Q3 2023 Expedia Inc Earnings Call
Okay.
Okay.
Okay.
Good day, everyone and welcome to the Expedia Group Q3, 2023, why not sure results teleconference.
My name is Lauren and I'll be the operator tobacco.
If you wish to ask a question at the end of the presentation. Please press star one.
Yes.
If you change your mind, please chocolate bars to come to your question.
The opening remarks, I will turn the Kool aid to SVP corporate development strategy and Investor Relations. Please go ahead.
Good afternoon.
Third quarter 2023 earnings call.
It needs to be joined on today's call by our CEO, Peter Coleman, and our CFO Julie Whalen.
Our commentary today that include references to certain non-GAAP measures.
Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in our earnings release.
And unless otherwise stated any defense expenses exclude stock based compensation.
We will also be making forward looking statements during the call, which are predictions projections or other statements about future events.
These statements are based on current expectations and assumptions, which are subject to risks and uncertainties that are difficult to predict.
Actual results could materially differ due to factors discussed during this call and in our most recent forms 10-K, 10-Q and other filings with the SEC.
As required by law medium not undertake any responsibility to update these forward looking statements.
Alright, Thanks release, SEC filings and a replay of today's call can be found on our Investor Relations website at <unk> Dot com and with that let me turn the call over to Peter.
Thank you harsh and good afternoon, and thank you all for joining US today, our third quarter results came in ahead of our expectations with record revenue and EBITDA. This was particularly gratifying considering the fires in Maui, which had a disproportionate impact on our <unk> business.
Pressure on the top line overall.
Travel demand otherwise remains solid with broad trends consistent over the last few months North America, and Europe demand remained stable with more pronounced growth in APAC and Latin America.
<unk> also remains stable by and large hotel and verbally the yards are holding up in each region, but mix effects are leading to a slight year over year decline in overall lodging ADR.
Conversely, we have seen some modest price pressure in the air and car.
We are also keeping a close eye on the escalating violence in the middle East, which appeared to have some impact on global travel in early October.
More relevant to our specific performance I am happy to share that we've just completed the final leg of our verbal migration onto our single front end stack with the conclusion of our global launch of the new verbal App. This past Monday in the U S.
This marks the last of our major migrations associated with our multi year transformation.
It has been a long complex journey, but well worth the effort as we are now in position to accelerate into the future without the drag of transformation work that forced us to go backwards in order to go forwards. We are now in position to dramatically increase our test and learn capacity and feature released velocity, while also providing a scalable and efficient base to operate upon we.
Continue to utilize our industry, leading AI and ml capabilities to radically improve all aspects of our traveler experience and with the launch of <unk> and our increasing ability to understand the long term value of our travelers. We can now begin to drive faster more profitable growth.
Moving on to the key pillars of our performance starting with our category, leading <unk> business, which remains on track for a strong year with Q3 revenue growing 26% versus last year, we're winning new deals increasing wallet share with existing partners and launching new products and features to support our growth demand from China in particular.
It continues to pick up with Q3 bookings from China partners up over 150% year on year we.
We anticipate continued strength from b to B going forward driven by our continuing push into the addressable market along with the advantages that our platform improvements will bring to the <unk> business, whether in core technology. The application of AI and machine learning are in service and payments.
As we unify stacks. This will also further enhance the capabilities on offer for our <unk> partners.
But as pleased as I am with the continued growth of our <unk> business I'm, even happier to CRB to see business picking up momentum with year over year revenue growth in Q3 accelerating over 400 basis points sequentially. This is what we've all been working so hard for us. So it is very gratifying to see these results beginning to improve.
Another major milestone for US was the U S launch in July of <unk>, Our new loyalty program <unk> unifies, our major brands of Expedia hotels dot com in vivo, allowing our members to earn and burn one simple currency, one key cash across our vast marketplace.
As I've mentioned before getting dividends from a program like this will take some time given the frequency with which most consumers travel that said we are very happy with the early results and traction <unk> has with our members.
We've already migrated over 82 million members to the program and with the addition of <unk> to the mix, we have seen 34% growth in new members over last year.
We've already seen many members using one key cash across brands, including on bareboat and have been pleased that hotels dot com members have not been unduly impacted and have already been using <unk> to shop for other products on Expedia.
Overall these promising results have given us solid learnings that will be useful as we launched <unk> in other countries next year and with the verbal migration complete we can now more fully went into the core differentiation differentiation that <unk> per Boe in the vacation rental space.
<unk>, along with our ongoing efforts to more generally attract higher lifetime value customers is accelerating our mix of loyalty members app users and that members and the percentage of bookings coming through our apps continues to grow and was up approximately 300 basis points sequentially in the third quarter.
Which ultimately.
Excuse me and contributed to our year over year marketing leverage in our <unk> business for the third quarter.
We have also been releasing exciting products and features that will move more and more friction from the planning and booking process in September we announced our fall release showcasing a series of new features and products squarely aimed at solving complex traveler problems and enhancing engagement.
In case, you missed it I'll give you a few of the highlights we've simplified group travel planning providing for the first time, one place for friends and family to collaborate on a group trip to see one another selections and add saved options across air lodging car rentals and activities significantly using the group planning process and creating a better more successful trip forever.
One.
Products like these not only enhance the consumer experience, but allow us to utilize our consumers own network of friends and family to expand our reach we.
We've also launched tools to aid research into a given destination hotel prices, whether best times to visit crowd levels and even generative AI powered tools to determine the best neighborhoods to stay given the travel one place to research where and when to stay in their dream location.
We now also leveraged generative AI to scrape reviews to answer traveler questions about amenities and property details. So no more sorting through hundreds of reviews to find out how strong Wi Fi is the quality of the pool or whether youre going to like the breakfast.
We also launched the first product project of its kind EG labs, which allows interested customers to test our AI powered data products, allowing them to play a hand in how we shape the future of travel.
I can literally go on and on but the takeaway is no. One in travel is innovating faster than us and with so much important platform work behind us and with our leading capabilities and machine learning and AI, we will out innovate in this space for many years to come we have literally worked for years and given up many short term opportunities to get to this place and I don't believe any.
One is in a better spot technologically which is not only exciting for our existing business, but sets us up to go back on offense in many more markets next year.
In closing I am pleased to see our solid execution in Q3 and through 2023, so far.
While the geographic mix of business distorts global growth rates, we believe that we have held or grown hotel gross booking share in virtually all of our key markets and with verbal finally, completing its migration and a key differentiator of <unk>, we expect our vacation rental share to improve going forward.
In addition, we are finalizing our plans for 24, where we expect to drive faster and more profitable growth.
Our high level strategy is not going to change best product best loyalty program best marketplace, and best service, but instead of spending most of the year doing surgery on our own business, we will be focused on growth innovation and efficiency.
I'm excited for 2024 and beyond and for what we will bring to our travelers partners and shareholders and with that let me hand, it over to Julie.
Thanks, Peter and Hello, everyone.
Our third quarter results reflect a meaningful acceleration in the business with revenue, reaching a record $3 9 billion with year over year growth accelerating approximately 300 basis points sequentially from the second quarter to 9% and with earnings accelerating even further to almost 31% EBITDA margin over 110 basis points of expansion versus <unk>.
Last year, both of which beat expectations.
It's clear our transformation strategy and growth initiatives are playing out and we anticipate this momentum to continue into the fourth quarter.
This is why we have continued buying back our stock at an accelerated level have announced a new $5 billion share repurchase authorization and our confidence to reiterate our full year guidance of double digit top line growth with margin expansion.
Now onto our results for the quarter.
Total gross bookings of $25 7 billion were up 7% versus last year, a sequential acceleration in growth from last quarter.
Overall lodging gross bookings grew 8% and was the highest third quarter on record.
This acceleration would have been even higher but for our verbal business given our hotel business grew at a much higher pace at 14%.
Our variable business was particularly impacted by the recent rally fires as well as the brand's short term migration to our single front end stack and the continued softness in the demand shift towards more urban areas.
Despite this impact we saw our <unk> business accelerated from the second quarter, primarily from continued strength in hotel.
In our <unk> business saw continued strength and outperformance consistent with what we havent seen all year.
Moving to the key financial metrics in the P&L, starting with total revenue revenue of $3 9 billion was the highest on record and grew 9% versus last year.
Revenue growth was primarily driven by the continued performance of lodging, which grew 12% driven by our hotel business.
We also saw our b to see year over year revenue growth accelerate over 400 basis points sequentially versus the second quarter.
This growth was partially offset by the softness we've been seeing in our insurance and car businesses, which as we discussed last quarter have been impacted by some industry wide changes post pandemic.
Both insurance and car have become less of a drag to growth this quarter and we expect that trajectory to continue for the rest of the year as we start to comp these declines in the fourth quarter.
Total revenue margin increased by approximately 20 basis points versus last year, primarily driven by the continued mix to higher lodging revenue, which have higher margins.
Cost of sales was $409 million for the quarter, which is lower than last year by $42 million or 10% with approximately 210 basis points of leverage as a percentage of revenue versus the third quarter of 2022, driven by the ongoing efficiencies we have seen all year and.
And while we will start to comp some of these benefits. During 2024, we expect to continue to drive efficiencies as we eliminate redundant systems and reduce key costs in such areas as cloud licenses and maintenance.
Direct sales and marketing expense in the third quarter was $1 7 billion, which was up 11% versus the third quarter of 2022 due to an increase in commissions in our <unk> business to support strong revenue growth of 26%.
Again commissions paid to our <unk> partners are in our direct sales and marketing line and overall, a more expensive as a percentage of revenue than our b to C business, but as they are generally paid on a state basis and to a contractually agreed upon percentage the returns are more guaranteed and immediate.
Our <unk> business marketing leverage again this quarter as a percentage of gross bookings. These BTC marketing efficiencies resulted from the incremental benefits. We are seeing from our continued investments in loyalty and App members and we expect this positive trend to continue as higher loyalty members result in higher direct and repeat traffic that is more efficient.
Overhead expenses were $617 million, an increase of $48 million versus last year or 9% and in line with revenue growth.
As we have said this increase as a result of our year over year investment of talent across our product and technology teams to support our strategic initiatives and as we finish our technology work this year and look to deprecate systems and redeploy resources in 2024, we expect to realize cost efficiencies going forward.
With this strong revenue performance and expense control with expenses overall growing lower than revenue, we delivered record EBITDA of $1 2 billion, which was up 13% with an EBITDA margin of almost 31% expanding over 110 basis points year over year.
Our free cash flow remains strong at $2 3 billion year to date similar to last quarter. The year over year decline is primarily associated with timing changes within working capital.
Last year as the business emerge from the pandemic, we saw meaningful year over year increases in our deferred merchant bookings balances, which has since normalized this year.
We remain pleased with our ongoing robust cash flow levels from record EBITDA levels, and we expect them to remain strong going forward.
On the balance sheet, we ended the quarter with strong liquidity of $7 6 billion driven by our unrestricted cash balance of $5 1 billion and our Undrawn revolving line of credit of $2 5 billion, which provides us with plenty of cash to operate the business.
From a debt perspective, our debt level remains at approximately $6 3 billion with an average cost of capital at only three 7% and with our expanding EBITDA. Our gross leverage ratio has come down to two four times.
As a result, we have continued to make progress towards our target gross leverage ratio of two times and expect to make further progress in the coming quarters through EBITDA growth and potentially some early debt repayments.
From a capital allocation perspective, we have been buying back our stock at record levels. We continue to believe that our stock price remains undervalued and does not reflect our expected long term performance of the business.
And given our liquidity and strong free cash flow levels, we believe that buying back our stock on an accelerated basis is the best use of our capital to maximize shareholder returns.
As a result, we bought back approximately $1 8 billion year to date were approximately 17 million shares our largest level of repurchases to date offsetting not only our COVID-19 area era dilution, but in fact getting us to our lowest share count since 2015.
And given our confidence in the long term outlook of our company and the cash generating power of our business as well as our commitment to maximizing returns for our shareholders. We have announced a new $5 billion share repurchase authorization and we expect to continue buying back our stock opportunistically going forward.
So in closing we are pleased to see the continued momentum in the business delivering our best ever quarter, we have been able to deliver upon what we said we were going to do amid a significant period of transformation and corresponding uncertainty.
Looking ahead, we are reiterating our full year outlook of double digit topline growth with margin expansion.
As for the fourth quarter based on the uncertain geopolitical environment and its potential impact on travel we expect gross bookings growth to be relatively in line with third quarter levels with modest sequential acceleration in year over year revenue and EBITDA growth versus the third quarter.
Overall, our execution and results this year give us the confidence that we're on the right path and that there is a huge opportunity in front of us to drive long term profitable growth and to maximize shareholder returns. We look forward to updating you next quarter on our plans for 2024 and with that I would now like to open the call for questions. Thank you.
Thank you.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
I would like to retract to question. Please press star two.
Our first question comes from Eric Sheridan from Goldman Sachs. Please go ahead.
Thank you so much for taking the questions maybe two if I can.
In terms of <unk> and the migration, how should we be thinking about post migration elements of growth and how variable will be tied deeper into one key as a stimulant for growth on that brand as we look out beyond 2023 and into 2024 and with respect to the new buyback authorization any guardrails either aligned against Andrew.
<unk> free cash flow targets around liquidity about how you might deploy that $5 billion in the year that thanks, so much.
Thanks, Eric I'll take the first one maybe I'm Giulia answered the question on buybacks.
As far as <unk> goes obviously as I said, we just literally finished the.
The migration and it's not even people who haven't been updated all their apps yet so it will take a little time for us to be fully across but we're talking about weeks.
And then I think it's a build from there you have to remember that going through the migration was actually a negative process right. It was conversion negative for us to come across switch. The stacks then optimize the stacks and improve them. So we're in the process now of having everything across and working on the improvement part and inflicting.
Past, where we were previously so one the product will improve from here, we won't have the drag of the conversion drags we've had during this past year, while we were migrating and then there are many things to drive growth.
In the future. We believe obviously, we believe greatly in one key it's a key differentiator in the VR space.
Allows all our members across Expedia, and <unk>, which are many more in number of humans to have the option of using their one key cash on verbal instead of on a different VR platform or for other products. So there's a lot of it as a way to pull a lot more customers into <unk>, it's a way to make verbal decidedly better.
As a value proposition than its competition and I think theres a number of then other things we're doing I mentioned on last call. We will work to incorporate much more of a multi unit vacation rental properties, we actually have on our OTA brands that don't live on verbal yet that we will be moving so there's many parts to our growth plan and verbal but.
I think we're excited now we had to get across this work. So that we can again start optimizing really pushed <unk> fully and take advantage of some of these other pieces, we've been waiting on to finish the migration. So that we could then move this inventory into other other things that open up growth opportunities. So we feel good about how verbose positioned obviously.
This was a tough year of migration, but a lot of optimism for what we can do in the coming years with them.
And then as far as the $5 billion buyback authorization, we don't per se have any set guardrails, although I would say that generally speaking we look to what our free cash flow levels are on the year and obviously make a decision then where our stock price is and where we believe the valuation of the company is and what our long term outlook is and make a call as to.
How much then pivots to buybacks.
At the same time, we've also got excess cash is that if we wanted to be even more aggressive than what is per se. The free cash flow plan for the year, we could do that as well. So the short answer is it really depends but we have a lot of flexibility there and we intend to buyback our stock opportunistically.
Great. Thank you.
Thanks.
Thank you.
Question comes from really Hubbard.
Bank. Please go ahead.
Alright. Thanks for the question Peter you talked about your business next year, driving faster more profitable growth, yet, which presumably underwrite some top line acceleration youre a bit more cautious on the fourth quarter given some geopolitical concerns I guess, what gives you the confidence in sort of that accelerated outlook into 2024 despite that.
Political concerns you guys highlighted as well as others in the market, perhaps calling out some incremental macro headwinds building for the travel industry.
Thanks Lee.
Im not finding.
The world leader on the likelihood of geopolitical.
Acceleration potentially in 'twenty four I, certainly hope not for all our sakes, but.
What we're seeing now.
As we referred to there was some short term.
Movement in early October that appeared to be from what was going on.
In the Middle East.
That doesn't appear to be an ongoing thing, but there was some noise. So we are mindful of the.
Potential volatility from that but I would say, we're more ambitious and more excited because frankly, even the fourth quarter.
Just barely beginning to get the benefit of like when I talk about <unk> being past the migration like it was like two days ago. So.
Fourth quarter, we're in the middle of the fourth quarter. So we're getting a lot out of that now in the next eight weeks.
It's a lot harder than what we have ambition for next year and if you take that across everything and you take that across <unk> still being in relatively early days and so forth. It's just we're still like this is a big snowball, we're pushing and it's starting to turn but it's going to turn faster and faster. So we have more ambition about our own ability to drive it.
At year end, our own opportunity there, obviously, there could be macro things that make it harder or easier on all of us, but we think relative to our competition relative to where we've been we're just going to be in a much better place. So that is what gives us an ambition. It's not that we think the world will all come down in all wars will go away and everyone will have piece that we.
Thank you.
We're just going to be in a materially better spot as we are further along in this journey.
Got it and then maybe one follow up on that you talked about sort of leaning into some international markets, perhaps next year.
Now with all of the Tech migration behind you are there any gating factors as it relates to the timing of when you may put some investment dollars to work there.
Or how should we just sort of thinking about the phasing of sort of those broader global ambitions that you guys have into 2024.
Yes, I think technologically there arent a lot of gating items I mentioned that we haven't we've only rolled one key to the U S. So rolling <unk>, along with winning with more energy into certain places will be part of the strategy.
But again not a gating issue, but that has to happen and there is some technical work to getting that getting that launched in other countries. It will come it's not a big lift it's just something that will come as we rollout.
More importantly, I would say, it's a balance we believe we're equipped now we believe we have the tools to compete better than we ever have we believe we have a winning product and as we all know you've got the market back into these countries I mentioned, the better understanding of customers, which customers. We want how we get the right customers, how we find the highest.
Lifetime value customers things like that so we're just it's really just about doing it in an orderly process, we're not going to just carpet bomb the world. We're going to go selectively after the most valuable markets to us where we have the most right to win and we're going to keep chipping away at it but we're we're excited to go back on offense in the rest of the world.
Very helpful. Thank you.
You bet.
Thank you.
Our next question comes from Kevin Kopelman from Cowen Kevin. Please go ahead.
Hi, This is Jacob on for Kevin I was wondering if you can provide.
Culture and regional performance quarter to date.
So what are the cost.
Leverage that you expect to see from the Tech migration as we look at Macquarie.
Macquarie.
Sure.
Sorry, you broke up a little bit, but I'll take a stab at it.
In terms of the regional what we've seen as you know.
As I mentioned, APAC and Latin America have been faster growing markets for everybody.
Basically it's a function of where different regions are in terms of their rebound post COVID-19.
North America, and Europe and APAC.
Accuse me EMEA are more stable they have been kind of saw there. So other rebound earlier and have been on a more consistent.
We've seen the same in our business, but our business is less exposed to APAC.
Then it is through obviously in North America somewhat less exposed to Europe. So there's differences there, but what we've seen and I referred to is what.
What we're seeing is pretty much around the globe, we've been able to hold or grow share.
Even in markets, where we have relatively small share again, we're eating into the pie.
Different of those markets, we have different aggression for.
But remember we've done this basically with four arms tied behind our back we're trying to do what we could with the levers we had an increasingly we have more and more levers and better and better product and all of that will make us more competitive we believe as we go forward.
As far as the efficiencies go I think we've been saying this for a while but we've had these huge task.
That we've undertaken to get across the transformation do these migrations et cetera, everything gets faster and easier so think of it as either more output.
With the same amount of energy or.
Or opportunities, whether it being cloud as Julie referred to our other.
Other licensing and maintenance other opportunities in which work we choose to do that there's just the opportunity now to stop we've grown quite a bit of time now and are particularly in product and tech.
We no longer need to grow to.
Grow our base of overhead in order to grow our business much faster so.
As those lines diverge, we become more efficient and that's what we're talking about.
Thank you.
Our next question comes from Robert column can be body Securities. Please go ahead.
Yeah, Thanks, a lot.
<unk> of questions here so.
Just on the consumer are you seeing any sign of the consumer weakening or maybe.
Trading down or just taking taking longer to book any anything there and then on the wearable migration.
Thank you.
About how the website piece was down in the App with the bundle.
That was remaining.
And that I think has been completed.
And enough.
Week or so.
But anything you can share on the web site migration and how that might be using windows any early signs on that thank.
Thank you.
Sure.
So the first part of your question.
We haven't seen really anything on the consumer side, we keep looking but.
There's definitely nothing obvious and you'd have to squint at really hard and look.
By sub sub sub region to try to cut it by price point and a lot of things to really see anything noticeable interestingly and anecdotally we've seen that.
Customers who have.
<unk> gotten one key cash where they didn't have it before etcetera or in some cases.
At <unk>, we introduced higher discounts for for our silver and gold members at certain properties that people are customers are typically using it to get a better.
Uh huh.
Better room type as opposed to take the money to the bottom line. So they are actually using the available capital. They had in mind just for more rather than saving the money. So again, that's just an anecdote but.
There does not appear to be any major shift going on of course, we have historically and still are strongest in our mid and upper parts of the market as opposed to the lowest end of the market.
And.
That again, maybe maybe moving slightly but we have not seen any broad consumer change in cabinet.
As far as your second question goes.
As I mentioned, the first part of moving the website was going backwards to go forwards was consolidating it.
<unk> is now getting the benefit of a lot of.
Successful winners that we had rolled out on our OTA brands across Expedia and hotels Dot com and now it will benefit from many of the things that one there. So we're in the middle of testing in all the things that have won historically on the OGA brands getting the best in class of maps and other things search and sort and so.
So it's I'd say, we're still in that journey I would say, we're still behind in terms of conversion in terms of pre versus post migration.
On the website, but we are on the rise on catching up and we expect to inflect past, where we were soon niche and in the App. So far has appeared to have done better and our hopes are that we will see less of it.
That's going backwards and more going forwards faster. So we're we're directionally going up from here, but we did have to take a little bit of a step back as we as we migrate.
And so it's Peter.
Thank you.
Thank you. Our next question comes from Jed Kelly.
Jeff. Please go ahead.
Hey, great. Thanks for taking my questions.
Two if I may can you just talk about some of the marketing efficiencies you plan, you think youll get around Brad now being able to use <unk>.
Highlight your three brands.
And then just just going in now that the tech migration is complete how do you view growing EBIT dollars versus EBIT margin. Thank you.
I'll take the first part and maybe thanks, Jed and how can we take the second.
I would say that.
From a marketing efficiency standpoint, we you've seen us just begin to market more with the launch of <unk> sort of the brands together and that is a journey that we will continue to learn on and grow on in terms of how to.
<unk> optimize our our brand spend and all of our performance marketing spend to optimize the best place to bring a customer in and then the best way to bring them around our universe of products, but.
But I would say what we're most excited about is the ability to get customers to cross shop and to get them to use stay in our group of brands and spend their money there and that gives us a lot more opportunity to drive direct business, because we already have a big base of customers in each of those brands that we can now bring to.
Other brands, whether it's an H com customer who needs.
Who needs a flight or a car or whether it's an expedia customer who needs a verb that.
<unk> ability to keep everything in the universe get people to use that currency across.
As we all know the more direct business, we have the more margin that drives and then we have the latitude to invest or not as much as we want into performance marketing driving new customer acquisition and again, we're getting smarter and smarter about who we go after how we go after them and how we optimize for the lifetime value of that customer base.
I think thats, how we think about in terms of the practical like have we figured out all the nuts and bolts of the best way to promote the brands together in the best way to from a <unk> I think we're still on a learning journey there, but we're excited about it and the <unk> work was awesome and youre going to start to see the brands more present in other brands.
Time goes on but I think the big opportunity as I mentioned about new members. We took a group that didn't have membership basically and turn them into new members and a big pool of membership where they can get a lot of benefit across a bunch of different products that they couldnt get before from Provo. So so that's what's exciting to us our goal is to draw.
Much more direct business through that and as I think we've said before we look at spend for loyalty for marketing for.
Or any kind of pricing and discounting things, we do always one pool of capital.
That's focused on the best way to acquire and retain customers and Thats really so we're happy to trade those dollars off to the most efficient way to drive the overall business and Thats, what youre going to see us do over time more and more.
I think the short answer on the EBITDA question Post Tech migration as we expect to drive obviously, both how.
We want to have strong EBITDA dollar growth and we want to have margin expansion.
We're not going to need to invest as much as we have in the past as Peter et cetera earlier now that the tech migration is complete we should be starting to get more efficiencies out of the machine here by deprecating systems redeploying resources cutting all the incremental costs associated with that.
And just getting more output getting more leverage.
From all of the goodness that we've been investing in in the past now we are also wanting to be on the offensive as we said so there may be times in areas that we think we need to invest.
Still driving EBITDA growth.
And maybe not as much EBITDA margin in certain situations, but for the most part we're committed to both.
But this is a year of offence and so we want to have that flexibility.
Thank you.
Thank you.
Thank you.
Our next question comes from John <unk> from.
Jeffrey John Please go ahead.
Hi, there this is Chris on for John Thanks for taking our question. So there have been some questions around the trajectory of alternative accommodation nice growth across the industry broadly could you elaborate on kind of how recent demand trends, it's fair to <unk> and beyond the one time impacts from things like the tech migrate.
And I always thought players have you seen any changes in customer preference for vacation rentals.
Yeah, Thanks, Chris I think for us and we're a little differently situated than our competition, but for US we saw huge COVID-19 era boom when everyone was trying to be in their own house and rent their own space and whatever we definitely saw a little bit of pressure on that this past year is that kind of came off.
But in terms of how things are progressing once you've kind of reset for that we think demand is pretty stable and there is lots of opportunity for growth.
In the other parts of the business our friends across the way.
They play in an urban much more and shared accommodations. We do think there's opportunity in urban and we are seeing we are building supply in many areas, but we are sticking to our knitting of the whole home whole apartment experience as opposed to shared spaces et cetera, We think there's lots of runway there and there will be.
Probably more supply coming on.
As homeowners struggle with mortgage rates and other things there is a good opportunity for supply there.
So we still see plenty of opportunity in compressed places and compressed time.
Banded time periods and different areas. So I think.
We feel good about going back on offense. We've been playing this is one of the areas we've been playing a little bit with a hand tied behind our back but macro in the whole home space, we expect there to be growth.
Again, barring geopolitical who knows.
And.
I can't speak for other shared accommodation spaces and other things that's that's not that's not where we're focused.
Great. Thanks, so much.
Thank you.
Thank you. Our next question comes from Anthony <unk> from Bank of America. Anthony. Please go ahead.
Great. Thank you.
Bookings growing 7% this quarter and you're suggesting similar growth next quarter. How do you think that positions you for topline growth next year, you mentioned, maybe accelerating off of this year. So just thinking about the bookings great growth rate implications and then second.
No theres been a lot of effort to increase app users versus maybe using search marketing are you seeing anything in the customer metrics and I apologize. If this is already been asked but anything in the customer metrics that show better repeat rates or better return on that AD spend and Youre getting say a few years ago. Thank you.
Okay I'll take the first one I mean as far as the bookings I think this past quarter.
And the subsequent Q4 guidance that we gave those are both indicative of some shorter term things that have occurred so as we mentioned we were unfortunately impacted by O'malley fires.
That brought down gross bookings lower than we had expected in Q3, and we're being thoughtful in our Q4 guidance of what could potentially be an impact associated with the uncertainty.
And the geopolitical environment. So we'll see how that plays out for the Clarksville early in the quarter, we've seen very little noise at this point, but that doesn't necessarily.
Provide an indication of what's going to happen in 2020 point for all the things that Peter mentioned that we have completed all the momentum we have in the underlying health of the business and coming out of the tech migration and all the goodness, that's coming from the <unk> launch and the growing.
<unk> App and loyalty members and all of that kind of adding on top of each other as we incrementally roll through the year should drive that gross bookings up.
Yeah, and I'll, just add and I'll I'll take the second part but.
Wish I could tell you that this migration is like we flip a switch when it's over and everything goes to X, but it is it is.
You are growing out of a period of lots of change with all the tools you need to go faster, but they build on each other over time. So our first week out of the gate is not going to be like our 50 <unk> week out of the gate and so this is something where there is some noise in the numbers as we alluded to from geopolitics and other things.
We will see where we will see where it ends up landing but.
But.
Our enthusiasm for what next year can bring is built on the underlying building blocks not on the what is the trend line today or what is the macro so so.
So that's where that's where our enthusiasm comes from as for the metrics Youre asking about yes, absolutely I mean, it was the <unk>.
Understanding and knowing that members in particular, our highest producing customers have the highest return rates the highest C. L. B.
Et cetera has what was the reason we win so heavily into app.
It may not be that surprising that that's the case, obviously they have a propensity to come direct more which saves us money.
Marketing them, so theres lots of elements that make those members better for us we have <unk>.
Invested both directly and acquiring them through marketing as well as doing much much more in the product to move customers.
Into the App for all of those reasons and we're still seeing that those cohorts still perform better even as we push more and more people they still performed better.
Then a guest or a member who is not in the app et cetera. So those statistics have held up we keep pushing it youre going to see us keep pushing it.
We are going to be App first in terms of product in terms of where you see the most innovation coming and coming fastest. So we are fully leaned into getting customers into our best product, making our app, our best product and experience in.
And making sure all of that innovation I talked about is happening first.
First and foremost in the App, so we get more people in it more people into the state we like and then of course hopefully.
Working between our apps as they enjoy the benefits of our loyalty program. So.
So thats, yes to all of that the numbers hold up we've seen the benefit and that's why we keep pushing it.
Okay. Thank you.
Yes.
Thank you.
Next question comes from Tom Champion from Piper Sandler. Please go ahead.
Good afternoon, Peter I was wondering if you could talk a little bit about the growth youre seeing out of China and maybe it was on the <unk> side it sounded quite strong.
And then.
Julia question for you going back to the buyback the size is kind of eye popping how did you arrive at that amount.
Being appropriate and.
And whats the total in the plan.
As of today, including the existing plus plus new thank you.
I'll.
I'll knock off the first first.
Yes.
<unk> business, we have a nice a nice business in China, China as you know is a tough place to.
<unk> on a <unk> basis, and really none of none of the western companies do anymore.
So we don't have that benefit on the <unk> side, we're seeing a nice pickup, but I'll remind you that airlift out of China is still well below pre COVID-19 levels.
There were some recent announcements in the last week of increasing flights between China and the U S, which is a good story, but it's still not a massive story. So you still have substantially less air lift out of China into.
Most of the west and.
But so it's not going to be again, it's not going to be a snap your finger and it's back to 2019 levels, but I think it's going to be a nice tailwind for a long time as hopefully relations improve and more more travel opens up.
Theres visa issues in China, and other things. So we're seeing some good good progress there we power some of the local players in our <unk> business offline travel agents and online and theirs.
There's definitely a pick up of travel some of that is intra Asia.
Some is even intra China, but.
But for the big pickup there is a there is a piece that we really haven't gotten to yet which is getting China back to real international travel at pre COVID-19 levels, which will take some time, but it's a nice tailwind obviously, mainly for our <unk> business and that.
That business has a lot of tailwind so.
Another one for us.
As far as the $5 billion buyback I mean, if you look at how much we bought back just year to date.
Over to X that so this is meant to be a multi year.
But we feel definitely very comfortable with this level.
And with the fact that we know we're going to be having growing free cash flow and so we thought this was the right amount to go out with so we're not doing an annual review if you will.
Well, but not also making it so far out so we thought it was a good healthy balance as far as what's left in the plan today is very very very little.
So this is really I would see this as sort of the new.
New and existing launch.
Thank you.
Thank you.
Thank you. Our next question comes from Deepak <unk> from Wolfe Research Deepak go ahead.
Hey, Thanks for taking our question. This is Jack on for Deepak.
Just wanted to ask about.
Hotels dot com like consumer behavior has been performing.
Change in incentives from the <unk> launch.
<unk>.
Yes, Thanks Jack.
As I mentioned in my in my comments, we've seen we were prepared for some dislocation and some people being upset.
Obviously, there have been a few but actually it's been considerably less than we expected and the behavior of the customer base has been frankly better than we anticipated.
Charlie.
A number of ways, we were going to make that right with our customers and continue to do but.
In general we've seen less.
Yes on happiness, and generally paviour, that's consistent with their prior.
The prior buying behaviors by and large there are there are some exceptions and we've had some programs to help with our most valued customers there.
But again, we think we're moving them into a really good state with being a gold or even flat in the member of <unk>.
Benefits that come with that and as I alluded to we're starting to see them use their wonky cash on expedia to buy other things. So it's the.
Beginnings of what we are trying to foment, which is this idea that the.
While it may not be quite as rich it's much more flexible you can use it for many more things.
And with the improved member discounts and other other added benefits. We've added to the program you can get just as much benefit out of the program just built slightly different way and now way more flexible so.
In General we were pleased I would say, it's we took the over under it was definitely better than we than we.
I had hoped and.
And knock on wood it remains that way and we feel pretty good about how it's trending.
Great. Thank you.
Yes.
Yeah.
Yeah.
Thank you.
Our next question comes from Richard Clarke from Bernstein, Richard Please go ahead.
Hi, Hi, good afternoon. Thanks for taking my questions just the first one thinking about your growth into 2024 and beyond.
The ability to keep <unk> revenues growing in the double digit level, what visibility do you have of future deals or upside within your current deals to keep delivering that level of growth.
Yes, I'd say, we feel quite good about our continued growth of the <unk> business as I mentioned, we're still finalizing our plans for next year so not.
Not committing to any numbers or anything but in terms of double digit growth, we feel confident that.
The <unk> business can continue to grow based on a number of reasons one.
We are constantly adding new partners and like.
Like like same store sales first year, new partner doesn't perform like a second year partner and so people mature into performance. So we've got a runway of that we have an expectation of what we continue to sell into in the marketplace, whether it's offline travel agents new.
New partners on our API is or on our platform.
We've got a number of initiatives designed to make our products, even more appealing whether it's new flexibility in how you know how our technology works for our partners how they can choose the best priced how they can put the best pieces together. So we have a number of initiatives that are all kind of build that all build up to what we think is good visibility into continued.
Strong growth in that business.
Thanks, and maybe if I can just ask one follow up to a question someone asked earlier just on the <unk> launch I guess theres been some questions around what's the cost to you of rolling that out and maybe could you quantify what.
What's been the level of Contra revenue you've had to include two to fulfill D. The decent growth you've seen there.
Yeah, well I would say that in principle, when we were rolling it out the idea was that between our collective loyalty programs. It would not be net additive to the cost it would be allocated differently, among our customers and the benefits would be.
Spread more evenly across our base of customers. So you can think of it as kind of a zero sum game in terms of total expected dollars expended in Contra revenue now there were other benefits as I mentioned more member discounts.
Other things built into our platinum level and others. There are some other pieces that added other value outside of just what you see in kind of the contra revenue space, but.
But that was designed to kind of be a zero sum game and as I alluded to we we held some back.
To help bring along our hotels dot com customers et cetera.
Some of which we've expanded but all in all.
It's basically been as good or better than we thought in terms of.
Costs.
Exercise.
We still have a long way to go to get all the benefit on the growth side of it that's something we continue to work on that and I've mentioned it takes some time to come through the numbers.
But in terms of the cost side I think we've made that transition.
We are we are incurring roughly a similar think of it as a similar overall cost against.
Revenue margin.
Across the whole business and now we just have a lot more people engaged in the program. So we think it's a net positive on the growth side.
And shouldn't really cost us in terms of think of it as revenue margins Shouldnt really cost us anymore than <unk>.
We're expanding before.
Very clear thank you.
Thank you.
Thank you. Our next question comes from Mark Mahaney from Evercore ISI. Please go ahead.
Thank you.
This feature that you've had on the App for quite some time I think maybe on the website too.
<unk> could you just talk about what kind of traction that features getting and what you'd like to get out of that and in the future. Thank you.
Yes sure Mark.
I would say so first of all we were the first to launch it we've been learning a lot as we've gone out we've talked at a few conferences about how we've learned to help customers engage with it sometimes they don't know what to ask Theres a lot of disk.
Discovery going on in the world of generative AI around prom.
Prompts and how to get people into the right questions et cetera. So we're work we're doing a bunch of work on that.
We've recently frankly, just highlighted it more so people can find it we wont necessarily certain there was a net conversion winter net anything when are we just new customers were curious we wanted to see if we can help them with planning et cetera. So we've since we've highlighted more we've gotten much more engagement, but again, it's early days and it's not really.
I wouldn't think of it is impacting the business and materially other than keeping.
Keeping us on the forefront of technology for our customers and the customers who want to experience it and discover through it now as I mentioned, we are using generative AI in many other ways. Besides just that hey, I don't want to go to Paris When's, a good time to go to Paris question, but we're using it.
Our reviews to help customers sift through reviews and ask a simple question.
We're using it in service, we are using it and a lot of places so <unk>.
Generative AI is a bigger story for us long term and for everybody.
But I think in terms of that one feature on the homepage, it's still pretty small people like the people who like it really like it.
Wouldn't say, it's moving the business one way or the other but it's a feature we want to end up there and it's a feature we want to enhance and ultimately we want to use AI broadly in generative AI to take you more easily through the collective journey whatever part of that you want to you can use it best score whether thats.
Homepage discovery kind of.
Greenfield is trying to figure out a trip or anywhere through search sort.
Purchase comparison all of those places that are complicated areas for customers. We want to help use AI used generative AI, where appropriate to just take friction out of that journey end to end and.
That's a that's a journey we're on and homepage is just one part of it.
Okay. Thank you Peter.
Thank you.
Thank you. Our final question is from Ken <unk> from Wells Fargo. Please go ahead.
Hey, this is Alex on for Ken I. Appreciate the question. It seems like the business journey over the last couple of years has been focused around centralization and centralization of the tech platform centralization of the loyalty program. How do you think about centralization of brands specifically it feels like Orbitz Hotwire Travelocity. The legacy brands have been a drag on nights correct.
Over the last few years could it make sense to clean that up in 'twenty four.
Yes, Thank you Ken.
I'd say again, we are happy to have customers on any brands. They enjoy but if you look at how we've invested capital.
We have not been really investing in those smaller brands for the last few years.
There are still customers, who enjoy those brands, we're not planning to turn them off or make them go somewhere else.
We obviously think they'd be better off in our main brands with the best in class loyalty program and everything else, but.
At this point.
And really to your point as we've centralized the technology the lift of maintaining those things has gone away. So as we get rid of having multiple stacks and an old stacks to keep up and other things like that.
We get to an efficient state, where one or 'twenty, one doesn't really matter now.
Matter of brand marketing as a matter of consumer experience, we are focused on the big three.
And we will keep doing that and in different parts of the world that may look slightly different we may have fewer than three we may have one or two that's under a different name, but in general we are going to be focused on a small group.
Brands.
Where most of the entities, where all the spending goes.
And then to the extent we have these other brands, we don't want to run customers off as you say that's been a drag.
The inquiry.
Increasingly small drag if I can say that like it is getting smaller and so the drag is getting smaller which is.
Which is helping us honestly as we start to accelerate the bigger pieces and the outrun the drags.
But.
But we're also not trying to accelerate their drag on us and we will we will maintain those.
As long as customers like using them, but you should expect those to continue to shrink and.
And for virtually all of our energy certainly are spending energy to go into the core brands.
Thank you.
I think that's it so thank you operator last question. Thank you all for joining US today, we look forward to talking to you. After the end of the year take care.
That concludes today's call. Thank you for joining everyone. You may now disconnect your lines have a nice day.
[music].