Q3 2023 Booking Holdings Inc Earnings Call
Welcome to booking holdings third 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 guaranteed of future performance and are subject to certain risks uncertainties and assumptions that are difficult to predict.
Therefore actual results may differ materially from those expressed implied or forecasted in any such forward looking statements.
Expressions of future goals or expectations, and similar expressions, reflecting something other than historical facts 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' speaker for this afternoon, Glenn Fogel and David Golden Go ahead gentlemen.
Thank you and welcome to booking holdings third quarter Conference call.
Joining this afternoon by our CFO David <unk>.
I am encouraged by the strong results we're reporting today.
The strong leisure travel demand environment that we continue to see.
In the third quarter, our traveler customers booked 276 million.
More than a quarter of a billion landmarks.
An increase of 15% year over year.
And we had gross bookings of $40 billion, which was an increase of 24%.
Year over year.
Room night growth versus 2019 was 24% in Q3.
Both room nights and gross bookings were a record quarterly amounts for the company.
So it came in ahead of our previous expectations.
Third quarter revenue of $7 $3 billion grew 21%.
And adjusted EBITDA of $3 3 billion increased 24%.
Versus Q3 last year and both exceeded our prior expectations.
Finally, our non-GAAP earnings per share in the quarter grew 36% year over year.
And was nearly 60.
<unk> six zero, 60% higher than in the third quarter of 2019, our earnings per share growth benefited from our improved profit levels as well as our strong capital return program, which reduced our end of quarter share count by 10% versus the third quarter 2022.
Now turning to October.
We estimate that room night growth was about 8% year over year.
20% versus 2019.
Excluding Israel, we estimate these growth rates would have been about 9% and 22% respectively.
We saw a significant negative impact on our business in Israel and there was some impact on travel trends outside of Israel.
Nevertheless, we were encouraged to see global room night growth improved towards the end of the month and David will explain more about October in his remarks.
Overall, we continue to see resiliency and global leisure travel demand.
And as we take a very early look ahead to 2024, we see strong growth on the books for travel that will take place in the first quarter of next year, though a high percentage of these bookings are tangible.
Given current trends, we expect customers and consumers will continue to prioritize travel or other discretionary spend in 2024.
I firmly believe we are well positioned to continue our work attracting customers and partners to our platform, while making progress on several important initiatives, which will help strengthen our business over the long term.
These initiatives include.
One.
Advancing our connected trip vision.
Further integrating AI technology into our offerings.
Continuing to grow alternative accommodations and for building more direct relationships with our truck customers.
Starting with the connected trip.
This is our long term vision can make booking and experiencing travel easier more personal and more enjoyable, while delivering better value for our traveler customers and supplier partners.
In the third quarter, we saw an increase in the percentage of transactions, which we count as connected trip.
Meaning to a more travel components within there.
It's still a small percentage of our total transactions today. It is encouraging to see an increasing number of our travelers booking more elements of their travel with us.
Outside of accommodations, one of the most important elements of travel is flat and we continue to focus on further developing our flight offering on booking dot com.
In the third quarter air tickets booked increased 57% year over year, driven by the growth of bookings dot coms quite often.
To provide some context on how this has developed over the last few years, the 9 million tickets booked on our platform. During the third quarter were more than five times the number of air tickets booked through us in Q3 2019.
This significant growth of our flight offering at booking dot com over the last four years was achieved through our successful partnership with E travel Avi.
As previously announced our proposed acquisition of <unk> was blocked by the European Commission in September.
Susan we will appeal.
While we strongly disagree with the Ec's decision to block the deal.
Our commitment to building the flight vertical booking dot com has not changed in fact, we have extended our partnership agreement you're traveling through at least the end of 2028.
Which means we anticipate continue to work with them on improving booking dot com fight offering over the coming years.
We believe offering a compelling flight product alongside our accommodation ground transportation attractions offering helps to create a better easier and more comprehensive travel booking experience for our travelers and more opportunities for our partners.
We will continue to build out our connected trip vision, which we believe will ultimately result in increased customer and supplier engagement with our platform.
As we discussed last quarter, we have always envisioned AI technology at the center of the connected trip.
We have a long history of investing in AI technology and incorporating it in our platforms across our company.
And previously spoke about the hard work our teams have been doing to integrate generative AI HR offerings innovative ways, including Priceline generally travel assistant named Penny and booking Dot coms AI trip planner.
It is still very early days, but both teams are gaining valuable insights on booker questions concerns and behavior as the tools continue to interact with customers.
At Priceline, we're seeing some encouraging signs of lower customer service contact rates and we are exploring other areas across our business, where we believe we can use generative AI tools to increase productivity.
Yeah.
<unk> are running projects using generative AI to enhance the productivity of our software developers with encouraging results so far and.
And we look forward to using these tools more widely in the future.
I remain confident in our company's ability to benefit from AIG developments by improving our product for our customers and operating more efficiently over time.
Turning to our supply partners, we strive to be a trusted and valuable partner for all accommodation types on our platform. When you look to add value for our partners by delivering incremental demand and developing products and features to help support their businesses.
During the quarter some of our partners are booking dot com experienced delayed payments due to a planned upgrade to our finance and payment platforms in early July.
We have now cleared the backlog of outstanding issues lead to this system upgrade we plan to provide compensation of partners, who experienced an extended delay and we recorded this in our Q3 results. We plan to communicate to all partners who were impacted by these payment delays within the next few days.
We continue to focus on strengthening our alternative accommodation offering a booking dot com by increasing supply and raising awareness among travelers.
In the third quarter alternative accommodation room nights grew at about 24% year over year, which was faster than our traditional hotel category.
Alternative accommodations represented about 33% of booking Dot Coms total room nights, which was about three percentage points higher than in Q3 2022.
We are seeing continued momentum in terms of alternative accommodation supply growth both globally and in the U S with global listings, reaching about seven 2 million by the end of the third quarter, which is about 9% higher than Q3 last year.
We aim to build on this progress by continuing to improve the product for our supplier partners and travelers, particularly in the United States.
For our travelers we remain focused on building a better experience that leads to increasing loyalty frequency spend and direct relationships overtime.
In the third quarter, our mix of customers booking directly on our platform continued to increase year over year, we see a very high level of direct bookings and the mobile App, which is an important platform as it allows us more opportunities to engage directly with travelers.
For the first time ever for our company over 50% of our room nights were booked through our apps in the third quarter, which is about six percentage points higher than in Q3 2022.
This is a remarkable achievement considering the mix of our mobile App room nights in the third quarter of 2019 was about 18 percentage points lower than it was in the third quarter of this year. We will continue our efforts to enhance the app experience to build on our recent success we are seeing here.
In conclusion.
I am encouraged by the strong third quarter results and the continued resilience of leisure travel demand.
Teams continue to execute well against our key strategic priorities, which helps position our business well for the long term, we continue our work to deliver a better offering and experience for our supplier partners and our travelers.
We are confident I am 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 go.
Thank you Glenn and good afternoon.
I will review our results for the third quarter as well as our thoughts for Q4 and the full year all growth rates for 2023 are on a year on year basis, unless otherwise indicated we will be making some references to the comparable periods in 2019, while we think these are helpful.
Information regarding reconciliation of non-GAAP results to GAAP results can be found in our earnings release we.
We will post our prepared remarks to a booking holdings Investor Relations website. After the conclusion of the earnings call.
Now onto our third quarter results.
We are pleased to report, 15% room night growth in Q3, which was a few percentage points better than our expectation.
Looking at our year on year room night growth by region in the third quarter Asia was up about 35% rest of world was up mid teens Europe was up low double digits in the U S was up low single digits.
Compared to 2019, our Q3 global room night growth was 24%.
The average booking window, a booking dot com expanded in Q3 versus the same period in both 2022, and 2019 and was a bit more expanded versus the prior periods than it was in Q2.
In Q3, our mobile App represented over half of our total room nights for the first time ever.
Q3, mobile App mix of about 51% was 6%.
Points higher than the third quarter of 2022.
We continue to see an increasing mix of total realized strong interest in the dark channel Dark channel increased as a percentage of our room nights in the third quarter relative to the third quarter of 2022.
The Q3 international mix of our room nights was over 50% up from about 45% in the third quarter of 2022. The Q3 International mix was in line with 2019 levels similar to the second quarter.
Our cancellation rates in the third quarter was slightly higher than Q3, 2022, but slightly below Q3 2019 cancellation rates were the same as in Q2.
For our alternative accommodations are booking dot com, our Q3 room night growth was about 24% year over year.
And the global mix of alternative accommodations was about 33%, which a few points higher than Q3 2022.
Q3, gross bookings increased 24% year over year or 21% on a constant currency basis, the 24% increase in gross bookings was nine percentage points higher than the 15% room night increase due to about 4% higher correlation constant currency.
<unk>.
Plus about three points of positive impact from FX movements and also due to about two percentage points from flight bookings.
Yes.
Our year over year ADR growth was negatively impacted by regional mix due to a higher mix of room nights from Asia, and a lower mix of room nights from the U S. Excluding regional mix constant currency.
Up about seven percentage points year on year.
Despite the high $8 in the third quarter, we have not seen a change in the mix of hotel star ratings being booked or changes in length of stay but could indicate that consumers are trading down we continue to watch these dynamics closely.
Airline tickets booked in the third quarter, we're up about 57% year on year, driven by the continued expansion of booking dotcom slight offering.
Revenue for the third quarter exceeded our expectations, increasing 21% year over year or about 18% on a constant currency basis.
Although we had stronger than expected Q3 from a room night and gross bookings point of view the outperformance versus our expectations was driven.
Mainly by bookings.
Travel in future quarters.
As a result, we do not see all of our revenue in Q3 at least incremental bookings.
As a percentage of gross bookings in Q3 was 18, 4%, which was lower than expected due to this timing effects.
Our underlying a combination take rates continue to be in line with 2019 levels.
Marketing expense, which is a highly variable expense line increased 13% year over year.
Marketing expense as a percentage of gross bookings was about 50 basis points lower than Q3, 2022 due to higher rois in our pay channels and a higher mix of direct business.
Performance marketing Rois increased year over year helped by our ongoing efforts to improve the efficiency of our marketing spend.
Marketing merchandising combined as a percentage of gross bookings in Q3 was about 30 basis points lower than last year, which was a little better than our expectations driven by the improved performance marketing rois.
Q3 sales and other expenses as a percentage of gross bookings were up about 10 basis points compared with last year, a bit better than our expectations about 51% of booking dot coms gross bookings with process to our payments platform in Q3 up from about 40% in Q3 2022.
For the total company, 56% of gross bookings were merchant up from about 45% in Q3 2022.
A more fixed expenses in aggregate were up 24% year over year, which was below our expectation due to lower personnel and personnel related expenses.
We continue to manage a more fixed cost expenses very carefully.
On a GAAP basis are more fixed expenses were up 33% year over year, including a $19 million accrual and G&A expense for the termination fee related to the acquisition agreement for a traveler. This accrual was excluded from our non-GAAP results.
Adjusted EBITDA was $3 $3 billion in the quarter, which was up 24% year over year and would have been up 22% on a constant currency basis. This was also head of our expectations.
non-GAAP net income of $2 6 billion as third quarter resulted in non-GAAP earnings per share of $72 32 per share, which was up 36% year over year.
Our average share count in the third quarter was 9% below Q3, 2022, and 16% below Q3 2019.
On a GAAP basis, we had net income of $2 5 billion in the quarter.
Now onto our cash and liquidity position.
Our Q3, ending cash and investment balance of $14 3 billion was.
It was down versus our Q2 ending balance of $15 $7 million due.
<unk> two 6 billion of share repurchases, we completed in the quarter.
Partially offset by the $1 $3 billion of free cash flow generated in the third quarter.
We repurchased $7 $7 billion of our shares through the first three quarters, which represents 8% of our year end 2022 share counts.
The repurchases so far this year I would take our combined authorization down to $16 billion from a total of $24 billion, we discussed earlier in the year.
Our buyback program takes into account it takes our share price into accounts on our current share price levels, we expect to spend more on buybacks in Q4 than we did in Q3.
We remain comfortable with our ability to complete the full $24 billion of share repurchases within four years from when we started the program at the beginning of this year, assuming no major downturn in the travel environments.
Now onto our thoughts for the fourth quarter of 2023.
October we estimate year over year room night growth was about 8% down from 15% in Q3, due impart to a tougher year on year compare as well as the wall in the middle East when.
When comparing versus 2019 October room night growth was about 20%.
Excluding Israel October room nights grew about 9% versus 2022.
About 22% versus 2019.
22% growth versus October 2019, excluding Israel is a little lower than the 24% growth we saw in Q3 versus 2019.
Looking across our major regions in October we saw Asia year on year growth of room nights without 15% Europe up about 10% and the U S and rest of world were down slightly.
Impacts of the Israeli Hamas War is seen most in the rest of world growth numbers.
Israel.
Book, plus inbound travel basis is about 1% of our global room nights, the middle East, including Turkey, and Egypt on a book basis is about 4% of our global room nights.
Globally, we saw a slowdown starting the second week of October due to cancellations or drop in new bookings after the start of the war and the Middle East.
The cancellations, we saw it sounds like we saw starting in the second week of October were concentrated in Israel, but we also saw some impact on travel trends outside the country as people absorbed the news we were pleased to see room night growth recover towards the end of the month.
All comments for the fourth quarter make the assumption the room night growth will be up about 9% year on year.
When comparing versus 2019. This means we expect Q4 room night growth to be about 20%. This outlook assumes there is no further expansion of the war and the middle East.
We expect Q4 gross bookings to grow about 5% each points about five points faster than room nights on a year on year basis due to a couple of points from higher correlation constant currency <unk>.
Including some pressure from changes in regional mix as well as a couple of points from continued flight bookings growth.
We expect Q4 revenue as a percentage of gross bookings to be about 15%, which would be higher than Q4 last year due to benefits from timing.
We expect Q4 marketing expenses as a percentage of bookings gross bookings to be slightly lower than last year.
We expect marketing and merchandising combined as a percentage of gross bookings in Q4 to be slightly higher than last year as we continue to look for opportunities to lean in.
We expect Q4 sales and other expenses as a percentage of gross bookings to be about in line with last year as the higher gross booking mix is offset by efficiencies and payment costs.
We expect a more fixed expenses in Q4 to grow a couple of points faster than it did in the third quarter.
Taking all this into account, we expect Q4 adjusted EBITDA to be just over $1 4 billion.
Our year to date results plus a fourth quarter country means that for the full year, we expect room night growth to grow in the mid to high teens year over year.
We currently expect full year gross bookings growth of over 20% year on year with.
We currently expect revenue as a percentage of gross bookings increased year on year by about 10 basis points down from our previous expectation for a 20 basis points increase due to higher bookings growth and a longer booking window, which will reduce the expected benefit from timing.
We continue to expect full year marketing merchandising as a percentage of gross bookings to be slightly below 2022, and four are more fixed expenses to grow around 25% year over year.
We manage our more quickly or.
More fixed cost very carefully and continue to expect a more fixed expenses next year to grow at an appreciably lower rate than this year.
We continue to expect that our adjusted EBITDA margin will expand by a couple of percentage points versus 2022.
In closing we are pleased with our Q3 results the trends, we're seeing into Q4 and with the bookings. We've already received for early 2024, we'll now move to Q&A. So Barry can you. Please open the lines.
Absolutely if you would like to ask a question. Please press Star then the number one on your telephone keypad.
Your first question comes from the line of Mark Mahaney with Evercore. Your line is open.
Thanks, I'll ask two questions. Please Glen I think just at the very beginning you mentioned something about March quarter visibility into the March quarter.
Is there anything in particular that.
And that you were trying to.
Hint that or point to the areas because the bookings when there is a little longer that you get do you have more visibility into the March quarter than you typically do and then secondly.
David the room night growth.
Outside this quarter that came in a little bit faster than your guidance. What would you attribute that to was it particular region that contributed to that or was that the alternative accommodations that came in a little bit stronger than you thought just the sources of room night growth upside in the quarter. Thank you very much.
Hi, Mark.
I was.
Not saying that I have seen more than I normally do I'm, just saying I'm very pleased to see this resilience in global leisure travel demand in saying that we're looking at 2024, and we're seeing strong growth on the books for travel and that's going to happen in the first quarter. So it's just just reinforcing my belief that travel as hell.
And we're looking forward to continued healthy traffic.
Yes.
Yes, Mark to answer your questions.
A little bit to what Glenn just said.
Our upside in the quarter, our room night growth was driven by travel expect by stronger travel demand across the peak season, and a longer booking window. If you remember, we said that coming into Q3.
Have exceed we see the bookings lengthening of the booking window in Q1, Q2, and therefore, we expected fewer last minute bookings in Q3, while the last minute bookings in Q3 were a little lower than we would have expected in a year, where we didn't have that loan bogey with <unk>, but what we got we're more bookings.
For longer periods of time out there. So what are you going to actually expanded in Q3 and that created the situation that Glenn talked about what are we now looking into the first quarter of next year because of the strong demand we saw for bookings all of which are outside of the core plus the window means that.
Our Q1 on the books situation is much stronger than it has been prior to the current situation.
Okay. Thank you Glenn Thank you David.
I would also just comment that the over performance. We saw this our expectation was ranked across all different regions I wouldn't call. One region out we actually did better than we expected in all regions when compared to our guidance.
At the actuals for the quarter for room night growth.
Okay. Thank you David.
Your next question comes from the line of Justin Post with Bank of America. Your line is open.
Great. Thanks for taking my question, maybe one for Glen and one for David Glenn you've been working on connected trip for a long time, obviously, a lot of progress with air and other areas.
This vision really works out what does it mean for bookings financials and do you think you are accelerating the pace of progress there and then for David we see the U S, which reopened FERC that kind of low single digit growth.
How are you thinking about Europe comps next year.
And can you just remind us of your kind of relative exposure by geography. Thank you.
So Justin Hello, and I have been talking about the <unk> trip for.
A while because I do believe that really is a differentiator in the long run and why someone would come to us and continue to come to us rather another way to do their travel. So in the long run of course, if somebody is coming direct because they really enjoy the way we do it versus alternatives that of course is lower the marketing cost you wouldn't have to reacquire.
That customer and it's interesting because small small data, but we do see people who book more than one element with US currently we do see some benefits as the person coming back more frequently.
The higher direct so I like that and I think we can do a lot more with them now one of the things that we're not the only person doing this of course in this competition because I think a lot of people see this and now.
The top of this the whole benefit of generative.
Along with all the AI work, we've been doing for a long time and when we see the potential to create a much better experience in discovery planning and executing your travel in a way that if we do this right we may be able to greatly accelerate the growth of the company because it really is.
Transformational difference versus just incrementally different and that's what we're striving for and Thats not going to happen tomorrow.
I know that it's not going to happen next week next quarter.
I'm going to have next year is going to take time to get all this built out but what I'm really pleased about is seeing historically, we said, what we're going to do and we've been doing it and we're showing markers along the way of hitting milestones hitting a flat growth rate still 57% of those air ticket booking that I talked about talking about.
That's five times greater than 2019, we said we were going to do it and we did it.
Going forward and so many of these other areas, where I believe that people are frustrated when they travel now.
You can do it better we will achieve great things both for the traveler of course, we're going to achieve great opportunities for our partners to give them more opportunities to get more business working with US and then of course together those things will end up with a great derivative, which is more value for the shareholders. That's what we're trying to do and I'm really pleased to where we are.
Okay.
Yes. Thank you and then just in relative to your question.
Yes, we were pleased to see room night growth year over year.
In the U S market don't forget in the U S. Our room nights of over 30% higher than they were in 2019. So we have made significant strides.
In terms of advancing our overall position in the U S. If you compare that with market growth rates are probably.
More like recovered versus 2019, not up by 30%.
When we think about next year I don't want get into too much detail, but I will give you a couple of things to think about.
I would say that when you look across all the regions. If you look at where I travel as a percentage of GDP is going to wind up in 2023.
<unk>, where it was in 2019 it still has some recovery before it fully gets back to the percentage of GDP it used to be in 2019.
So I think that provides.
So I'd I'd also say that as <unk>.
<unk> said in his comments that we see we do see consumers continue to preference travel or other discretionary expense items. We don't see any reason why that should change based upon current trends.
And then also just relative to our own view of the business, we're still committed to.
Got it.
Millstones. We gave you is that we will continue to grow faster post COVID-19 than we were before on the topline and bottom line on a constant currency basis that was 8% bookings on revenue.
8% on bookings revenue, 15% earnings per share or constant currency growth rates in 2019, and whilst we're not talking about anything specific around 2024, we also sticking to those overall guidelines and.
Outlook.
Okay. Thank you Glenn Thank you David very helpful.
Your next question comes from the line of Kevin Kopelman with TD Cowen Your line is open.
Thanks, a lot could you comment on the outsized growth in the alternative accommodations that you saw in Q3 I think in Q2 the growth is closer to the overall growth. So over the drivers there any regions and then I have a follow up thanks.
So Kevin why don't I start and David can add on anything I fail to add in obviously very very pleased with that number thats, a really good growth rate and when we compare it to some other people in the space I am very impressed by what we've been able to accomplish all will shout out to the whole team that works on alternative accommodations, but just on <unk>.
Again, I have been talking about for some time about we need to improve the product we've made people aware of it.
And by doing that we will get more business and that's what we've been doing all the things I've talked about them in the past and we continue to do things to make it a better product there's still a lot of things that need to be done to make it even better and that's what we're going to keep on doing.
There is no magic bullet no silver bullet that tell here's how it came about it comes to a lot of hard work and a lot of different ways of just grinding away cranking out, making it better talking with the suppliers who have these properties, making sure we're marketing appropriately when people want that property. They can find it and they see it all those things together.
Are what enable us to achieve what I think was a very very good.
Growth rate, there, but I'll tell you we're not there yet.
Look I want to increase the supply of lot more luck, it's great 9% increase I mentioned in my prepared remarks, an increase of $7 2 million listings. That's great. That's good but I know there are a lot of areas, we need to add even more particularly in the United States because that's the place that I want to use our products, but I look for anything and I don't see it look to me that.
Upside, though we're doing great right now and I still see so much opportunity ahead. Because for example, we don't have enough properties in certain areas and the other product features that we need to improve upon altogether I look at this a great opportunity, we're going well, we'll do even better in the future I hope David anything to add to that.
Thank you Greg.
Your next question comes from the line of Brian Nowak with Morgan Stanley. Your line is open.
Thanks for taking my questions.
First of all let me just ask about the U S a little bit.
<unk> made some really good progress in the U S post COVID-19, but it decelerated quite a bit.
<unk> been down in the most recent month. So well then I guess the question is as you look into 2024, what are the keys to sort of Reaccelerate that U S growth from here to sort of.
Tribute to your goal of growing faster post COVID-19 than you were pre COVID-19. So what drives us growth from here and then secondly, any any quantifiable metrics are factors you can share with us on progress on genius in the loyalty program over the course of the summer into the fall.
Yeah sure. Thank you Brian So the U S is not that much different than any other geography in terms of the elements that help create growth are providing a better product.
Enabling people to be able to find properties. They want at the right price and easy for them to do and but I think overall given great customer service that that's the playbook and ESI.
The numbers will go funky and of course, Covid is really create all sorts of things different geographies come out faster than others. So you compare on a year over year and maybe it looks like a deceleration, but and then there is domestic and international that I think a good way to look at those like you compare back to 2019 and the fact is we've achieved we've accomplished great things in terms of increasing our share in the U S.
And we keep on doing what we have been doing and that will continue to increase that share.
And I just mentioned in the previous question about our alternative accommodations, which is important part of growing out the U S. And now think is also you mentioned genius. So I'll switch over to there and that is continuing to develop the genius program in a way that continues to provide not only great value to the traveler, which of course is an obvious one but it's providing <unk>.
Opportunity for our partners to be able to get incremental demand when needed, we really need and how they need working that together is a way for us to find a better opportunity for both sides of this marketplace to achieve greater value for both sides and I think that we have that great things layer on all those other things we talk about the whole idea of the connected trip.
Bringing in more of the AI stuff and altogether I think there's a good playbook to try and continue to grow our share in the U S and again, we've been doing it for some time now so I'm really pleased with where we stand.
Your next question comes from the line of Lloyd Walmsley with UBS. Your line is open.
Thanks.
A couple if I can first it sounds like Youre still talking about holding this lean in posture on marketing with the leverage on I think marketing plus merchandising and <unk>.
Growth slows should we expect to see you all moderate that posture and get more leverage and I guess looking at markets like the U S. Growing low single digits are you still holding that that posture, there or are you kind of bifurcated in the strategy.
Differently is different different markets or perhaps more recovered.
Anything you could share there would be great and then the second one would just be sort of related but as.
More than half of room nights are now booked through the mobile app.
Should that also be an increasing driver of of marketing leverage or do you think just escalating.
Pricing in performance channels offsets that so so it's kind of a balance of that how should we think about that thanks.
So Lloyd let me talk a little bit about the smaller do that other other facts that he wants to add in here.
Want to be very careful here, obviously, the one thing I don't want to do is give away our or call for online games and all the things we are going to play with our competitors listening in on this.
Understand while it'd be a little bit general on this.
One of the things I continue to try and talk to the team about is we need to be nimble, we need to be agile, we need to be able to be smart and move into markets, where we see opportunities and pull back and other places where we think we're not here at the right Rois and would that be a geography, whether it be a channel whether it be developing you didn't hire product whatever it is I don't look at any of these.
In a different way I look at it all together Holistically, what we're trying to do achieve growth at the right type of profitability levels and were going to continue to do that right now as David said, we have a leading position because we see opportunity here.
Time decent can change depending on the time and certainly the idea to say I'm going to do this for a long term period is it's a nice thing to say, but who knows what the world is going to be like and as we all see and unfortunately the world can change very very rapidly. So we will continue to do this and this is our profile right now the way David explain those numbers.
What we are going to disclose right now, but you should always recognized that we have an overall view of how to do things, but we will be willing to change depending on circumstances regarding the mobile App I talked about David why don't you just take in terms of how that will apply to our numbers going forward.
Yes, Laurie typically.
Silicones. So first of all just to kind of pick up on white Glenn left off on the lead again, we are leading into a recovery marketplace. Ive said there is still one of my other hazardous saw some recovery of travel as a percentage of GDP post Covid left tap into 2024, we haven't seen to fully recover yet. So there are still opportunities to do that you'll notice though that.
Even though we're spending more on marketing merchandising in 'twenty.
In 'twenty, three and we did.
2019, we are getting leverage relative to what we spent in 2022.
A couple of things happen.
As a dark mix increases and of course mobile is highly correlated to dark mixes.
Majority of the vast majority of all mobile all.
Mobile App bookings are in fact, our bookings so that helps as well so.
Although you did make a reference I would just say to Q4 and I wouldn't read too much into Q4, here's how I would explain why we expect to get some deleverage in marketing in Q4 relative to the other quarters, where we've shown leverage is really quite simple.
We're having a strong year and we decide to invest in some additional programs in Q4, it will help us finish the year well and to build on our momentum going into 2024. So that was US is very conscious again, we're not going to go.
The playbook in terms of what they are where they are but we recognize that we are doing well as you have branches delivering great EBITDA and results. So we're going to lean in a little bit in Q4 to position us well going into 2024 strong again thats, what we are doing.
Not driven by any dynamics in the marketplace with our conscious decision of course will still create a leverage our marketing and merchandising for the full year.
Thank you.
Your next question comes from the line of Doug Anmuth with Jpmorgan. Your line is open.
Okay.
Thanks for taking the questions Glenn you talked about expecting a strong 2024, just curious if he has any more color on how youre thinking about the outlook for <unk> next year I think you said it was up 4%.
The increase in <unk> and any more thoughts there would be helpful. Thank you.
I'll, let David talk about what he wants to talk about it I don't think we talked about 2024, I think we've tried to first quarter or so I'll, let David clarify where do we want to clarify.
Yes, Doug I mean, the 2020 for compensation is going to have that when we get into February next year really don't want to have how that now we've kind of told you a little bit about the strength of the on the books in.
In the first quarter, given the strength of bookings in the booking window, and we talked a little bit about our framework for growth post COVID-19 hasn't changed so.
I want to keep anything beyond that until we get to see a little bit more and we're talking to you next time and of course, we'll give you much more insight at that point in time, but it's too early to talk about the specifics of kind of line items in the income statement in 2024.
Okay. Thank you David.
Your next question comes from the line of Lee Horowitz with Deutsche Bank. Your line is open.
Great. Thanks, and maybe following up on some of the comments around sort of the vacation rental agents can.
Can we talk a bit more about sort of the USD Acacia rental business, Glenn you talked about growing supply and building product functionality.
To grow that.
If you think about this.
Getting the incremental products rolled out and getting supply to the place where you are competitive relative to some others in the market. So how do we think of sort of the timeline and maybe even the investment dollars needed to get that business to the place where you want to you want to get it to.
Hi, Lee.
You won't be surprised not actually going to give out the details of exactly how.
What level and what amount of money, we're going to put to work out and what the message or I will say that the best way to look at this and look at what we've done historically.
Where the numbers have been going and how the growth has been growing that's the best indication for you in terms of thinking forward how what.
We're going to end up in the results as a result is going to be.
I will say that its fairly obviously, but it looks at our site and tries to find homes in certain properties in certain parts of the U S. C. Perhaps we don't have enough of them in those areas. So would not be illogical to think maybe thats, where we will start going to as we've talked in the past we think that there is.
Lower hanging fruit for us in properties that are controlled or managed by larger.
Groups of properties makes it easier for us to get that so not I'm not giving anything away here when I say, let's go there first and especially we're doing that.
And for example, you may have noticed that recently, we started doing.
Request on demand type thing, where person doesn't automatically be able to book instantly and thats a product improvement because some people in let's say a higher quality or higher value property is perhaps the owner of the manager did not more than a half instant booking and wanted to have a chance to.
Do it on on request basis, so vast improvement. So we'll continue to roll out all these different things that we think will make our property.
As good as anybody elses, and then apply the money to the appropriate marketing to make sure people are aware of it and that will enable us to continue the growth that we've seen so far I hope.
Helpful. Thanks, and then maybe one follow up on perhaps another area of low hanging fruit can you comment at all on anything Youre seeing in terms of APAC outbound travel patterns travel patterns and how much room. There may be in this travel corridor to recover.
So we'd be thinking just thinking of this travel pattern as a source of premium growth in the medium term.
Not sure of the term premium growth I'd, just say, what we talked a little bit of outlook.
We've talked for sometime about different geographies coming back faster than other areas in Asia was certainly the one who is last and of course it will.
Good when you're starting to see the nice growth rates from those regions and the other one started getting more normalized its nice thing to say and certainly outbound for eczema outbound China still significantly behind when you look at any of the industry reports I need to think how much how much lift do they have gone out bound et cetera.
That's a small part of our business is not going to make a huge difference even once it starts to come back. So overall look we love to see that Asia is going to get back to where all the other parts of the world.
I really don't understand the term premium that you mentioned maybe explain that.
Give a better explanation.
I guess just faster gross growth relative to the core.
Okay.
I thought maybe you were talking about more expensive travel or something.
No no no.
Got it alright, thank you.
Thank you.
Your next question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open.
Thank you so much for taking the question maybe come back to the topic of air were understood on the comments about appealing the traveler decision from the European Commission. If we go beyond that appeal and think about how you plan on building scale and are on the supply side would love to know how you're thinking about some of the investments that are key.
To build that as opposed to possibly going down the acquisition route in air and where you've already deployed there, especially markets like North America can you remind us of what <unk> done in terms of growing overall checkout baskets and return on trip size. Thank you so much.
I'll, let David handle that last part in terms of the appeal and the appeal will take some time.
This type of court action is not going to happen overnight I can't tell you exactly how long it'll take but it's not going to happen anytime soon so I would not.
Putting anything in terms of what that will mean for our Airbus anytime in the relative future.
However, we do like the fact that we do have this new agreement with E travel I going out 2028, that's really great also as you know it's not just booking any travel I. That's one area of our air business, where we have price line of course after that company started price lines on it as an air product that was the first product we have lots of good relationships with.
Air travel there.
Obviously, I'm very disappointed by the European Commission blocking what I believe would have been extremely beneficial transaction.
The travelers good for them.
Good for the partners good for them and together this one creative value, which of course would come back to.
All the people involved in the company whether they be for.
Higher.
Value for our shareholders or a higher value for employees working on this et cetera, very disappointing decision. We've moved on will continue to develop this product and by the way it's been growing very nicely, even though we didn't actually have possession of your travel and yet we still were able to reduce a 57% increase in air tickets, David I'll, let you.
If you are talking to you about our basket size I think is around if you do.
No I can talk about where we always some of the customer oriented dynamics around Erika I think will be helpful. So we said. This this is about booking dot com, which is co courseware areas still relatively new and growing very rapidly. We said previously the over 20% of customers are brand new to us we've never seen it before that continues to be the case as the business grows which is very very healthy.
We also see that those new customers, who are booking accurate before who have never bought anything prior to off price.
With us.
Ill.
A healthy attachment rates.
Into accommodation because these are brand new customers. So you wouldn't expect that attach rates will be all that high but it's quite healthy and not quite as high for example, what we're doing with price line, where we can do that for many years, but it's certainly an encouraging attachment rate what I would tell you, though on the other side of course by definition most of the.
That we're selling to existing customers, which you would expect.
And there is a very good attach rate.
Of those tickets to a correlation because these customers those from and the combination of background in the first place.
While I would also say is that we still have good data that says that customers, who buy multiple things from us whether they'd be the new customers all the existing customers buy and the combination. We have good data that says that that will drive better frequency loyalty future basket size getting them kind of up that loyalty and frequency curve.
We talked about to the high value customers, so the dynamics around <unk>.
Ill still ask to healthy and they haven't changed we're encouraged by all of them and as you can see the healthiest in multiple different ways.
Thank you so much.
Your next question comes from the line of Ron Josey with Citi. Your line is open.
Great. Thanks for taking the question Glenn I wanted to ask a little bit more about AI and just you talked about a little bit in your script, just consumer adoption of the booking tools a trip planner I'm wondering if this adoption is trending as you would have expected I think we're still relatively early days and you also mentioned the comment around lower customer care costs because of the AI. So any insights there would be helpful and David we don't have.
Too much about just the milestones coming out of Covid I know, they're there we've talked about it but just remind us a little bit more about the underlying assumptions of maybe the bookings and revenue growth. Thank you.
Okay AI.
We have so much time, because I could go on for a long time on this so I'll try and try and concise my thoughts on this.
So it is an all new technologies. The hype is always great very beginning our receipts. This thing's going to be the greatest thing since sliced bread, but then it takes longer than it takes to turn.
The size.
Can you kind of need it.
That's the thing about what we're seeing is that it's really exciting I absolutely believe is going to be transformative, let's go and take a long time and when I said in my prepared remarks, Matt. This is very early.
<unk> very very early now some of the stuff that we are seeing we have done now so we see some data to see theyre going to be some good benefits. So the example of the customer Service example is for example, you have a customer service agent.
Who actually is able to use a co pilot, let's call it with.
With AI agent in health and needle that customers for agent answer. The question, we've taken action much faster than they would have been able to do previously, particularly or in terms of.
Years, the person has been in <unk> and maybe <unk> been here Forever for instance, how do everything appropriately is great and all that these are relatively new CMS agents. This is going to be extremely helpful for that person as you know the turnover in CNS agents is very great. Good efficiency productivity gain there then everybody Im sure <unk> read lots about how coding.
Can be greatly increased in terms of speed and efficiency using some of these co pilots in terms of the coatings. So theres. Another area again early stages, just seeing it but we do believe that is going to do something like that and then you go on into the things that we have for the customer and the things like pricing and their pending product where a customer when they are bound.
To buy something here's a chatbot, where they can put in a question because it gets us not sure they want to buy or not.
And instead of having to go all the way back up the final. The final information lets say do we want to buy or not using that chatbot that can be instantly given an answer.
Help.
Convert that person into a buy much faster and actually not lose the Ms market and questions we everything.
One thing I've noticed is coming a lot is can I bring my dog to the hotel.
Can become quite a conversational type thing, where yes, you can bring your dog, but my dog is a very big dog, how big is your dog and you can go back naturally hedged using our information we have.
All of our content using in L. A and in combination to Kuwait This type of.
Relationship.
That's really good and then even going to be other things, where the booking dot com AI product, which is really trying to create in itinerary. The discovery from the very top and going down and when it offers hotels it integrates with our hotel kind of as you're going to book right. There.
So very good now.
Both of those things relatively small usage of even these things compared to the overall size of the amount of inquiries, we get number of bookings we do in terms of the overall size of the company.
It's very encouraging that this tough really does matter and it can make a difference now question will be how long until we get sort of that hit that inflection point, where people start to go higher because there's so much that I don't know that yet, but we're going to keep on experimenting on all of these things increasingly efficiencies. So we can do things faster, which are lower cost.
And the same time, increasing things for the travelers to make sure they want to come and use our products and our services.
Body else's, that's the plan right now and I like it and David I'm not sure what the second question was.
I'll talk a little bit about the framework for post Covid recovery, because I think that's important so we've committed that when the dust settles and the market goes back to normal growth rates whenever that is we will be a larger and faster growing business delivering more EPS and faster growing EPS that we did before the larger and faster growing on the top line and the bottom line. So.
Why do we think that is the case well we will have made a ton of progress. So the comparison point is 2019, if 2020 for us is.
When we get to normalized growth rates it will be five years later.
<unk> 25, it will be six years later, but the business is so fundamentally different the business. We had in 2019 I think we need just to step back and remind you of that so why are we done since 2019, and mainly around booking dot com or other parts of the business are also contributes as well back then we were mainly on the combination mainly hotel mainly.
<unk> business. So since then we have added a significant alternative accommodation business, which is now very sizeable knows we couldnt before growing quickly.
Back then.
We did very little in payments now over half our business is transacted through payments, we built out our payments platform, which is enabling better service for customers and partners.
We have built out a taxi and car capability, we didn't have back in 2019 back in 2019 with greater performance marketing didn't do much around merchandising. We've now developed the big Big merchandising capability, but also we've refined our performance marketing tools to the level, where we really think we can lean into recurring marketplaces and gained share more.
<unk> that we did back then.
And then of course, we've added our Janus program and enhance it significantly. So we believe that we have made huge strides since 2019, we start comparison point when we grew 8% on the top line constant currency bookings and revenue and of course. This year, we're going to be a lot bigger than we were in 2019 beyond all of those capabilities together and we believe we have a fundamentally different.
And more competitive businesses, providing more value to our customers and partners and is much much further towards a vision of the connected trip than we had back then and Thats. Why we are confident that we can grow faster and have a bigger business that grows fast on the topline on the bottom line than we had in 2019 that is the framework.
Okay very helpful. Thank you both.
Okay.
Your next question comes from the line of John <unk> with Jefferies. Your line is open.
Okay.
Great. Thanks for taking my questions a couple for me.
So.
As more bookings come through the App.
Curious how repeat rates have trended among more recent cohorts on the app or whether you're seeing any diminishing returns and stickiness as you move beyond early adopters into the longer tail.
And second are you seeing any patterns and behavior like demand strength in higher priced hotels.
Giving you confidence and consumers continue continuation of prioritizing travel spend over other forms of discretionary spend next year. Thanks.
Let me just take that last one and I'll, let David I'm not sure what we what we disclose what we don't disclose of all your first question, obviously, it's an important one.
So we say and we've said this several times several quarter essentially the same question keeps coming up with different forms of do we see any softening do we see anything decline do you see a decrease in star rating do you see decreasing.
Length of stay and things like that and we do say no and no and that's wrong Pete No and no.
No.
In terms of why we believe that.
Discretionary spending will continue to Q2.
Travel versus other things and that's obviously a lot of different surveys.
A whole bunch of things that are independent third party with actual people, who are saying they are going to do et cetera, Here's something more important note I really try and stress. This at some point. The long term is in terms of how we think about the business increasing value.
So.
If we agree overtime.
<unk> for the World will continue to increase in per capita GDP will continue to increase its purely logical to add people get wealthier, they're going to spend more of their money on things that or services or experiences than they are things.
Once we come rich enough to have let's say an apartment.
One apartment generally or you have one sofa youre not going to buy a sofa each year. What you wanted to do it. He will give you get more money. If you will travel in a more frequently or in a higher level style travel or you'll do both and we see that over and over again, if you look at countries and you see what the amount of the easy way to look at international.
Travel, which has a higher thing that's maybe a higher level for some people and you'll see the GDP per pair.
Person there goes up you'll see the amount of growing outbound travel increases too.
So that's why I believe that this is a long run we have a great tailwind to travel will continue to be one of the things that people always are going to want to own more of it and that's providing great service. Our job is to get a bigger share a bigger piece of that pie is going to continue to grow and Keith as well.
But faster than global GDP, that's why I believe we have a great future here and David I don't know, what we talk or do not disclose regarding his question regarding apps I'll be really quick because of time, but.
There are multiple ways you can book on our property on our platforms directly you can book directly through the App you can book directly on the mobile web and booked our desktop laptop. The app is by far the stickiest those in terms of repeat rates and return rates and of course, the average where we kind of designing to optimize the <unk>.
Screens around the connected trip because not only do we want you to be able to book all elements through the App, but also it goes with you on the trip that doesn't usually happen. When you have book in print something on one of the other platforms. So.
It's very important for us.
Big effort.
The connected trip is.
Moving towards and then what I would just leave you with the final four is of course, not all customers are created equally and the higher value customers who do.
More business, where spend more of their total spend with us.
Higher usage of both App and direct buy an appreciable amount compared to the average customer. So the app is very much at the center of that thinking.
Okay. Thanks, so much.
And with that I will hand, the call back over to Glenn Fogel for closing remarks.
Thank you so I wanted to thank our partners our customers our dedicated employees and our shareholders. We appreciate your support as we continue to build on our long term vision for our company. Thank you and good night.
This does conclude the conference call you may now disconnect.
Okay.
Yes.
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Yeah.
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