Booking Holdings Inc (BKNG) — Q1 2022 Earnings Call Transcript

Thank you, and welcome to Booking Holdings’ first quarter conference call. I'm joined this afternoon by our CFO, David Goulden. I am pleased to begin by reporting that our first quarter was a record. Our customers booked $27 billion in gross bookings, the highest quarterly amount ever. The continued improvement in our room night trends, increased accommodation ADRs and significant growth in our global flights product all contributed to achieving this gross bookings record. In our accommodations business, we saw meaningful improvement from last year, with first quarter room nights declining only 9% versus Q1 2019, which was an improvement of 12 percentage points from our fourth quarter 2021 results. Our bookings continued to strengthen in April, with room nights increasing 10% and gross bookings up over 30% versus 2019, making April a record month for gross bookings and our first month that global room nights exceeded 2019 levels. At Booking.com, I'm encouraged by the strong gross bookings already recorded for the summer period, which are over 15% higher than at this same point in 2019. In Western Europe and North America, gross bookings for the summer period are now over 30% ahead of where we were at this point in 2019. Though, I know that a high percentage of these bookings are cancelable. Of course, our brands and others are seeing the benefits of a global recovery from the pandemic with strong travel demand in the US for Priceline, a rapid recent improvement in trends in Asia for Agoda, and an uptick in international flight searches at KAYAK and the return of diners to restaurants for OpenTable. In many countries, especially across Europe and Asia, travel restrictions were eased in the first quarter, which we believe has contributed to the strengthening of travel demand trends. As we have said before, when leisure travelers believe it is safe to travel and restrictions are lifted, people book travel. With that being said, there are still restrictions and inconveniences imposed on travelers today by some countries, though we believe that the industry is moving in the right direction and progressing back to normalcy. While we are pleased with the trends we're seeing right now across our brands, as we look toward the rest of the year, we are cognizant of the potential for macro uncertainty and are aware that inflation or other macro factors may have an impact on consumer demand. And before providing further updates on our business, I want to address the devastating war in Ukraine. Since first hearing the terrible news of Russia's invasion of Ukraine, our first priority was the safety of our colleagues and supporting them through this time. We worked closely with our employees and their families in Ukraine to provide them with safe refuge, and we have continued to support humanitarian efforts in the region. As we previously disclosed in early March, we suspended travel services in Russia and Belarus. By mid-March, Booking.com developed and launched a no commission initiative that enabled properties in select European countries to offer free or heavily discounted accommodations to refugees fleeing Ukraine. We believe that about 30,000 refugees have been provided with places to stay through this initiative so far. We continue to work closely with our hotel and home partners and expect to expand this program to more properties in the region. As an example, Booking.com has partnered with Hilton and the UN Refugee Agency to make it easy for NGOs to book temporary accommodations on behalf of refugees fleeing the war in Ukraine. These rooms have been made available for free by Hilton at hundreds of their properties across Europe, which we in turn are providing through our platform. I am very proud of our team's quick actions to help our employees, customers, partners and the many people impacted by these tragic events. And, of course, we all hope this barbaric violence ends soon. Let's now turn to the progress we're making in our business. We continue our work strengthening our core accommodation business by driving benefits to our traveler customers and to our supply partners. For our customers, we are focused on their critical needs of value, choice and convenience. With this high degree of customer focus, we aim to increase loyalty, frequency, spend, and direct relationships with our customers over time. In March, our unique active Booking.com customers were within 95% of 2019 levels, driven by strong growth in returning customers who had not made a previous booking in over a year. In the first quarter, we saw a higher mix of customers booking directly with us than in any of the last three first quarters. We see the strongest direct repeat customer behavior in our mobile app compared to other platforms like desktop or mobile web. We continue to see more of our business shift to the app with over 40% of our room nights booked through our apps in the first quarter. Booking.com’s app hit a new record in terms of monthly active users in Q1 and continues to be the number one downloaded OTA app globally, according to a third-party research firm. As I said before, the app is a critical platform as it allows us more opportunities to engage directly with travelers. And ultimately, we see it as the center of our connected trip experience. We will continue our efforts to enhance the app to build on the recent success we have seen here. For our supply partners, we strive to be a valuable partner to all accommodation types on our platform, which means 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 the first quarter increased to about 31%, a couple of points higher than in Q1 2021. We continue to work on improving our alternative accommodation product globally with an additional focus on the US market. We've been working closely with property partners to identify opportunities to improve our platform to better fit their needs. Related to these efforts, we launched partner liability insurance for our alternative accommodation supply partners with global coverage in the first quarter. In addition, we are making progress on an enhanced payment solution for professional property managers that we're rolling out in the US. In the first quarter, we saw the largest sequential net increase in alternative accommodation properties on Booking.com since the start of the pandemic. While the net increase in Q1 was still a modest number of properties, we’re aiming to build on this growth throughout 2022 by continuing to improve our alternative accommodation offering and attracting more partners to our platform. This week, we launched a new campaign in the US to promote Booking.com to alternative accommodation owners and managers who want to grow their business with us. Let me now talk about the progress we've made in our interrelated strategic priorities of payments and the connected trip. We believe both of these priorities will further enhance the strength of our core accommodations business and support its continued growth. On payments, 34% of Booking.com’s gross bookings were processed through our payment platform in the first quarter, which is our highest quarterly level ever. This year, we are focused on continuing to increase supplier adoption of payments, while introducing new products and features that over time will improve the customer and partner experience and bring new revenue streams to our platform. We will continue to position Booking.com as an attractive and trusted payment service for both travelers and our supplier partners across hotels, alternative accommodations, cars, flights and attractions. Furthermore, Booking.com’s payment platform helps deliver a more seamless and frictionless booking experience, which are important elements of our larger Connected Trip Vision. On our Connected Trip Vision, we continue to make progress as we work on the foundations such as developing a flight offering on Booking.com, which is now live in 40 countries. This flight offering 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. We have seen that in over 70% of our flight bookings on Booking.com, the flight was the first or only product that was booked. This helps confirm the value of flights as the starting point in many people's booking journey and is an anchor part that we can utilize to cross-sell accommodations and other products, resulting in a meaningful percentage of bookers who first book a flight, then book accommodation. We'll continue our work to further optimize the cross-sell opportunity and build on the early positive signals that we're seeing so far. Flights continues to be a source for new customers, with about one quarter of all flight bookers in Q1 being new customers for Booking.com. We've also seen recent success driving incremental room nights and experiments where discounts are applied to non-accommodation products that were attached to the transaction. To put it simply, we believe having more products on the shelf increases our merchandising opportunities and helps us sell more room nights. Finally, as I previewed on our last earnings call, we published our 2021 sustainability report and our Climate Action Plan in March. In our Climate Action Plan, we highlighted the significant emission reductions we've already achieved, in part driven by sourcing 100% renewable energy for our office by the end of last year. We are committed to more than halving our emissions by 2030 and achieving net zero emissions by 2040. We are proud of the emissions reduction achieved and the ambitious target set for our business. But as I said before, we believe our greatest influence on sustainable travel is through making it easier for travelers to find and book sustainable options. We are addressing this opportunity through our work with our Travel Sustainable Badging program, which now includes over 100,000 properties that can highlight their sustainable practices to customers on Booking.com. In conclusion, I am encouraged by the strength we are seeing in bookings, the level of summer travel on our books, and the potential for a very busy travel year ahead. As we discussed last quarter, in this recovery environment, we will continue to lean into performance marketing channels and appropriate ROIs as we look to bring more customer demand to our platform. Overall, we believe we are well positioned to continue capturing this returning travel demand. And we will continue our work executing against our strategic priorities. As I said before, we are focusing on building a larger and faster growing business with more products that is sustainable and generates more earnings dollars for the long run. Now I turn the call over to our CFO, David Goulden.

Thank you, Glenn and good afternoon. I'll review our results for the first quarter and provide some color on trends we've seen so far in the second quarter. All growth rates for ‘22 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 first quarter. On our February earnings call, we discussed the improved trends we've seen so far in 2022. With room nights getting back to about flat versus 2019 in the first half of February after declining 21% in January, just hours after our earnings call on February 23, the terrible news broke that Russia invaded Ukraine. As a result, we saw an immediate negative impact on room night trends, particularly in Eastern Europe. Despite this impact, towards the end of the month, room nights for the full month of February came in about in line with 2019 levels. In early March, we suspended the booking of travel services in Russia and Belarus. This led to a loss of new bookings, as well as significantly elevated levels of cancellations of reservations for these countries. Additionally, we saw some slowdown in booking trends within Europe as travelers took in the news of the invasion. We disclosed that total room nights for the week ending March 6 were down about 10%. That slowdown was driven by Eastern Europe, primarily Russia, and to a lesser extent by Western Europe, which remained mostly above 2019 levels. I'm pleased to say that compared with the first week in March, we saw our overall trend improve during March driven mainly by Europe, resulting in room nights being down about 4% for the month, which is only a modest pullback from where we were in February. For the first quarter, room nights were down 9%, an improvement from down 21% in Q4, and our best quarter results since the onset of the pandemic. Excluding Russia, Ukraine and Belarus, our room nights were down about 2% in March and down about 6% for the first full quarter. But Q1 on a regional level, room nights in Europe and the rest of the world were both down mid-single digits. Asia was down about 35% with all three improving from Q4 levels. The US showed strong growth versus Q1 2019, similar to what we saw in Q4. Mobile bookings primarily through our apps represented about 6% of our total room nights in the first quarter. Our apps accounted for over two-thirds of our mobile bookings and over 40% of total room nights. In the first quarter, we continue to see an increasing mix of our total room nights coming through as the direct channel versus Q1 2019 and Q1 2022. The international mix of our total room nights in Q1 was about 40%, an encouraging increase from about 33% in Q4. Q1 international room nights were down about 30% compared to Q1 2019 levels, an improvement from the almost 50% decline in Q4. The improvements in international bookings we saw continue to be driven mainly by travel plans within Europe. These cross-border bookings continue to have, on average, longer length of stay and a shorter booking window compared to bookings in 2019. We saw strong growth in our domestic room nights for the first quarter, also an improvement from Q4. Our cancellation rates were about in line with 2019 levels in Q1 despite the impact of the Russian invasion of Ukraine. The booking window in Q1 of Booking.com contrasted less versus 2019 than it did in Q4, and this booking window expanded versus the first quarter of 2021. For our alternative accommodations at Booking.com, the global mix of room nights increased to about 31% in Q1, a couple of points higher than in Q1 2021. Within Europe, our mix of alternative accommodation is continuously meaningfully higher than the global average. Gross bookings increased to 7% in Q1 versus 2019 and were up 10%, excluding Russia, Ukraine, and Belarus. This 7% increase in gross bookings was 16 percentage points better than the 9% decrease in room nights due to 18% higher accommodation constant currency ADRs and strong flight bookings across the group, partially offset by about four percentage points of negative FX movements. As Glenn mentioned in his remarks, the $27 billion of gross bookings in Q1 is a new record for us, higher than the previous record at $25 billion in Q1 2019. In March 2022, we experienced our first month when gross bookings exceeded $10 billion in a single month. This was up 17% versus March 2019 and compared to up 18% in February and down 11% in January. Our accommodation constant currency ADRs benefited by about three percentage points from regional mix and about 15 percentage points from rate increases in most of our regions, most notably in Europe and North America, and especially in higher demand leisure-oriented destinations. Constant currency ADR growth versus 2019 accelerated from 13% in Q4 to 18% in Q1, primarily due to higher rates in New York. Airline tickets booked in the first quarter were up 152% versus 2019 and up 69% versus 2021, driven by continued expansion of the Booking.com site platform, as well as continued flight ticket growth at Priceline. Consolidated revenue for the first quarter was $2.7 billion, which was down 7% versus 2019 and down about 2% on a constant currency basis. Revenue as a percentage of gross bookings was about 150 basis points below Q1 2019 in line with our expectations, primarily due to differences between gross bookings, as well as timing differences between gross bookings and revenue recognition. Our underlying accommodation take rates were about in line with Q1 2019 levels. Marketing expense, which is a highly variable expense line, decreased to 4% versus Q1 2019. Marketing expense as a percentage of gross bookings decreased about 50 basis points versus Q1 2019, which is better than our expectations, mainly due to unexpected marketing ROIs. Sales and other expenses were up 58% versus Q1 2019 due to a higher volume of merchant gross bookings and higher third-party call center costs. About 34% of Booking.com’s gross bookings were processed through our payments platform in Q1, up from 13% in Q1 2019. Compared to Q1 2021, sales and other expenses as a percentage of gross bookings were about 30 basis points higher. Our more fixed expenses in aggregate were about in line with our expectations, up 12% versus Q4 and up 17% versus Q1 2021. Adjusted EBITDA was $310 million for the quarter, which was better than our expectations due to unexpected ADRs and better than expected leverage of our variable expenses. However, sequentially, EBITDA was down 67%, which is significantly more than the seasonal decline we saw pre-COVID and aligns with our commentary in February. Non-GAAP net income of $161 million results in a non-GAAP EPS of $3.90, which was down 65% versus Q1 2019. Our Q1 non-GAAP tax rate of 16% was lower than 19% in Q1 2019 due to effects from a discrete tax benefit on a lower base of earnings. On a GAAP basis, we had operating income of $174 million in Q1. We recorded a GAAP net loss of $700 million in the quarter, which included an unrealized loss on our strategic investments of about $987 million and a $36 million loss on assets held for sale related to the Majorelle strategic partnership we discussed last quarter. Now on to our cash and liquidity position. Our Q1 ending cash and investment balance of about $12.8 billion was down versus our Q4 ending balance of $14.3 billion, primarily driven by the payments of $1.1 billion for a margin debt maturity, about $950 million in share repurchases in Q1, and the declining value of our strategic investments. These factors, which reduced our cash investment balance, were partially offset by positive free cash flow of about $1.6 billion, which was driven almost entirely by change in working capital resulting from an increase in our deferred merchant bookings balance. As we disclosed last quarter, we started returning capital to shareholders in early January. In addition to share purchases in Q1, we repurchased about $325 million of shares in April, which brings our outstanding authorization to just over $9 million. As we said before, we expect to complete our remaining authorization within the next three years. Now moving on to our thoughts for the second quarter, April room nights increased about 10% versus 2019, an improvement from the 4% decline in March driven primarily by Europe. Excluding Russia, Ukraine, and Belarus, April room nights increased about 16% versus 2019. All regions show improving growth in room nights in April. Europe was up high teens percent in April and up about 30% excluding Russia, Belarus, and Ukraine. Growth in the US was very strong, and the rest of the world showed double-digit growth, while Asia recovered to down high teens percent, all versus 2019. The international mix of our room nights in April was over 45%, an encouraging increase from the 40% in Q1. April international room nights were down slightly compared to 2019 levels, an improvement from down 30% in Q1. International demand driven mainly by travel plans in Europe accounted for most of the improvements in room nights in April versus Q1. Domestic room nights also improved in April with very strong growth versus 2019. April gross bookings increased over 30% versus 2019, driven by growth in room nights, continued accommodation ADR strength, and continued strength in flight bookings. April gross bookings increased to almost $11 billion, which was a new monthly record. April gross bookings typically decline from March in a normal year, but while it's encouraging to see continued improvements in trends into April, the environment is still uncertain and difficult to predict with confidence how room nights for the remainder of the quarter will develop. While many countries are lifting their list of travel restrictions, COVID is still a factor which can impact travel, and of course, the war in Ukraine continues to create volatility and macro uncertainty. We do expect the recent strength in ADRs to continue for the remainder of the quarter. As a result, we expect the difference between the level of room nights growth and gross bookings growth for the full second quarter to be around 20 points, which is similar to what it was in April. In April, the overall booking window for Booking.com continued to move back closer to 2019 levels. We continue to see strength in our summer booking trends, and our gross bookings for summer are now more than 15% higher than they were at this time in 2019. Within Western Europe and North America, both are over 30%, albeit with a higher mix of cancelable bookings. If the current trends continue, we could see a record summer travel season, and we're gearing up to prepare for that across all parts of our business. Turning back to Q2, given recent booking trends combined with lengthening booking windows, we expect Q2 revenue as a percentage of gross bookings to be about 200 basis points lower than it was in Q2 2019. This 200 basis points difference in revenue as a percentage of gross bookings is mainly timing related, and the impact could be greater if booking trends accelerate from April, especially if a high percentage of these bookings are staged in future quarters. The timing impact on take rates in Q2 is driven by a combination of the acceleration in gross bookings from up 7% in Q1 to up over 30% so far in Q2, coupled with the lengthening booking window from Q1 to Q2. We expect our underlying accommodation take rates to remain stable. We expect marketing expense as a percentage of gross bookings to be slightly higher than in Q2 2019, which is consistent with our prior commentary about the opportunities for us to lean into the recovering travel market in 2022. We expect Q2 sales and other expenses as a percentage of gross bookings to be about 60 basis points higher than it was in Q2, 2021, due to higher virtual booking mix and higher third-party call center costs. We expect our more fixed expenses in aggregate to be about 15% higher than in Q2 2021, with personnel down slightly on both G&A and IT up meaningfully versus Q2 last year. The overall year-on-year increase in G&A is driven by higher digital sales taxes, which is tied to revenue, as well as increased office expenses due to the return to hybrid work environments. We expect IT to increase year-over-year at similar rates to what we saw in Q1. If we were to see similar top line growth rates for the rest of the quarter that we saw in April, we'd expect adjusted EBITDA to be over $900 million for the quarter. The expected timing difference between gross bookings and revenue, which is the primary driver of our expected 200 basis points lower take rate than Q1 2019, will have a significant negative impact on EBITDA in Q2 as our more variable expense lines are linked to bookings. If we normalize the timing impact on our take rates in Q2 2022 to be the same as it was in Q2 2019, adjusted EBITDA in Q2 2022 will be slightly higher than it was in Q2 2019. Now turning to the enhanced strategic partnership with Majorelle we discussed last quarter. As a reminder, Majorelle, one of our most trusted long-term external customer support partners, will begin employing most of the customer service representatives who previously worked for Booking.com outside of the Netherlands and the UK. We currently anticipate finalizing the sponsorship around the middle of the year. Following the anticipated closing in the second half of 2022, we expect personnel expenses to be lowered by about $25 million a quarter, but G&A expenses will be lower by $6 million a quarter. Our external expenses will increase to offset the lower personnel and G&A expenses. As we said last quarter, we do not anticipate much of an impact on adjusted EBITDA in 2022 from this initiative beyond 2022. We believe this partnership will help reduce further expense growth and enable a more efficient ramp-up of our customer service function. Outside of the P&L geography changes to the personnel G&A and sales and other expense line from Majorelle, we are maintaining the full year P&L commentary we provided last quarter. We expect the impact on our take rates is difficult to predict as it is impacted by the rate of recovery of bookings coming into and during the year, as well as the length of booking windows during the year. We do know that compared to 2021, there was a negative impact on our take rates due to timing in Q1 2022. Our current best estimates of take rates for 2022 are just below 15%, which is lower than in 2019 primarily due to timing. We expect the underlying accommodation take rates will remain stable. Timing also negatively impacted adjusted EBITDA and EBITDA margins for the year. If not impacted by timing, our expectations for full year EBITDA margins will be a few points higher than our guidance for the year. We're encouraged by our better than expected Q1 results and the strengthening trends we've seen in April, and we are confident that our focus on customer acquisition and expanding our product offerings is the right approach for 2022. We’ll now take the questions. Shawn, over to you for Q&A.

Alright, thanks for taking the question. Two, if I can, first, on the April trends in bookings and room nights, those sound nicely ahead of where street estimates are for the whole quarter. So is there any reason to think that you won't continue to build from April in terms of kind of thinking about monthly comps or anything else we should keep in mind, pull forward or pent-up demand? And then secondly, helpful color on the revenue take rates and the EBITDA impact from timing. I guess, how do we think about that as we work into next year? Should take rates at least normalize to 2019 levels next year? And does that EBITDA headwind of a few points on timing unwind you think as we get into 2023? Any help you can give us on the kind of margins and how they progress further would be great. Thanks.

Hi, Lloyd. I'll take that first one, and I'll let David go back over the timing issues that you just asked about. So your question really is trying to predict the future, which is always an interesting adventure, particularly over the last couple of years that we've all gone through. As I've said, David was saying, we're very pleased with where we are. And we're happy with what's happening. I think everybody around the world is happy about travel coming back. And we've mentioned how some of the trends that we're seeing in Asia where things are getting better, we know they're not as good as they are in Europe or in the US. That's a good positive sign. Hopefully, that will continue. We're also pleased with the things that we've been saying that throughout Europe and Western Europe and Eastern Europe are coming back. So we're all very happy where we are. But we never know. We never know what's going to happen. You know that we've done this. We had a call, our last call. And then there was terrible, terrible news shortly thereafter, regarding what happened in Ukraine. If you recall going back a quarter before that, COVID Omicron came out of nowhere. So we all know that the world is, let's say volatile right now. But I will say I am happy with where we are, and I'm pleased with the incredible job of execution our team has done. David, I'm not sure you want to add any more than that.

Maybe, Glenn, just a couple of extra points on what we're seeing in April. In March, we did see a steady progression from that first week in March where things were minus 10, up through March and April on a fairly steady basis, week on week. But as Glenn said, there's still a lot out there, and the environment is hard to predict. I would call it this Easter happened in April in both periods, so there's no Easter effect there relative to the growth rates versus 2019 in August 2021 for that matter, either. Relative to longer term take rates. And I explained on the call, take rates are impacted by timing, which is a mathematical effect that sees the difference between the amounts that you spill into the year from the prior year and the amount you still have in the current year. And of course, that can be variable based upon effects. We saw this year, we said that there was hurting Q1 on timing effects on take rates, because that's when Omicron came into play. That results in less bookings in Q1 than we would expect. So it's really going to be a function of how the recovery develops overall in terms of how rapidly things recover, and also just the timing of that recovery. So as growth rates start to normalize and get back to more normal levels, you should expect the impact upon the take rate and the timing impact on take rates to come down. But there could still be some additional factors that could impact those specific things relative to what happens in Q4 going into Q1 and the next Q4 going into future Q1s. So, normally, as the growth rates start to normalize, the relationship of revenue growth rates and booking growth rates start to align more, so there will be less effect. But there could still be unusual effects they have, like what we've seen before that could impact the specific timing of Q1 and Q4 and the relative difference between those quarters across the years.

Great. Thanks for taking my questions, guys. I have two. First one, David, I think last quarter, you talked about some like shape of the year comments. You talked about marketing as a percentage of gross bookings being a little higher than was in 2019, etc. And sales and other expenses and sort of thoughts about that as far as your bookings? Yes, I know there were a lot of pieces with ADRs moving around, etc. But can you just sort of maybe tell us your latest thoughts about some of those metrics on marketing spend for the year and sales and other for the year, however you want to kind of help us think about it a little bit? And then Glenn, good to hear about traction you're making on payments and flights, etc. I guess, talk to us about on the connected trip front, which of the initiatives you think is most likely to really have a meaningful impact on the P&L as soon as maybe 2023 from an incremental dollar perspective. Thanks.

David, you want to do that first one?

Yes, Brian. Let me go first. So with the exception of the mechanical movements, I'll talk about how they impact things a little bit. The mechanical moves relative to Majorelle, which are basically just P&L geography movements. We're not, I'm not changing what we said last time. We do expect some deleverage in marketing to gross bookings for the year. We said we expected in Q1 to be relatively flat; we were a little bit better that we were actually 50 basis points leveraging in Q1 due to a higher ROI. But we did say we'd be leaning into the busy travel season more in Q2 and Q3. So we're still expecting to see some level of deleverage during the year and also increased spending on merchandising, sales, and others; we still expect that to be about 50 basis points for the year. That’s tied to payments. The mechanics of the Majorelle adjustment with moving those additional expenses into the geography would be less than 10 basis points. So essentially, with the exception of the mechanical movements, what we talked about last quarter for how we see the year shaping up, we still expect to see the shaping up the same way. Of course, I've given you some additional color on take rates we didn't provide last quarter so that gives you a little bit more guidance than we gave you on the quarter because we now know what happened in Q1 so we can give you a bit more guidance around that.

And, Brian, talking about the connected trip. So connected trip is a long-term vision. And it's going to take some time before we get to where I believe we need to be in terms of a truly functional change in the way people are currently exploring and going through travel. I think we all know how difficult it is, and we all know that it should be better. So that's the goal down the road. In 2023, we're still going to be pretty early in this, and I think I would think we're still in the base level of just getting great verticals up and running so that they, by themselves, are fantastic products for people to use. Then just the basic cross-selling things that we think is a first step towards that connected trip. If you ask me one of the biggest things for 2023, well, the things I just talked about right now flights right now, I really like the fact again, there's new customers coming in, and they're coming in, and they're buying a meaningful number of buyer combinations. We haven't optimized that yet. That's something important. Then on top of that, I mentioned in my prepared remarks about just beginning small experiments with other types of verticals and how putting these things together can give a better experience to a customer. The great thing about these things is trying to build a belief that coming to us to Booking.com is the best way to go. So getting more repeat business and getting this done in the app so that we don't pay for that person to come to us, and increasing that loyalty. So there are a lot of ways we are trying to increase this flywheel so people know the products better and come to us. As we continue to do that, we aim to get more information and be able to provide a better proposal to them— a better offer to them that they can work more easily. And it continues to build on its own. It's going to take time, though. In 2023, I don't think you're going to see huge numbers from all the things I just talked about but you will see incremental improvement.

Thanks a lot. I wanted to explore the trends from April a bit more. The improvements are encouraging, with a 10% increase indicating significant acceleration. Can you share what specific changes you are observing? Additionally, regarding your ad spending, you had some leverage compared to GBB in the first quarter, but you're increasing your expenditure in the second quarter. How much of this is a response to what you're seeing versus a strategic decision made at the beginning of the second quarter? Thank you.

So let me tell you in general, and David, I'm not sure you want to talk in terms of any sort of numbers and levers or whatever. But yes, we are very pleased with what we're seeing. But I believe it's a combination of many things that we're working on. It really is a game of execution in the small details. It means you're working with partners and getting the right price, the right inventory. Then it's making sure we're showing it to the customer at the right time in the right way. It also includes doing things we're talking about with alternative accommodations, bringing in incremental more supply there, and making sure we're working to come up with ways that work better so that the customers have a better experience and their payments are more smooth, etc. I can go through a lot of little things that we're working on, and each one builds on its own to make it a better experience. Now, yes, we have a brand effort in the US, as you hopefully remember from our Super Bowl. I believe it was a great ad, and we're continuing this. This is not just a one-off; it’s a campaign. We tie that with some efforts in social and we're doing a lot of different things to try to increase our awareness and build that top-of-mind awareness in the US, for example. But this is a global effort really in terms of trying to build our business by doing all the little things that will make it a better product because, in the long run, the better product is what's going to win. David, do you want to speak about any specifics in terms of ROIs or levers right there?

I think, Glenn, let's go where you went because this is just not one geography. We're seeing improvements across all geographies in April, which for us is very encouraging. We mentioned that Europe is now back in high teen growth versus 2019 for room nights, and that is really encouraging. It's really the first time we've been able to talk about growth over 2019 in Europe. The US is back to very strong growth versus 2019, which we think is well ahead of the market. Glenn mentioned some of the factors. APAC is recovering nicely. It's still down, but down less than it has been. Overall, the rest of the world is back up to double digits, so all nice improvements from Q1 and all nice improvements from March. So it's not just one reason we're seeing it; we're seeing it across the world, which I think is a positive sign. I mentioned that we expect to lean in more in Q2 than we did in Q1 regarding the amount of spending and ROI, but as we said, that is really in response to the opportunity to capture demand. When we see demand and traffic on the site, that's when we can start increasing our marketing spend. So we're responding to the opportunity of recovering travel, and whereas we see travel for that is when we can start leaning in, particularly in Q3 of last year you saw us do that in prior quarters. So it's early during the quarter, but that’s why we said we expect it to be at a small level of deleveraging this quarter in marketing, but the impact we’re seeing and the change we’re seeing from March to April is very positive.

Great, and could you touch on currency with the 30% GBV figure for April? Is that reported or constant currency? The dollar has strengthened since the last call. So I wanted to ask about that.

Yes, that's a reported number. And currency is an impact, for what it's worth. When we did our guidance and our calculations here, we had your currency come down a little bit. It doesn't make a huge amount of difference. But the numbers we gave you are reported unless we call some out specifically as constant currency, for example, we call our constant currency ADRs. Everything else is reported.

Great, thank you. I guess I'm just trying to think about market share. Can you give us any indication of how much share US nights were back in ‘19? And what that looks like now? And then one question on take rates, I know your merchant, sorry, your payments platform is handling 34% versus 13%. I would think that would be increasing your overall take rates. But you said take rates are about flat. So just talk, maybe you can help us understand how the merchant business is affecting take rates? Thank you.

Dave, why don’t you take that? And I’ll just turn my thoughts on the other part.

Yes, when we talk about the underlying take rates, we're talking about the basic take rate on the room—we're not factoring in payments to that at all or mentioning the next steps. As I said, the biggest impact on timing is, sorry, the impacts on take rate is timing. We talked about it being raised significantly, but you're right, we are getting an increase in the overall take rate from our mix towards payments, and the fact that we gain additional revenue from payments. As I mentioned in 2021, for example, that was somewhat offset by the merchandising that we cannot do because we couldn't merchandise and participate in pricing actions ourselves. So we have the payments platform, and in 2022, that again will be largely offset by the merchandising activities. Now bear in mind, merchandising is also like marketing, we can turn it up and turn it down. We think that this year in a recovering travel marketplace, there's a potentially once-in-a-generation opportunity to really lean into both marketing and merchandising. But we are seeing improvements in take rates from the payment platform. And again, the number of, when I talked about the underlying accommodation take rate being very constant, that does not include the additions for things like payments or things that go on top of payment, nor does it impact anything that we do on top of that with our merchandising activities. So hopefully that clarifies the movements there.

Great. And then on US share of nights, any help there?

David, I think we don't reveal that granularity.

I think our view just as being that shared data, and we should look at the share on a medium-term basis. Single-quarter is very difficult to predict. We certainly believe that last year, with our growth in the US being strong versus 2019, we certainly covered a lot faster than the market did in 2021. We were strong again in Q1 in the US market versus 2019. And very strong here in April, so it's difficult to give you an individual share point. But when we look at the overall accommodations markets, which is a way to think about things, we know we picked up some share points in 2021. We know we are continuing to stay above where the market is in 2022 from a recovery point of view.

Yes, and I'd just say, look, I'm very pleased with what we've done over the last 2.5 years since the pandemic started. What we've been doing in building out our business in the US, and I made the point of how important it was strategically to do better in the US because we had been under-indexed in the US. We have been doing a lot of blocking and tackling over these 2.5 years in the midst of this pandemic. And we're beginning to see it come through, and I'm very pleased with the results up through Q1.

I am here. Sorry about that. David, a question for you. And then one for Glenn. David, you’d talked about take rates this year being I think just below 15%, or something like that. You said that would be a few points higher if not for timing. So I want to ask you—is this implication that once we get beyond these unusual timing issues for a variety of factors this year, that the normalized take rate is a couple of points higher, like 17%? You haven't done that; your booking has done that in the past, but that's going back 5, 6, 7 years. But is that the implication of your statement? And then Glenn, about the connected trip? I wondered if you think that there's something that has structurally changed, that makes connected trip more attractive, more viable, or more impactful than it has been historically. I think about the history of online travel, and there were connected trip companies, but they never would large package business but never generated as many room nights as you did. And you were a solo lodging company. Is there something that's changed now, maybe it's much greater use of mobile or mobile apps that just makes the connected trip a greater needle mover today than it was historically? Thanks a lot.

Yes, let's not confuse the difference between the impact on EBITDA margin and actual take rate percentages. What we talked about is the fact that let's go back to some numbers: in 2019, take rates blended across the year was 15.6%. In 2021, we said it was 14.3%. We said last quarter, it was somewhere between those two; this quarter we gave you a bit more guidance because we know more about the timing impact in Q1. So we said just below 15%. We said that the impact on timing would cause a few points of EBITDA margin compression. So it will take a few, so we said last quarter, and we still maintain that our EBITDA margin rates for the year will be a few points higher than it was in 2021. And what we said at the last call was clarified again today. If it wasn't for the impacts of timing, the EBITDA margin would be a few points higher again on a normalized basis. So the fact that take rates are being hurt for the full year is causing us to have a few points of compression on our EBITDA margin this year, which is timing related. We did not say that take rates would be significantly lower; we said that they would just be below 15%. If you normalize that from just below 15% back to 15.6%, something like that, then that will give you those few points of EBITDA that we talked about.

Okay, yes, sorry that was my mistake, and I can confuse you. Thanks, David. And thank you, Glenn.

Thank you for taking the questions. So I want to come back to the comment you made in the prepared remarks on investing in supply as we go deeper into 2022. Can we talk about what kind of investments you feel you need to make? And also, as you look at the base of gross bookings in the booking window, you have now deeper into the year, where do you find yourself with elements of supply-demand imbalance on either the shared accommodation side or the hotel side that you're trying to sort of unlock or think about not only just for summer of ‘22, but beyond it to 2023? Thank you.

Sure. So maybe talk a little bit about trying to build our supply in areas where we think we need it. I've talked about this in the past regarding the alternative accommodations area, where we think we are not as well positioned as some of our competitors, especially in the US. We absolutely need to go out. Firstly, we have to ensure we got a product that people who own properties want to put on our platform. That's kind of the new things I talked about in terms of liability insurance in terms of a payment system that is actually workable. But then we have to make people aware of this. And that's going out; we mentioned we have a new campaign out, and we're spending money. It’s more than just marketing out there. It’s actually individuals talking with the big owners of multiple properties, making sure they understand what we can bring to them. That's how we start to bring in more of that because we don't have the supply; you've never become business. So we do that. And then we obviously have the second side of this two-sided marketplace, making sure that consumers are aware of this too and making sure they are coming to it. That's how we're going to do this over time. I've mentioned how we had a net increase in alternative accommodations, and I'm very pleased about that. We are going to keep on building this, and it builds on itself. This is again, it's one of those things where it’s like a snowball, and you need to get it rolling. Then it will build faster and faster. It's going to take some time, but I'm pleased with where it is in terms of the window. Can you repeat that part of the question?

Great. Thanks for taking the question. I just wanted to ask about international recovery. It seems like you're suggesting it's coming more from short haul. Just curious what you're seeing in terms of long haul and how you're thinking about none of that coming back.

Sure. I’ll start—

You start.

So yes, you're right. The international recovery in total, international bookings in total across borders, we define it in April as down a little bit. Short haul within Europe is actually up decently, but long haul is still down not surprisingly. I mean total to see the international booking number close to flat for April, I think is a great step forward. Not surprisingly, inter-region is going to recover fastest. Most European countries have now relaxed all restrictions for travelers within Europe, which is great. Long haul is still down but also rapidly improving. We see strong growth from travelers from the US, for example. Obviously, travel into and from Asia is still down and that's an important destination for both US and European travelers when you look at long haul routes.

And David, you basically said what I was going to say. We have a situation that is very tied somewhat to restrictions, and countries that are typical long-haul destinations, some of them in Asia, for example, as they'll begin to lighten up and feel more confident they can go without having to do a lot of different things. They won't have to quarantine, or get a test done beforehand; as these things go away, then people will travel more and more on these long-haul trips. So I definitely remain positive on the continued trend in this area.

Good, thank you both.

Okay. Was that the final question?

Okay, thank you. As always, I want to thank our partners, but I really want to thank all of our partners who have generously contributed to our refugee platform. Also, of course, want to thank 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 all and good night.