Q3 2024 Booking Holdings Inc Earnings Call
The End.
Speaker Change: Welcome to Looking Holdings Third Quarter 2020 for Conference Call. Looking Holdings with likes remind everyone at this call making things forward with these statements which are make our students to these day-parder petitions of the private security litigation reform act of 1995.
Speaker Change: These forward-looking statements are not guaranteed of future performance and are subject to certain risks on certainty and assumptions of difficult to predict. Therefore, actual results may differ materially from these expressed implied or forecasted in any such forward-looking statements.
Speaker Change: Expressions of Future Goals or Expectations in similar expressions reflecting something other than historical facts or intended to identify for resulting statements.
Speaker Change: For I list of factors that could cause booking holdings actually results to differ materially from those described in the forward-booking statements, please refer to the same Farber statements at the end of booking holdings earnings press release, as well as booking holding most recent violins with the securities and exchange commission.
Speaker Change: and less required by law booking holdings undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Speaker Change: A copy of Booking Holdings earnings press release together within a company, financial and statistical supplement is available in the four investors section of BookingHoldings website www. Bookingholdings.com
Speaker Change: and now I'd like to introduce cooking-holding speakers for this afternoon, Glenn Fogel and Abel Steenbergen. Go ahead, gentlemen.
Glenn Fogel: Thank you, and welcome to booking holdings, third quarter conference call. I'm joined this afternoon by our CFO 8 out of steambreggen.
Glenn Fogel: I am pleased to report an improvement in top line trends in the third quarter, particularly in Europe. There are results in roommates, gross bookings, and revenue all exceeding the high end of our prior expectations.
Glenn Fogel: The revenue outperformance combined with discipline marketing spend and lower than expected fixed opx growth helped drive a just-to-eabit-toe that was 9% above the high end of our prior guidance range.
Glenn Fogel: We can change to be encouraged by the strength of our underlying business, the help of the travel industry and the attractiveness of our products.
Glenn Fogel: In the third quarter, our Travelers book just under 300 million roommates across our platforms in increase of 8% year or year.
Glenn Fogel: Revenue of $8 billion through 9% year of year.
and adjusted Emitda of $3.7 billion increased 12% year of year. Finally, adjusted earnings per share grew 16% year of year. Health by our strong capital return program, which reduced our average share count by 6% year of year.
Glenn Fogel: For a regional perspective, we observe and improve it in our rune-like growth in Europe in the third quarter, which was a primary driver of the sequential increased on global rune-like growth.
Glenn Fogel: In Asia, we continue from well with another quarter of double digit growth. And we remain optimistic in our outlook for this region, which I'll discuss in more detail later on the call.
In the U.S., we see relatively stable levels of growth in our business so far this year, which we think continues to outpace the broader U.S. accommodation industry.
As we look ahead to the fourth quarter, we expect a conchinacy, healthy levels of room nagroath as demand for travel remains resilient. Avat will provide further details on our third quarter results and our thoughts about the fourth quarter.
Glenn Fogel: Iron Man Company in the attractive growth profile of a travel industry are competitive position and are long-term growth in earnings model.
Glenn Fogel: We continue to see progress across several important initiatives which include growing alternative accommodations, advanced ER Connected Trip Vision, continuing to develop our AI capabilities and continuing our progress in Asia.
Glenn Fogel: These initiatives contribute to our ongoing effort to deliver a better planning, booking and travel experience for our travelers while also benefiting our supplier partners.
Glenn Fogel: We remain focused on being a trusted and valuable partner to all of the combination properties on our platforms by delivering incremental travel demand and developing products and features to help support these businesses, the majority of which are small independence.
For alternative accommodations at booking.com, we continue to see more properties getting to our platform with listings at the end of Q3, reaching 7.9 million up about 10% from last year.
The growing number of listings provide more accommodation choices for our travelers, which we believe can contribute to strong alternative accommodations, room-ite growth of 14% in Q3.
Glenn Fogel: We believe that we have a differentiated offering because we make all property types. Hotel's annual tournament of accommodations available on our booking.com platform.
Glenn Fogel: We see benefits to this approach.
For example, our data shows that a portion of our bookers landing on our platform within interest in a hotel will instead end up booking in alternative accommodation and vice versa.
Glenn Fogel: We believe that this shows in many cases travelers are open to compare hotel and alternative accommodation options when determining the best place to stay for their trip. Our objective is to make sure we can keep to provide great choices for our travelers across all property types.
Glenn Fogel: On the Connected Trip, we continue to dig steps towards our long term vision to make the planning, booking and travel experience easier, more personal and more enjoyable while delivering better value to our travelers and supplier partners.
Glenn Fogel: We believe the Connected Trip is streptin' by our growing merchant capabilities, which help bring the different elements of travel together in a more seamless booking experience.
Glenn Fogel: In addition.
Glenn Fogel: Our genius loyalty program at booking.com has been expanding outside of accommodations and into our other travel verticals, which helps to deliver more value to our travelers as they book more components of their trips with us and to our partners as they receive incremental bookings.
We get into Sea Growth and Connected Trip Transactions, which means a trip that includes booking more than one travel vertical. These connected transactions increased by over 40% of your beer on the third quarter, and represent a high-similar digital percentage of booking.com's total transactions.
We believe by making it easier to plan and book multiple elements of a trip on our platform. We are providing a better overall booking experience for our travelers and we have seen in past experiments.
That customers who choose to book a connected trip, but more frequently with us and have a higher likelihood of booking directly with us in the future.
Turning to flights, they're an important component for many of the connected trips that our travelers are booking.
Glenn Fogel: In the third quarter.
Air tickets booked on our platforms increased.
Glenn Fogel: 39% of your beer.
Glenn Fogel: which was an acceleration from Q2 growth of 28%. And was driven primarily by the growth of booking that come slight offering, but we also benefited from strong growth in a go-to-s flight business.
We can see a healthy number of new customers coming to booking.com through the flight vertical and are encouraged by the number of these customers and returning customers that also see the value of the other services we offer on our platform.
To achieve the easier and more personalized experience of the Connected Trip, we've always intended for AI technology to be at the center of this vision.
Glenn Fogel: Eaterer Brands, our teams of AI experts in Tudor on their valuable experiences in corporate AI technology into our platforms.
We believe in our proprietary data, along with our resource and scale, position as well to build, compelling and personalized AI power offerings for our travelers and partners.
This technology will also enable us to drive further efficiency in our own operations. We have significant activity in this area across the company, and I'll briefly discuss just a few of the encouraging efforts that are underway across our ramps.
Last summer, booking.com launched its AI Trip planner. And since the launch, booking.com has gained valuable insights from its millions of interactions with bookers, as well as from the use of the Gen AI technology alongside our existing machine learning models.
The learnings from the AI Trip plan are leading to new applications of Gen AI technology, including a recent launch of a smart filter, which makes over 200 potential search filters, findable through a free text interface.
These innovations all look stand to the partner facing side of the business at book.com. Gen AI is being leveraged to help properties write responses to travel queries, and this tool is led to an increase in response rates to travel or measures.
This improves the experience for travelers and partners, bugging that Thomas also testing a Gen AI powered partner chatbot to help with questions during the onboarding process and accelerate signups, starting with a focus on alternative accommodation properties.
Glenn Fogel: Working back on is also working to incorporate Gen AI into his customer service function to drive increased efficiency and a better experience for travelers.
Glenn Fogel: A initial testing shows meaningful improvements in topic detection in booking.com's customer help center, as well as customer service, agent case summarization.
Looking back on this, still early in this journey, and she's many of the opportunities in proving customer service and driving greater efficiency by leveraging AI in the future.
Glenn Fogel: and Price Loading.
Travellers have now had over 3 million interactions with this generative AI traveler system called Penny
Glenn Fogel: This is lunch last summer.
Glenn Fogel: While Penny was originally positioned at the end of the final on the checkout page, it's now available across the full booking experience and can address many types of travel requests, including destination discovery, hotel search and trips of work.
In October, Price I launched Penny Boots, which enables Penny to engage in verbal conversations with travelers and do assist in with planning trips, searching for hotels and servicing bookings.
As Christ-like intention answers this offering, we envision that Penny will be able to anticipate needs based on preferences and past interaction and then respond in a real time voice.
While there's been great progress in the development of Penny over the last year, Christmine has focused on further enhancing Penny over time by leveraging their valuable learning so far.
And a Goda, over 120 use cases for Gen AI have been implemented across customer service, software development, content generation, product, finance and HR.
A Goulden is highly focused on leveraging Gen AI to automate product development using both externally and internally developed tools. This is leading to an increase in the share code written by AI, as well as measurable improvements in productivity, peer-to-valper and development time.
In March, kayak launches Ask kayak travel planning tools, which improves and personalizes the search experience by allowing travelers to use free form text entries to search and refine the results.
At the same time, Kaya also launched price check, a price comparison tool that allows travelers to upload a screenshot of a flight and dinnerory, which Kaya can then check against many different sites in order to determine if there's a better price available for the trial.
At Open Table, an AI voice spot has been recently integrated into its offering to help participate in restaurants and their phones.
Glenn Fogel: Dinos can call these restaurants and perform tasks like making a reservation, altering the reservation, asking questions and noting dietary restrictions, which are then automatically updated into OpenTables Offwear.
Oven Gables also partnered with Salesforce Agent Force platform. This helps its customer service agent better serve its restaurants and diners.
Glenn Fogel: This platform is now handling restaurant web queries. We just help the agents focus under the written great service in more complex situations.
It's exciting to see the work happening across our company to integrate Gen AI into our platforms and then now it's sharing this, I'm going between all of our brands.
We know we're still in the very early days of Gen AI.
and we have much more to learn about consumers. How they would also want to interact with this new technology, but I remain confident in our company's ability to benefit from AI developments and to improve our products for our customers, giving our many years of experience in AI, our travel-related data, connections to our supply partners, and our human and financial capital.
Over time, as we further incorporate this technology, we expect to see benefits in trial or part-track position, retention and satisfaction. In addition, we expect it to improve operational efficiency, which we can forget to desaleration of our fixed expense growth in the future.
Finally, as I mentioned at the start of the call, we continue to be optimistic about our long-term outlet for Asia.
We see age as strategically important to its size, growth potential and our positioning in the region.
Glenn Fogel: We estimate that the trial industry grow than Asia will be in the high single digits over the next five years, which is the highest market growth rate of our major regions. Our ambition is to continue to grow faster than the overall trial industry in Asia as we have done through the pandemic recovery.
Over the last 12 months, about 24% of our global room nights for both by buckers in the Asia region, which is a slightly high-end mix that it was prior to the pandemic.
Our business and ages diversified across the countries in the region with no single country representing more than a low single digit percentage of our global roommates.
The success we have seen at Asia and our solid positioning of the region has been driven by operating two complementary brands, Agoda and booking.com.
Our approaches to utilize both of these brands across the region, with an iron profitable growth for booking holdings over the long run.
Glenn Fogel: Inconglusion, Army Courage by our strong third quarter results, and the continued resilience of leisure travel demand. Our teams continue to execute well against our key strategic priorities, which helps us as it is now business well for the long term.
We are in confident in the long term growth of travel and in the many opportunities ahead for our company.
Speaker Change: I will now turn the call over to our CFO AVout Steenbergen.
Thank you Glenn and Gould afternoon. I will now review our results for the third quarter and provide our results for the fourth quarter and the full year.
Avout Steenbergen: All growth rates are on a year over year basis. Information regarding weak conciliation of non-gap results to gap results can be found in our earnings release.
Glenn Fogel: We will be posting a summary earnings presentation, as well as our prepared remarks to the booking holdings investor relations website after the conclusion of the earnings call. Now, let's move to our third quarter results.
Our room nights in the third quarter grew 8% which exceeded the high end of our guidance by 3% at 4.
The stronger than expected alumni growth was driven by an improvement in trends in Europe, starting in August and benefited from the booking window expanding year over year in the third quarter, versus our expectation for it to be more similar to 2023.
Looking at our alumni growth by region in the third quarter Europe was up high single digits, Asia was up low double digits, rest of world was up mid single digits and the US was up low single digits
Speaker Change: As Glenn noted, we continue to make progress against our strategic priorities, including growing alternative accommodations, increasing the mix of our bookings to the Directional and our mobile apps.
and Hensing Our Genius offering and driving growth in our other travel fortacles as part of our connected trip fishing.
For our alternative accommodations at booking.com, our third quarter roomnight growth was 14% which continued to outdase the overall business.
The global mix of alternative accommodation roomnights at booking.com or 35% which was up 2% to spoil from the third quarter of 2023.
Speaker Change: We continue to strengthen our direct relationships with our travelers and increase loyalty on our platforms.
Over the last four quarters, the mix of our total room nights coming to us through the Directional was in the mid 50% range and when we exclude our B2B business was in the low 60% range. We've seen both of these mixes continue to increase year over year.
Speaker Change: Mobile App Mix of our total third quarter room nights was in the mid 50% range, which was up from the low 50% range in 2023. We continue to see that the significant majority of bookings received from our mobile apps come through the direct channel.
Speaker Change: For our Genius Loyalty Program, the mix of Buking.com, Moonlight, Bootbyt Travelers, in the higher Genius Tears of Levels 2 and 3 was in the mid 50% range for over the last 4 quarters, and this mix continued to increase year over year.
Speaker Change: In our other travel fortacles, we saw airline tickets and booked on our platforms in the third quarter, increased 39%.
Driven by the continued growth of flight offerings by booking.com and Agoda. We also saw rental car days booked on our platforms in 3-16% in the third quarter, driven by strong growth at booking.com.
The growth rates for airline tickets and rental car days were both better than our expectation, and both accelerated from the second quarter.
Speaker Change: Thuracorded Rose Bookings, increased 9%, which was approximately 1% at point higher than the 8% Lumet Rose
Due to about 2% support from higher flight booking scroll, partially offset by a decrease in constant currency accommodation 80 yards of less than 1%.
The year over year 80 yard decline was negatively impact by a higher mix of the room nights from Asia.
Speaker Change: Excluding regional makes, constant currency 80 yards or up less than 1% vs 2023.
Speaker Change: The increase in gross bookings exceeded the high end of our guidance by 5% at points due to stronger room-night growth plus less pressure from changes in effects and stronger flight ticket growth.
Third quarter revenue of $8 billion through 9% year over year, which also exceeded the high end of our guidance by 5 percentage points.
Revenue as a percentage of gross bookings was in line with our expectations at 18.4% and was also in line with the prior year as increased revenues associated with payments were offset by higher mix of flight bookings.
The increased revenues from payments were driven by an increase in our merging mix, which reads to 65% of our total gross bookings up from 56% in the third order of 2023.
Marketing Expense, which is a high-verbal expense line, increased 6% year over year.
Marketing Expense as a percentage of gross bookings was 5.0% about 15 basis points lower than the third quarter of 2023 due to a higher direct mix in higher performance marketing or a wise.
Speaker Change: Partly offset by increased spend in social media channels.
Speaker Change: Thurved quarter-sills and other expenses as a percentage of gross bookings was 2.0% in line with last year.
Speaker Change: Our fixed expenses on an adjusted basis were up to 7% year over year and were below our expectation do primarily to lower IT expenses, some of which we expect to shift into the fourth quarter as well as lower DNA expenses.
Speaker Change: We continue to be very focused on carefully managing the growth of our fixed expenses.
We believe it is important to drive greater operating efforts in our fixed expenses as this creates capacity for disciplined investment across our strategic initiatives, which we believe will help drive stronger topline and earnings growth in the future.
Adjusted Evidad of $3.7 billion, who 12% year over year, and was above our expectation, largely driven by the higher revenue and also by the lower than expected fixed expenses.
Speaker Change: Adjusted Evita Margin, 45.8% in the third quarter, was up for a slasher by a bit more than 1% at point due to marketing and fixed expense leverage.
Speaker Change: A just-it-net income of over 2.8 billion dollars was up to 9%. A just-it-epis of 83 dollars in 89 cents per year was up to 16%. And benefited from a 6% lower effort share counts than the third quarter of 2023.
Speaker Change: On a gap basis, Net income was $2.5 billion in the third quarter and was negatively impacted by a $365 million of cruel and DNA expenses related to a potential settlement of certain Italian indirect tax matters.
Partly offset by a $250 million reduction to our US Repatriation Tax Liability, which lowered income tax expense.
Now, on to our cash and liquidity position, our third order ending cash and investments balance.
Speaker Change: of $16.3 billion, was down versus our second quarter ending balance of $16.8 billion.
Due to about 2 billion dollars of capital return, including shared purchases and dividends, and a pay-down of about 1.1 billion dollars for debt that matured in September. Partly offset, about 2.3 billion dollars in free cash flow generated in the quarter.
Moving to our results for the fourth quarter, which, back fourth quarter, room that grow to between 6 and 8 percent, continuing our positive friends from the third quarter.
We expect fourth order gross bookings to grow between 7 and 9% A point ahead of Runei growth due to expected higher flight ticket growth We expect constant currency accommodation ADRs to be approximately flat year over year
Which expected fourth quarter revenue growth to be between 7 and 9%.
The expected fourth order adjusted Evita to be between about 1.6 and 1.65 billion dollars, representing growth between 9 and 13%.
We expect a just it EBITDA to grow faster than revenue due primarily to marketing leverage as a result of increasing direct mix.
Speaker Change: We're increasing our outlook for the full year, driven primarily by the strong-gradin expected third quarter, which is our seasonally largest revenue and profit quarter.
We expect full-year gross bookings to increase about 8% and improvement from our prior expectation of faster than 6%.
We expect a full year revenue growth of just below 10%, which is better than our prior expectation of faster than 7%.
Speaker Change: We expect a slightly negative impact from changes in FX on our full-year top-line growth rates, which compares to our prior expectation for about one percentage point of negative impact.
We expect fixed OPEX on an adjusted basis to grow around 10%, lower than our prior expectation.
Speaker Change: We expect adjusted EBITDA to grow between 13 and 14 percent, which is better than our prior expectation due to the increased revenue growth and lower fixed OPEX growth. We expect adjusted EBITDA margins to expand year-over-year by a bit more than one percentage point.
And finally, we expect our full-year adjusted EPS to grow in the high teams.
In conclusion, we are pleased with our third quarter results and our outlook for the fourth quarter and the full year. Thank you to all my colleagues across the company for their hard work, determination, innovation and teamwork.
With that, we'll now take your questions. Operator, will you please open the lines?
Thank you, sir. And everyone, if you would like to ask a question, please press star one on your telephone keypad. We'll take the first question today from Justin Post, Bank of America.
Justin Post: Thanks. I guess since you talked a lot about AI in your prepared remarks, maybe you could talk about how you expect that to translate to financials. Do you think AI could bring more direct traffic because of all your tools, better attach rates when people come to your site, maybe lower expenses? Just how would we see that translate to financials?
and then one went on bookings. It looks like, you know, can you talk about some of the factors in Q4 that could affect bookings, either hurricanes or the, you know, maybe the Middle East comps, how you're thinking about some of the four key factors. Thank you.
Glenn Fogel: Hi Justin, it's Glenn speaking. I'll take the first question about AI and then I'll let Ewout talk a little bit about your question regarding fourth quarter.
So, we did give a number of examples about some of the things we're working on at the company on AI, because I know there's a lot of curiosity about where are we, what's happening.
And it is one of the most exciting times.
Glenn Fogel: this company ever. And it's something I've talked about before, maybe you've heard me talk in some conferences, et cetera.
that this type of technology is really transformational.
Glenn Fogel: And it's going to make it so much better for all people in the travel industry, particularly for the traveler. It's also going to enable us to be able to provide a better service to our partners, enabling them to get more incremental, more targeted customers, help their business better.
You, of course, you'd like to know how does that translate into dollars and cents.
That is difficult at this time. It's still very, very early.
We see some of the efficiencies already coming in in some places, and we've mentioned, I mentioned the prepared remarks about some of the numbers in terms of the number of people using it, which is actually a relatively small number compared to the total number of interactions we have with customers.
Glenn Fogel: Sounds like a big number three million, but it's small compared to the size of this company.
So, I know what you'd like to know, but we're not going to project those kind of numbers right now. But what I will say is it's incredibly important.
The companies that are successful in AI are going to be the long-term winners because it is going to
Glenn Fogel: as I say, be transformational, I'm very pleased that we've made progress so far and we have some certain advantages. We've got capital. We've got people who've been working with AI now for many, many years. Sure, it wasn't Gen AI. They were working on machine learning models, et cetera, but we've got a lot of people who are very, very skilled in the areas of technology.
In addition, having more data, which is so important.
Glenn Fogel: to be able to combine with other people's large language models, other people's systems, and come up with really unique ways to provide a better service.
Glenn Fogel: It's something that I'm just so thrilled to see what we're doing, what we're building. And I urge anybody who's curious about this, test out some of the things we have out there. It's out in the market. It's live.
See what you think of it. I've done it a lot myself, and sometimes I'm really pleased, sometimes a little disappointed, but I know we're making great progress. And in the, you know, in the future, we'll be able to better quantify for you what you'd like to know. Maybe I'll let you, I'll let you go on the fourth quarter.
Speaker Change: Justin, with respect to the outlook for bookings in the fourth quarter, I think the headline is we're looking at the fourth quarter as a very robust
Glenn Fogel: and Positive Quarter, where we see a continuation of the trends we have seen over the last few months.
But let me dive a little bit deeper into that. First, the comms get a little easier in the fourth quarter, because we're lapping the period last year where we had an impact, particularly with respect to the start of the conflict in the Middle East.
The second point is you are referring to events. Events from our perspective doesn't really impact our results. It might have a really short-term impact, but in the end it always will average out. So you will never hear us really pointing to events as an impact on our outlook or actual performance.
The third is what we have seen so far is continuation of the strength of August and September, also in October.
The fourth is, I think it's important to take into consideration that we expect the booking window to be less expended.
Glenn Fogel: in the fourth quarter than we have seen in the third quarter. In other words, there might have been some pull forward of bookings that otherwise would have been in the fourth quarter into the third quarter.
Glenn Fogel: And the last is...
we absolutely also have reflected.
uncertainties and risks with respect to the global geopolitical environment. We all know there are a lot of things out there that are happening and we also have taken that into consideration in our consideration with respect to our four-quarter outlook and guidance.
Speaker Change: Great, thanks. Thank you. Appreciate it.
The next question comes from Mark Mahaney, Evercore
Two questions, please. On the Asia call-out, Glenn...
It was just the first time that Asia's, I think it's a percentage of your mix, was higher than it was pre-COVID. I assume so, that's why you called it out, but anything in particular in the region that you've done, or is that just the region, you know, finally recovering back to kind of full outbound travel mode? So, you know, how much of that sort of success for you was what you did versus just the market there finally recovering? And then AA in the mix, this I think 35% number,
The question I have for you is, I'm trying to figure out where that mix is, you know, long-term. In markets where you have kind of full sufficient inventory, both traditional and AA, is the usual mix in those markets around that average of 35% or is it materially higher? Therefore, we could expect the overall mix to go up because you still have a lot of regions where you don't have enough AA inventory. Thanks a lot.
Mark: I'm Mark.
I'm not sure if you're right, actually, on that thing about calling out Asia. I think we have some things where Asia has done better. But regardless of that, let's just talk a little bit about how pleased we are with the growth we're seeing in Asia. And yes, we're obviously getting a bit of a benefit because Asia overall as a market is growing fast. There were certain areas of Asia that were a little slower coming out of the pandemic and such. But this is an opportunity for me to really put out a thanks to our Agoda team.
That team has been just doing really well in coming up with ways to provide a better service to the Asia customers.
It's a little bit different in some parts. Now, I say Asia, obviously. Asia's a very big place. A lot of different countries, a lot of different ways people buy, what people are looking for.
Mark: and the Agoda team has done a good job of localization.
of coming up with the ways that the customer in different parts of Asia, the way they want to buy.
matching up with different types of payment methods, for example, to be able to let the local person who wants to pay in a certain way can use our service and feel comfortable doing that.
in addition to making sure we're getting great inventory. Again, it can be a little bit different in Asia than other parts where there's a lot of small independence or different ways to get great pricing. Make sure it's showing up on our site. So, great team effort by everybody there in Agoda, and that's helping a great deal. Booking also doing Asia efforts.
So overall, we're really, really pleased with what's happening.
Now, your second question about alternative accommodations, we are pleased, again, with the growth rate there, 14% like it, increasing the listings to 7.9 million, 10% increase from last year. Like that one, too. You know, last time in the call, I said how we had...
have beaten our biggest homes competitor in 11 of the last 12 times, and we came out of that time ahead of them in terms of the earnings announcements. I didn't know if we were going to beat them again.
And we did, so I'm wondering this time, will we do it again, make it 13 quarters out of 14? And it's not a small business, it's a big business, because as we've mentioned a couple times,
Mark: The total amount of room nights for alternative accommodation is running, you know, roughly a little bit, two-thirds of the biggest homeless player in this marketplace. So it's a big business. So it's great to be able to growing at this size.
It's great to be doing it and sort of leading in terms of growth. Your question is, at what stage do we end up and feel sort of that's sort of the max or so? I don't know. Because one of the key things to our business is making sure that we just get as much of the inventory that the customer wants on the site and they choose.
And I mentioned it in the remarks about how customers come to our site and from what they've chosen to start with, we know what they were thinking of, and then they go and they buy something else.
So, I don't know what the ultimate share is going to be. I do know, though, what's important is to continue to work on getting great inventory. And as long as we're talking about it, we're nowhere near in certain regions in terms of getting it. It's a lot of ramp left in front of us.
Mark: U.S. in particular. I keep repeating myself quarter after quarter. Sure, we're growing that business nicely.
in the US. But there's so much more to be done. And I was just looking today, literally today, because seeing what was available for us in the Hamptons, I'm in New York, or I look in the summer, it's like, not enough inventory there yet. So
Some people say that's a negative. I say that's, you know, an opportunity for us, and I'm really looking forward to us continuing to build out the business.
Thank you, Glenn.
And your next question comes from Doug Anmuth, J.P. Morgan.
Thank you. Thank you. Thank you.
Speaker Change: One moment. I apologize, just one moment. Okay, go ahead Doug, I'm sorry.
First, with respect to Europe, we have clearly seen a re-acceleration of growth starting in August.
We believe that perhaps in July there was a bit of impact of some of the events, but again, we always look at that as purely timing, and that is averaging out.
But then we also believe there's a general underlying improvement what we are seeing in Europe in terms of the general demand for our products and services.
It's partially market, but it's partially also our proposition, of course.
As Glenn already explained, having such a great platform with so many options, so many verticals, where you can purchase in so many different ways.
and in Europe, many people use us on the app.
And it's really very much a mainstream app
You have your credit card there, easy to book, easy to adjust. So that is definitely in Europe a big winner and therefore we have been so much really the standard in Europe with respect to our proposition.
I also need to point at the expansion of the booking window that happened in the third quarter, so that definitely also helped with the acceleration of growth at the same time.
Thank you.
And the next question comes from Kevin Koppelman, TD Cowen.
Kevin Koppelman: Great, thanks so much. I have a question on marketing.
Could you give us an update on kind of, you know, what you're seeing, you mentioned higher ROIs in the third quarter, how much of that is underlying improvement in ROIs versus Europe being stronger?
And can you update us on how you expect the fall year now to look in terms of marketing and merchandising as a percentage of GDP? Thanks.
Speaker Change: Yeah Kevin, overall how you should look
I think this is really where the company has such a specialized expertise.
has such great algorithms that are continuously optimizing our incremental spend to make sure that the incremental ROIs are really the highest that are possible.
and doing that across all the different options we have how to allocate our dollars. So this could be the different forms of performance.
Speaker Change: Performance Marketing Channels
it could be with respect to merchandising, but it could also be with the social media channels where we are expanding our marketing spend as well. So clearly the opportunity was there through our continuous optimization to ultimately achieve higher growth.
with higher ROIs at the same time.
with respect to your question on the outlook.
Speaker Change: merchandising as a percentage of growth bookings, we expect it to be more or less flat.
Speaker Change: compared to last year for each of the quarters of 2024 and for the full year. With respect to marketing, we expect marketing leverage to continue in the fourth quarter as a result of the continued growth of our direct channels.
Speaker Change: David Goulden, Connected Trip, Ewout Steenbergen, Glenn Fogel
Speaker Change: Great, thanks so much.
Next up, we'll hear from Eric Sheridan, Goldman Sachs.
Thanks so much for taking the question. I want to come back to the theme on fixed investments, you know first looking backwards You know, maybe highlight some of where you've made investments around fixed costs
today, and not about 2025, but just longer term, how do you think about coming out of that fixed investment cycle, and how do you think about the return profile or incremental margin that could be produced in the business as fixed investments start to grow slower than revenue over the longer term? Thank you.
Yeah, Eric, I really love that question because it's something I'm extremely personally passionate about.
The way we look at this is actually in two different ways. One is, where do we see opportunities for efficiencies and achieving operating leverage?
Speaker Change: and then a completely separate decision mechanism around where can we reinvest those dollars in the most optimal way that we will achieve the highest growth potential and attractive business case returns in the future. So let me start with the first part.
Speaker Change: In terms of operating leverage, we believe there are many opportunities we have as a company because we have been building up scale in the organization, and now we should have an opportunity to run much more volume over the existing scale over the next period.
Speaker Change: So let me point you to a couple of areas. First, we have tremendously slowed down hiring. So if you look now, our year-over-year headcount is up approximately 3%. If you go back a year ago, in the third quarter of 2023, headcount was up 13%.
So clearly we are being more efficient and we are very careful with hiring.
Speaker Change: who already touched on AI, artificial intelligence, as a clear opportunity to find efficiency.
in the future across many different areas.
Speaker Change: In the interest of time, I will not elaborate on that, but that's a clear opportunity. We're also looking at procurement, real estate, operating model optimizations, looking at spans, layers, to really make the organization more agile, and many of those areas. And we believe we really have an opportunity to expand on that in the future.
But then, I think your question is also, what are we proud about in terms of investments?
Well, if you think about the number of new areas where we're growing as a company,
It's super impressive from my perspective. A few years ago, we were not really in flight. Look at the growth we're reporting, 39%. Look at all the other protocols.
looking at what we're doing with respect to payments and fintech.
Speaker Change: looking at what we're doing from a geographical perspective. Glenn was touching on the very impressive growth in Asia, the investments we're making in the U.S., and we believe we're growing still faster than the market in the U.S., and we'll continue to aim to do that in the future as well, and many other areas. So we are very much focused on, in a very disciplined way, looking at our scarce resources,
Making sure that we're using that in the most optimal way and, in the end, invest in the most attractive growth opportunities for the company over the next period. And I'll just add, I think what Ewout said really hit a lot of the key things that have made us successful.
Speaker Change: And looking back,
There have been a lot of times that people question what are we investing in and why are we spending the money there, etc.
Speaker Change: And we're now finally beginning to see a little bit of a benefit to this. So there was a point where, as you know, Booking.com was totally an agency business. Totally an agency business. No payments at all.
Speaker Change: Now we talk about our merchant mix is now 65%.
Speaker Change: Why are you getting into these other verticals? The end of the day is, the long-term success of a company is...
being able to make change.
to make things different as the world changes, you have to change with it. We just stayed as an agency-only hotel and not had invested.
Speaker Change: In other areas, we would not be where we are today. Now going forward, we can't stop, we continue to have to do that.
Ewout said, we've got to be very careful. Where are we spending our money? We've got to not put money into things that are not going to be productive and move resources into places that is Something is no longer necessary. We just have to have the will to stop that and do something else
So I'm really proud that we've been able to do it. I've been here now almost 25 years. It'll be 25 years in February. And throughout this, we have changed tremendously. But the one thing that we have really concentrated on is making sure we are careful with our shareholders' money.
Speaker Change: Thank you.
And from Deutsche Bank, Lee Horowitz has the next question.
Great, thanks. Maybe Glenn, another one on alternative accommodations. You give a lot of color on the booking patterns you're seeing on the platform as it relates to cross-shopping hotels and alternative accommodations, but can you comment at all on what you're seeing in terms of incrementality of this volume?
Speaker Change: Thank you. Bye.
That's a very interesting question because
I haven't
If you noticed any surveying or trying to understand, obviously we can see...
Glenn Fogel: If we look at it, a customer has come who we've never seen before, who started with an alternative accommodation because they knew that we had alternate accommodations.
That would be.
accommodations. I don't have the data on that, but I can say I believe, without actual data proof, I believe that we have brought in people who would not have come otherwise, would have gone to another site, but came to us because we did offer them an alternative accommodations. And I would say specifically in Europe, I'm almost certain of that.
because the awareness of our alternate accommodations business in Europe is very high, unlike in other parts of the world. When somebody thinks that I want to have a nice villa in Nice in France, they will think
Speaker Change: Booking.com
And that is the incrementality that you're asking about.
But, again, what's more important is to offer all aspects of travel. That goes back to the whole Connected Trip mission.
Because if somebody does get that nice, neat, you know, villa, they have to get there somehow. So if they're going to fly, it's good to be able to combine that. And then they'll have to get from the airport to the villa. So it's nice to have the ground transportation. Maybe they need insurance. And as I always say,
Nobody goes on a holiday so they can sit in the room, whether it be a villa, even if it's a really nice one, or a hotel room. They want to do stuff, and that's why attractions is important. I can go on and on and on.
Speaker Change: and tying that all together in that Connected Trip vision.
Speaker Change: using science, using data, using our Gen AI capabilities, make sure we're offering the optimal things for that traveler, in addition, giving the opportunities for our suppliers to offer up different types of services, different price points, so that they too can enjoy the benefits of this Connected Trip vision in terms of more customers, more profitability.
Speaker Change: That's the thing we're building, that's the real true incrementality, and that is getting people, whoever they're traveling right now some other way, that they come to us because we offer them a better service.
David Goulden, Connected Trip, Ewout Steenbergen, Glenn Fogel
and the P&L. Do you think that, you know, the business is in a place where it can drive fixed op X leverage, not just next year, but for many years out into the future, and it should be part of the way we think about you guys going forward?
Speaker Change: I would say absolutely there is a big opportunity to do that.
But there's always the flip side of how much opportunity do we have to reinvest in the business? So again, coming to the two sides of the coin that I was talking about before, do we have opportunities to find more opportunities for operating leverage?
Speaker Change: not only in 2025, but also in 2026, absolutely. And of course, some of the initiatives that are being worked on or in the development or have been recently implemented, the run rate effects, you will see that coming in then over time in the future.
But as I said as well is, I think this company, the uniqueness of this company is it's doing well, it's growing fast.
is delivering very strong results. We have a lot of free cash flow generation.
But we also can reinvest in so many initiatives in order to grow even faster, grow even faster in all those different areas. So how that on a net basis will play out, that's a little bit hard to say, but on a growth basis.
in the sense of how much can we really find in terms of efficiencies. I think there's still a long way to go.
Speaker Change: Next up, we'll take a question from Tom White, VA Davidson.
Thank you for joining us. Thank you.
Great, thanks for taking my question. Just one, if I could, on social. It seems like in recent months, you know, we've heard you guys mention having better success kind of accessing travel demand and social media channels.
which I guess for a long time didn't didn't really seem to be the case there's obviously a ton of engagement there but it didn't seem like it was
necessarily efficient demand source for you. Can you maybe talk a bit about why that's changing or it seems to be changing and curious like how big a vector of growth social maybe could be for you guys over the next several years and how do you think about the incrementality, I guess, of that channel? Thanks.
So it's Glenn speaking. I'll let Ewout talk a little bit if he wants to about anything that I don't mention.
Speaker Change: Bye.
We are pleased.
Speaker Change: that we
are seeing good results from putting money to work in social platforms.
And as you know, over many years, we had mentioned that we were experimenting, but it wasn't really working for us yet.
And now, finally, we are beginning to see it work. That being said...
Speaker Change: It's a relatively small amount of money compared to our overall marketing.
Speaker Change: Expenses
But we're glad. And the thing is, it always comes out that we're agnostic. As long as we get the right ROI, that's what we really, you know, our goal is, that's what we care about. And it's working now more than in the past, because I think cooperation with people in the social platform areas, that we're working with people there and coming up with creative ways together to achieve our mutual goals.
and we want to continue to do that and we'll continue to invest as long as we keep getting the ROIs that we want. That's as simple as it is. How big could it be? I don't know. It really will depend on how much further ahead we get the ROIs.
In the past, we'd seen some interesting things that worked a little bit, but then when you tried to scale it...
The ROIs fell off. Now, we're not really seeing that in the things we're trying now.
But I can't promise that, you know, as we grow bigger and bigger and start getting to large numbers.
Real large numbers, like you know what our number or total amount we spend on marketing, who knows? But I am encouraged by the progress we have made so far and I am really glad to be able to diversify that paid performance type of spend. And anybody you want to want to say anything on it?
There may be two quick things to add.
First, coming back to AI, actually AI is an important tool to help with the additional advertisement effectiveness, so that the targeting is better and therefore we can achieve those higher incremental ROIs.
and maybe one other point with respect to the financials.
Speaker Change: Glenn is right. In absolute terms, the spend on the social media marketing channels is still relatively small. But I'm actually encouraged because if you look at the marketing increase spent year over year, actually a meaningful part of the delta increase is actually going to those social channels.
Next question is Jed Kelly, Oppenheimer.
Hey, great, thanks for taking my question.
Just going back to the U.S., you're getting some nice branding here with the baseball playoffs having, you know, record ratings, you called out room nights, maybe growing low single digits. So can you talk about where you think your brand is in the U.S.? And then just on the single units in the U.S.,
you know, talking to some property managers, they still think you're a little more complex to work with versus some of the other platforms. Can you talk about where you are in terms of maybe simplifying it for them? Thank you.
So you're right on your second point about it's not as easy yet.
as some of our competitors. I know that's true, and that's one of the things we're working on. And I'll be short and say, that's opportunity for us. That's great. We're doing so well right now, and we still haven't perfected that. So that's all upside for us. In terms of awareness,
Speaker Change: We're still not where we'd like to be, but we continue to improve. I continue to see those numbers going up. When I look at the reports, marketing comes back, marketing report comes back to me. Reports in our marketing department comes back to me. I am pleased with the progress we're making, but again, that's more opportunity for us.
Speaker Change: Yeah, just a small technicality just to point out is it looks like where we said last quarter We're growing in the US mid single digits and now it's low single digits
I would still characterize this more as stable growth over these periods because we're really at the cusp in both quarters in terms of which of those buckets it's falling. So I wouldn't read too much in it as an investor, but overall I would call this more stable growth over the last two quarters in the U.S.
Speaker Change: Thank you.
Speaker Change: www.cdc.gov.au
The next question is from Navid Khan, B. Reilly Securities.
Navid Khan: Thanks a lot. A couple of questions.
Navid Khan: Glenn, it's great to hear the updates on Gen AI.
Maybe give us your thoughts on...
If you think GEN AI can drive...
More shift in bookings.
that can happen through online marketplaces like bookang.com versus those that happen directly on a hotel website.
And then, with respect to Connected Trip,
I remember you guys had a partnership with some super apps in Asia like Grab, which is a ride-hailing app. Any updates you can share on those partnerships would be great. Thanks.
Speaker Change: There are so.
Speaker Change: Um...
Speaker Change: This stuff's not easy.
It's complicated. Gen AI is hard stuff.
And it's really good to be in a position where you have resources, people, capital, data to be able to drive forward, experiment to see what works, what doesn't work, see how well, how quickly it works. And there's no doubt this is an advantage. So if you're a hotel, even an extremely large hotel,
You do not have the resources that we have, I believe.
Speaker Change: Now of course you can partner with others. In fact, we're doing that ourselves. For example, we have a, you know, go to our OpenTable example. They're not building so much, and so they're partnering. Oh, they did a good agreement with Salesforce to work with their new AI service. That's great there.
But I believe it's really important to be able to combine your own data in the hotels accommodations area and come up with things that are truly differentiating.
and Personalization.
Speaker Change: So I am confident that we have, I'd say, the pole position in the growth of this area, and I'm very excited about it.
The other thing you mentioned about our partnerships in Asia with some other players, it's a very small amount of this. We're pleased with where our relationships are with them, etc. But that is not something that should be seen as anything that was influencing our Asia numbers at all.
Thank you, Glenn.
We'll go next to John Kowalewski-Tawami, Jeffrey.
Great, thanks for taking my questions. A quick one on booking window, maybe you just help us size the benefits of the third quarter in terms of room nights from both
John Kowalewski-Tawami: relative to your expectations and on a year-on-year growth rate perspective.
And then second on North America, your business there seems to be maybe the one region that's tracking more consistent with the broader market. Talk about what investments and capabilities you're making to start driving market share gains once again in North America. Thanks.
John, I will take the first question.
We're not really breaking out how much the booking window had an impact on accelerated growth in the third quarter. It is a bit of benefit, but I wouldn't overestimate the impact period over period. So I would say slight benefit in the third quarter, but we're not really quantifying that.
In terms of your second question, who we are doing in North America relative to the market?
John Kowalewski-Tawami: based on external data sources that we are looking at.
We believe in the third quarter, actually, we were growing a bit faster than the market overall.
And that's, of course, the result of a lot of investments we're making. Glenn has touched on many of those already. The number of listings, the focus on alternative accommodations.
the investments in the brand we're making, for example, with respect to the World Series and the baseball playoffs in general, what we're doing in terms of creating more familiarity with the brand in the U.S., and many other features and product enhancements we're making to really further improve our market position in the U.S. We're a challenger in this market, and actually we think that's a good position to be in, because it is an opportunity to grow and ultimately be able to get to our natural position in terms of overall market impact in the U.S.
John Kowalewski-Tawami: Thanks so much.
And everyone, that does conclude our question and answer session. I'd like to hand the call back to Mr. Glenn Fogel for any additional or closing remarks.
Glenn Fogel: Thank you. I want to thank our partners, our customers, our dedicated employees, and our staff.
We greatly appreciate everyone's support.
as we continue to build on the long-term vision for our company.
Thank you and good night.
Glenn Fogel: John Fogelman, John Fogelman, John Fogelman, John Fogelman, John