Booking Holdings Inc (BKNG) — Q2 2021 Earnings Call Transcript

Thank you and welcome to Booking Holdings' second quarter conference call. I'm joined this afternoon by our CFO, David Goulden. I’m pleased to report another quarter of significant improvement in our accommodations business, with Q2 room nights up 59% sequentially compared to Q1. This is a strong comparison to our pre-pandemic trend of a slight decline in Q2 room nights versus Q1. Compared to 2019, Q2 room nights were down 26%, which is a considerable improvement from the 43% decline reported for April and a 54% decline in Q1. The increase in the second quarter was mainly driven by both domestic and international booking trends in Europe due to rising vaccination rates and the easing of many travel restrictions in the region. Growth in international bookings in Europe largely stemmed from reservations made within the region. We also saw significant room night growth in the U.S., which continued through May and June, resulting in robust growth for the full quarter when compared to Q2 2019. David will share further details on our second-quarter performance shortly. We are closely monitoring the Delta variant's impact on rising COVID case counts worldwide and the new travel restrictions that have caused a slight pullback in our booking trends in July compared to June. However, the booking trends in July showed improvement relative to our full Q2 results. While the Delta variant introduces volatility and uncertainty regarding the timing and nature of the travel recovery, we remain optimistic about a strong global rebound in travel demand. The swift return to growth, first in the U.S. and then in Europe, clearly shows that leisure travelers are eager to book trips with us when restrictions are lifted. We anticipate approaching our 2019 revenue levels in Q3, fueled by the solid booking improvements seen recently. As always, we will continue to enhance our core accommodation business and support its long-term growth. The strength of our business comes from the benefits of our two-sided marketplace, where we serve both our travelers and supply partners. We strive to offer the best selection of accommodations, great value, and a seamless booking experience, all supported by excellent customer service. By addressing these key needs, we create a superior booking experience and foster strong relationships with our customers. I'm pleased to announce that at Booking.com, we are seeing pre-pandemic customers returning to book their trips while also attracting new ones. The mix of past and new customers is consistent with pre-pandemic levels. One way we add value to our large customer base is through our Genius Loyalty program, which offers discounts at hundreds of thousands of properties, along with additional perks like complimentary breakfast and free room upgrades. We will keep innovating to enhance the value for our Genius customers who historically exhibit higher repeat rates and direct bookings compared to non-Genius customers. Our app plays a crucial role in providing an easier booking experience. Globally, Booking.com was the most downloaded OTA app in Q2, according to a third-party research firm. In the U.S., we also led major OTA app downloads, with a significant uptick in downloads in the second quarter. Furthermore, U.S. app users in Q2 surpassed our previous peak before the pandemic. In this quarter, we observed increased direct bookings compared to the same period in 2019, which is encouraging. We will continue to explore performance marketing channels where we see attractive returns on investment. We have effectively managed our performance marketing channels historically, and we plan to maintain this successful approach. Additionally, we're utilizing our marketing expertise to test new channels such as social and digital media and deploying promotional campaigns like our Back to Travel initiative that we started in the U.S. and then expanded to the U.K. and Europe. We will expand our marketing and customer acquisition efforts to drive more traffic to our platform and raise consumer awareness of our brands. While we concentrate on growing and retaining our customer base, we expect to benefit from the ongoing trend of more people booking trips online. Historically, the accommodation industry has seen a steady increase in online bookings each year, and we believe this trend will persist in the foreseeable future. A recent McKinsey survey across 24 countries revealed that travel has the highest percentage of customers planning to increase their use of digital channels post-pandemic. On the supply side, we aim to help our partners reach a larger pool of potential customers. Our scale enables us to connect them with significant global demand, as evidenced by the 845 million room nights booked across our platforms in 2019. Besides being a major demand channel, we also provide value with services like customer support in over 40 languages, localized partner service teams, market intelligence, innovative products responsive to traveler trends, fraud liability shifts, and access to various payment methods. Whether for alternative accommodations, independent hotels, or large hotel chains, we strive to be a valuable partner for all types of accommodations on our platform. In the second quarter, we experienced our first sequential increase in the number of properties on Booking.com, combined with the lowest number of properties leaving our platform since the pandemic began. By June 30, we reported over 28 million listings on Booking.com, including 6.6 million alternative accommodation properties. In the U.S., we continued to add targeted new properties in alternative accommodations and saw positive market share growth with some of our larger property managers. While these are promising developments, we acknowledge that there is significant work ahead to enhance our alternative accommodation offerings in the U.S. Our alternative accommodations business in Europe performed well this quarter and accounted for an increasing share of our European accommodations business. I want to highlight our strategic priorities of expanding Booking.com's payment platform and building the Connected Trip vision. We believe these initiatives will further strengthen our core accommodations business and support its ongoing growth. We have made progress on our integrated payment platform, increasing adoption among our supply partners in the U.S., including several major hotel chains added in the second quarter. Approximately 24% of Booking.com's total gross bookings in Q2 were processed through this payment platform, up from around 22% for the entire year of 2020. We have established a new fintech unit at Booking.com to centralize our payments initiatives, aimed at improving efficiency for both customers and supply partners while capitalizing on transaction flows. In 2019, we facilitated nearly $100 billion in transaction value, and we believe this dedicated unit will benefit us long-term. Regarding the Connected Trip vision, as mentioned in our previous earnings call, this year's development will focus on enabling travelers to book key trip components on Booking.com. Our top priority has been to enhance our flight platform, allowing us to connect with flight bookers early and enabling us to cross-sell accommodations and other services. Since our last earnings call, we launched our flight product in six new markets, achieving presence in 24 countries. The number of air tickets booked through our flight offering has exceeded expectations, although it still represents a small portion of our overall reported air tickets, which increased 120% in Q2 compared to Q2 2019, primarily driven by Priceline. Although it's still early for our flight product, we’re attracting new customers and observing a promising attach rate for combined bookings from these new customers. This data signals that our flight offering is helping us reach new customers and allows us to cross-sell accommodations effectively. We plan to build on this early success with our flight services at Booking.com. In conclusion, I see encouraging signs of recovery in various regions, and I'm confident we will eventually witness a strong rebound in travel demand globally. We are committed to enhancing our company's position and executing our strategic priorities. Our teams are diligently preparing for a robust summer travel season in North America and Europe. As mentioned, we are focused not just on returning to 2019 demand levels but on building a larger, faster-growing business that can generate more earnings in the long run. I will now turn the call over to our CFO, David Goulden. David?

Thank you, Glenn, and good afternoon. I'll review our operating results for the second quarter and provide some color on trends we've seen so far in the third quarter. To avoid comparison to pandemic-impacted periods in 2020, all growth rates will be relative to comparable periods in 2019 unless otherwise indicated. Information regarding the reconciliation of non-GAAP results to GAAP results can be found in our earnings release. Now on to our results for the second quarter. On our last earnings call, we discussed the improvement in trends in Q1 which continued into April, driven by strong results in the U.S. and improvements in Europe. On the earnings call, we saw the overall improvements in our trends accelerate in May and continue to get better in June, which resulted in our Q2 reported room nights declining 26% versus Q2 2019, which was significantly ahead of the 54% decline in Q1, a 43% decline we saw in April and our expectations in May. The improvement in Q2 room nights growth rate versus Q1 was driven by Europe and the U.S. as well as better results in the rest of the world. Europe showed the greatest level of recovery in the quarter and actually achieved slight room night growth versus 2019 in June. Booking trends in Europe clearly benefited from a notable improvement in vaccination rates, as well as loosening travel restrictions. The U.S. was again the strongest performing major country in Q2 and had very strong room night growth versus 2019 for the full quarter. Asia partially offset improvements in other regions with greater room night declines in Q2 than in Q1, due to the increase in COVID outbreaks with related travel restrictions. In the month of June, our room nights were down 13% and our monthly active unique customer accounts at Booking.com reached about 90% of the level we saw in June 2019. As Glenn mentioned, we are pleased to see the solid rebound in our customer base of Booking.com as well as a healthy mix of new customers, which is only a little lower than the mix of new customers in Q2 2019. Mobile bookings, particularly through our apps, represented over 60% of our total room nights. Our app continues to represent an increased percentage of our mobile bookings. Our direct channel increased as a percentage of room nights year-on-year and relative to Q2 2019. Domestic room nights grew in the mid-teens in Q2, while international room nights remained down significantly versus 2019; we saw a sequential improvement in our international bookings resulting in international mix of our room nights increasing to about 25% in Q2 from about 15% in Q1. Our cancellation rates improved from Q1 and were in line with Q2 2019 levels in the quarter. The percentage of our Q2 2021 bookings made with flexible cancellation policies remained significantly higher than in Q2 2019. The booking window at Booking.com remained shorter than it was in the second quarter of 2019 as we continue to see a higher mix of near-term bookings. However, the booking window contracted less than it did in the prior three quarters. The mix of alternative accommodation room nights on Booking.com in Q2 was 32%, which is three points higher than Q1. In June, our alternative accommodation room night growth was flat versus June 2019, the first time we've reached 2019 levels for this segment since the start of COVID. The sequential improvement from Q1 to Q2 was due primarily to the overall improvements in room night growth in Europe in the quarter. As we noted last quarter, Europe is where we have our highest mix of alternative accommodations. Gross bookings declined 12% in Q2, which is less than the decline in reported room nights, due to an increase in average day rates for accommodations of 11% versus 2019 on a constant currency basis, and also due to a few points of changes in FX rates and strong performance in our flights business. Our accommodation constant currency ADR benefited by about 7% from an increased mix of business in North America, which is the high ADR region, and a decrease of mix of business in Asia, which is a lower ADR region. Excluding regional mix effects, constant currency ADR was up approximately 4%, driven mainly by rate increases in North America and in Europe. The increase in North America was driven by high levels of demand for beach-oriented leisure destinations. And in Europe was driven by a higher mix of summer bookings which have higher ADRs. Airline tickets booked in the second quarter were up 120% versus 2019, driven by strong growth of Priceline and by flight bookings of Booking.com and Agoda, neither of which had flight products in Q2 2019. We are encouraged to see another record-breaking quarter for air tickets booked for our flights business, which is a key component of a multiproduct Connected Trip strategy. Consolidated revenue for the second quarter was $2.2 billion and decreased 44% versus 2019, which is better than our expectations. Revenue in the quarter declined meaningfully more than gross bookings due to bookings made in the quarter that are expected to check-in in future quarters at which point the revenue will be recognized. Take rates in Q2 were about 10%, largely driven by these timing differences. As you will recall, we discussed the impact of timing on take rates in Q1, Q2, and for the full year during our last call. We continue to expect these timing factors to impact full year take rates, although the second half of the year will be less notably impacted than the first half of the year. Removing the impact of timing, our take rates on accommodation bookings in Q2 were stable versus Q2 2019. The better-than-expected top line performance resulted in adjusted EBITDA of $48 million in the second quarter, which came in better than our expectations. With the exception of Q3 last year, this is the first EBITDA positive quarter since the first wave of COVID. Marketing expense, which is a highly variable expense line decreased 29% versus 2019. Marketing expense declined more than gross bookings due to higher ROI in the paid channels and the increase in our direct mix. Sales and other expenses in Q2 were significantly higher than they were in Q1 on a dollar basis. Sales and other expenses as a percentage of revenue in Q2 were better than our expectations due to lower-than-expected bad debt and customer service-related expenses. Personnel expenses in Q2 were higher than they were in Q1 on a dollar basis, primarily due to the $136 million expense related to our decision to repay the government aid in the second quarter. Excluding these repayments, personnel expenses in Q2 would have been in line with our expectations. G&A and IT expenses were both higher in Q2 than they were in Q1 on a dollar basis, and they were in line with our expectations. We recorded a non-GAAP loss of $105 million in the quarter. On a GAAP basis, we have an operating loss of $56 million in Q2. We recorded a GAAP net loss of $167 million in the quarter, which includes an income tax expense of $146 million. On a GAAP and non-GAAP basis, in Q2, we recorded a tax expense on a pre-tax loss due to higher earnings expectations for the full year relative to our expectations for Q1. For the full year, we expect on a GAAP and non-GAAP tax rate to be slightly higher than in 2019. Now onto our cash and liquidity position. Our Q2 ending cash and investment balance of $16.1 billion was down versus our Q1 ending balance of $16.4 billion. However, our Q1 ending balance benefited from the timing of the $2 billion raised in our euro bond offering which we completed in March and the subsequent redemption of the two higher coupon senior notes occurring in April. Adjusting our Q1 ending cash balance for the redemption of the two notes that happened in April would have resulted in an adjusted Q1 cash balance of $14.4 billion. Our Q2 ending balance was higher than this adjusted Q1 balance primarily due to operating cash flow of $1.2 billion and a $0.5 billion unrealized gain on long-term investments. $0.2 billion of operating cash flow in the quarter was driven almost entirely by change in working capital. Change in working capital represented a source of cash of $1.2 billion in the quarter due to the increase in our deferred merchant bookings and other current liabilities, partially offset by the increase in our accounts receivable. We will continue to focus on maintaining a strong liquidity position given the continued uncertainty created by the COVID pandemic. Of the $16.1 billion of cash and investments at the end of Q2, $4.3 billion was related to our long-term strategic investments, and $11.7 billion was cash and short-term investments. We ended the quarter with about $12.3 billion in debt, which is about $3.6 billion higher than our pre-pandemic levels. We have a $1 billion convertible note maturing in Q3. While the return of capital to shareholders will be an important component of our value creation strategy in the future, we remain on pause and we will wait to reinitiate until we believe each of our three major regions is beyond the risk of a significant reversal in trends due to COVID. We're not there yet, given the current trends we're seeing in Asia and with our current close watch on how things are developing in Europe. Now on to our thoughts for the third quarter. With the recent rising case counts driven by the Delta variant in many countries, some governments around the world have responded with new travel and leisure restrictions as well as some stricter vaccination and testing requirements for tourists. However, there are indications that hospitalization rates are lagging the recent increases in case counts, particularly in countries with high vaccination rates, which could be an important factor in how governments plan their responses to the recent increase in COVID cases. We're closely watching the U.K. where the vaccination rate is high and the government’s move forward with relaxing travel restrictions despite rising case counts in the country, which are among the highest in Europe. We are encouraged by the recent decline in new case counts and by the continued low level of hospitalizations in the U.K. compared with other outbreaks. We saw booking trends improved in the U.K. in July leading up to an after travel restrictions were lifted on July 19. Our July room nights declined about 22% versus 2019, which was a modest pullback from the 13% decline in June, primarily due to softening booking trends in Europe. Looking within Europe, we saw a reduction in room nights in July across several of our key countries including Germany, France, and Italy. But despite the recent pullback in these countries at the end of July, we had a high amount of gross bookings on the books for the remaining summer period in Europe than we did this same point in time in 2019. Outside of Europe, the U.S. continued to have very strong room night growth in July, although modestly below Q2 levels. While Asia and the rest of the world room night declined for about the same in July as it were in June. Asia continues to be the least recovered region in July and continues to be down significantly from 2019 levels. The changing growth rates from June to July were similar for domestic and international room nights, with domestic remaining positive and international room nights remaining down significantly versus 2019. Given the recent additional uncertainty around COVID, driven primarily by the Delta variant, it's difficult to predict exactly how room nights in August and September will compare with the 22% reduction we saw in July. Turning to the income statement. We expect Q3 gross bookings to decline several points less than room nights, driven by expected improvements in reported areas and my flight bookings. We expect that the Q3 revenue decline will significantly improve from Q2 reflecting the strong improvement in bookings in the last few months. I just mentioned we have more gross bookings for the summer than at this time in 2019 for Europe. The same is also true for North America. We expect our Q3 revenue as a percentage of gross bookings will increase meaningfully from Q2 due to the high concentration of check-ins expected in the third quarter, which will be about in line with Q3 2019. As a reminder, the exact relationship between revenue and gross bookings in Q3 will be impacted by how our bookings trend in August and September. We expect marketing expenses in Q3 will decline several points less than gross bookings, as we expect to invest in capturing demand and increasing awareness during the peak travel season and ahead of the continued global recovery of travel demand. We expect sales and other expenses in Q3 to be up significantly versus Q2 on a dollar basis due to higher gross booking volumes in the third quarter as well as an increase in the mix of gross bookings processed on a merchant basis. However, we expect sales and other as a percentage of revenue in Q3 will be a bit lower than in the future. We expect our more fixed expense categories in Q3 in aggregate to be about in line with Q2 on a dollar basis. We expect Q3 EBITDA will be the highest since Q3 2019. In conclusion, we are pleased with our better-than-expected results in Q2, which benefited from a recurring travel demand and also reflects the strong fundamentals of our business, and good execution by our teams. We remain confident in the eventual full recovery of travel demand globally, and we're looking forward to a strong summer travel season this year in North America and Europe. We will continue to respond to invest in our business to ensure we're well-positioned for the full recovery of travel, and for building a larger and faster growing business to generate more earnings than prior to the pandemic.

Great. Thanks a lot. Could you talk more about key drivers of your competitive share gains that look like you're seeing in the U.S.? And would you say growth in the U.S. over the past few months has been driven more by traditional hotels or more by alternative accommodation? Thanks.

So Kevin, why don't I take a little of this and let David add anything that he thinks I didn't include that I should have said. So we are very pleased with the strong results that we're seeing in the U.S., and that is a result of a lot of hard work by our team. A lot of it is just the blocking and tackling and making sure that we're getting the right inventory, the right price at the right marketing, presenting the right offer to the customer at the right time. And doing a bunch of things that we've been doing for so long in terms of improving conversion, a lot of A/B testing, all the things we've always done, blocking and tackling. There's no silver bullet. There's no sense that, oh, this is the magic key to unlock extra demand in the U.S. It's just a lot of very good work. Now in terms of alternative accommodations, I talked a little bit about how we're pleased to be getting more inventory there. We're focused on gaining some share with some of our professional managers; that's going well. But overall, it's everything that we do to improve our business and provide a better service to both sides of that marketplace, both the customers given a paid offer and working with all of our suppliers from the biggest international chains to the small alternative accommodations and everything in between to make sure we're providing them with the demand they need to make their business successful. David, anything specific you want to add?

Oh, Glenn, I think you said it well. Just in response to your last part of the question, Kevin, as we said, our business in the U.S. is more heavily mixed to hotels than alternatives than our global average. So therefore the growth rate has to be driven by both. We don't have levels of growth that we're seeing without seeing strong growth in the hotel business.

Great, thanks for taking the question. As to alternative accommodation, I believe you mentioned you're gaining share on the managed properties globally. So can you provide some color on what drove this share gain? Whether it was just mostly geo-based or specific actions that you guys made on your end? And then really, if you could share what percentage of the 6.6 million listings are actually managed properties versus by individuals? Thanks.

I got a little backwards on that. So we don't disclose the breakdown of all the different categories of our alternative accommodations, how many are professionally managed, how many are single property owners, and everything in between. I have said in the past and I'll repeat that one of the areas we do need to add more to is these single property owners. So we know that is an area that we need to focus on. Regarding your other questions about how we're doing adding care, I think we spoke a little bit about that. When I did the prepared remarks and when I just said now is a lot of this is just working hard with people who are the property owners or the managers, people who have inventory that want to get it filled. It's a wonderful thing in this business that everybody knows an empty bed at night is at zero revenue; if you fill that bed, you get an incredible margin on it, and they want to fill up their property. So we're there to make sure that they know we're there to help fill that into all the things I mentioned before making sure that we can bring in that demand. I'll leave David anything you want to disclose that is any different, I'm not sure if there's anything further to that.

No, no additional data points on the mix of 6.6 million. What I just want to clarify, Mario, is that the comment that Glenn made about gaining share gains with a larger professional manager that's really related to how we're doing in the U.S. Now the specific U.S. like he pointed, I'm not saying that's not the case worldwide. I'm just saying that if you remember, Australia is really getting a lot of additional properties in the U.S. with the target, more of the pressure managers where there's a lot of high-quality supply available through those managers again, single property owner-owned properties that are available via managers. So the content we were making was there relative to what we're doing in the U.S.

Thank you. I have a couple of questions. David, I believe you mentioned that marketing efficiency is higher compared to 2019, and based on my analysis of the bookings data, it appears to be higher in recent quarters. Can you elaborate on what factors contribute to this improved marketing efficiency? Additionally, Glenn, could you discuss the reports of flash deals being tested on the site later this year? What kind of interest have you noticed from hotels regarding their participation?

So, David, do you want to take that first one?

Let me discuss marketing and what has been happening. I believe I understood the question. Essentially, in Q2, our marketing expenses decreased relative to our gross bookings, which is the right perspective to take. When comparing it to revenue, there are various timing factors involved. The potential in our gross bookings did improve in the second quarter, with a greater decline in marketing expenses than in gross bookings. Two main factors contributed to this: we observed higher returns on investment across many of our paid channels that we utilized a couple of years ago, and we also experienced a notable increase in direct bookings as well. With more direct bookings, we spend less on marketing to attract new customers. Overall, there wasn't anything particularly unusual in the current marketing environment, which I would describe as still somewhat unstable as we continue to recover in the industry. Not all elements are directly comparable to where we were in 2019, but we were pleased to see an improvement in ROI. It's important to note that what I mentioned regarding Q3 suggests that the opposite may occur. Being just a month into Q3, we anticipate that our marketing spend will be higher, as historically, this has been our peak season. We plan to ramp up spending on brand initiatives in Q3 compared to Q2. This increase will likely lead to some dilution in marketing spend relative to gross bookings in Q3. We will observe how the quarter unfolds as we anticipate this trend for the third quarter. However, in the first two quarters, we did see ROI helping us gain leverage on the marketing front.

And regarding your question about flash deals, if you read the same article that I did, I think there was something in there about there being no official response from Booking. So let me say that I have nothing to say specifically about this, but let me reemphasize that we are putting a lot of effort into working cooperatively with our supply partners to get the incremental demand through all different ways. Being a better merchandiser and providing more value to both sides of the marketplace, is where we're going.

Great. Thanks, guys. Thanks for taking the question. I wanted to ask a little bit about your experimentation with a more diversified marketing strategy. Historically, performance marketing has been the one that worked the best for the space. How should we think about your approach with some of the other channels? Are there specific kinds of objectives that you look for kind of gravel comes back to leverage into those channels? And then the second question, kind of related to that, but how should we think about your market share during this time? I know it's sort of still early and there's not a lot of data points yet, but any color that you can provide on how your market share is trending in some of the markets where travel is recovering, that'd be great. Thank you.

So regarding diversifying our marketing efforts, you are absolutely correct, we built this company on doing a great, great job with performance marketing channels. So we know that. But what a lot of people don't know is that Priceline.com was very, very successful in its early days in brand marketing. And of course, we Booking.com, we brought the U.S., we have lots of brand marketing. The key thing in any type of marketing program is making sure that you're getting the ROI that you want to get. And we are going to continue to do that. I mentioned in my prepared remarks about how we are looking at new channels, like social channels, you've seen, I hope, some of the things that we've been putting out; we're going to continue to experiment and do all different ways to make sure we are reaching out for every pocket of demand. But we always do it with the knowledge that it's going to be cost-effective. It's going to produce in the long run, because it takes longer for brand to produce results. So we recognize that, but in the long run, it's got to produce the results that we want. And we're going to keep on doing that. I really believe that in the long run, we will have many different ways that we're going to bring in marketing. One of the key things though, before you start spending a huge amount on a brand marketing campaign is making sure that you have the product the way you want it. And that's one of the things that we are keen to do, and perhaps the alternative accommodations area is really working to make sure in the U.S., for example, that we've got that product the way we wanted. In regards to market shares, we're very pleased with how we're doing right now. I haven't seen results from some of our competitors. And I'm not really going to go down country by country in terms of what our shares are. But I am pleased with the results that we're achieving. I will let David say, if he wants to give any specificity.

Glenn, you articulated that well. We are happy with the progress, but we will need to wait and see how things unfold. I believe that market shares provide a better perspective over a year rather than just a quarter or two. Since we are only two quarters into this year, we are pleased with our performance relative to the broader market trends. However, we will assess this further and discuss it in detail at the end of the year when we have more concrete data on the market's actual development.

Great. I have a couple of questions. First, David, can you elaborate on your comment about July traveler bookings being better than the summer of '19 and what that implies for revenues in the third quarter? Any insights on that? And Glenn, I believe you mentioned that June's figures returned to 13% compared to 2019. How does that influence your confidence in a full travel recovery? Additionally, when we do recover, do you have any thoughts on whether your market share or margins could exceed those of '19? Any insights on these topics would be very helpful. Thank you.

We have more gross bookings this summer compared to the same period in 2019 for both Europe and North America. If the cancellation rate remains stable, we could see increased revenue in these markets for the summer months. It's worth noting that we have a significant number of cancelable or refundable bookings, similar to what we had in 2019, which introduces some risk if more of these bookings are canceled than before. Overall, our potential revenue for the summer in these two markets is currently higher than it was in 2019. However, we need to consider the situation in Asia and other parts of the world, where revenue and bookings are significantly lower than they were at the end of July in 2019.

I will start by clarifying our position. We have higher gross bookings for the remaining summer months compared to the same period in 2019, both in Europe and North America. If the cancellation rate remains consistent, this could lead to increased revenue in these markets for the rest of the summer. However, I want to highlight that we have a significant portion of cancelable or refundable bookings similar to what we had in 2019. Therefore, there is a risk that more of these bookings may be canceled compared to that time. This indicates that our potential revenue base for the summer in these two regions is currently stronger than it was in 2019. On the other hand, we must consider the situation in Asia and other parts of the world, where our revenue and booking levels are considerably lower than they were at the end of July 2019.

I would just say that no one can predict when a full recovery will occur. While many can make guesses, it's essentially a shot in the dark. With all the changes happening and new variants emerging, we've clearly seen their effects. However, I maintain that we are very optimistic that this will eventually end, and we will emerge stronger. We've discussed in the past how we aim to come out of this with a larger business, generating more EBITDA, and growing at a faster pace. We've also mentioned our commitment to margins, as we aspire to be a leader in our industry regarding EBITDA margin. It's important to acknowledge, though, that some of our current strategies may lead to lower margins; for instance, while a 120% increase in air ticket sales since 2019 sounds impressive, those margins are significantly lower compared to the accommodation business, and I could provide more examples. Ultimately, what's crucial for us and our shareholders is to return with increased EBITDA and to maintain growth that aligns with our business objectives.

Hi, this is Dae Lee on for Doug. Thanks for taking the questions. One for Glenn. In your prepared remarks, you talked about better monetization of the transaction flow, and that's one of the drivers that led to the creation of this fintech. So just curious about what’s the opportunity that you're seeing there? Is this something that will affect user experience as well or more focused on the back end? And then second one for David, a follow-up question on the sales and marketing ROI. You guys had called out higher ROIs last quarter and again this quarter. So I was curious if this is a result of something that you're doing differently, or is this just more on the outcome due to the competitive dynamic on the performance advertising channels?

So in terms of the fintech unit, there are many opportunities for us with a flow in 2019 of $100 billion worth of transactions flowing through there. We know that there are ways that we can save money for the consumers and the suppliers on both sides. And we can make good money on it too in the long run. So it's coming up with things like providing better FX tools. It's things, for example, making sure that if somebody wants to pay with an alternative payment method that we're able to provide that. It means making sure that we can do a better job with different types of regulations in terms of making sure that any transaction is not fraudulent. It's all sorts of things as a player at scale; we can do things that many, many, many other partners with our partners could not do. And it's also providing conveniences to our customers who want it. But our suppliers can't do it on their own. And there are lots of different things that we can do. Even things as simple as our fintech unit setting something up, like our e-wallet, that enables us to easily provide value to that customer, which can come from a supplier or it can be something that we're promoting ourselves, all different things. So what I see is not only the basics that we need to make our Connecting Trip work, which of course you have to have that if you want to create a Connected Trip with a single price point that one person pays one amount, but it's all the other types of things that we can provide that others really can't do on their own right now.

Yes, and then on the second-quarter ROIs, our playbook really has not changed. And our strategy and performance marketing channels have not changed. We continue to seek high-quality traffic at the right price. And to us, high quality means high converting traffic, lower probability cancellation, which must recalculate a high probability of those coming back to us on a daily basis. And those are the things that kind of go into our bidding strategy plus all the damage that occurred in each of those marketplaces. So we expect there'll be ROI volatility throughout the recovery. Of course, we also look at what the developer demand is and when there are times to get leading versus leading more. We are certainly looking at this as an opportunity to win customers onto our platform and get new customers and we mentioned a very healthy mix of new customers in the business quite similar to nature as it was in feature '19. So we're pleased with how things are going. We like the way that we're bringing back existing customers. We like the way we're winning new customers. We are pleased to see the existing customers come back generally much more directly than the new customers, which you expect as part of the playbook. So I'd say many factors go into those ROI calculations, including cost per click, conversion rates, cancellation rates, and we're still in a period of relatively high volatility in each of those compared to where we were in 2019.

Thank you. I would like to follow up on your learnings and discuss whether this is a tool for acquiring new customers or a product for cross-selling. Have you noticed greater engagement in the 24 markets where this has been implemented with Booking? Has this resulted in increased overall spending and purchase frequency? What insights do you have so far, even if it's early to tell? If you're unable to provide a clear answer, when do you anticipate having a good understanding of any lasting effects this may have on your Booking.com customer base? Thank you.

Hi, Mark. It's still early to make definitive statements, but I want to share my thoughts. I'm very pleased with the fact that we haven't actively marketed yet, and we are still seeing new customers coming to the site, along with attractive cross-sell opportunities. This signals to me that we are moving in the right direction. I had a strong feeling this would occur because we've observed similar trends with Priceline over the last twenty years, so I was confident about it. However, we want to gather more data before we provide detailed insights, such as attachment rates in comparison to Priceline or what we're observing in relation to the industry and the influx of new customers from different channels. I want to emphasize that we're happy with the new customer acquisition, including those purchasing not only flight tickets but also hotels. This is validating our long-term vision for the Connected Trip. I don’t anticipate that people will come primarily for activities first before purchasing flights or hotels; it’s likely to be the reverse, which can help foster loyalty and repeat business. We are focused on utilizing wallets for credits and promoting various offers to different customers, which all contributes to increasing our momentum. It’s exciting to see these developments starting to unfold, even at this early stage.

Great, thanks for taking my question. I wanted to talk a little bit about your perspective on leisure versus corporate. I believe you historically see about 80% of the business in leisure. So first there, some markets are running 15%, 20% ahead of '19 levels. And I'm curious your perspective on the long-term trend line within leisure and how COVID has changed that, maybe people's ability to work remotely. You mentioned more leisure business shifting online with that McKinsey study. But just curious how you think about leisure over the long run. And then the second part is on the corporate side, any early indications of recovery there and how you think that evolved through the second half of this year?

Yes, I'll share my thoughts on leisure travel compared to business travel and what I foresee for the future. David will follow up with our previous disclosures about the business mix. You're correct in noting that we are now more leisure-focused, and much of our business travel consists of small business owners arranging their own trips rather than through large travel management companies. This changes the dynamics for business travelers, who sometimes behave similarly to leisure travelers. Leisure travel has rebounded more quickly than business travel, which is understandable. Businesspeople are often concerned about risks and costs associated with travel. Many wonder if all previous travel is necessary, especially now that technology allows for effective meetings without the need for expensive trips, such as flying someone from New York to London for a costly one-day meeting. This shift will likely alter how business travel is conducted, resulting in fewer high-cost expenses related to flights and luxury accommodations. However, since our focus is on leisure, we aren't likely to be negatively affected. In fact, it may even benefit us due to increased availability that needs to be utilized. You also mentioned the impact of remote work, as more people might choose to work from different locations, potentially leading to weekend getaways or mini-vacations. It's uncertain how this trend will influence travel since the future of work remains in flux. No one can accurately predict how many days people will spend in offices versus working remotely. It will take time to understand the full implications, but we do hope for an increase in travel as we are keen on that. There is still considerable uncertainty in this area, and despite some positive reports from suppliers and airlines, a recent Deloitte report indicated a less optimistic outlook for corporate travel in the near term. Thus, we remain uncertain and will have to observe how things develop. David, if you have any additional insights on our business travel numbers, please feel free to share.

No, the number. First of all, we have given recently, but we're over 88% leisure. And as we said, our business, first of all, it's a self-declared metric when you make a booking. So it's hard to be precise about it. But the type of business travel we do have is much more unknown business travelers, Glenn explained. So we're heavily biased towards that larger segments.

Great, thanks for taking my question. Two, if I may. Just as you sort of you mentioned earlier in your prepared remarks that you're gaining share with professional property managers. Can you sort of talk about your supply strategy, heading into this winter in the U.S. trying to increase that single-unit inventory? And then, can you give us an update just on how APAC is trending, particularly with Agoda? Thank you.

I will let David discuss Asia in general. Regarding this year, I want to be cautious. We mentioned that we are pleased with our progress; we are gaining share with professional managers, and I like what we are seeing. Building out the U.S. inventory for all types of alternative accommodations, whether professionally managed or single properties, will take time to reach our goals. We are actively working on this by engaging with managers, providing the right information, and helping them understand our strong proposition. I am confident we will succeed. If you look at what we have accomplished in Europe and our share of alternative accommodations there, it sets a benchmark for the U.S. We should strive for that, as our customers and propositions are similar. There is no reason we shouldn't be able to achieve that over time, but it will require patience. David, would you like to share some insights on Asia?

Yes, so Asia, APAC, I mentioned that the room night growth was worse in Q2 than it was in Q1. So that really deteriorated to counteract some of the benefits and frankly, saw in the Europe and North America, of course, both puffed up and Agoda’s cyber businesses in APAC, although clearly that's the majority of Agoda's. So the whole region is very depressed as you know. Vaccination rates are lagging in most parts of Asia. Also, response to COVID outbreaks tend to be more aggressive. And restrictions are put in place more quickly, based upon outbreaks in the Asia region across almost all countries. So travel level is very low, particularly in international travel levels exceptionally low, and still a long way to go. No recovery in Q2, in fact, worse in Q2 than Q1.

Thank you. So in closing, I want to reiterate our strong belief that our industry's full recovery will be hastened by everyone who can get a vaccine going out and getting it. We urge all people who are approved for a medically able to be vaccinated, to do their part to make our society safer and go out and get a vaccine. And as always, I want to thank our partners, our customers, our dedicated employees, and our shareholders, we appreciate your support as we continue to build on the long-term vision for our company. Thank you and please be safe. Good night.