Booking Holdings Inc (BKNG) — Q4 2021 Earnings Call Transcript

Thank you and welcome to Booking Holdings' fourth quarter conference call. I'm joined this afternoon by our CFO, David Goulden. Despite the appearance of the Omicron variant in late November and its rapid spread throughout Europe, the U.S. and other parts of the world, we closed out 2021 by delivering fourth quarter revenue and adjusted EBITDA of $3 billion and $940 million, respectively, which were better than we expected. Room nights decelerated from down 10% in October compared to 2019 to down 35% in December. However, I am pleased to say that since December, we have seen a meaningful improvement in top line trends, with room nights in the first half of February reaching 2019 levels and with gross bookings higher than 2019. At Booking.com, I'm encouraged to see strong gross bookings on our books for the summer period in Western Europe and North America, both of which are now ahead of where we were at this time in 2019. Although I note that a high percentage of these bookings are cancelable. 2021 was a year in which our hopes for a return to normalcy were set back several times, first with the Delta variant and then Omicron. However, we witnessed proof that people have a deep desire to travel. When leisure travelers believe it is safe to travel and restrictions are lifted, people book travel and we are currently seeing this starting to happen in many parts of the world. While this is a potentially favorable backdrop for 2022, we do expect there will still be periods when COVID negatively impacts travel trends as we move through the current year. David will provide additional details on our fourth quarter results and what we are seeing so far in the first quarter in his remarks. As I look back over the last year, I am proud of the work we have done under still difficult times to strengthen our core accommodation business by driving benefits to our traveler customers and to our supplier partners. For our customers, we remain focused on addressing our customers' critical needs of value, choice and convenience. One of the many ways we provide value for our customers and partners on Booking.com is through our Genius loyalty program. For our customers, our Genius loyalty program offers lower prices and other benefits like complimentary breakfast, room upgrades and discounted airport taxis. For our partners, our Genius program delivers incremental room nights to properties from our most loyal customers. Over the last year, we have meaningfully expanded our Genius loyalty program at Booking.com by opening the lowest level of Genius benefits to any customer who creates an account and is logged in on Booking.com. At the beginning of 2022, we fully launched a third tier of Genius for our top customers that made at least 15 bookings in the last two years. These Genius Level 3 members have access to even lower prices and priority customer service support in addition to all the benefits available to Genius Levels 1 and 2. These improvements to our Genius program are indicative of our efforts to move beyond just the transaction and increase our focus on value for the customer. With a higher degree of customer focus, we aim to increase loyalty, frequency, spend and our direct relationships with our customers over time. Over the last year, we have enhanced Booking.com's mobile app, making it more user-friendly and easier to use. As I said before, the app is a critical platform as it allows us more opportunities to engage directly with travelers. It is also where an increasing number of bookings are happening and ultimately, we see it as the center of our connected trip experience. In 2021, Booking.com was the number one downloaded OTA app globally according to a third-party research firm. For 2022, we are increasing our efforts to enhance the app in order to build on the success we saw over the last year. In the fourth quarter and for the full year, we saw a consistently higher mix of our customers booking directly with us than in 2019 and our direct mix improved even as we leaned into performance marketing channels during the year. We will continue to lean into performance marketing channels at appropriate ROIs as we look to bring more customer demand to our platform during the recovery. In addition to performance marketing, we will be utilizing brand marketing, particularly in markets where we are looking to raise consumer awareness of our customer-facing brands. A timely example of that which I hope all of you saw two weeks ago or so, was Booking.com's first Super Bowl ad in which we reintroduced the Booking slogan to our U.S. audience. We had a great year in the U.S. in 2021 with strong growth in room night and very strong growth in gross bookings versus 2019, even though Booking.com was relatively quiet from a brand marketing perspective. We are looking to accelerate the momentum of last year's performance by layering in brand marketing that extends beyond the Super Bowl ad through the rest of the year in order to introduce Booking.com to an even broader audience. As I mentioned last quarter, we have an ambition to acquire more customers in the medium intent space. We continue to work on strengthening our foundations for digital marketing, including in social channels. However, our spend so far remains relatively small. For our supply partners, we strive to be a valuable partner to all accommodation types on our platform which means focusing on bringing incremental demand to properties from the broad audience of potential customers on our platform. For alternative accommodations, our global mix of room nights in 2021 of about 29% was in line with 2019 levels. In Europe, where our alternative accommodation offering is more competitive, our mix of room nights increased in 2021 by a few percentage points relative to 2019. We continue to work on improving the competitiveness of our alternative accommodation offering in the U.S. market, where we have added targeted supply over the last year and have plans for more additions and improvements to come in 2022. We closed out the year with 2.4 million hotel and alternative accommodation properties and over 28 million total reported listings on Booking.com, both of which were stable relative to the prior year. Let me now talk about the progress we have made over the last year in some of our key strategic priorities around payments and the connected trip. These strategic priorities are interrelated and we believe both will further enhance the strength of our core accommodations business and support its continued growth. On payments at Booking.com, we saw a further increase in adoption by our property partners in the U.S. in the fourth quarter, now with over half of U.S. gross bookings booked at properties that have adopted payments. Globally, about 60% of gross bookings are booked at properties that have adopted payments. About 30% of Booking.com's total gross bookings in Q4 were processed through our payment platform which brings the full year 2021 mix to about 27% compared to about 22% for the full year 2020 and about 15% in 2019. We will continue our work on positioning Booking.com as an attractive and trusted payment intermediary by providing payment options favored by both travelers and our supplier partners across hotels, alternative accommodations, cars, flight and attractions. Furthermore, we see Booking.com's payment platform as a key component of our larger connected trip vision. On our connected trip vision, we made progress in 2021 as we work to build a robust flight platform on Booking.com. This flight platform gives us the ability to engage with potential customers who choose their flight options early in their discovery process and allows us an opportunity to cross-sell our accommodation and other services to these flight bookers. Flights also enables us to provide a more complete travel offering to our accommodation customers. Booking.com's flight platform is now live in 34 countries which collectively represented about 70% of Booking.com's room nights booked in 2019. We continue to see that over 25% of Booking's flight bookers are entirely new customers to the platform. And of those new customers, an encouraging percentage are attaching an accommodation to their flight booking. These are positive early signals which help demonstrate that our flight offering can drive incremental new customers to us and we can cross-sell our accommodations product to them. We will continue our work to further optimize the cross-sell opportunity and build on the early positive signals we are seeing in flights. In November, we announced our intention to acquire Etraveli for €1.6 billion and we expect to close the transaction later this year pending regulatory approvals. Etraveli is one of the largest flight-centric online travel agencies and is a leader in flight booking technology. They've developed a comprehensive technology platform sourcing complex flight content from a variety of supply providers which is then distributed to consumer-facing sites. Booking.com and Etraveli have been successfully partnering over the last two years with Etraveli powering Booking's flight product. Given the strategic importance of flights to our connected trip offering, we believe it is critical to bring Etraveli flight expertise and technology in-house while also unlocking some of the limitations that exist in our current commercial agreement. When the deal closes, Etraveli will continue to operate as an independent company within Booking Holdings while further supporting the development of Booking.com's flight platform. Outside of flights, Booking.com has significantly improved the coverage of its attractions product over the last year, in part due to the successful integration of third-party supply from Viator and Musement. We now have bookable attractions available in cities that represent about half of Booking.com's accommodation transactions which is up from about 10% coverage a year ago. While the volume of attractions bookings is still modest, we believe that developing a compelling, easy-to-use attractions product will help keep travelers engaged with our platform through the trip and build loyalty. We had a very busy end to 2021 and start to 2022, so I'd like to address a few other important recent updates. First, I am very excited to welcome the Getaroom team to Booking Holdings. We closed our $1.2 billion acquisition of Getaroom at the end of December and we are well underway with integrating Getaroom into Priceline, where it will help expand Priceline's current strategic partnerships business. Getaroom is a B2B-focused distributor of hotel rooms, primarily servicing leisure demand through about 150 affiliate partners primarily in the North American market. The B2B business is an important component and channel in our expansion efforts to reach new customers and partners, particularly in key markets such as the U.S. We believe the B2B business can generate attractive returns by providing inventory to affiliate partners without the B2B business needing to invest significant dollars in brand marketing or online performance channels to generate customer demand. I am confident that the combined strategic partnership business of Priceline and Getaroom will improve B2B distribution for hotel partners while offering a robust accommodations technology stack for affiliate partners to help further enhance our offerings in North America. Second, some of you may have seen the news two weeks ago that Booking.com plans to enter into an expanded strategic partnership with Majorelle, one of our most trusted long-term external customer support partners. As part of this partnership which is still subject to consultation with works councils and regulatory approvals, Majorelle will begin employing most of the customer service representatives that previously worked for Booking.com outside The Netherlands and the U.K. We have been successfully working with Majorelle for six years in order to help meet the evolving seasonal demands of our business and we believe that this expanded partnership will help increase the flexibility and efficiency of our customer service offering going forward. Finally, on our last earnings call in early November, I discussed the urgency of tackling the global climate crisis and the importance of our industry coming together to work towards the goal of carbon neutrality by 2050. Shortly after that earnings call, Booking.com launched its Travel Sustainable Program. This is a first-of-its-kind program that features a travel-sustainable badge for any property on our platform that has implemented a combination of sustainable practices. When searching for accommodations, travelers can see whether or not a property has been given a travel-sustainable badge and can filter search results based on the badge. We believe our greatest influence on sustainable travel is through enabling our accommodation partners to showcase their sustainable practices to travelers who are looking for ways to travel more sustainably. We are looking forward to talking more about this program and other efforts and commitments related to sustainability when we publish our 2021 sustainability report and our first climate action plan in March. In conclusion, we executed well and produced strong results in 2021. As we look ahead to 2022, I am encouraged by the quick rebound in bookings we have seen so far this year and the level of summer travel on our books. While we expect to see some volatility in trends as a result of the ongoing effects of COVID, I am confident in the continued recovery in travel demand globally as there is clearly a very strong desire to travel among our leisure bookers. Of course, we are concerned and are monitoring the situation in Eastern Europe which we recognize could be disruptive to travelers who may be going to that region. Overall, we believe we are well positioned to continue capturing travel demand and we'll continue our work executing against our strategic priorities. As I have said before, we are thinking about our business beyond just getting back to 2019 levels of demand. And we are focused on building a larger and faster-growing business with more products that generate more earnings after the full recovery and for 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 results for the fourth quarter; provide some color on the trends we've seen so far in the first quarter and our thoughts on 2022. All growth rates for 2021 and 2022 are relative to the comparable period in 2019 unless otherwise indicated. Information regarding reconciliation of non-GAAP results to GAAP results can be found in our earnings release. Now on to our results for the fourth quarter. On our November earnings call, we discussed the improvement in trends that we saw throughout the third quarter driven by Europe, followed by a further improvement in October driven by Asia. You will recall the trends weakened in Europe towards the end of October driven by a number of countries that have seen recent increases in the Delta variant infections at that time. In November, we saw a slowdown from October in our overall trends driven mainly by Europe and this slowdown continued to worsen in December across all regions with future Omicron variant concerns. This resulted in Q4 reported room nights declining 21% versus Q4 2019 which was 11% worse than the 10% decline in October but only a few points worse than the 18% decline in Q3. December room nights were 35% below 2019. Looking across the full quarter; the slowdown in Q4 versus Q3 was driven primarily by Europe which declined about 20% versus Q4 2019, while our other regions improved in Q4 versus Q3. Compared with Q4 2019, the U.S. continued to have strong growth in the fourth quarter, while Asia was still down considerably and the rest of the world was down modestly. However, as I mentioned, we saw a slowdown across all of our regions in December, most meaningfully in Europe and in the U.S. Mobile bookings primarily through our apps represented two-thirds of our total room nights in the fourth quarter and for the full year. Our apps continue to represent an increasing majority of our mobile bookings. We continue to see greater than 50% of our total room nights coming to us through the direct channel. Our direct channel increased as a percentage of our room nights in the fourth quarter and for the full year relative to 2020 and 2019. The international mix of our total room nights in Q4 was about 33%, in line with Q3. Q4 international room nights were down almost 50% compared to Q4 2019 levels, a few points worse than the decline in Q3. We continue to see growth in our domestic room nights in the fourth quarter, also a level slightly below Q3. The December slowdown was more severe for international than for domestic. Our cancellation rates were up a few percentage points versus 2019 in Q4 and for the full year and increased meaningfully in December due to concerns about the Omicron variant. The booking window in Q4 of Booking.com was much shorter than it was in the fourth quarter of 2019 and contracted further in December as customers focused mainly on short-term travel needs. Alternative accommodation of Booking.com, the global mix of room nights is about 27% in Q4 and about 29% for the full year was in line with 2019 levels. The global mix was impacted by the underperformance of Europe relative to North America. Within Europe, our mix of alternative accommodations increased in Q4 by a couple of percentage points and for the full year, by a few percentage points relative to 2019. Gross fee declined 8% in Q4 which is less than the 21% decline in room nights due to an increase in average daily rates for accommodations on a constant currency basis of about 13% versus 2019 and very strong performance in our flights business. Our accommodation constant currency ADR benefited by about 4 percentage points from an increased mix of business in North America which is a higher-ADR region; and a decrease of mix in business in Asia which is a lower-ADR region. Excluding regional mix effects, constant currency ADRs were up about 9% driven by rate increases in most of our regions, most notably in Europe and North America and especially in higher-demand, leisure-oriented destinations. Constant currency ADRs were higher than expected due in part to continued higher rates for flexible bookings plus generally higher pricing in North America and in Europe. Airline tickets booked in the fourth quarter were up 116% and for the full year, were up 104% versus 2019 driven by very strong growth of Priceline and by flight bookings at Booking.com. We're encouraged to see a full year of triple-digit growth from our flights business which is a key component of our multi-product connected trip strategy. Consolidated revenue for the fourth quarter was almost $3 billion, down sequentially 36% from Q3 2021 and 11% below Q4 2019. Q4 2021 revenue was more than double the $1.2 billion of revenue we recognized in the fourth quarter of 2020. Q4 revenue was stronger than our expectation due to higher ADRs and a shorter booking window. Revenue was less impacted than bookings from Omicron in Q4. Revenue as a percentage of gross bookings was about 40 basis points below Q4 2019 which was better than our expectations as the deceleration within Q4 more negatively impacted our gross bookings than revenue in the quarter. Excluding timing impacts, our underlying accommodation take rates were about in line with Q4 2019 levels. Our full year revenue was almost $11 billion which is 27% below 2019 but improved 61% versus 2020. Full year revenue as a percentage of gross bookings was 14.3% which was lower than 15.6% in 2019, primarily due to the timing differences between gross bookings and revenue recognition. The strong revenue results in the fourth quarter helped drive adjusted EBITDA of $940 million which was 27% below Q4 2019. Sequentially, Q4 EBITDA was down 55% which is better than we expected. This was driven primarily by the higher-than-expected revenue and lower-than-expected OpEx in our more fixed expense categories. Marketing expense, which is a highly variable expense line, decreased 2% versus Q4 2019. Marketing expense as a percentage of gross bookings increased slightly versus 2019, in line with our expectations. The marketing ROIs were a little lower than our expectations due to the negative impact of cancellations late in the quarter and this was offset by a higher-than-expected mix of direct business. Sales and other expenses were 21% higher than Q4 2019 due to a higher volume of merchant gross bookings and higher outsourced call center costs. About 30% of Booking.com's gross bookings were processed through our payments platform in Q4 and about 27% for the full year, up from 22% in 2020. We expected our more fixed expense categories in aggregate to be about in line with Q3 due to lower personnel costs offset by higher IT and G&A costs. They came in 10% lower than Q3 due to year-end finalization of our bonus expense accruals as well as lower-than-expected IT costs. This means our Q4 personnel expenses do not reflect our run rates going into 2022. Non-GAAP net income of $554 million results in non-GAAP EPS of $15.83 which were down 32% versus Q4 2019. Our non-GAAP tax rate of 20% was higher than 18% in Q4 2019. Our full year non-GAAP tax rate of 20% was 1% higher than in 2019 due to a high proportion of non-deductible tax expenses in relation to a lower pre-tax income versus 2019. On a GAAP basis, we had operating income of $848 million in Q4. We recorded GAAP net income of $618 million in the quarter which included income tax expense of $198 million. Now, on to our cash and liquidity position. Our Q4 ending cash and investment balance of $14.3 billion was down versus our Q3 ending balance of $15.4 billion primarily driven by the $1.2 billion Getaroom acquisition, partially offset by positive free cash flow of about $178 million. Two housekeeping notes about Getaroom. The first is that it closed at the end of Q4 and was not meaningful to Q4 results. The second is that we did not include the incremental room nights from Getaroom in our commentary about January and February. These incremental room nights will be included when we release our Q1 actual results. In early January, we started returning capital to shareholders under our remaining authorization and have to date purchased about $500 million. Assuming that travel recovery continues, we still expect to complete our remaining organization within the next three years. Now on to our thoughts for the first quarter. And to remind you, we'll make comparisons with 2019 unless otherwise indicated. January room nights declined about 22%, an improvement from the 35% decline in December as concerns around the Omicron variant eased. This improvement was driven primarily by a recovery in cross-border travel within the European region and domestic travel in Europe. We saw room nights trends improving throughout January and continuing into February. Our room nights in the first half of February were about in line with 2019 levels and gross bookings were higher. In the first half of February, we saw a meaningful improvement across all of our regions compared to January. The U.S. has strong room night growth versus 2019 in the first half of February, while Europe had about 10% growth. Rest of the world was up slightly and Asia was down about 35%. Our mix of international room night recovered from about 23% in December to over 40% in the first half of February which is the highest international mix we've seen since the start of COVID. As a reminder, our pre-COVID international mix was just over 50%. As I mentioned, the improvements we see in the first half of February are broad-based with large countries in Europe and international travel routes within Europe driving the largest impact. The new cross-border bookings we're seeing in Q1 in Europe on average have a longer length of stay and a shorter booking window than comparable bookings in 2019. As we've seen throughout the pandemic, when travel restrictions are lifted and traveler confidence increases, bookings improve quite quickly. Given the rapid changes during the first half of Q1, it's difficult to predict how room nights for the remainder of the quarter will develop. While it's encouraging to see the recent improvements, we are still in a potentially volatile environment with high COVID infection rates in some parts of the world and geopolitical uncertainty that could impact our business, especially in Europe. So far in Q1, the overall booking window of Booking.com has contracted less versus 2019 than it did in Q4. We've seen recent strength in our summer booking trends and our gross bookings for the summer are higher than they were at this time in 2019. The summer booking trends are stronger in Western Europe, where gross bookings for the same period are up double digits versus 2019 and gross bookings for the U.S. are also higher for the summer than they were at this time in 2019. Of course, a very high percentage of all bookings for summer are cancelable, so things could change rapidly. Turning to the income statements; we expect the change in gross bookings in Q1 versus 2019 to be several percentage points better than the change in room nights due to an increase in ADRs and very strong flight bookings. Constant currency ADRs in Q1 so far have increased versus 2019 at a similar rate to Q4. We expect Q1 revenue as a percentage of gross bookings to be about 1.5 percentage points lower than in Q1 2019 as the booking deceleration in Q4 negatively impacts revenue and the booking recovery in Q1 benefits revenue in future quarters. This 1.5 percentage points of difference in revenue as percentage gross bookings could be higher if booking trends increased meaningfully from the first half of February, especially if a high percentage of these bookings offer stays in future quarters. We expect margin expenses in Q1 will trend about in line with gross bookings compared to Q1 2019. We expect sales and other expenses in Q1 as a percentage of gross bookings to be about the same as it was in Q4. We expect our more fixed expenses in aggregate will be about 15% higher in Q1 than in Q4 on a dollar basis due to the impact of seasonal increase in benefit costs, the 2021 year-end personnel-related accrual finalizations and the impact of planned hiring as well as increases in IT expenses, including some deferral from Q4. In my just explained and reminding you that Q1 is our seasonally lowest quarter, we expect adjusted EBITDA to be positive but down sequentially from Q4 significantly more than the sequential declines we saw pre-COVID primarily due to the impact of Omicron on Q1 revenues. As we think about the full year ahead, we're encouraged about the strong summer bookings we're seeing so far and we're optimistic about the continued recovery of later travel. However, we do expect continued volatility in our top line trends driven by COVID. There are other uncertainties on the horizon, including the current geopolitical situation which could impact travel. If we look at Russia and Ukraine combined as destination markets, they represent a very low single-digit percentage of our total gross bookings. All this makes it very difficult to predict how the top line will progress during the year and how the full year will turn out. As we think about the recovery of travel in 2022 and the opportunity in front of us, we plan to invest in marketing other incentives and improvements and expansion of our products to attract existing and new customers to our platforms and to drive additional loyalty in the future. This also requires investments in people and technology. We're excited about the opportunity to expand our business and we believe we can strengthen our position in accommodations and build a much more complete travel solution for our customers and partners. We believe this is the right thing to do for higher longer-term returns from our business. With this in mind, there are a few factors to consider when thinking about the shape of the P&L for the full year. These fall into four buckets; revenue, marketing, sales and other expenses and our more fixed operating expenses. Starting with revenue as a percentage of gross bookings, we expect this to be higher in 2022 than it was in 2021 but lower than in 2019. In 2021, our revenue as a percentage of gross bookings was about 130 basis points lower than 2019, mainly due to timing differences between the recovery of gross bookings and revenue. In 2022, we expect this timing to be less of an impact than it was in 2021. Moving to marketing; there are a number of factors that come into play. We expect the environment to remain competitive, especially as the leisure travel market moves closer towards full recovery. We intend to remain disciplined in our performance marketing ROIs and we'll continue to invest in developing the medium intent social media channels, and you'll see us active in branding in the U.S. and other major markets. Our goal continues to be to use our marketing strength to gain share in markets where we can with reasonable returns. We expect to run initiatives and programs during the year to attract both existing and new customers to our platforms. It's difficult to know exactly how these factors will play out across the year but we expect marketing as a percentage of gross bookings to be a little higher than it was in 2019 and also in 2021. Of course, an increasing direct mix helps our marketing efficiency and we believe the investments we're making will result in a higher direct mix over time. Turning to sales not expenses; we expect these to be up 50 basis points higher than in 2021 as a percentage of gross bookings. This is mainly from additional payment processing costs but also impacted by anticipated higher third-party customer service expenses. The additional expenses related to payments are offset by a higher payment-related revenue. The last area is our more fixed operating expenses which include personnel, G&A and IT. We expect our personnel expenses to be impacted by higher-than-average annual wage increases, especially in the product and technology areas; and by planned headcount increasing in key areas, including product and technology and bond-related functions. We expect personnel expenses to be about 10% higher than in 2021. We expect that G&A and IT will both grow faster than personnel driven by a number of factors, including digital services taxes, returning to a hybrid work environment and the investments to enhance our customer and partner-facing and internal systems. The comments we made for 2022 do not include the anticipated reduction to personnel expense and increases to sale and other expense from the enhanced strategic partnership with Majorelle that Glenn spoke about. We do not anticipate much of an impact on adjusted EBITDA in 2022 from this initiative and we'll update you again in May. Also, we expect our acquisition of Getaroom to have a small positive impact on our P&L in 2022. As Glenn noted, we expect that the Etraveli acquisition will close later this year which will result in a minor impact to the P&L in 2022. So when thinking about the shape of the P&L in 2022, these factors mean that revenue recovery will lag the gross bookings recovery and EBITDA recovery will lag revenue recovery. Some of the lag in EBITDA versus revenue is timing, i.e. the marketing we spend on bookings we expect to recover ahead of revenue. On top of this, we plan to make investments in customer acquisition and in expanding our product offerings we mentioned earlier. Taken together, we expect our EBITDA margins in 2022 to be a few points higher than we were in 2021. Looking beyond 2022, we continue to remain focused on investing to build a larger and faster-growing business with more products than we had pre-COVID that delivers more EBITDA dollars and more earnings per share with industry-leading EBITDA margins. In closing, we're confident in our ability to capture demand as the global travel market recovers and to execute against our strategic priorities.

It's great to see your bookings returning to 2019 levels. I understand there is a lot of consideration about what bookings will look like after the travel recovery. I'm curious if we could explore some of your thoughts on what the business might resemble in terms of booking levels and margins as we reach normalcy. I know you've made a couple of acquisitions that you must be excited about, and your connected vision trip appears to be moving in the right direction. Perhaps we could also discuss how you're assessing the overall value of bookings and the potential level of EBITDA once we achieve full recovery.

Why don't I let David address the margin issue? He mentioned it in his prepared remarks, so I'll allow him to elaborate on it again.

Justin, let me give you a little bit more color. And I appreciate the question. So we are focused upon, as I said, growing a business that is larger than it was in 2019. It's more diverse in terms of product offerings. It's growing faster than it was in 2019. It has more absolute EBITDA dollars and EPS dollars. That's our focus. We've given you obviously some color where things go in 2022. We expect that we can expand our volume beyond 2022. And we expect that once we are kind of to normal in that final state, we'll have industry-leading EBITDA margins. But beyond that, we don't want to get too specific about exactly what they're going to be other than our goal is to give more EBITDA dollars, more EPS dollars that are growing faster than they were pre-COVID.

Great. And then the two acquisitions you made, one you closed and one is still open. How are you thinking about those? Are those areas that are really going to help you save costs? Or do you think those are actually booking drivers?

Well, they're really two different acquisitions, Justin. Why don't I take them separately. So the Getaroom one, as I described in my prepared remarks, is very much adding to what we already have at Priceline in a B2B business that helps bring in customers that we wouldn't have gotten through our other marketing programs, whether it be pay-for-performance or brand. These customers are coming from affiliates. And there are contracts that Getaroom had and different technologies they have that by bringing them in is going to get us additional business that we wouldn't have gotten otherwise. On Etraveli, that was a different situation where, as I pointed out many times, how important it is for us to have this connected trip vision fulfilled. And one of the critical parts of it is our flight business. And we absolutely are very pleased to see not only the growth in our number of flight bookings but also the fact the number of new customers getting coming and the number who are then buying an accommodation. Now Etraveli has been powering the Booking.com product for two years. Great technology. They do a lot of things that could we recreate on our own? Probably it would take a long time, would require us to use resources that we want to use elsewhere. So by acquiring Etraveli, we're going to bring that technology in-house and be able to do things that we couldn't do when we were just a commercial partner. So I'm looking very forward to having that close and hopefully, as we said, in the future and then really began to develop a great, great combination.

Two, if I can. First, can you give us just an update around how you're thinking about timing for adding some of the value-added features to payments that could drive positive contribution to the P&L? And is it safe to say that even if you pass some of that cost, some of that margin along to consumers, it would likely drive faster growth and therefore, revenue, even if it wasn't directly revenue margin-accretive? And then the second question would be, can you maybe give us some color around the benefits of connected trip beyond incremental revenue from adding new products? So what do you see with repeat rates or direct rates among users who adopt multiple products? Anything you could share there would be great.

Sure, Lloyd. Two separate questions. Let me talk a little bit about the payments product and what we're developing and how it's going and I'll let David add a little more to it. I'm sure he want to add some more specifics. Clearly, we've talked about this in the past that one of the critical things is enabling a customer to be able to pay in the way they want to pay and enabling the supplier to get paid in the way they want to get paid. So right way, getting that out in the market enables us to have more business. Then you go beyond that and you see do it cheaper for our suppliers, do it in a way is cheaper than they're doing it right now the way they're doing their payments the way they're getting it through our old agency model Booking.com and finding a way that we can do that in a way that not only improves their business because they'll not to pay as much but obviously, we'll make a little out of that, too. But then it goes much more beyond and that is the connected trip. The connected trip doesn't work if you don't have payments because we need to put it all together in one payment that we can then handle on our own. And particularly, if there's anything goes wrong, we don't have to undo it, too. That's really going to be helpful to us. And then it's not just payments but it's our fintech unit, which is the payments people but doing more things; it's coming in and helping out in flexible-type products. People want a flexible product. They can cancel us. Creating that on our own is something we'll be doing more so in the future. There are a number of different things we can do that will absolutely increase both the ease of use, the convenience and enable us to make more money out of it. And I'll pause there and let David, if he wants to add anything more to that.

I think, Glenn, you did a great summary of the interconnectivity between those two and the new areas. A lot on timing. Nothing major in terms of market impact in 2022. We're still in building mode for some of those value-added products that you mentioned. And market entry where you might see any impact will be more into the 2023-2024 time frame.

Then to the second thing, Lloyd, in terms of the connected trip, step one is build out the verticals. We didn't have flights a couple of years ago on Booking.com at all. And as you can tell by the numbers I put out, we still don't have 100% coverage for all the areas that we do accommodations. Have to build that out. Also just some of the technologies at Etraveli, we have a lot of things we can do to just improve that product. I talked a little bit about the attractions product where we had only 10% coverage last year. Now we made a lot of good progress to 50%. We had to put that all out. And then there are other areas, ground transportation, other parts of the trip. So we're building out all the verticals first to make sure we have the supply, make sure it works well, et cetera. At the same time, we are beginning, as I pointed out, about the people who get flights and then buy in a combination, we are doing some of that cross-selling and bringing that out. We'll do more and more. The goal, of course, is to make it so that it is so seamless, so frictionless that people when they're using Booking.com or any kind of trials we're doing, they're finding it easier and offering more value. And that value comes from suppliers being willing to chime in to our platform and be able to offer different things that we can then very, very scientifically target at different customers in a way that gets an incremental customer to that supplier. The customer is happy, the supplier is happy and we, of course, make money. That will develop loyalty, that will develop the direct business and that's where we're going for. It's going to take some time but I love the progress that we're making.

And Glenn, I'd just add to that as well that when we kind of look at our customer base and not too surprisingly, our top customers, the ones who can spend the most with us, uses most often are more likely to use multiple things, more likely to use the app and a much more likely to interest directly. So that's the model that we're trying to build upon to build the loyalty that Glenn mentioned. And we do have good evidence that, that is a trend that we can build on. And the more we build value, complete travel offering, frequency, direct linkage via the app, the more loyal those customers become.

I had a follow-up on the latest recovery trends. Based on all the data that you have, do you have a sense of to what extent the strong booking numbers you saw in the first half of February reflect sustainable levels that you could see going forward in the coming months as opposed to kind of a short-term catch-up after the Omicron pressure that you saw in December and the start of the year? And as a follow-up to that, to what extent are travel restrictions that are still in place in many European countries still hurting booking activity based on the data that you've got?

Kevin, while it's challenging to pinpoint exactly what is driving the positive trends we observed in the first half of February, it's clear that there is significant pent-up demand for travel. For years, people have faced limitations on their travel preferences, but now, with increased savings, they have the means to travel. This sentiment is echoed in my conversations with industry CEOs who share their observations. Everyone seems to agree that the desire to travel is strong. I don’t view the current situation as merely a minor rebound from Omicron; it reflects a broader trend of people being able to travel as restrictions ease and safety perceptions improve. New developments in Europe, including proposals to lift some restrictions, are contributing to this positive outlook on travel. However, certain regions are still experiencing challenges, and those issues will eventually subside as well. I remain optimistic about travel demand and the industry's future. That said, we must acknowledge that uncertainties remain regarding the trajectory of this recovery. History has shown us that we may not always be as far along as we think. Additionally, various macroeconomic factors in different regions can influence travel trends. Therefore, it's essential to maintain a cautious but optimistic perspective. One thing I am certain of is that, in the long run, the demand for travel will persist. People will return to traveling, though the pace of recovery may vary. I have confidence in our future.

Could you comment on the travel restriction piece in Europe? To what extent are you still seeing restrictions in Europe still limiting some of the activity? Or is that pretty much up already?

No, it's not completely finished. In different countries, there are varying levels of restrictions. Some places have lifted them entirely, like the U.K., while others still have some in place. The key question is whether a test is needed before arrival. The distinction between being vaccinated with an EU-approved vaccine versus a WHO-approved one raises issues as well. I believe many of these restrictions will soon be lifted. I hope that in other regions, similar restrictions can be reduced quickly. For instance, Australia has started allowing tourists again, and there have been many joyful images shared. I do not believe, and have seen substantial data supporting this from the WHO and other credible sources, that travel restrictions significantly reduce infection rates. Therefore, considering the social and financial costs, many of these restrictions should be removed.

One for Glenn and one for David. Glenn, was just hoping you could talk about the elevated brand strategy in the U.S. and just how the approach differs here versus in previous years. And then also any comments just framing the broader marketing landscape as you go into stronger recovery. And then, David, unless I missed it, I was just curious on any financial implications from expanding the customer service partnership with Majorelle.

So Doug, I caught part of your question about brand marketing, but I missed the first part. Let me address our brand and overall marketing strategy in the U.S. moving forward. Clearly, we didn't invest much in brand marketing during the worst of the pandemic, and there was no justification for that expenditure. Now that we're seeing a recovery, we're starting to return to a more conventional marketing approach, similar to what we did in 2019. I'm pleased with our subscription add-ons; it’s still early, but the initial figures are encouraging. We're focusing on where we believe we'll achieve the best return on our marketing investments and continually assessing what will yield the highest returns. Importantly, we're evolving our focus beyond immediate transactions to also concentrate on long-term customer loyalty, repeat business, and understanding the customer journey and post-purchase behavior. We're taking a more analytical approach than we have in the past for sustainable growth, which I believe is essential for building our franchise and enhancing the company's value.

Let me address that. First, it's important to contextualize this regarding Booking.com. We have collaborated with external service providers for a significant period. During peak times, most customer interactions are managed by our XL partners. For instance, last summer, around 75% of customer service contacts were managed by EXLP. This is not a new development; it has just accelerated slightly. We do not anticipate significant financial impacts in 2022 as we are still navigating approvals and the closing process, followed by a transition period. In 2023 and 2024, this is more about potentially allowing for cost increases compared to the past, but cost is not the main reason for this change. The key factor is flexibility. Our workload varies substantially between peak and low periods, making it inefficient to maintain an in-house customer service team, which also affects employee experience due to fluctuating demands. Thus, the primary consideration is enhancing flexibility, providing greater opportunities for our employees, and potentially achieving cost benefits through lower increases as we scale up volumes.

And I would just add one other thing is we still believe absolutely the importance of great customer service. This has nothing to do with changing that. We're still going to be doing the technology that goes into the customer service process, our policies, all those things we're doing that. Also, it's looking to the future but we hope to build a very big company. The idea of then having to build a very big internal customer service operation is just not the best use of our resources, our managerial capabilities. This is something that is better done by people who are experts in that and can really do it better than we can do it but we can still provide all the great things in the actual customer service to the customer. It's definitely a win-win.

I have two questions. First, your 9% constant currency ADR growth is impressive and seems to be the highest I've heard from you. Considering the overall inflation rates being at decade highs, can you share your thoughts on the sustainability of this growth for the year? Do you view inflation as temporary or permanent? What assumptions are you making regarding ADR as you manage your business? Second, David, regarding Booking's capacity to grow faster than it did in 2019 post-recovery, if that happens, what do you think will be the main drivers for this growth? What factors would contribute to a faster top-line growth post-COVID compared to pre-COVID?

Sure, Mark. Let me address both of your questions. The 9% constant currency ADR growth was adjusted for geographical mix, so it's essentially the same country comparison. This is a solid figure, especially considering we saw 9% ADR growth last year compared to 2019. It's quite likely that ADR will reach or exceed levels from 2021. I highlighted the contributing factors and noted that the results were better than we had anticipated. There was speculation that rates might start to decline as we entered the high season, where supply often surpasses demand, but rates have remained stable. Additionally, flexible rates continue to command a premium. Furthermore, we've seen increased prices, particularly in high-demand, left-oriented areas, which remain robust. We believe that ADR is likely to match or exceed 2021 levels in 2022 when compared to 2019. Regarding faster growth, several factors contribute to this belief. We see significant opportunities in the accommodation sector, particularly from a geographic standpoint by broadening our portfolio to include alternative accommodations. Additionally, we can leverage the connected trip benefits, optimizing payments and providing a more comprehensive offering. By focusing on tailored solutions for our customers—encompassing pricing, payments, and customer service—we feel we're currently addressing just a small segment of the overall travel equation. Expanding our capabilities will drive further growth, enhance our product and service quality, foster customer frequency, and boost loyalty. All of these elements work together to create a tremendous growth opportunity for us.

Thank you. We are very pleased with 2021. It was a volatile and difficult year but it showed progress. 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 good night.