Booking Holdings Inc.

Good day and thank you for standing by. Welcome to the Booking Holdings Q3 2021 conference call. Booking Holdings would like to remind everyone that this call may contain forward-looking statements which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guaranteed of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual results may differ materially from those expressed, implied, or forecasted in any such forward-looking statements. Expressions of future goals or expectations and similar expressions reflecting something other than historical fact are intended to identify forward-looking statements. For a list of factors that could cause Booking Holdings' actual results to differ materially from those described in the forward-looking statements, please refer to the Safe Harbor Statements at the end of Booking Holdings' earnings press release as well as Booking Holdings' most recent filings with the Securities and Exchange Commission. Unless required by law, Booking Holdings undertakes no obligation to update publicly and forward-looking statements, whether as a result of new information, future events, or otherwise. A copy of the Booking Holdings Earnings Press Release, together with an accompanying financial and statistical supplement, is available in the For Investors section of the Booking Holdings website, www.bookingholdings.com. And now I'd like to introduce Booking Holdings speakers for this afternoon, Glenn Fogle and David Golden. And I'll turn the call over to Glenn Fogle, your CEO. Please go ahead, sir.

Thank you, and welcome to Booking Holdings' third quarter conference call. I'm joined this afternoon by our CFO, David Golden. I am pleased to be reporting strong results today for our peak travel season, sir. Compared with 2019, Q3 room nights were down 18%, which was an improvement from the 22% decline we previously reported for the month of July and the 26% decline in Q2. The improvement since July was primarily driven by stronger room night trends in Europe. In the United States, room night growth in Q3 was strong but lower than Q2. Asia room night declines in Q3 were about in line with Q2 and remained down significantly versus 2019. International travel, which is important to our business, drove the overall sequential improvement in room night trends from Q2 to Q3. Nevertheless, our international room nights remained significantly depressed versus 2019. Q3 consolidated revenue of $4.7 billion was more than double the amount of revenue in Q2. The third quarter was also our most profitable quarter since Q3 2019, with $2.1 billion of adjusted EBITDA and a 45% adjusted EBITDA margin. Moving into the fourth quarter, we have seen a further improvement in our room night trends in October, including early signs of a pickup in room night trends in Asia. However, Recently rising COVID case counts in many countries, including several important European countries, adds to the uncertainty around how November and December trends will progress. David will provide additional details on our third quarter results and what we are seeing so far in the fourth quarter in his remarks. The improvement in trends we saw in the third quarter and so far in the fourth quarter following the negative impact from the Delta variant in July and August once again demonstrates the resilience of leisure travelers who are looking to travel when it is safe to do so and restrictions are lifted. We are confident that we are on the path to the eventual strong recovery in travel demand globally. As the global recovery continues, We are making progress, strengthening our core accommodation business to support its long-term growth. As I've said before, the strength of our core business comes from driving benefits to our traveler customers and our supply partners alike. For our customers, we are aiming to create a superior booking experience and build stronger relationships, which we believe is accomplished by addressing our customers' critical needs of value, choice, and ease of use. We continue to see Booking.com's pre-pandemic customers coming back and booking with us, while we're also attracting new customers. Importantly, we see our top customers from before the pandemic returning to us at a meaningfully higher frequency than other customers. Providing attractive prices on accommodations is a key component of offering value for our customers. We work closely with our supply partners to increase participation in our targeted rate programs to ensure that compelling prices are available to our customers. Our Genius Loyalty Program at Booking.com is a great example of a program where hundreds of thousands of our property partners are participating to offer lower rates and other benefits such as complimentary breakfasts, room upgrades, and discounted airport taxis to our large customer base. In addition to offering lower rates on accommodations, we have recently extended lower rates on rental cars to our Genius customers. This is just one example of the way we continue to innovate and add value for our Genius members. With about two-thirds of our room nights booked on mobile devices and the majority of those booked through the app, it's critical that we provide our customers with a positive booking experience on our app. The app is an important 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. In the third quarter, Booking.com was once again the number one downloaded OTA app globally according to a third-party research firm. Also in the third quarter, we surpassed 100 million monthly active app users for the first time. The recent growth of Booking.com's app is encouraging, and we are working hard to continue to build on this success. In the third quarter, we saw a higher mix of our customers booking directly with us than in the third quarter of 2019. A direct mix improved even as we leaned into performance marketing channels during our peak travel season. While we will continue to invest in performance marketing, We will also look to expand the diversity of our marketing and customer acquisition channels as we aim to drive incremental traffic to our platform and increase consumer awareness of our brands. For example, with our ambition to acquire more customers in the medium intent space, we've made progress in strengthening our foundations for digital marketing, including in social channels, though our spend so far has been small. However, we're increasingly confident in the potential for these channels. And as we see positive results, we expect to raise our level of participation there. Remaining active and investing effectively across marketing channels is made even more important by the opportunity to acquire bookers who are new to online booking channels. Travel, like many industries during the pandemic, has seen a meaningful shift from offline to online, according to third-party data, and this has increased our addressable market. For our supply partners, we are focused on bringing incremental demand to their properties from the broad audience of potential customers on our platform. In a survey of 600 small and medium hoteliers in Europe conducted earlier this year, 85% of respondents agree that online platforms are a cost-efficient way to increase the reach of their hotel and source more diverse guests. We agree with this statement and believe it applies more broadly. Whether we are working with a small and medium hotel in Europe or an alternative accommodation or a large global hotel chain, we strive to be a valuable partner to all accommodation types on our platform. With our chain hotel partners, we are contained to see increased engagement relative to 2019 levels. which shows up in higher levels of participation in our programs that enable them to differentiate and promote themselves on our platform. For our alternative accommodations, the global mix of room nights in Q3 of about 30% was up slightly from Q3 2019. This increase in alternative accommodation share of our business in the quarter was less than it was in Q2. as we saw a greater sequential improvement in demand for hotel room nights in Europe from Q2 to Q3. Our property count of about 2.4 million and reported listings of over 28 million on Booking.com remained stable relative to the prior quarter. Let me talk more about some of our key strategic priorities, payments and the connected trip. both of which we believe will further enhance the strength of our core accommodations business and support its continued growth. Turning to payments at Booking.com, last quarter we spoke about the organization of all of our payments initiatives and efforts within a new FinTech unit at Booking.com. The recently established FinTech unit enables Booking.com to have a dedicated focus on enhancing payments in our core business for both customers and partners, as well as monetizing our overall transaction flows via new payments related products and services. Adoption of our payment solutions by our supply partners in both the U.S. and Europe continues to grow. Adoption in the U.S. has seen significant increases recently. driven by the additions of some major hotel chains in the second and third quarters, which we will look to build on in the fourth quarter. In Europe, more customers are choosing to pay using Booking.com's payment platform when finalizing their booking as attractive and localized options are provided. This is a result in nearly a third of Booking.com's total gross bookings in Q3 being processed through our payment platform, which is up from about 22% for the full year 2020. The FinTech unit is also driving continued payments innovation to ensure that growth is sustained into the future. This includes offering low-cost payout choices to our suppliers, as well as partnering with third parties to provide payment solutions to our bookers, such as buy now, pay later. We believe these efforts help position Booking.com as an attractive and trusted payment intermediary for all parties on our platform. On our Connected Trip vision, we have been focused this year on enabling travelers to book the major elements of their trip in one place on Booking.com. We continue to work on scaling up a robust flight platform on Booking.com, which will give us the ability to engage with flight bookers early in their travel journeys. and allow us an opportunity to cross-sell our accommodation and other services to these bookers. Booking.com's flight product is now live in 27 countries. Total company air tickets in the third quarter was up 131% versus Q3 2019, primarily driven by strength at Priceline, but also helped by Booking.com's flight offering, which continues to meaningfully exceed our expectations. While it remains early days for bookings flight product, we are seeing that over 25% of bookings flight bookers are entirely new customers. With these new customers, we are seeing an encouraging attached rate of accommodation bookings. However, there is more work to be done to further optimize the cross-sell opportunity. The yearly signals help demonstrate, though, that a flight offering can drive incremental new customers to the platform to which we can cross out our accommodation product. We are beginning to test initiatives targeting these new flight customers, including, for example, encouraging account creation to activate genius status, and in some cases, offering additional incentives for them to book accommodations. We remain focused on continuing to test and innovate in order to build on the early successes we are seeing with flights at Booking.com. We're also continuing to run tests using offerings from our verticals like rental cars and taxis. Now, before closing, I do want to note that as world leaders assembled this week in Glasgow for the COP26 Summit, discussing the urgency of tackling the global climate crisis, I cannot overstate the importance for our industry to come together to work for the goal of carbon neutrality by 2050. Decarbonization is a major challenge for the entire industry, and solving this challenge requires the commitment of all stakeholders. I am proud to say that our company, Booking Holdings, is committed to addressing this challenge. We recently released a report that we commissioned with EY Parthenon. that looks into what will it take to get the accommodations industry specifically to a carbon-neutral future. Well, a big task. Data shows it is achievable. At Booking.com, we are working on making it easier for travelers to find and choose sustainable accommodation options when booking their travel. In addition, we're working with our accommodation supply partners by sharing guidance, insights, and best practices to enhance sustainability initiatives at the property level. Of course, there is much more that must be done, but we believe that we are taking important steps to contribute to a more sustainable future for our industry. And finally, we plan on publishing a booking holdings climate transition plan in early 2022, which we'll speak more about at that time. In conclusion, we executed well. and produce strong results in our peak travel season, which is a credit to the hard work and support provided by the many teams across our company. I'm encouraged by the signs of recovery we are seeing in many parts of the world, and I'm confident that we are on the path to an eventual strong recovery in travel demand globally. We continue with our important work to strengthen our company's position and execute against our strategic priorities. As I've 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 that generates more earnings after the full recovery and for the long run. I'll now turn the call over to our CFO, David Goldberg. David?

David?