Expedia Group Inc (EXPE) — Q3 2021 Earnings Call Transcript

Good afternoon, and welcome to Expedia Group's financial results conference call for the third quarter ended September 30th, 2021. I'm pleased to be joined on the call today by our CEO, Peter Kern, and our CFO, Eric Hart. Following discussions including responses to your questions, reflect management's views as of today, November 4th, 2021 only. We do not undertake any obligation to update or revise this information. As always, some of the statements made on today's call are forward-looking, typically preceded by words such as we plan, we expect, we believe, we anticipate, we are optimistic, we're confident that, or similar statements. Please refer to today's earnings release and the Company's filings with the SEC for information about factors which could cause our actual results to differ materially from these forward-looking statements. You will find reconciliations of non-GAAP measures to the most comparable GAAP measures discussed today in our earnings release, which is posted on the Company's Investor Relations website. And I encourage you to periodically visit our IR website for other important content. Unless otherwise stated, all references to cost of revenue, selling and marketing expense, general and administrative expense, and technology and content expense exclude stock-based compensation. And all comparisons on this call will be against our results for the comparable period of 2019. And with that, let me turn the call over to Peter.

Thanks, Pat. Thank you all for joining us today. Eric and I will make some brief comments and then, of course, take questions. Let me begin by saying we're very pleased with the quarter we had in Q3, nearly matching our adjusted Net Income and EBITDA from 2019. But I would add that if not for Delta, this would have been our most profitable quarter ever—and I think it's a tremendous milestone for the Company to be here while we are still in the throes of COVID and still coming out. And a testament, really, to the work we've done to simplify the Company, to focus on technology, and to run the business more efficiently. And with that performance and what we're seeing in the market, we have the confidence to further pay down our preferred stock, which we did a few weeks ago. And as far as the trends for the quarter go, I'll do high-level and Eric will give a little more detail. We went into the quarter following a strong Q2 and good momentum. But as we remarked last quarter, Delta had begun to have an impact. We saw it impact cancellations, we saw it impact booking trends. But as we got through August and into September, the Delta fears particularly in the U.S. began to wane, and we ended stronger in the back half of September, and that has continued into the fourth quarter with even greater strength. We've seen improvement across all segments, really. Well, we heard domestic have led even though segments which have been harder hit by corporate and international travel have been coming back. Cities have been returning as well. And so all-in-all, it's been a broad-based recovery, but it has been led obviously still by leisure and domestic travel. And for us, Vrbo has been a particular highlight and beneficiary of that. Few highlights on Vrbo, since you've always asked. We've seen strong share growth in our focus markets. And in particular in the U.S., about half of our customers so far in 2021—more than half—have been new customers. We expect to book in excess of $2 billion of earnings for new Vrbo hosts who came on the platform this year. And looking ahead, we are already seeing better bookings for next summer than we saw this time last year. So, the trends continue to be quite strong there. And while the story will continue to be impacted greatly by mix effect, which I talked about before, we are feeling more and more confident. And as international vectors open up, which you've no doubt all read about, this is a particular strength of ours historically, and we think again that is a mix effect which will generally benefit us. And COVID recovery, of course, remains somewhat bumpy and as unpredictable, to say the least. But we're feeling good and at every turn, we are seeing demonstrated that when people can travel, they will travel for business, for pleasure, and everything in between. We are looking forward to seeing the rest of our business return. In terms of some of the details in the business on the marketing and brand side, our focus continues to be on bringing customers efficiently back to the platform and retaining those customers for the long term and building those long-term direct relationships. Obviously, the better our product is, the better our customer experiences and the proposition, all those things add to that direct relationship, and we're feeling confident about the work we're doing on all fronts. But marketing, of course, is the typical sphere. And with our new focus on being a family of brands, we have announced that we will be launching one loyalty program which will actually cross all our brands and all our products. We think it will be the most powerful loyalty program in the industry. We are really excited about bringing that extra usability and added value to our customers through that loyalty plan. Because when we get to a place where people can use it across all brands, across all products, we think that just adds tremendous value to the customer. You should expect to see us do more of that. We will be looking for more ways to unify our brands in a united front of bringing value to the customer in every way we can. We spent the better part of the last six quarters building out the organization. And in particular, in the last few months, building our creative organization. We've improved, as I've talked about before, all our performance marketing tools and technology. We're very excited about our position right now. But we went into the third quarter and specific with a much more aggressive posture. Delta hit, we have pulled back somewhat. And now again, that we are seeing things growing and recovery building again, we are winning back in. We intend to go on the offense with all the new tools we have in our arsenal and our marketing group. We expect to go on offense and expand share across the world. On the B2B front, which we haven't talked about a lot in the past quarters, I want to highlight a few things here. We brought our groups together as I remarked last quarter, our supply team and our business we have called Expedia Partner Solutions, which is a business we have used to power other partners in the travel industry. We brought those together officially in the last few months, and we're seeing lots and lots of opportunities for those businesses to build on the relationships we have with our supply partners, with our B2B partners and find increasing ways to drive their business and drive their success on our platform. UPS itself has done well even during COVID. We've won wallet share with our partners. We've had many new signings, and for the first time in late October, we actually booked more business than we did in 2019 in that business and that has continued into November, so great signs there. And then finally, on the Egencia front, we've all seen earlier this week, we announced the conclusion of our transaction with Amex GBT. We have merged Egencia and Amex GBT. We will retain a significant equity interest. We feel really good about that corporate. We believe this will become—coming roaring back. Egencia, even during this time of transition had its highest signings this year that it's ever signed in terms of new clients in the first half. So, lots of good signs there. This deal is emblematic, as I said before, of our desire to power more of the industry. We want to power Amex GBT with our Expedia Partner Solutions business, with our technology, and with our supply, and that is something we will continue to build on as the months and years unfold. Very exciting. I just want to thank the Expedia team who did a tremendous job building that business and getting it to a place where we could find such a great transaction, put it together with someone else, and work through the time we had during the transaction and do just a terrific start. So, I thank them, the Expedia team, for getting to help close that transaction. Finally, while I've talked a lot about technology in the past, I will see this brief. I am as excited as I've ever been since I started about a few months ago regarding where we are in terms of our technology evolution. We certainly have a lot of work left to do, but it can't be understated the importance of finally being aligned on our technology, on our roadmap, on our architecture. We have one plan, and everybody is rowing together and our velocity is increasing. Delivery, most importantly, to the customer, will increase along with it. Just for clarity on the front end, we're focused on being data and design-driven and focused really on personalization and using all the data and machine learning—the opportunity is great for a better and better experience for the customer and for our suppliers. On the back end, we're really re-architecting everything. As I've talked about, we've moved from this many technical stacks to one stack on one pool of data that serves all the outcomes, all our partners, and all our customers, and it's really getting exciting. This moment for us is really important as we move into 2022, getting all of this aligned, getting the work streamlined, getting everybody on the same roadmap is a powerful opportunity. It reminds us that we're finally getting to what we wanted to be getting to, which is delivering new value to our customers. We've been internally focused for a lot of COVID. COVID was a tough thing to get through. We're now in a position where the entire Company is aligned. We can see the light at the end of the tunnel concerning COVID and the opportunity to innovate for the customer and bring great new products and value is really exciting to us, and we're looking forward to doing that. And with that, I will pass it over to Eric.

Thank you, Peter. I'm also pleased, as Peter mentioned, with the overall recovery of our business. As you will see, it includes two quarters in a row of positive adjusted EBITDA. In Q3, excluding the impacts of the Delta variant, our results were roughly on par with the third quarter of 2019. I wanted to start by providing an update on the booking trends that we have seen and are seeing. Following a pullback we witnessed for much of the third quarter and into the first part of September due to the Delta variant, we saw a notable broad-based improvement across geos and product lines. Overall, total bookings for all products net of cancels were down 30% versus the third quarter of 2019, which was slightly worse than the 26% decline we saw last quarter. Given the continued volatility in recovery, we also provide additional monthly detail on our total lodging bookings net of cancels. That, of course, includes bookings in hotels and Vrbo. In July, bookings were down approximately 17%, down approximately 25% in August, 19% in September, and further improved to down only 2% in October. The trends we saw in October improved throughout that month, so we exited at a much-improved rate relative to the start of that month. Moving to the P&L, starting with revenue, it was down approximately 17% versus the third quarter of 2019, which was a meaningful improvement from last quarter where revenue was down approximately 33%. We saw significant improvement in both Vrbo and hotel revenue, which benefited from seasonally strong summer travel. Revenue margin for the third quarter was approximately 15%, up from approximately 10% last quarter. This was primarily driven by typical third quarter seasonality in the business and product mix weighted towards lodging. On sales and marketing, direct spend in Q3 was approximately $1.1 billion, which is down approximately 19% versus third quarter of 2019 levels. As Peter mentioned, we've reduced spending, given the reversal in trends we witnessed in the third quarter. However, going forward, given the more positive recent trends that we have discussed, we are again leaning into marketing expenses in Q4. Moving onto overhead costs, they totaled approximately $530 million, a slight decrease versus last quarter and below our expectations. We saw lower than anticipated discretionary spending, which was down roughly 90% versus the third quarter of 2019, as employees continue to largely work from home in the quarter. I would also call out slower than anticipated hiring, as there continues to be a high degree of competition for talent, especially for technology roles. Looking ahead, we expect overheads to increase by approximately $40 million sequentially in the fourth quarter, primarily due to lower capitalized labor, due to the holidays, as well as higher anticipated headcount and people costs. In total, adjusted EBITDA was approximately $855 million, which is approximately $650 million improvement over last quarter, driven primarily by typical seasonality. Moving on to free cash flow, we reported a total negative of $1.4 billion in Q3. If we exclude the change in restricted cash, which was primarily driven by the change in Vrbo deferred merchant bookings, free cash flow was negative for approximately $450 million. As a reminder, the third quarter is traditionally a low quarter for free cash flow due to seasonality. In terms of the balance sheet, we continue to be investment-grade rated today and remain committed to deleveraging back to more historical levels. This will further reduce our cost of capital. As you may recall, we refinanced some debt earlier this year, yielding $80 million in annual interest rate savings. Last month, as Peter mentioned, given the improving trends and continued confidence in our liquidity position, we paid off the remainder of the preferred stock. In total, paying off all the preferred stock this year will save us approximately $150 million in annual dividend payments. Finally, on the Egencia front, I want to echo Peter's comments, and thank the Egencia team, as well as all of the Expedia employees who were involved with Egencia for their dedication and hard work. I would also like to point out page 17 of the earnings press release which provides details on Egencia's financials. For the third quarter, Egencia generated $55 million in revenue and negative $18 million in adjusted EBITDA for the third quarter. As it relates to Egencia costs in the third quarter of 2021, rough numbers included approximately $35 million recorded in cost of sales, $20 million in sales and marketing, and the remaining roughly $20 million spread across tax content and G&A. Going forward, we will report our minority stake in the combined company within the other income line in the income statement. In terms of the 10-year lock-in supply agreement with Expedia Partner Services, we will account for it like any other standard EPS deal. As a reminder, at 2019 volumes, we expect the EPS deal to be worth in excess of $50 million on an annualized basis. In closing, as Peter and I both mentioned, we're quite encouraged by recent trends. The pace of recovery is clearly improving. Things are getting better. I remain truly and very optimistic about the future of travel and our Company. So, with that, Charlie, we are ready for our first question.

Yeah, hi. Thanks a lot. A couple of questions. Maybe Peter, you can give us some color on your thoughts around marketing spend. Do you continue to see scope for efficiencies here going forward, where do we stand today? And then the second question I had is just around the organization structure going forward? I think you guys had outlined cost savings from the reorg—$750 million in fixed costs and $200 million in variable. As we think about the organization build-out from here on, where do we stand with respect to that?

Sure. I'll go first, and Eric can take on the cost issues. I would say we're still working towards a better marketing world for the Company overall, which yes, means more efficiently being able to get customers. But it's a multi-pronged approach. It's the performance marketing issues that I've talked about before. We have come a long way in terms of the tools, the data, and the algorithms, etc. But COVID has been a bumpy time, and we have not found normalized time to really get everything tuned exactly how we want. Yes, we believe there's opportunity ahead of that. We also believe there's significant opportunity for our brand teams to really be much more impactful than they have historically. That has an impact not only on driving direct customers but also on how people respond to performance marketing and other things. So, there are many places where those teams can have more impact and ultimately be more efficient in attracting customers. It's not entirely on that. We've got to build better products. We've got to have better engagement cycles with the customer. We've got to improve our service—every— part of our game to continue to make the customer stickier and bring them back and want them to make this their place to come for travel. Marketing can be more efficient, but it's really a virtuous cycle on how we've streamed marketing together with the experience. The new efficiency gives us more opportunity to reinvest in more profitable long-term customers who create long-term value for the enterprise.

Great. Thanks. I'll take the second part of your question regarding the cost structure. On the fixed side, the most recent update provided was $700 million to $750 million, and we expect it to land at the higher end of that range. On the variable side, we set to achieve greater than $200 million, but remember that at normalized levels, we need the volume to come back to see that fall into the end of the P&L. Both of those are substantially completed. There's been a ton of work by the team to simplify the business. We're feeling really good about both the fixed and variable side. I'll also add, we are a technology company. We're going to continue to invest and improve our services for our customers and the way we operate this business. While this program I think has been a tremendous accomplishment in simplifying our business, we don't expect to stop there; we'll keep going. From a program perspective, I think we can put the billion-dollar investment to rest.

Thank you, Peter. Thank you, Eric.

Thank you.

Great. Thanks so much. Could you dig in a little bit into the significant improvement that you saw in booking trends in October? If you could talk about key segments, geography at all, maybe Vrbo versus hotel? Thanks a lot.

Thanks, Kevin. I would just say generally, I know it feels planned, but we've seen it everywhere. Cities are picking up, international has picked up—virtually every area has seen growth. I will say that some of the benefit we have seen, and I've talked about mix effects before, when cities were forbidden places that obviously hurt us. Cities have been a great market for us. As we've seen cities come back, there are still greatly lagging major leisure destinations like beaches. But they're coming back, and that return benefits us probably disproportionately compared to some others. So that mix effect, we have some winners and some losers, but we've seen cities come back more. We've seen—relative to the growth, we've seen in the consistently strong leisure areas. The opening of international channels—announcements from U.S. from Singapore, etc. about allowing international travel, we see that whip up basically as soon as it's announced. We see search queries go up. In places like EMEA, where we're traditionally stronger in international travel as compared to domestic, those openings I think all go well for us going forward. It really is a broad-base recovery. It's not down to every country because there are lifting countries that have COVID spike, but we're seeing improvement too. It’s really broad-based, and it's just about the base you're building off of, and some are different than others.

And then only to add to that, as we've talked about over multiple quarters now, there will be volatility in the recovery of the series of many stories and a lot of the intersection points that Peter just mentioned, so we'll continue to monitor and manage our marketing spend appropriately, as we did in Q3. We have the brakes on some areas of that just because we saw a bit of a slowdown, but so far, so good in October and going forward.

Very helpful. Thank you.

You bet.

Thanks. This is Zach on for Deepak. Just two questions. First, your kind of large main competitor in the space—booking.com. Your room rates are still lagging. I think they’re down 33% in the third quarter versus 2019. That's lagging kind of bookings performance. Is there any kind of driving force or explanation for that Delta and performance? Is it a mix of certain markets lagging, a timing difference in reporting structures? Any color there would be helpful. The second question is around COVID restrictions. I know it's very dynamic and hard to predict, but are you seeing any differences in terms of travel restrictions and implications on demand when we see COVID cases rising in certain markets now versus 6 or 12 months ago? Thanks.

Yes, thanks, Zach. A lot of good questions in there. I would say, first off, remember that they report on bookings; we report on stages, so it's sometimes challenging to compare. But I'd say, as I've said before, and I mentioned regarding cities—the mix has helped them. They've always been better in smaller markets, long-tail markets, etc. We've been really strong in big cities. When cities were dragging, cities get built by international travelers, and we have been strong in long-haul air for those travelers, like all those mix effect actually impact things. Some of them we won in, and Vrbo has been a beneficiary, with some of them we lost in big cities and international travels. We're less focused on room nights rather than room dollars, if you will. It's a little misleading. We could book a million more one-star hotel nights, and it wouldn't mean much to our P&L; we could book 100,000 five-star hotels, and it wouldn't mean a lot. You have to take it all into balance, but we're feeling good about the recovery. Our numbers domestically are running ahead, in lodging, of where we were two years ago. We feel we're in good shape there, and we feel good about that. We have had a somewhat conservative approach along the game with COVID. We've been, as Eric mentioned, tapping the brakes. We tried to respond. Sometimes we get over our skis; sometimes we're behind the recoveries. It's a balancing act, but we're getting more confident and aggressive. I think you'll see us continue to lean in to gain share across the globe. In terms of the COVID question, it remains to be seen at every, as Eric said, every story has its own. But I will tell you if you look at recent news, for example, of the COVID cases in the UK spiking from recent openings—when I was in London, it was amazingly open. I would say that queries have remained elevated since the international announcements to the U.S. and they remain elevated. We have not seen a pullback from the caseload news, so I think that remains strong. Science is helping us out along the way. We've just announced that kids will be able to be vaccinated in the U.S., which is a great benefit for society, let alone our business. Likewise, the announcement today about the UK approving the Merck pill for treatment—this is, I think we all agree, is probably going to be an endemic, not a pandemic. The more treatments we have, the better off we're all going to be.

Very helpful. Thank you.

You bet. Thanks.

Thanks so much for taking the question. Maybe following up first on the growth initiatives when you're looking out against the recovery. Are there any things we should be keeping in mind in terms of the ability to continue to grow supply or align some of your supply priorities, especially outside of North America, to capture as much of that growth as you can? The second question, guys, comes back to capital return and how you're thinking about a more normalized environment. Booking.com called out the ability to possibly return capital to shareholders as we get into early 2022. Any updates on how you're thinking about return of capital on the balance sheet over the medium to long term? Thanks so much.

Sure, Eric. I'll take the first one and Eric can comment on the second one. I would say that we continue to look tactically around the globe at what the right vectors are to focus on in terms of supply. I don't think we feel like we're terribly deficient, but we've been a little bit peanut buttered around the globe. As we did with Vrbo during COVID, we're very focused on those compression markets, freeing up supply there, making that supply really successful right out of the gate. That is the virtuous cycle we think is most valuable. You will continue to see us do that for Vrbo, but you will also see us do that in a very targeted way around the globe. That's where the focus is tied into where we are marketing, where we are driving our brands, and where we think we have the opportunity to win. Remember, in many markets around the globe, our B2B business or Expedia Partner Solutions business drives those markets more than our direct relationship with consumers, so driving the right supply to feed those businesses is also a critical piece. We will continue to drive into it. If anything, we've been relatively modest in terms of supply growth during COVID, with a particular focus, again on Vrbo, which is a different use case. But as things are reopening, we're seeing more demand. You will see us go after a targeted way, more supply again, in a very targeted end-to-end way, keying on the markets we're focusing on growing and where those markets want to travel to. We feel very good about that opportunity. It's just a question of focus.

Yeah. Thanks for the question, Eric. I'll take the second component. Our philosophy and strategy is consistent. First and foremost, we want to remain investment-grade rated and will commit to that going forward. Second is our commitment to continuing to lower our leverage ratios and get our cost of capital down. We've taken some great steps on that this year and will continue to make progress as we move forward. The third is our Company has traditionally been committed to returning capital to shareholders in different forms. Right now, it's not necessarily the right time for us to do it, but it’s certainly something we are committed to doing over the long haul. We'll continue to observe and make what we deem to be the right choice at the right time to move forward.

Thanks, guys.

Thank you.

Thanks. Just two quick questions. You referred to those growth rates for the four months, July, August, September, October, was—I'm sorry, was that room nights or was that bookings? And then secondly, I know you said that generally all the regions are recovering. Just to be specific about it, and I know that there are flareups in countries or markets here or there. But in the major European markets like Germany, you didn't see a—whatever, a dampening of demand at the end of October recently. Thanks.

Yes, I'll take the second part first, Mark. There are some blips here and there. For better or worse, I wish our business were bigger in domestic EMEA, but we don't feel those blips in quite the same way, and we had the countervailing issue of more interest in international. So that has probably offset some of what others may have seen. But yes, there are blips here and there. As I mentioned, even in countries that are more COVID-challenged, we have still seen sustained interest, probably buoyed by the international factor, as opposed to what was going on in the summer.

Mark, on the first question, it is lodging gross bookings, excluding cancellations.

Okay. Thank you both very much.

Thank you.

You bet. Thanks.

Great, thanks for taking the question. I just wanted to ask you about your comment on continuing to gain share. Can you expand on the initiatives that you guys have made on your end to allow you to gain share and whether you think that is sustainable?

Yeah, thanks, Mario. Look, I think it's a combination of good work we've done and popular use cases. We know that the whole-home solution has been a very popular option during COVID, and that has helped us compared to apartments in cities, where we might be less strong. But on the 'what are we doing' side, we felt a tremendous amount to work on the brand, to land the brand, and to make people really think about Vrbo as a primary source of vacation options. We've invested more than ever, much more than ever, in that brand, and we're driven that hard. More than half our users so far this year have been new customers to the experience, and we think the experience is great. We do think we've sustainably landed the experience on the use case and the brand, and that will continue to benefit us for many years to come. How share exactly shakes out when the market moves back, or if people who go into cities will change. We're not strong everywhere. In terms of Vrbo supply, we are more focused on leisure destinations. We think we sustainably put Vrbo in the minds of many people and other brands in other parts of the world that are strong, like stays in Australia, etc., and that is a powerful long-term benefit for us.

Great. Just a quick follow-up. In terms of the new users on the platform, have those user behaviors matched those of prior users, or have they been stronger during this time? How should we think about the new cohort? Thanks.

Yeah, I think it's early to say. I'd like to tell you that people use Vrbo every two weeks, but they tend to need vacation time, school vacations, and other things. We'll know more as things unfold, but again, as I said, bookings for next year are already running well ahead of this time last year, when there was a lot of pent-up demand for Vrbo. We are seeing the multiplication effect of adding new successful customers to the experience and piling those things up. People are figuring out they better book next summer, next Christmas, or spring break. That's a really powerful cycle that works for us. We're really excited that we've added so many happy customers to the experience, and we believe there will be tremendous long-term value from them.

Great.

Thanks.

Hey, this is Daniel for Doug. Thanks for taking the questions. First, Peter, you talked about improving these experiences a few times in your prepared remarks, so I assume combining the loyalty program would enhance those. But I'm curious to hear where you see the biggest opportunities looking ahead. Secondly, could you guys talk a little bit about how your bookings look like today and how that compares to what you saw earlier in the year and historically?

Sure. I'll take number one again and let Eric take number two. I would say, frankly, we see enormous opportunities across a wide swath of work to improve the customer experience. Some of that is yes, things like loyalty, which can enhance what it means to be part of our platform. But it’s also working on the product, payments, CRM relationships with customers, how we give them information, how we reveal and give them the discovery process to find the right products at the right time. All of these are real opportunities and ripe for innovation. We invented this industry 25 years ago, and I wish we had done more to innovate for the customers. We've done a lot, but there's a tremendous opportunity ahead across virtually everything we do from service to the product to how they discover book multiple products in a trip to how they get informed about cancellations or delays, the app becoming their companion in terms of experience. We are working across all those fronts and determined to keep bringing innovation to the customer every week, month, and quarter for the next many years in a way and velocity we haven’t done in a long time.

On your second question, just on bookings, we continue to see it revert back in trend towards what we would have seen or expected in 2019, though it’s still a bit skewed. On the hotel side, it continues to be a little more on the shorter-term side than Vrbo, which is a bit on the longer-term side at a macro level, so still a little bit impacted by COVID and booking patterns, but generally trending back to normal levels.

Great. Thank you.

Thank you.

Hey, great. Thanks for taking my question. Just regarding what you mentioned on the loyalty program across all the brands, can you sort of talk about how your tech stack is going to be able to do that, sort of merchandise say flights with Vrbo and then developing more of a vertically integrated tech stack around your loyalty program?

I wouldn't describe it quite that way, Jed. But what I would think about is we're building every domain that we own—think loyalty, checkout, etc. to be multi-tenant and to work across our brands and partners, because we have many B2B partners. In doing so, we enable our brands or multiple brands to live on one stack, to live in one currency, if they wish to allow you to earn that currency and burn it wherever you want. This is one of the powerful things we talked about, new Vrbo customers coming on the platform. Imagine when they're not only in the Vrbo product stream and enjoying that, but then they are earning value they can use across air and other things when they have different travel needs. Likewise, the Expedia and Hotels.com travelers who might want to rent a Vrbo for a vacation. The expansion of being able to spend across all those brands is that architecture for our technology, which is really building everything we do into multi-tenant, ultimately having all our products on one app, all on one stack, and one way. That doesn't mean we want to separate brands, but they'll run on the same technical infrastructure. They'll have their own differentiation for brand, etc. It’s all going to be built for us and our partners.

Any update on where you are in terms of having more Vrbo supply on-brand Expedia?

We have Vrbo supply on Brand Expedia, but the experience isn't terrific. It's a little disjointed for the customer. We need to solve the entire customer experience—not just getting the content up—making the checkout process seamless, making servicing seamless, and making it all feel like it’s coming from the right place. That's a big opportunity; it’s one of a dozen of equal opportunity. But all of it is enabled by getting the tech right.

Thank you.

Hi, guys. Thanks for taking the question. With travel coming back and Booking.com calling out lean into marketing channels yesterday, can you talk about any changes you're seeing to the competitive dynamics within performance marketing? The second question: sounds like nice progress being made on the technology rebuild. Can you help us just more tangibly understand what this entails? Do you have any examples? Thanks so much.

You’re on my favorite topic, Andrew. There are myriad opportunities. We have massive opportunities on the CRM front. We're not adequately focused there, and the app is not a seamless product across all our brands. That’s a huge opportunity. The ability to sell multi-products, which we've been a leader in the industry for years, could be so much better in terms of how our checkout paths work. So there are numerous options; many of them unlock and enable really big opportunities on the B2B front and our ability to power partners, suppliers, etc. We could give a dissertation on this if you'd like, but in the meantime, suffice it to say there are dozens of them around the Company, and they are big rocks and big opportunities. As far as competitive dynamics, we've kept it pretty consistent. We've leaned into brand marketing, and frankly, we've leaned into brand marketing even when maybe it could have been sharper—that's why we rebuilt that team. We're bringing the creative teams in-house now and really going at it in a different way. We expect to be balanced. We've seen our competitors move around and gyrate a bit, but we've kind of kept to a balance between brand and performance. We believe there's an opportunity to be more aggressive as our performance marketing machine gets sharper and better with all the right tools. So, I think we will have opportunities to lean in. I'm excited about what our brand teams are going to do. They are second to none in the industry. We'll be the best in the industry, and our performance marketing will be phenomenal.

Thank you.

Thanks, guys. Very thorough call. I want to ask a little more color on the mechanics of the GBT Egencia deal. We think Egencia traditionally has gone to market with low air fees and made up for that by making a margin on hotels, leveraging the supply footprint. I want to check on the mechanics and see if the margin there would be comparable to Partner Solutions or any other color there? Thanks.

Hi, Brian. It's Eric. I'll take this, and I don't mean to be flippant in my response, but ultimately, you've got to ask GBT and Egencia going forward what their ultimate strategy is. I can't say that they plan to run against it, but it’ll be a core part of their offering and they may expand some of their existing customer base. We see a great opportunity with that relationship that we have. We see an opportunity in the equity component we have, and we see upside with some of their other volumes as well.

Our goal is to continue to export more of our technology to power more of our partners. We think that is our true advantage. As a partner, we hope we can find more ways to help Amex GBT monetize their customers better long-term and serve their customers better.

Very clear. Thanks, guys.

You bet. Thank you.

Hey, guys, thanks for taking the questions. Just two. On the Vrbo bookings strength you talked about for summer '22, wondering if you have any comments looking at rates and occupancy, the split between that. The second one, just direct mix—maybe how that's been trending and how you see that direct mix evolving with the investments you're making in tech infrastructure around Vrbo and loyalty. Thank you.

Yes. I'll take those in reverse. Vrbo has consistently had a strong direct business. I mentioned our continued investment in brand across the globe, really on Vrbo and its sister brands. We mentioned two or three quarters ago that we got out of performance marketing for Vrbo in the U.S., and it benefited from that with more direct traffic. We feel very good about the direct nature of that business. How the product will continue to improve and how loyalty will add to it is just another vein of opportunity across our Expedia customer base, hotels customer base, etc. So, we want to create that universe of people that want to move between our brands, use them, and build value. I think we will continue to see that. As far as rate and occupancy goes, rates have been very strong throughout COVID. There has been a lot of competition for the product. Owners and managers know that, and they have pushed prices where they could. We've seen many price increases, and those have held. There seems to be no abating of those. Likewise, occupancy in those compressed markets—you want to be on a beach in the Southeast or on a beach in Hawaii at Christmas? Good luck. It's hard to get. We will keep seeing that. I think that’s why you're seeing this effect of wanting to get out in front next summer and get the house I want. That's smart for the consumer and great for the business; it gives us a lot of confidence going into next year that this use case will continue to be highly top of mind for many consumers, and we are well-positioned. With that, I will thank you. Thanks, Dan. Thanks, everybody. I hope you all stay safe. We look forward to seeing travel recover and feel free to start your corporate travel now; it's safe out there. Thanks for your time.

Thanks, everyone.