Q1 2025 Expedia Group Inc Earnings Call
Okay.
Okay.
Okay.
Okay.
[music].
Okay.
Speaker Change: Good day, everyone and welcome to the Expedia Group Q1, 2020 financial results teleconference.
Speaker Change: My name is Alex they'll pay that off price of say it's cool.
Speaker Change: If you wish to ask a question at the end of the presentation. Please press star followed by one on your telephone keypad.
Speaker Change: If you change your mind, Please press star two.
Speaker Change: Opening remarks, I'll turn the call over to SVP corporate development strategy and Investor Relations ship Ash to begin. Please go ahead.
Speaker Change: Good afternoon, and welcome to Expedia group's first quarter 2025 earnings call.
Barry Gordon: Pleased to be joined on today's call by our CEO already on Gordon at our CFO Scott Schenkel.
Barry Gordon: As a reminder, our commentary today, but include references to certain non-GAAP measures.
Barry Gordon: Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in our earnings release.
Barry Gordon: Unless otherwise stated all growth rates are on a year over year basis.
Barry Gordon: <unk> expenses exclude stock based compensation.
Barry Gordon: We will also be making forward looking statements during the call, which are predictions projections or other statements about future events.
Barry Gordon: These statements are based on current expectations and assumptions, which are subject to risks and uncertainties that are difficult to predict.
Barry Gordon: 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.
Barry Gordon: Except as required by law, we do not undertake any responsibility to update these forward looking statements.
Barry Gordon: Starting this quarter, we will also be casting an earnings deck, while going through prepared remarks, a copy of this deck will be posted online after the quarter.
Barry Gordon: Our earnings release earnings deck, SEC filings and a replay of today's call can be found on our Investor Relations website at IR got Expedia group Dot com.
Ed: And with that let me turn the call over to Ed.
Ed: Thank you Harsha and thank you all for joining us today.
Ed: In the first quarter, we posted bookings and revenue within our guidance range growing 4% and 3% respectively.
Ed: This was at the lower end of our range due to weaker than expected travel demand in the U S and into the U S.
Ed: Beat on bottom line was 16% EBITDA growth and 90% growth in earnings per share.
Ed: We delivered these results with solid execution and disciplined cost management, while continuing to make progress on our strategic priorities.
Ed: Booked room nights grew 6% with low single digits in the U S mid single digits in Europe, and mid teens and the rest of the world.
Ed: U S demand was soft driven by declining consumer sentiment and we saw pressure on key inbound U S corridor.
Ed: While in the last year, we've made strides in growing our consumer business outside the U S.
Ed: Hi, U S mix resulted in 1% bookings growth for our consumer business.
Ed: In contrast, our <unk> business, which has a heavy heavy international presence.
Ed: 14% bookings growth another strong quarter of above industry performance.
Similarly, our advertising business delivered a robust 20% revenue growth.
Ed: Within consumer Expedia continue to be our fastest growing brand with room nights up 7%.
Ed: <unk> grew modestly for the third consecutive quarter.
Ed: And hotels Dot coms slipped back into negative territory to the softer U S demand and foreign exchange headwind.
Ed: We remain focused on what's in our control improving everyday on the basics of our business and executing against our three strategic priorities.
Ed: First deliver more value for travelers.
Ed: Second invest where we see the greatest opportunity for growth.
Ed: And third drive operating efficiencies and expand margins.
Ed: As I'll discuss AI is amplifying our efforts across all three of these.
Ed: Let me start with how we are delivering more value to travelers to our supply and products.
Ed: In February we became the first online travel agency that list southwest Airlines inventory.
Ed: The early results have been great and exceeded both our in southwest's expectations.
Ed: One third of travelers booking southwest tickets on Expedia are new customers to us and our hotel partners are benefiting from this new demand offering package rates and deals to bundle with southwest.
Ed: This is a great example of our supply flywheel, when we add new supply in flight, we bring on better supply in hotel, both of which create more traveler value and translate into new customers.
Ed: Similarly in Europe, we launched Ryan air across most points of sale.
Ed: We've seen strong traction so far and around 75% of travelers booking Ryanair on Expedia are new to us.
Ed: In addition, we continue to enhance our lodging supply, adding more member rates more deals and more flexible right.
Ed: Our March sale produced nearly twice as many bookings this last year with a record number of hotels participating driving value for both travelers and our supply partners.
Ed: On product, we ship new features to help travelers identify great deals and that our broad inventory like flight deals on brand Expedia and property price insights on for Bill.
Ed: We continue to inject AI into our product experiences like AI powered property Q&A filters and property highlights to make shopping and booking easier.
Ed: We're also leveraging AI beyond our own products, we're partnering with AI search companies to ensure our brands show up well across customer queries and building new experiences to connect with travelers outside our ecosystem.
Ed: We're live with open Ai's, operator, and where our launch partner with Microsoft Copilot actions and today, we're launching expedia trip matching and early access on Instagram, allowing travelers to seamlessly build an itinerary based on an Instagram real and then book directly on Expedia.
Ed: These innovative features supported by our rich first party data and coupled with our own marketplace, bringing travelers back to our brands.
Ed: Now moving to the second pillar of our strategy investing where we see the greatest opportunity to drive growth.
Our beauty business continues to grow by double digits, driven by our supply technology commercial incentives and new partnerships.
Ed: We're adding new <unk> specific hotel supply and optimizing our BTB partners ingest and sell it.
Ed: This is another powerful flywheel.
Ed: We're also expanding product features and points of sale exploring partnerships with AI native companies and selectively investing in commercial incentives to profitably drive volume and share.
Ed: Finally, <unk> is a geographically diverse business. So as we grow we're diversifying our overall geographic mix.
Ed: On.
Ed: We grew revenue, 20% by adding more partners optimizing our existing products and shipping new products.
Ed: We signed a record number of 1 million plus deals for our display offerings include active hotel partners and sponsored listings by 22% to our highest level ever.
Ed: Last quarter, we launched video ads and are seeing a two times increase in click through rates and we're making it easier for advertisers to manage their spend with us to AI driven bid optimization and automation.
Ed: We see a lot more opportunity ahead, as we continue to innovate and advertising and VW.
Ed: Turning to our consumer business, while our overall growth isn't in line with our ambition. We are seeing good performance in our areas of focus.
Ed: Brand Expedia is scaling multi item trips and driving more attach and in Q1, we saw record high attach rates for insurance.
Ed: On <unk>, our work over the last few quarters to improve our offering for shorter stays is paying off.
Ed: Nearly a third of verbal growth came from the multi unit inventory we added last year.
Ed: Finally, our plan to Reinjection hotels dot com with a refreshed value proposition is on track.
Ed: In late April we launched a new visual identity, and new product capabilities like hotel price insights and alerts.
Ed: We look forward to sharing even more later this year.
Ed: Now moving to the third pillar of our strategy driving operational efficiencies and expanding margins.
Ed: In Q1, we delivered over one point of EBITDA margin expansion.
Ed: We're taking a surgical approach looking at areas, where we can simplify our organization and improve our effectiveness.
Ed: We've eliminated roles and removed layers and we're seeing good results from deploying generative AI to streamline our operations across technology commercial and marketing teams.
Ed: We're also looking at every dollar of spend including in our loyalty program.
Ed: Active loyalty members grew mid single digits, and we continue to see the fastest growth from our silver gold and platinum members.
Ed: At the same time, we're tuning the loyalty program by brand and by geography.
Ed: Last month, we removed the always on earned for our Blue tier loyalty members on Bravo.
Ed: While we see healthy returns from our discretionary loyalty spending the base earn for Blue members didn't drive sufficient repeat to justify the cost and resulting pressure on <unk> revenue.
Ed: As we closely evaluate spend our highly variable cost structure enables us to proactively adapt to market demand and will be opportunistic about investing where we see attractive returns.
Ed: In closing, while none of us can predict with certainty how the economy will evolve we do know that people always want to travel.
Ed: I'm confident that we're well positioned to continue delivering for our travelers partners and shareholders, regardless of the demand environment now.
Scott Schenkel: Now Scott over to you.
Scott Schenkel: Thank you Ari and good great good afternoon, everyone.
Scott Schenkel: Cited about the progress sorry on highlighted on our three strategic pillars and there is more that we'll share next week at explore our partner conference.
Speaker Change: As <unk> indicated we posted top line results within our guidance range with booked room nights up 6%.
Speaker Change: Gross bookings up 4% and revenue up 3%.
Speaker Change: Our <unk> and advertising businesses had another strong quarter of growth with <unk> bookings up 14% and advertising revenue up 20%.
Speaker Change: PTC was more pressured given its U S heavy mix and saw bookings up 1%.
Speaker Change: Finally, we delivered on the bottom line ahead of our guidance with strong EBITDA margin expansion of over a point and non-GAAP EPS up 90%.
Speaker Change: Now onto the details booked.
Speaker Change: Booked room nights grew 6% to $108 million.
Speaker Change: This was primarily driven by <unk>, which grew 20% with strong international performance, particularly in APAC, which grew 30%.
Speaker Change: Brand Expedia also posted healthy growth of 7%.
Speaker Change: Average daily rates were 214 down 1%, although up 1% on an FX neutral basis.
Speaker Change: Another one another one quarter of air ticket prices growing in Q in Q4 of last year declined in Q1.
Speaker Change: Total gross bookings of $31 5 billion were up 4%.
Speaker Change: In February when we discuss guidance, we call about two points of headwinds in Q1 gross bookings due to foreign exchange and one point due to leap year.
Speaker Change: FX came in roughly one point better than anticipated as the U S dollar strength softened in the back half of the quarter.
Speaker Change: However, we saw a couple of points of headwind from the macro environment, which more than offset the FX benefit.
Speaker Change: In particular demand in the U S with softer than expected.
Speaker Change: It was a headwind given two thirds of our business comes from U S point of sale.
Speaker Change: We also noticed softness in demand for inbound travel into the U S, which was down 7%.
Speaker Change: As part of that inbound bookings from Canada, Canada fell nearly 30%.
Speaker Change: Revenue of $3 billion grew 3%.
Speaker Change: We had one point, we had one point of headwind to Q1 revenue growth from the Easter timing shift to Q2. In addition, we added three point headwind from foreign exchange roughly one point worse than expected.
Speaker Change: The foreign exchange impacted Q1 revenue differently to gross bookings as revenue is driven by gross bookings from prior quarters that were more materially impacted by the strong dollar as well as those in the current quarter.
Speaker Change: In terms of performance by product.
Speaker Change: Lodging bookings of $23 billion grew 5%.
Speaker Change: Lodging revenue of $2 3 billion grew 3%.
Speaker Change: Non lodging bookings of $8 4 billion grew 2%, while our advertising revenue of $174 million grew 20%.
Speaker Change: The advertising business continues to be a powerpoint growth engine with strong growth prospects ahead, as we launched new AD solutions and increase adoption.
Speaker Change: Moving onto our segment's top line performance.
Speaker Change: <unk> gross bookings of $22 6 billion grew 1%.
Speaker Change: The deceleration from Q4 was driven by the pull in of demand into Q4 foreign exchange and the weak euro impact all of which were anticipated. However, the previously mentioned U S market softness with pressure on the quarter.
Speaker Change: Brand Expedia remained our strongest growing consumer brand hotels was under some pressure in the quarter in part due to higher FX exposure given its international mix.
Speaker Change: <unk> bookings remained positive for the quarter and grew in line with the market in the U S.
Speaker Change: <unk> revenue declined 2% driven by the Easter shift to Q2 and FX pressure.
Speaker Change: To see EBITDA margins were 11, 1% roughly in line with last year.
Speaker Change: Yeah.
Speaker Change: CDP gross bookings of $8 8 billion grew 14% materially above the market.
Speaker Change: Although decelerating sequentially.
Speaker Change: We had anticipated deceleration given the strength of Q4 leap year and foreign exchange, but there was some additional pressure from the macro related headwinds.
Speaker Change: <unk> revenue grew 14% in line with bookings <unk> EBITDA margins were up 22% 22, 8% up over 200 basis points, mainly driven by volume growth.
Speaker Change: Our <unk> segment continues to benefit from our strong product differentiation solid execution and stronger international exposure, particularly in APAC as I mentioned earlier.
Speaker Change: Moving onto profitability we.
Speaker Change: We delivered first quarter adjusted EBITDA of $296 million with an adjusted EBITDA margin of nine 9%.
Speaker Change: Expanding by more than one point driven by <unk>.
Speaker Change: We also delivered 40 cents of EPS up 90% versus the prior year, largely driven by <unk> and advertising growth and share repurchases.
Speaker Change: Moving on to our cost structure cost of revenue was $354 million, which was flat year over year, reflecting ongoing efficiencies, particularly in customer service and leveraging 44 basis points as a percentage of revenue year over year.
Speaker Change: Direct sales and marketing expense in the first quarter was $1 8 billion up 6% and slightly deleveraging as a percentage of gross bookings driven by the growing <unk> mix.
Speaker Change: As a reminder, commissions paid to our <unk> partners are included in the direct sales and marketing expenses for <unk>.
Speaker Change: <unk> see the business was nearly flat on marketing leverage as we continue to invest towards international expansion and growing hotels dot com and vivo.
Speaker Change: Overhead expenses were $604 million.
Speaker Change: A 1% decrease resulting in approximately 90 basis points of leverage.
Speaker Change: Benefiting partly from the restructuring actions, we took late last year and earlier this year.
Speaker Change: Our more recent restructuring this quarter to further simplify our organization will drive more overhead savings for the rest of the year and be a key factor in our margin expansion goals for the year.
Speaker Change: Overall in a more cautious consumer environment, our disciplined cost control supported profitable growth.
Speaker Change: Moving to our balance sheet, we ended the quarter with $6 1 billion of unrestricted cash and short term investments in February we successfully closed on a $1 billion of debt refinancing maintaining our total debt of $6 3 billion and our leverage ratio of two one times, we remain committed to maintaining debt levels consistent with our inverse.
Speaker Change: <unk> grade rating.
Speaker Change: One aspect of our capital allocation strategy is to return some of our free cash strong free cash flow to shareholders by repurchasing stock and issuing dividends with that in mind, we re initiated and continued our quarterly dividend of <unk> 40 per share and accelerated our repurchases versus the prior quarter buying back $330 million.
Speaker Change: For one 7 million shares in the first quarter.
Speaker Change: Going forward, we expect to offset dilution and opportunistically repurchase additional shares which in total should be roughly in line with levels, we've repurchased over the last couple of years.
Speaker Change: Turning to our outlook given our performance to date and the continued macroeconomic uncertainty in the U S and into the U S. We expect our second quarter to deliver gross bookings growth.
Speaker Change: 2% to 4% and revenue growth of 3% to 5% with approximately 75 to 100 points basis points of EBITDA margin expansion.
Speaker Change: Our gross bookings guidance does not assume a material impact from foreign exchange. Our Q2 revenue guidance reflects the benefit of Easter, providing a one point tailwind to revenue growth.
Speaker Change: And an estimated two points of foreign exchange headwinds at current rates given the dynamic explained earlier with regards to timing of GBP translating to revenue.
Speaker Change: As we consider the same factors for the full year, we are revising our guidance for gross bookings and revenue our updated guidance is 2% to 4%, we expect foreign exchange to drive a one point headwind to revenue at current rates.
Speaker Change: With no material impact from booked from FX to bookings.
Speaker Change: At the same time, we continue to focus on profitable growth and are raising our bottom line guide to roughly 75 to 100 basis points of EBITDA margin expansion for the year up from 50 basis points that we mentioned on last call. The actions I discussed earlier will aid in driving.
Speaker Change: In summary, we remain focused on driving long term profitable growth, while maintaining disciplined capital allocation, our execution and strategic initiatives position us well to navigate the evolving environment and continued to continue delivering shareholder value.
Speaker Change: Let me now open the call for questions.
Speaker Change: As a reminder, if you'd like to ask a question you compress style. So that's probably one on your telephone keypad.
Speaker Change: Congrats from me for your question you May Press Star followed by <unk>.
Speaker Change: Our first question comes from Anthony <unk>.
Speaker Change: Bank of America. Your line is now open. Please go ahead.
Anthony: Great. Thank you. Thanks for taking my question. It's just a couple of questions just on the marketing spend obviously youre, beating EBITDA or are you kind of at your ROI frontier and could you have spent more to drive higher bookings and then second area could you talk about the hotels dot com turnaround are you feeling more optimistic that youre, making.
Speaker Change: Positive change there. Thank you.
Scott Schenkel: Why don't I start with the first one and then I'll hand, it over to Scott for the second one on hotels Dot com.
Scott Schenkel: I feel optimistic I mean, I've always believed that this is a brand that travelers love.
This is a brand that was heavily impacted from the period a couple of years ago. When we did in migration and we changed the loyalty program and we've got a great leader in there as I said, we relaunched the brand a couple of weeks ago with the new visual identity and the mascot, there's actually been some nice positive.
Scott Schenkel: I would say positive momentum behind that the last couple of weeks and we have some good things coming in the back half of the year. So it's a brand that people love we need to be targeted at which countries are we growing it in where we're growing it in and I feel good about where we are.
Scott Schenkel: Yes, im with sales and marketing costs, we spent about $1 billion in Q1.
Scott Schenkel: As I mentioned in my prepared remarks to slightly deleverage by about 11 basis points by views. They view this as flat and B to C. Approximately four points of deleverage while the rest of it was mix impact from <unk> to be growing faster as.
Scott Schenkel: As far as for the full year trend, we'll maintain our focus on profitable growth investing in marketing, we're profitable growth opportunities exist for reducing costs, where they do not when we think about it for the rest of the year.
Jeff: And Jeff Let me just come back to the end of my answer.
Jeff: Am I happy that hotels Dot com was not in growth in Q1, no do I feel good about the plan that the team has in place going forward yes.
Jeff: Oh.
Jeff: Alright, thank you.
Jeff: Yeah.
Speaker Change: Thank you. Our next question comes from Deepak come at the panel of Cantor Fitzgerald your.
Speaker Change: Your line is now open. Please go ahead.
Jeff: Great.
Jeff: Ferrari on and one for Scott and can you discuss expedia has opportunity to kind of manage maybe macro headwinds if it gets worse. How do you think about the sensitivity that the b to B business has and our competitive b to C. And then on the <unk> side are there things in your control that you can help hotels with perhaps.
Jeff: By doing more bundling our pricing adjustments that.
Jeff: You can maybe.
Scott Schenkel: Help manage demand and then maybe Scott on the.
Scott Schenkel: Margin guidance for the full year being device stop how much of this is already from the efforts that you have done.
Scott Schenkel: Two things more things that you can do over the next few quarters. It gives you confidence about the margin guidance for the year. Thanks, so much.
Speaker Change: Yeah. Thanks, So let me take the first one on <unk>.
Scott Schenkel: How are businesses is set up now.
Speaker Change: Headwinds get worse.
Speaker Change: As you said, we've got a very strong <unk> business, which is quite diverse geographically its diverse not only geographically, but also by segment. So it's exposed to corporate travel.
Speaker Change: To leisure travel to travel bundled with airlines really we sort of run the gamut of partners.
Speaker Change: It's a profitable business, we tune the levers really well and not so.
Speaker Change: Obviously, nobody can predict what's going to happen, but thats, a really well diversified business.
Speaker Change: And then on your question about what can we do to help our hotel partners and by the way. It's our hotel partners. It is also our car rental partners and the like.
Speaker Change: The beauty of working with Expedia group is that supply partners will get access to demand in consumer and <unk> and we have a lot of ways for them to do that whether it's through member rates, whether it's mobile rates.
Speaker Change: Targeted rate Geo targeted rates.
Speaker Change: Packaging is a big strength of ours and what we often see is that hotel is really like to participate in the package path because it tends to be longer length of stay longer booking windows lower cancellations and many of those are opaque. So they don't impact one of the hoteliers public.
Speaker Change: New management strategy. So we've got a lot of data. Our teams are working with supply partners every day to help them fill their rooms and sell their airplanes.
Speaker Change: Airplane seats.
Speaker Change: Now I'll turn it over to Scott for the second part, yes, I think the way, we think about one point to 75 basis points to 100 basis points of margin expansion.
Speaker Change: The employment actions that we took over the last really four or five months helps.
Speaker Change: Helps achieve that.
Speaker Change: We have more work to do as it relates to working on discretionary costs balancing marketing for the rest of the year and Thats what gives us confidence that we can deliver the 75 to 75 to 100 basis points.
Scott Schenkel: Great. Thanks, Scott Thanks area.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from <unk> Khan of <unk> Securities. Your line is now open. Please go ahead.
Speaker Change: Okay. Thank you very much.
Speaker Change: <unk>.
Speaker Change: Curious if you can share any color on the.
In terms of monthly trends.
Brian: Hey, Brian.
Brian: To date in domains.
Speaker Change: Stable or are you continuing to see consumer weakening and when you talk about sort of consumer softness what exactly is that is that booking windows and is that length of stay or the consumer trading down any any kind of color or commentary there would be great and then the second question I have is around the social opportunity.
Speaker Change: You mentioned Instagram video of this as an opportunity how should we think about the.
Speaker Change: The Rois on this channel and how large it can get to you. Thank you.
Speaker Change: Let me take that one first and then Scott and I will take the second one together.
Speaker Change: Social as a channel is.
Speaker Change: It's an important channel for US we know that people are going more and more to social to get travel inspiration.
Speaker Change: And it's been multiple quarters that we've been working to make sure our brands are showing up well.
Speaker Change: We're getting good returns on the marketing spend there.
Speaker Change: I announced today is actually I mean, it's a great trip planning feature because what we realized is that people are watching real and then they wanted to share them or they wanted to figure out how to build an itinerary.
Speaker Change: So because of that relationship we had with the partner we are working with Instagram in this case, we were able to create the.
Speaker Change: The product that was came from an insight as customers wanting to share and then in one click will give people an itinerary it'll get some recommendations and then allow them to book with us.
Speaker Change: What I think is exciting whether it's with social or any of these new AI players is figuring out how do we show up.
Speaker Change: In a paid way or in their organic results. But then also are there new ways that travelers would want to interact where we can make sure our brands are there.
Speaker Change: So that's the first one.
Speaker Change: On the second one in terms of what we're seeing in the demand environment.
Speaker Change: Because we said we saw a slowdown in the first quarter, but the U S domestic and inbound AP.
Speaker Change: April was somewhat softer than March, especially in the U S driven in part by Easter timing.
Speaker Change: Yes, we are still continuing to see pressure on travel into the U S. But we've also seen some rebalancing.
Speaker Change: So Europeans are traveling less to the U S, but more to Latin America.
Speaker Change: We're also starting to see a shift to lower ADR rate plans, so whether travelers are going from refundable rates to non refundable rates.
Speaker Change: It's not a star rating shift its more of a rate plan shift and it's also starting to see hotel partners, providing more discounts.
Speaker Change: So obviously, we can't predict with certainty how this is going to evolve, but we know that we're well positioned to serve the demand that's out there.
Speaker Change: Thank you.
Speaker Change: Thanks.
Speaker Change: Thank you. Our next question comes from Trevor Young of Barclays. Your line is now open. Please go ahead.
Speaker Change: Great. Thanks first of all and then just on experiences and attractions that category is getting a bit more attention from booking holdings and Airbnb and re launching their effort next week can you speak to your own efforts and experiences is that something that you are increasingly focused on are in the area of investment that you want to put more dollars to work going forward.
Speaker Change: And do you see an opportunity to be particularly unique or differentiated there and then second question. Scott just employment actions that you alluded to can you speak a bit more to that in terms of size in terms of either number of employees impacted or potential savings from that effort and whether any of that it's getting reinvested. Thank you.
Speaker Change: Yes, so why don't I start there so since last year, we restructured approximately 4% of our employees.
Speaker Change: And we've also reduced our contractor population by about 7%.
Speaker Change: So.
Speaker Change: In addition to the cost there we also expect us to simplify our model speed up our efforts and prioritize what we're working on so we feel good about what we've done.
Speaker Change: As it relates to the margin dynamics for the company.
Speaker Change: We do expect to reinvest some of those savings back into the company somewhat in the form of lower cost locations and somewhat and strategic initiatives.
Speaker Change: Net net we expect about $75 million over the course of the next three quarters.
Speaker Change: To benefit our EBITDA for the next.
Speaker Change: So for the next three quarters.
Speaker Change: And then on the activities question.
Speaker Change: Think of it in the context of in particular on brand Expedia and our <unk> business.
Brand Expedia, and our B2B business. [inaudible]
Speaker Change: Brand Expedia is the travel super store and as people go on trips they want to have an activity often. So we think about how do we use activities as a way to attach to the full trip.
It's a growing business for us.
Speaker Change: I, you know, we talk a lot about it as a team of where the areas we do want to sort of double down as I said you know one of our [inaudible]
Speaker Change: Three priorities is investing where we see the best opportunities for growth. [inaudible]
Speaker Change: and Attach, and the complete trip on Expedia is one, but I don't have anything to share right now about a particular investment on activities.
Thank you both.
Thanks.
Speaker Change: Thank you. Our next question comes from Eric Sheridan of Goldman Sachs. Your line is not open, please go ahead.
Eric Sheridan: Thanks so much for taking the question. I wanted to go a little bit into the AI scene that you talked about in the prepared remarks and we're coming up on roughly about a year from the last explore event where you talked a lot about AI and how it could change.
Eric Sheridan: Both the internal running of the company and the elements of how AI might change the consumer interfaces across your brands. What do you see as the biggest strategic investment you want to make in AI looking out of the next 12 to 18 months?
Eric Sheridan: and maybe talk a little bit about how that might change the consumer funnel in terms of travel activities and what your current base cases for that going forward. Thanks so much.
Eric Sheridan: Okay, thanks for the question. I just start by saying it is an incredibly exciting time. I mean, AI, it feels like it's, you know, when the mobile was here, AI is changing everything. And we see it as an accelerator across our business. And I just, I just, I just, I just, I just, I just,
Eric Sheridan: I've talked about it as sort of four ways we think about it. How are we using it in our products? How are we using it to drive traffic to our brands? What new partnership opportunities do we have? And then how are we using it to make our teams more effective? [inaudible]
So let me just talk about each of those.
in terms of enhancing our product.
Yeah, over the last year. [inaudible]
Eric Sheridan: We have our AI assistant, but we've also made huge progress on using AI.
in the Traveler Shopping Funnel. [inaudible]
So, using AI to summarize reviews, using AI. [inaudible]
to highlight certain features of Properties. [inaudible]
Eric Sheridan: And so what we found is it's great in the existing funnel, once you're in the product.
Eric Sheridan: as well as having an AI chatbot that can, you know, someone chooses to interact with it.
Eric Sheridan: on their own, they can. I think what's exciting going forward is thinking about how do you do both of those together? So, if someone's in the ICHAT experience, and then they want to seamlessly get into the native flow. [inaudible]
Eric Sheridan: and our teams are working on that. It's moving very quickly. So that's sort of in our product funnel and as I said, it allows...
People to go between the two flows. [inaudible]
Eric Sheridan: In terms of driving traffic to our plans, we all see that people search behavior is changing, that people may be going to chat GPT or to other of these native AI players.
So, we need to make sure that-
Our brands are showing up well there. I mean those...
Eric Sheridan: companies are quickly evolving, you know, what they're doing. So how do we make sure we're there, both in the organic search, but also with these agentic experiences with operator and others. So, you know, I don't know where that's going to go. I know our teams are sort of. [inaudible]
Working deeply with those partners. [inaudible]
and what we found is no matter what. [inaudible]
because travel is complicated. [inaudible]
Eric Sheridan: The idea of being able to buy from a brand that's a well-known brand that's got all the supply that's going to service your booking well, gives me confidence that bringing traffic over from there is attracted for our brands versus the worries that people are just going to book somewhere else. [inaudible]
Thank you very much.
Eric Sheridan: You have talked about identifying new partnership opportunities. I think the ecosystem is evolving very quickly, and we've got this great asset with our B2B team and our B2B assets. And then finally on the effectiveness of our teams. [inaudible]
Eric Sheridan: Our developers are getting quite a bit of time back. Our sales team is actually increasing their win rate by using Gen AI technologies to coach them, to give them tips.
Eric Sheridan: and just to make them more effective. And our marketing team is using generated creative AI both to make their marketing more effective and also to save time. But I would really just say it feels like we're still very much at the beginning of this. [inaudible]
Great, appreciate it.
Thanks.
Speaker Change: Thank you. Our next question comes from Conor Cunningham of Millius Research. The line is now open. Please go ahead.
Speaker Change: Hi, everyone. Thank you. Just I want to talk a little about the booking curve just given the environment can just talk about how that's looking right now. Are you seeing hesitation further out in the curve?
Speaker Change: and then there's just a lot more close-in demand, just try to understand that. And then secondly, can you just talk about your international role, how that performed during the quarter-relatives to your core, and just how you're seeing supply there, and just kind of mark as I'm the international role, that would be helpful. Thank you.
Yep. Yeah, I know
Speaker Change: I'm the booking dynamic. I wouldn't call out anything that's unusual versus what you've already heard in terms of the pressure that we saw, kind of in addition to Q1 and what we referenced for Q2 in the rest of the year. I mean, effectively what we saw as a step down in both intra-US. [inaudible]
Speaker Change: and into the US Dynamics that we mentioned. You know, if we double-quit a little bit on that,
Speaker Change: You know, we're looking at U.S. NVV inbound to the U.S. It's down about 7% and specific quarters like Canada are down nearly 30%.
Speaker Change: Now, that in greater context of things is that's an appointed growth just for the entrust into the US, but it gives you a dynamic of what we're seeing underneath the covers.
Not dynamic.
Speaker Change: You see in the intra-US dynamic, but I wouldn't call out anything different inter-quarter that did to your question. No, and then we're seeing some slight expanding in booking windows for hotels, but the booking windows are declining and vacation rentals, so it's sort of a mixed picture.
Speaker Change: In terms of the international rollout, I mean, I start by just reminding us that the B2B business, very international, Scott talked about the 30%
Speaker Change: For the consumer brands, we're very focused on which geographies do each of our brands, in particular Expedia and Hotels.com, already have good brand awareness, and where we have strong supply and product. [inaudible]
Speaker Change: and then investing surgically there. What we found for Brand Expedia, for example, is that in Western Europe , in the three of the big Western Europe countries, we're growing roommates at mid-jeans.
Speaker Change: Last year, we launched two new points of sale in the Middle East, and while they're off a small base, they doubled. I'm a porter of a porter. So, we're seeing progress there, hotel.com, stronger in the Nordics. [inaudible]
Speaker Change: Again, it's off of a smaller base, so it's something we're invested in, we want to grow, but we're going to make sure that we do it surgically.
Appreciate it. Thank you.
Thanks.
Speaker Change: Thank you. Our next question comes from Jed Kelly of Oppenheimer. Your lines are open. Please go ahead.
Here's what's next!
Ged Kelly: Hey, great, just a stumbling, Vrbo, you said it grew in line with the vacation rental industry.
Ged Kelly: You know, can you just talk about, you know, summer travel season, you know, if you do have less US people go abroad to Europe and then how are you thinking about with Vrbo in terms of? [inaudible]
Speaker Change: You know, your brand spend at your end, and is that committed, or can you pull back if the back road deteriorates? Thank you.
I would just say, Vrbo, [inaudible]
is also a very U.S. concentrated brand.
Speaker Change: And as I said, it's the third quarter in a row where we've been growing even if it's softer because the U.S. demand was softer. [inaudible]
Thank you. Thank you.
Speaker Change: We've been focused on improving the products and improving the quality of our supply.
Speaker Change: I talked about how the work we're doing on shorter saves and the like. [inaudible]
Speaker Change: But we're obviously keeping a close eye on what's the market demand and what are the returns that we're getting for our marketing spend and we can adjust that along the way.
Thank you.
Speaker Change: Thank you. Our next question comes from Lee Horowitz of Deutsche Bank. Your lines are open, please go ahead.
Lee Horowitz: Great, thanks. So we know you guys aren't guiding B2B versus B2C, but sort of the update of God is perhaps suggested you're B2C business.
Speaker Change: Perhaps go negative this year. We know the US market is a good software but it doesn't seem to be the expectations from a lot of other moving industries. So, can you be just unpacked? [inaudible]
Speaker Change: That a bit more and help us understand what you're driving from this differential and how you see the path back to getting the BDC business back towards mid-signal digiagroth. [inaudible]
Lee Horowitz: I think first, why don't we start with, I'll just reframe kind of what I heard here and then you can talk about the future of me.
Lee Horowitz: You know, let's talk Q1 for a second. Q1 effectively goes...
Lee Horowitz: Went from Fort, you know, where it's 4% and Q2, we're going 2-4 [inaudible]
We don't talk about the mix of businesses, but with...
POSSAT.
B2B at
Lee Horowitz: You know mid-teens growth, I think we feel pretty good that we're going to be...
You know?
Lee Horowitz: When you do that math, slightly lower than we were in B to C for the core for the next quarter. Now where that goes we'll see we've got growth anchors growth benefiting from advertising. We've got other things that we're working on, so I don't I don't feel like. [inaudible]
Lee Horowitz: We start with that, it's going to be hugely negative, but I think it's definitely going to be pressured as we think, and it's going to depend a bit as we said on intra US and into the US. [inaudible]
and as we got to that. [inaudible]
Lee Horowitz: and to add to that, it's also going to depend a lot on pricing.
Scott Schenkel: As Scott said, in the first quarter, we saw ADRs actually go negative, in part due to FX. We saw air ticket prices go down, so some of what we're guiding toward is also related to pricing. But I would just come back on our B2C business.
Speaker Change: You know, a year ago when I took this role, I said we need to have strong brand value propositions for all three of our brands. We need to invest in the areas that are differentiated for us and make sure that where we are invested, it's hanging off.
Speaker Change: But, you know, Vrbo and Hotels.com, we are still making sure we've got strong value propositions that travelers have a reason to come back.
Speaker Change: And we're adding lots of features in the product for that. So, you know, of course I wish these things happened overnight, but we've got three big brands we believe in. And, you know, a great product and tech and marketing team behind them. [inaudible]
Speaker Change: David, one follow up on loyalty too, obviously Ariane, you made a number of changes to the loyalty program since you've been there, both at HCOM, and now they're about, I guess, how has sort of the return you've gotten on loyalty with large involves during your time? Are you getting the kind of repeat behavior that you want? And strategically how you think about loyalty growing forward is still core to sort of your overall growth plans and the way that you want to build this business.
Speaker Change: So first I just start by saying loyalty is incredibly important. As I said, our silver gold and platinum members, they account for almost half the room nights in the US and they're growing faster than any other part of the business. So let me just start loyalty is important.
Speaker Change: When we launched one key almost two years ago, it enabled us to create tiered member deals, those silver, gold, platinum, member discounts, and it's a very powerful common currency across the brands.
Speaker Change: We're always looking for new ways to deliver value to all of our loyalty members and the tweaks that you've seen or the changes that you've seen us make.
Speaker Change: are really around sort of the always on earn, right? We've changed it for Vrbo Blue because when we looked at the numbers, we realized that that investment, that always on investment of 1% or 1K cash, wasn't making a difference or wasn't making enough of a difference. [inaudible]
Speaker Change: when people were looking on Bravo. And so that investment probably better used elsewhere.
Speaker Change: You know, the same thing when I stopped the rollout of the Royalty program outside of US and UK because what I realized was...
Speaker Change: That loyalty program was a big differentiator for hotel.com. And once you took it away, it really, it diluted the value proposition. So what we're looking at is what are the things that matter to travelers? All right.
It's probably different by bland. [inaudible]
Speaker Change: And then, you know, where are the areas we're working with our supply partners to help them lean into the loyalty value proposition with the discounts, and then where are the things that we're going to fund ourselves?
Speaker Change: and that's still a working progress, but I feel good about the couple decisions that we've made. I think we're having a better idea of where the returns are, and making sure, as I said, it's part of our third strategic priority of expand margins by making the best use of every dollar. Thank you, Mark.
Alfa, thank you.
Speaker Change: Thank you. Our final question for today comes from a dog and a of JP Morgan. Your lines are open. Please go ahead.
Doug Anmuth: Great, the fifth day after that. Thanks for kicking the questions. First of all, your B2B performance. Could you unpack that a little bit? I know you talked about. Thank you very much.
Speaker Change: AJA exposure being gonna fit there, but you also did mention the trouble into the U.S. engulfment, so wondering if B2B has any exposure to that then. [inaudible]
Speaker Change: I guess if people are changing their destination based on what's happening in the US and then secondly on your advertising business also a very good performer for you guys wondering if you guys are seeing any impact of the softness in the US on your advertising side as well. Thank you.
Speaker Change: Yeah, why don't I take ads? As we crawl down and prepare the remarks, our ads business continues to be super powerful.
Speaker Change: and we're excited about its growth prospects as we look forward.
Speaker Change: Accelerating, hopefully, in the future. And it was particularly where it's new resolutions and platforms like video.
Speaker Change: An AI-driven bid optimization that Ariane talked about. There's a ton of opportunity to increase adoption.
Speaker Change: and expand with our supply partner base. So double digit growth rate should be achievable and we feel good about that going really good about that going forward.
Speaker Change: And then on the B2B business, they're still a good portion of the B2B business that originates in the US with US partners.
and that part of the business also experienced. [inaudible]
Speaker Change: Pressure in the same way that our consumer brands did. [inaudible]
Speaker Change: We've got B2B partners that are in Canada and their business into the US was also impacted. But as you can see it's a pretty globally diversified business and that's why it was able to sustain the double digit growth. [inaudible]
Got it, thank you.
Thank you. Thank you.
Thank you for watching!
Speaker Change: Thank you, I'll now turn the call back over to CEO Ariane Gorin for any further remarks.
Thank you for watching!
Speaker Change: So I just want to thank you all for joining the call today and for all of your questions. We deliver results within our guidance range this quarter amidst software U.S. travel demand thanks to our strong execution, discipline cost management and the global reach of our platform.
Speaker Change: Against the backdrop of an uncertain macro environment, we're laser focused on what's in our control and pushing forward our strategic priorities.
Speaker Change: I want to thank our global team for their work and dedication every day to help and travelers have successful trips and build lasting memories. Thank you.
Speaker Change: That concludes today's call. Thank you all for joining. You may now disconnect your lines.