points higher than last year, primarily due to higher gross bookings mix.
We expect a more fixed expenses in Q3 to grow year over year about 30% due to higher personnel related expenses.
<unk> expenses, including the impact of phasing from Q2.
Indirect taxes and G&A.
The year over year growth in our fixed expenses includes about seven percentage points from changes in FX.
The difference between the 20% growth in a more fixed expenses in Q2, and a 30% growth in Q3 is driven mainly by FX a major one.
Taking all of these accounts, we expect adjusted we expect Q3, adjusted EBITDA to be around 20% higher than last year.
Given the strong level of bookings that we've seen we are updating our commentary for the full year.
We currently expect gross bookings to grow slightly over 20% up from our previous expectation for low teens growth.
We expect full year room night growth in the mid teens in constant currency.
Constant currency combination.
Up slightly for the year, including a couple of points of pressure from changes in regional mix.
We currently expect revenue as percentage of gross bookings to increase year over year by about 20 basis points down from our previous expectation of 50 basis points increase the reduction in our full year take rate is driven by less of a benefit from timing.
Including <unk>.
Due to the high growth rate we expected.
And this year and also due to the expanded booking window.
Also from stronger performance, which drove a higher mix of clients than we expected earlier in the year.
We currently expect marketing merchandising as percentage of gross bookings to be slightly below 2022 as compared to our previous expectation.
The expectation for it to be similar to 2022.
The improvements in our expectation is driven primarily by higher rois in our pay channels.
We currently expect a more fixed expenses to grow about 25% up from our previous expectation for around 20% the increase and our expectation is driven primarily by variable components of personnel expense due to the over performance versus our expectations at the start of the year as well.
Taxes, which are generally tied to revenues and some additional FX pressure.
More fixed expenses very carefully and continue to expect our fixed expenses next year to grow at an appreciably lower rate than this year.
We continue to expect our adjusted EBITDA margin to expand by a couple of percentage points versus 2022.
In closing we are pleased with our year to date results.
Momentum in the business that we move into Q3, we will now move to Q&A. Adam can you. Please open the lines.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Your first question comes from the line of Lloyd Walmsley with UBS. Your line is open.
Great. Thanks, two if I can first.
Thanks for the some of the color on the Gen. III trip planners you guys have rolled out I'm wondering how you guys think about that strategically and balance that with what search engines are doing do you think this brings you guys more direct traffic.
Or do you think when you look at what some other players like Google are doing with their new search experience like how that might change traffic flows in the travel space.
And then second one you mentioned marketing ROI improvements and efforts to improve efficiency is that a function of just making higher ROI targets or just other changes youre, making within marketing.
Any any commentary you can give there would be great. Thanks.
Hi, Lloyd why don't I take the first one about AI and then I'll, let David talk about marketing Rois. So.
First and <unk> and.
An easy answer it's the true answer which is nobody knows yet.
Some very new technology generative.
How that's going to play out in the long run Francois.
Even though we don't know how it is going to come out we know it is very important that we continue to do everything we can to explore.
<unk> see what might be very helpful to our travelers and to our supply partners to along with internally to do things better internally for us.
Every company is doing that including the big search engines, like Google and Theyre coming out what they can do and nobody knows a couple of things, though I am fairly certain that history provides a good.
Roadmap and that is there'll be changes, but companies are able to adapt quickly. The agile has great technology experts, who will benefit from these kinds of changes we thought as things for example, like when the mobile phone came out when you're able to adapt quickly adjust and we got I think a very good advantage from.
That.
I think that we will hopefully get the same type of benefits as this new technology AI comes out.
One thing I didn't mention.
In the prepared remarks was I mentioned, all the comments I didn't mentioned Dakota. So gold is doing some very good things in terms of internally how can we use AI to become more efficient all types of code co pilot type systems. So there are lots of different things that we're playing with all at once I'm really happy the way that we're doing from a different direction.
Having price slide doing it at the bottom of the policy how that works doing booking dot com AI.
The top see how thats doing that chat GBT plug ins Trump open table and from kayak, so being able to do all these things from a different brands and being able to learn from each other what works what doesn't work to put more emphasis where she put less emphasis I think that will help us have an advantage over many other companies.
It had the scale the expertise.
Basically the capital to put into what could be a very very exciting future for us we will see how it plays out and of course, nobody knows how regulations are going to play into this and that is something that could affect everybody and <unk>.
David I don't know if you want to talk about.
Marketing Rois.
Yes sure. Thank you I will answer the question. So first of all let's clarify that this is not a change in our approach relative to our desire to lead in this year to recovery travel market with leading in sort of recovery can travel walk it and you can see from our topline numbers, we're doing quite well.
So that hasnt that hasnt changed our marketing merchandising investment in total will still be higher this year than it was in 2019.
It goes hand in hand without leading comment.
What I would say and what you're seeing is within that envelope as we look for ways to optimize our marketing spend we've done a little bit more optimization that we expected.
It's all the.
Once the weather where they're happening.
We're looking at channels the Incrementals for return to direct things like that.
And consistently testing across a very large marketing spend you see that during the quarter. We spent about $1 8 billion our marketing. So it's a large amount of money that we're spending across that.
Spectrum, we are always looking for ways to optimize different spend channels and different approaches. So it's really more to do with.
Ongoing effort to improve efficiency all of our marketing spend but again within the context. It was still a leading and looking to take share as the market continues to recover from Covid.
Yeah.
Your next question comes from the line of Mark Mahaney with Evercore. Your line is open.
Okay. Two questions. Please first Glenn have you noticed any changes in the in the.
Type of travel demand and short versus longer stay.
We're all suburban versus.
Urban and then I wanted to ask.
The CFO question on AI, which is when you think about the impact it.
Had in Gen AI could have on the business from a financial perspective, do you think that Thats, Dave do you think thats more likely to be on the monetization side or on the cost efficiency side and I'm sure you're going to say, both but if you if you could be a little bit more if you have any more specifics on which of those you think could be more it could be more impacted by the application of <unk>.
Over time, thanks, a lot.
Hi, Mark.
Filing because I wanted to do number two first and just say both.
Good morning, David.
So this is a question that comes up a lot because as I mentioned in the last call about how I'm always looking for the smoke signals is something changing in some of the key things I'm always look at our people trading down in terms of star ratings or are people going for a lower length of stay or are people ship.
The key areas that may be cheaper travel that's what previously was more expensive travel always looking for some of our early warning signal that something is happening and I do not see that yes, I do not see that any of those areas.
We're seeing right now.
In terms of the AI, it's a very interesting question and of course, if we knew the answer we'd have a good sense of where should we be putting most of our investment dollars and our people put them into the areas kind of give us the best return, but the thing is I mentioned in the first question Nobody knows the answer to these things. These are all just guesses. So at this stage is very important to spread.
But that surround us see where they're turning to come and see where we want to put people to work hard money to work and see what's going to come back.
One of the DNA of our company has always been experiment see what works and keep pushing and whats better working better than other areas. So we're going to be doing a lot of different experimentation I think that's been going on for some time before we really have a good sense of where the best returns are I think in the long run of course, all the things you mentioned are going to give tremendous bench.
Thanks to everybody, but Asia correct to ask the question, which things first and how much of that is not known yet.
Okay.
The next question.
Comes from the line of Justin Post with Bank of America. Your line is open.
Great. Thanks for taking my question.
Obviously very strong in Asia, maybe talk a little bit about what youre seeing there and are you able to take some share from direct bookings at hotels are competitors and then I think you are marketing ROI.
Comment was very interesting and a very crowded quarter for marketing spend.
Can you talk about is it the direct traffic thats, helping you be more judicious with your marketing spend or how youre getting that lay out.
So I'll, let David speak second about if he wants to give any more color into the marketing question.
Also we were Asia, So, yes, very pleased with Asia.
Very nice to see the second quarter numbers, and even nicer to see July accelerating like that Thats, great and obviously thats a function of Asia took more time to recover the restrictions dropped later on a year over year comp. So we're getting some benefit out of that.
And by the way just there.
And China is still not producing significant they're far behind in terms of outbound recovery and we are much more outbound player there and I don't expect a recovery in China for us for some time.
Significant time, probably.
So overall, it's good there are a lot of factors happening there that are very similar to other parts of the world where people want to travel going on out there. They are doing it and we have done a very good job. The same way we did in the U S and what we did in Europe is making sure that when people wanted to trial and we were there for them and we're seeing the results right there and David if you want to give any more color.
And to that marketing question.
Yes, just I think I gave a fair amount.
So I'm not going to repeat it you did ask about whether it takes place in this as well and yes, obviously as our target mix.
<unk> is increasing as we commented that it continues to do so that helps but we're also getting help from just looking across our total spend on marketing and looking at pockets of efficiency using some of the variables that I talked about earlier.
Great. Thank you.
Your next question comes from the line of Kevin Kopelman with TD Cowen Your line is open.
Great. Thanks, a lot could you give us an update on your efforts and progress and then North America vacation rental market.
Youre out of that initiative. Thank you.
Hi, Kevin So I am very pleased that we're continuing to advance while we talked about the overall will call alternative accommodation is the way we define that area.
We talk globally about our 11% growth being faster than the 9% for the overall company that 11% was a booking dot com number but in terms of North America, specifically are less reduces to the U S, which is the area where I think we all are more focused on we have said many many times I've said, many many times that's an area of focus for us.
We know we under index, we know the areas. So we had to improve the product and we talked in the last call with Gulfport had called for that to probably about the things we're doing to improve.
Both on the supply side, making sure we're improving things so that people who own homes.
We will manage our bench people who are in need of space.
I can say.
Im sorry, but booking com youre not doing certain things that you need to do for me I'm glad that we are doing those things that they will then be willing and are being to list on our other properties on our platform. That's great and then on the other side as I talked about last time is the importance. Okay. We got the properties now we got to make sure people know about and I talked last time again about awareness and that we need to.
To bring that up to this is not a thing you saw overnight. This is something that you.
Gabe <unk> step by step grind it out and Thats, what were doing and all the different areas and we're seeing the progress. So far we are we.
Yeah, no not even close to there yet but the good thing is we're making the progress and Thats all upside for us down the road. So we're going to keep plugging away at it and I think we will continue to experience. Good returns as we continue to invest in the area.
Great. Thank you guys appreciate it.
Okay.
The next question comes from the line of Doug Anmuth with Jpmorgan.
Your line is open.
Thanks for taking the questions can you talk about where youre seeing the biggest impacts of connected trip and how big of an impact do you think thats, having in terms of your outsized growth in the quarter.
Then.
Switching to mobile the 48% of room nights booked through the apps.
You can share in terms of.
Better frequency and loyalty among those app users.
So I'll leave the second one David wants to actually.
Revealing that area specificity I'm not sure if he does or doesn't can regarding the connected trip a couple of things on that so let's start off right at the start that the connect trip is not producing material numbers increasing.
What we're doing right now with good numbers that we're showing right now are not because of the connected trip.
Just too small to show that.
Imagine we are building.
And orange.
And so every piece is in place you are not getting a lot of advantage from this arch right now we're building the arch.
The parts that are showing up but not a big effect. So for example, really happy about one element, which is you have to have a flight product and we're doing 58% year over year growth in ticketing flight Thats core for I mean, thats a really good number shows that we're producing a good flight product, but we'll get that going.
And then there are the other areas that we have to build out like things like the attractions things like the right part to get from the hotel to the airport or from your home to the airport things like that building all of those things out and then of course, the glue payments that's very important to make sure. The whole thing is working correctly or able to give benefits value.
<unk> to both the traveler and the name of our suppliers have an opportunity to give types of benefit. So they'll win that deal. These are things, we need payments to do and we're making great progress and we're really happy to see that number up there that 48% and the growth from last year. So all of these elements are being worked on.
But that is not what's producing the very good returns in Q2.
Flip side that says look at all the potential future we have down the road, that's really encouraging to me. So I'm very happy where we are I'm glad with the progress we're making.
It should not be it should not be missed thought that this is the thing Thats produced Q2's numbers and David I know if you want to talk about mobile app anything there in terms of repeat.
Yes, thanks will so.
So Doug you're going to ask question.
No.
Thank you thank.
Thank you so in terms of.
What do you think about what's happening with the App.
Basically three ways for people to interact with our equity they can come through the app they can come to us.
Our desktop devices come to us directly.
<unk> device.
And out of those three not surprisingly.
Is the.
Is that.
The stickiest challenge in terms of the frequency of loyalty as you mentioned.
Which is why.
Obviously, the App is now <unk>.
The percentage of direct have become an increasing percentage of direct and we think that that's a good thing relative to differences in frequency and loyalty, we're not in a position to get into those today, but it is definitely a best challenges of frequency and loyalty.
And Doug one other thing I want to add to this is Doug and the importance of the App and the connected trip.
It's one of the important parks along with the other ones because one of the things that we really believe is important when you're traveling is to get in price deals all sorts of things that you want to have your travel agent in your pocket in your phone that is the travel agent in the pocket and then you throw on top of this all of the <unk>.
AI stuff all that there's some real potential opportunities down the road.
When people are traveling they're going to have a much better experience than they have had in the past and thats, what im looking for down the road.
Thank you Glenn and David.
Yes.
Okay.
Your next question comes from the line of Lee Horowitz with Deutsche Bank. Your line is open.
Great. Thanks.
Direct booking mix improvement remains impressive I guess for starters can you help us unpack what drove the acceleration in mix towards direct in the quarter something specific on your I know you guys aren't doing that drove that improvement quarter over quarter and how should we think that would be replicated going forward and then secondly are we getting to a point where direct mix may fully offset here.
Growth into lower margin business, and thus overtime allow you to actually walk margins back towards 2019 levels, just any commentary there in terms of direct mix and margins over time would be helpful. Thanks, So much.
Hi, Lee I'll, let David talk about whether or not he wants to talk about where the margin may go with that but I'll talk just in general why can we continue quarter after quarter. It seems to be improving our direct mix and I believe the reason is because people like the product.
That's the thing that helps have used it and they decided to come back closer given the best prices are going to most select selection. The greatest selection, we're making it easier for them to do it and we're providing great customer service and something goes wrong. The fix it the reason I use some Mike I'll, let some other retail online retailers that some big ones that he was a use of cash and I do it because.
It's better.
And thats, what wins as customers interest they come back with a better product one that people believe and trust is the reason people are loyal to a brand. That's what we're building here and I believe that's why we are slowly incrementally building out that.
That's the biggest thing for me David you can add if you want to add anything to that and also I'm not sure. What you are talking about in terms of margins when people come directly what that may do in the long run to our margin profile EBITA margin profile.
Yes.
Obviously mix is very helpful for business closely talking about hey, really dark mixes.
Accommodation businesses Scott.
Our core business and we've mentioned before that we bill.
I'll leave that we can continue to improve margins a little bit where they were.
In 2023.
Three but we're not trying to walk them, all the way back to where they.
We were in 2019.
How significant businesses.
The lower margin businesses than we had in 2019.
Large clients business with moving towards having a loss payments business. So.
Maybe you can obviously offset some of the pressure in the business, but don't expect it to work our margins back to 2019, that's about what we've talked about going through but we do believe as smaller boxes that can lead us to have continual improvements where we are now.
Helpful. Thank you.
Okay.
Your next question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open.
Thank you so much for taking the questions maybe against your broader long term goals for growth that you called out earlier in your comments, we'd love to get any update about how you are feeling about supply growth with respect to shared accommodations <unk> local experiences against continuing to diversify supply and build out more elements of the connect.
Trip and how do those factor in as elements of investment beyond 2023 looking out into next year. Thanks, So much.
Hi, Eric So the important thing is always priorities, what's the most important thing and we've mentioned numerous times in terms of our alternative accommodations. How important it is to continue to build out the supply there we have a large number of listings that's true.
Many times, though you have to have the right type of listing in the right locations and we've talked in the past.
Not done yet in the U S getting the right accommodations in the right places that we <unk> com they have something to buy that's very important and that's top priority when you shipped down to something like <unk>.
Attractions not as important right now it's important but it's not as high a priority is getting the El Toro combination. That's one of the most critical thing is making sure. We're spending the time energy effort money in the places that gave US the best return we have good attraction from third party connections, we have key the key ones and someday it will be important to build out further.
Along that but for right now for this year and next year I want to make sure that we're going to have the bigger bang for the Buck, which is making sure we have the right number and the right types of alternative accommodations on our platform.
Super clear thank you.
Your next question comes from the line of Jed Kelly with Oppenheimer. Your line is open.
Hey, great. Thanks, Thanks for taking my question just going back to the U S business you highlighted that.
Single digit growth in the U S. Can you just talk about how that's trending how that's trending relative to your competitors and does that number does that capture the amount of Americans travelling over to Europe or is that including in your European group nights. Thank you Ken.
Yes, David I'll, let you go.
I'm not sure what you want to talk about in terms of us versus competitors were not.
Yes, let me clarify first of all when we talk about these regions on a.
On a geography basis, we're talking about on the bulk of patients. So yes. It does.
It does capture.
Bookings being made by U S travelers, including those that are moving overseas, which is one of the reasons why are we getting growth we mentioned that we're back to.
Single digit growth in July .
In the U S.
I have to see a very very small decline in growth in Q2, and actually that was really just April may by the time, we got to June we are back to growth as well in April and May comparisons with the really strong rebound, we saw particularly in those months.
All clear was the class last year, so we've got a little bit of a cough.
<unk> comparison on that so I think we're going to.
We're doing well in <unk>.
Marketplace, it's too early to call, how we see us doing any against.
Against the market for a single quarter, we like to kind of look at that on a longer term basis and look at how the year pans.
Pans out I would just point out that relative to the market we mentioned in July .
Over 30%.
Growth in the U S versus 2019, nice significantly we'll have any market data points market is perhaps closer to breakeven maybe slightly positive compared to 2019.
So without tends to look at it over longer periods of time, and we'll have a better view on exactly how we're doing in the U S relative to the market.
<unk> develops.
And as I mentioned, we're pleased that many although programs. There. We also knows a lot of upside for us to continue to push more into.
The U S marketplace.
Thank you.
Your next question comes from the line of Alex <unk> with Redburn. Your line is open.
Okay.
Hi, guys. Thank you very much for taking the question I just have one on.
The full year guidance, obviously, the big chain.
Change that are unchanged.
Yes.
The revenue divided by growth.
Operating at one.
2% year on year.
So it could just talk a little bit about how that will manifest next year, obviously pulling forward some bookings brings forward the marketing.
And also therefore.
Touch on EBITDA, but can you talk about the longer term dynamic presumably that has no impact on 2024.
And on the margin trajectory to see going forward. Thank you.
Yes, let me take that.
Yes.
In the prepared remarks, there are two factors that are causing us to.
Take the.
The guidance for take rates to school that number down a little bit from where we were before and actually both of them.
Good things happening within the business. The first is that the business is growing faster.
Booking window has elongated compared to where we thought we'd be this year, which means that we're not all the benefit from timing recovery. This year some of that timing recovery will be delayed into next year. So that we should get back as a positive.
That piece of the reduction will get back as far as next year.
The license is growing faster than we expected as also pointed a little bit of pressure on margin, but as Glenn said Thats a good thing as well because we are building out more capabilities are more opportunities to work with our customers across connected transactions. So those are the two main dynamics, one of which we will get back in terms of the timing recovery, which we thought would happen this year.
Two years.
Yes.
Okay. That's really helpful. David Thank you as a follow up one of the things. That's obviously changed is that some of your marketing dollars, which come below the revenue line uptime into merchandising dollars above the revenue line and so it seems really that revenue line. It's very very hard to model. If we were to think of things in terms of EBITDA divided by gross book.
Is there any meaningful reason why your core business or the accommodation business outside of payments in July it's in order to sort of businesses.
That figure should not see a return to pre COVID-19 profitability, if not improvement as increased direct mix I just think accommodation EBITDA divided by gross bookings is there any reason why that should be less profitable in the future.
And then it was before Covid.
That's obviously a different way of looking at the EBITDA margin than we do but you are right. Obviously some of the contra revenue because of merchandising is impacting the revenue line.
The mix will obviously help.
Overcome pressures in the accommodation business, obviously is things like alternatives become slightly bigger single Asia becomes slightly bigger so even when we've talked about the long term model for the business I assume that the core accommodations business can get back to in the rough region, where where it was 2019 ish and then.
The impacts on EBITDA margins in the overall business was driven by a mix of some of the newer businesses will become quite large in terms of particularly payments and.
Why it's neither of which were a major factor in 2019, what I would point, so as I step back and.
What we've committed to for a long term model, which I think is very important compared to 2019, because we have a business that is larger on the topline and the bottom line on growing faster on the topline on the bottom line.
In 2019.
I think the overall commitment that we've made that we're very committed to that I think will help drive your thinking about the overall model.
So I guess, it's tricia.
The additional businesses as incremental to your core business.
To us the way to think about building the model out to look at our future EBITDA, yes.
Thank you very much.
The next question comes from the line of Ron Josey with Citigroup.
Your line is open.
Great. Thanks for taking the question and really helpful to hear all the stats and see everything go as well this quarter, but I wanted to take you back maybe a year ago, we talked about growing bookings share of annual spend per customer and as we see direct bookings increases the increase the connected trips rise.
<unk> launched just talk to us about the progress of just gaining share that annual spend per customer any updated goals. There. Thank you.
So Rob let me try answering the question you are saying the annual spend per customer right.
So percentage share of travel.
Travel spend yes, I think we've talked about getting 25 brightcove yeah, yeah right. So.
Clearly part of the issue is is that our customers.
I'm happy about those they don't always use loss, sometimes I use a competitor and we see that we see that unfortunately more than I'd like part of it is not having a product that they want that's one thing, which we're building out this year as we've talked a little bit about any other thing is perhaps somebody thinks that they go for example internationally I'll go for this brand and but to Mexico to that one.
The key thing for us is to develop that loyalty.
Reason that somebody really thinks that they will come to us for any travel will come to us. So part of it is bringing all this together then the connected trip bring it altogether with payments developing the more we learn about the customer with their permission of course, and then providing them with the.
They may want more than anyone else. So they will always come back to us for all of this what do I believe in the end it could be two I believe that in the end we could have some all customers. All the time of course, not but I hope that we can continue to improve this substantially in the long run and we will see that absolutely gives me to finish off some of these areas that we're still building out things.
Like making sure we have enough of those alternatives are combination people certainly want so we actually have one it's like making sure that we have the payment product that they want to use the payment system that many things around the one we've talked about they don't use visa card. They don't use Mastercard they don't use medicine.
They wanted to make sure we had that payment volumes.
Travel customer feels comfortable using us.
Go on and on and on with many other things that's what we need to do how high do I think can be I'm not going to guess at it I just know it can be substantially better than we are right now.
Alright, Thank you Glenn.
Your next question comes from the line of Scott Devitt with Wedbush. Your line is open.
Thanks for taking my questions I have two please the first one.
I'm just wondering Glen in terms of.
Anything you can speak to in terms of shift in travel trends theres been a lot of discussion around shoulder month travel April May August September .
Because there are noteworthy and elevated prices.
You guys talk about the months I don't necessarily see that.
And what you are saying, but it may be related to comps I just love to hear your perspective on shoulder month travel first and then secondly.
Now that Theres, a new loyalty program on the market I was just wondering your thoughts on genius, how youre thinking of the current offering relative to competing programs now in the market. Thank you.
Sure. So yes, it used to be either a shoulder and there is peak in life with easy to understand and that's how it used to be and it's not like that at all and boy are things confusing right now when you have the omnicom circling the world in some areas just hitting and then a year later, that's the year that comp against so it gets very very confusing as David was pointing out in the <unk>.
So something could look slightly but actually it's much more understandable to all of that they had COVID-19 in that area last year or they just opened up last year Here's the thing.
Hope that next year things have turned back to a more normalized ease of understanding what the seasonality of travel is however, there was a new thing thats comment and that is the idea of people not going to all of us as much and then Theyre also traveling more so they are using now this Monday and Friday, where they're traveling more for these longer weekends et cetera, or perhaps a whole week.
Et cetera, and I think thats going to make it.
More and more uncertainty to see what that is what that may end up doing is evening out travel throughout the year more where people are able to use time.
Areas that used to be shoulder season, but now people are using more which helps spread out the travel more I don't know, but we'll find out that's why though I can't change any of that so I'm not going to worry about too much what our users in the near term is what signals. We see in terms of how much we spend on marketing or not and in the long run what we hope is again to improve the products because that's the way in the long.
Run to win that's how we'll do it I'm sure lots of people going to have lots of guessing about what the seasonality trends are going to be for the next couple of years globally.
I'm not going to try and try and do that you had you had another question I believe I forgot it though.
Yeah, just genius and your thoughts on genius with a competing product now in the market.
So yes.
Yes.
So.
All the way back to when American Airlines came out with our first loyalty plan I'm actually old enough to remember actually joined.
All the way to now there are lots of different loyalty plans for all different things and beyond travel for sure.
Another company comes out with a new one whatever that is.
It's interesting, but the truth is I love, what we're doing on genius I think it's a great product and we're going to do even more with it one of the things that's really wonderful about is that we use it with our partners together in a way to give benefit to both of US making sure that is actually incrementally improving what's good for that.
Partner, along with of course meeting so it's good for our customer traveler doing that is the way of any type of loyalty program should really work and then some that I think we've done a good job with them continue to do it now we need to do is add on more benefit.
More benefits that enables the supplier to give more opportunity to merchandise and give things that'll be good for the travelers. So they can win that actual transaction and that's something we're going to continue to do.
We've talked about how we've improved it from where it started out and now we're up to three tiers.
And there are lots of things down the road that will add as we can to develop the connected trip that will gave us the opportunity to give more.
Incremental benefits to both sides.
Don't worry too much about what somebody else is doing more concern, making sure. We're executing right on the thing Thats important for our customers who are both travelers and suppliers.
Thank you and congratulations.
Okay.
Okay.
I'll now turn the call back over to Glenn Fogel for closing remarks.
Okay.
I'd like to thank everybody for participating and we're very very pleased with the results from that so I want to thank the partners of course, our customers our dedicated employees and of course, our shareholders. We appreciate everybody's support as we continue to build on our long term vision for our company. Thank you very much and good night.
Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
Goodbye.
Yeah.
Yeah.
Yeah.
Yes.