Booking Holdings Inc.

Welcome to the Booking Holdings First Quarter 2024 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, and 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 the 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 any forward-looking statements, whether as a result of new information, future events, or otherwise. A copy of booking holdings earnings press release together with an accompanying financial and statistical supplement, is available in the For Investors section of Booking Holdings website, www.bookingholdings.com. And now, I'd like to introduce Booking Holdings speakers for this afternoon, Glenn Fogel and Evald Steenbergen. Go ahead, gentlemen.

Thank you, and welcome to Booking Holdings' first quarter conference call. I'm joined this afternoon by our CFO, Eva Steinbergen. I am pleased to report a strong start to 2024. Our travelers booked nearly 300 million room nights across our platforms in the first quarter, which exceeded our expectations and grew 9% year over year. First quarter revenue of $4.4 billion grew 17% year-over-year and adjusted EBITDA of about $900 million increased 53% year-over-year. Both revenue and adjusted EBITDA were ahead of our first quarter expectations. Finally, adjusted earnings per share in the first quarter grew 76% year-over-year, helped by improved profit levels as well as our strong capital return program, which reduced our average share count by 9% versus the first quarter last year. We continue to see resiliency in global leisure travel demand, including healthy growth for travel on the books that scheduled to take place during our peak summer travel season. Although a high percentage of these bookings are cancelable and what is on the books today represents a modest percentage of the expected total summer bookings. As we look ahead to the second quarter room night growth compared to last year will benefit from the shift in Easter timing, however. We expect that this will be offset by less expansion of the booking window and an increased impact from the geopolitical situation in the Middle East. We believe this will result in some deceleration in room height growth versus Q1. Avow will provide further details on our first quarter results and our thoughts about the second quarter. Over the last few years, we have talked quite a bit about our key strategic priorities, which include building towards our connected trip vision, expanding our merchant offering at Booking.com, developing our AI capabilities, and enhancing our Genius Loyalty Program. These initiatives may seem to be distinct efforts, but I'd like to emphasize they actually all fit together in our ongoing effort to deliver a much better planning, booking, and traveling experience for our travelers while also benefiting our supplier partners. By creating a much better experience for our travelers and solving more of the challenges they face when planning, booking, and experiencing a trip, we believe travelers will choose to book directly and more frequently with us, resulting in increased loyalty over time. We see encouraging early proof points at Booking.com as we have grown the number of total active travelers while experiencing higher growth in repeat travelers, which speaks to the progress we are making in encouraging customers to book again with us. In addition, we are seeing increases in the average number of trips booked per traveler, as well as an increasing mix of our room nights that are booked directly with us. On DirectMix, We are pleased to see the direct booking channel continues to grow faster than room nights acquired through paid marketing channels. While we see paid marketing channels becoming a gradually smaller proportion of our business over time, we think it's important for us to remain proactive in these channels in order to bring new travelers to our platforms, so long as we're able to do so at a track-to-borrow office. We believe continuing to improve the experience for our travelers by advancing towards our connected trip vision will help to further drive these positive proof points around loyalty, frequency, and direct booking behavior. I'm encouraged to see strong growth in transactions that are connected to another booking from a different travel vertical in a trip. These connected transactions increased by just over 50% year-over-year in the first quarter. Though it's important to note that this growth is off of last year's small base. Connected transactions represented a high single digit percentage of Booking.com's total transactions in Q1. It's great to see more of our travelers choosing to book connected transactions. And we believe by providing more value and a better overall experience to those travelers, they may choose to book more trips with us and have a higher likelihood of booking directly with us in the future. Flight is the most frequently booked vertical in a connected transaction outside of accommodations, and it is an important component of many of the trips our travelers are booking. In the first quarter, air tickets booked on our platforms increased 33% year-over-year, driven primarily by the growth of Booking.com's flight offerings. We continue to see a healthy number of new customers to Booking.com through the flight vertical and are encouraged by the rate that these customers and returning customers see the value of the other services on our platform. Winning a traveler's business is never easy because of the high level of competition in our industry, but we are pleased to see that by providing a better way to do it, less friction, better value, a broader selection, and great customer service, we are building a customer base that is more likely to choose us. Outside of flights and accommodations, we are seeing strong growth from rental cars and attraction bookings that are part of a connected transaction. We believe continuing to enhance and expand the attractions vertical has the ability to increase traveler engagement with the app while travelers are in destination and looking for something to do. And we believe that over time, travelers who experience the value we provide for in-destination services, like attractions, will choose to use us more in the future. Bringing all these elements of travel together in a seamless booking experience and unlocking the ability of merchandise across verticals is a capability we have been building at Booking.com over the last several years. In addition to being a foundational element to our connected trip vision, our merchant offering brings many other benefits to our travelers and partners. For travelers, we provide the ability to pay in many different payment methods, and we can offer discounts, incentives, and other merchandising opportunities. For our supplier partners, our merchant offering enables us to take fraud liability from our partners as part of the services we provide, reduces cancellation rates versus the agency model, and over time, we believe we can help to lower payment costs for our partners. In order to achieve the easier and more personalized experience of the connected trip, we have always envisioned AI technology playing a central role. We believe we are well positioned to leverage this technology given we have built strong teams of AI experts and gained valuable experience from using AI extensively for many years. In addition, we have proprietary data that can be used to train specific use case models or fine tune large AI models and have the resources and scale required to help build AI powered offerings. As we have discussed before, our teams continue to work hard to integrate generative AI into our offerings in innovative ways, including Booking.com's AI Trip Planner, PriceWise's generative AI travel assistant named Penny, and Kayak's recent release of generative AI powered features and tools. We will continue to learn from traveler interactions with these tools and enhance our offerings over time. In addition, Customer service, which is a critical function that we provide to both our travelers and partners, is an area we believe will be meaningfully enhanced by AI advancements. At each of our OTA brands, our teams are actively exploring ways to leverage generative AI technology to improve self-service tools, which we believe will reduce live agent contact rates and enable us to answer traveler questions faster. When customers still need to speak with a live agent, we believe that this technology will improve our live agent's efficiency by making it easier to access information and document the conversations. In sum, we believe GenAI will lower our customer service costs per transaction over time and improve the customer experience. Our genius loyalty program, Booking.com, also plays an increasingly important role in the multiple elements of travel that we offer. As we expect, our travelers will be able to experience the benefits of Genius in each of our travel verticals over time. In addition, bookings in travel verticals outside of accommodations will contribute to a traveler's Genius level tier. We have seen an encouraging number of our rental car supplier partners choosing to adopt the Genius program, and we have just begun to test the program in flights and attractions. We are seeing success in moving more travelers into the higher genius tiers of levels two and level three, which require five and 15 bookings in a two year period respectively. We see encouraging behavior from our genius level two and three travelers, including higher frequency and a higher rate of direct booking than what we see for our overall business. We will continue to explore opportunities to enhance our Genius Loyalty program and deliver more benefits to our travelers with more of our supplier partners electing to participate. What we have mostly been discussing are about our traveler customers. We operate a two-sided marketplace and our supplier partners are equally important to us. The success of our business is built on a mutually beneficial and balanced partnership with our millions of hotels, alternative accommodations, and other supplier partners around the world. We strive to be a trusted and valuable partner for all accommodation types on our platform, the majority of which are small, independent businesses. We believe that improving the competitiveness and profitability of our smaller partners contributes to the long-term economic health of our sector. And we continue to onboard more small, independent businesses through our alternative accommodation offering at Booking.com and we are benefiting from having more listings available on our platform for travelers to choose from. At the end of Q1, our global alternative accommodation listings were about 7.4 million, which is about 11% higher than Q1 last year. We are focused on continuing to build on this progress by further improving the product for our supply partners and travelers, particularly in the U.S. In conclusion, I am encouraged by the strong first quarter results and the continued long-term resilience of leisure travel demand. We continue our work to deliver a better offering and experience for our supply partners and our travelers. We remain confident in our long-term outlook for the travel industry. We are positive about our future and we believe we are well positioned to deliver attractive growth across our key metrics in the coming years. I will now turn the call over to our CFO, Eva Steenbergen.

Thank you, Glenn, and good afternoon. I'm very excited to join the Bookings Holdings team. I look forward to continuing to work with you and David in his new role and the rest of the leadership team to help drive continued future success for our investors, employees, traveler customers, and supplier partners. I will now review our results for the first quarter and provide our thoughts for the second quarter. All growth rates are on a year-over-year basis. Information regarding reconciliation of non-GAAP results to GAAP results can be found on our earnings release. We'll post our prepared remarks to the Booking Holdings Investor Relations website after the conclusion of the earnings call. Now let's move to the first quarter results. Our room nights in the first quarter grew 9%, which exceeded the high end of our guidance by about 3 percentage points. The higher than expected room-night growth was driven by a continued expansion of the booking window, as well as healthy underlying demand with better than expected performance in Europe and less of a negative impact from the war in the Middle East than expected. Looking at our room-night growth by region, in the first quarter, Asia was up mid-teens, Europe and the rest of the world were up high single digits, and US was up low single digits. We're encouraged by the continued progress we are making and strengthening the direct relationships with our travelers. Over the last four quarters, the mix of our total room nights coming to us through the direct channel was in the mid 50% range. And when we excluded our B2B business was in the low 60% range. We have seen both these mixes increase year over year in each of those four quarters. We're focused on continuing to increase our direct mix going forward, which we believe will benefit from our efforts to improve the experience for our travelers, including building towards our connected trip vision. Increasing our direct mix benefits our P&L by driving higher efficiency of our marketing spend as a percentage of growth bookings, while reducing the mix of bookings resourced through paid marketing channels. In our mobile apps, the significant majority of bookings we receive are direct, and we continue to see favorable repeat direct booking behavior from consumers in our mobile apps when compared to direct bookings on desktop or mobile web. The mobile apps also allow us more opportunities to engage directly with consumers. In the first quarter, mobile app mix of about 51% was 5 percentage points higher than the first quarter of 2023. We continue to offer our travelers a broad selection of places to stay and are seeing an increasing mix of our room nights being booked in alternative accommodation properties. For our alternative accommodations at Booking.com, our first quarter room night growth was 13%. And the global mix of alternative accommodation room nights was 36%, which was up versus 33% in the first quarter of 2023. Outside of accommodations, we saw airline tickets booked on our platforms in the first quarter increased 33%, driven by the continued growth of Booking.com's flight offering. First quarter growth bookings increased 10%, which exceeded our expectations. The 10% increase in growth bookings was approximately 2 percentage points higher than the 9% room night growth on an unrounded basis due to about 1% higher accommodation ADRs plus about 1 point of positive impact from flight bookings. There was an immaterial impact from changes in FX on our growth bookings growth rate. Our ADR growth was negatively impacted by regional mix due to a higher mix of room nights from Asia. Excluding regional mix, ADRs were up about two percentage points. Similar to comments we have made in the past, we have not seen a change in the mix of hotel star rating levels being booked or changes in the length of stay that could indicate that consumers are trading down. We continue to watch these dynamics closely. Revenue for the first quarter of $4.4 billion also exceeded our expectations, increasing 17% year over year. Revenue as a percentage of growth bookings was 10.1% and improved versus the first quarter of 2023 due mostly to the Easter timing shift, as well as the easier year on year take rate compare due to changes in the booking window last year, as mentioned on our first quarter 2023 earnings call. Marketing expense, which is a highly variable expense line, increased 6% year over year. Marketing expense as a percentage of growth bookings was 3.7%, about 15 basis points lower than the first quarter of 2023 due to higher ROIs in our paid channels and a higher mix of direct business. Performance marketing ROIs increased year over year, helped by our ongoing efforts to improve the efficiency of our marketing spend. First quarter sales and other expenses as a percentage of growth bookings was 1.6%, about 20 basis points higher than last year, due in large part to a higher merchant mix. Our more fixed expenses on an adjusted basis were up 11%, which was below our expectation due primarily to lower G&A expense. We recognize that this fixed expense growth is elevated as we invest in the business, but are fully focused on driving operating leverage from our more fixed expenses and targeting a much lower OPEX growth level in 2025. Adjusted EBITDA of approximately $900 million was above our expectations, largely driven by stronger than expected bookings, as well as better than expected marketing efficiency. Adjusted EBITDA was up 53%, including about 20 percentage points of benefit from the shift in Easter timing. Note that we expect the first quarter will be our seasonally lowest EBITDA quarter for the year. Adjusted net income of over $700 million resulted in adjusted EPS of $20.39 per share, which was up 76%. Our average share count in the first quarter was 9% below the first quarter of 2023. On a GAAP basis, we had net income of $776 million in the quarter. Now on to our cash and liquidity position. Our first quarter ending cash and investments balance of $16.4 billion was up versus our fourth quarter ending balance of $13.1 billion due to the $3 billion debt issuance in the first quarter and $2.6 billion in free cash flow generated in the first quarter. This was partially offset by the $1.9 billion in capital return, including share repurchases and the dividend we initiated in the quarter. as well as $315 million in additional share repurchases to satisfy employee withholding tax obligations. Now onto our thoughts for the second quarter. We expect second quarter wound-up growth to be between 4% and 6%, a deceleration from the first quarter, as the first quarter benefited more from the year-over-year expansion of the booking window. we expect the booking window to be closer to the prior year in the second quarter. Additionally, the impact from the ongoing war in the Middle East was less negative than we expected in the first quarter. However, we expect a more negative impact in the second quarter, given the geopolitical situation in April. April room night growth rate was above the high end of that range and benefited by a couple points from Easter being in March this year versus April last year. Adjusting for Easter, April room-night growth was about in line with the high end of that range. We expect second quarter growth bookings growth to be between 3% and 5%, slightly below room-night growth due to about three points of negative impact from changes in FX, offset by about 1% higher constant currency accommodation ADRs, plus about one point of positive impact from flight bookings. We expect second quarter revenue growth to be between 4% and 6%, and for revenue growth to be impacted by about two points of negative impact from changes in FX. Adjusted for the changes in FX, we expect second quarter revenue growth to be in line with second quarter growth bookings growth, as the negative impact from the shift in Easter timing is offset by increasing revenues associated with payments. We expect marketing to be a source of slight deleverage in the quarter, but if you adjust for Easter timing, we expect marketing as a percentage of revenue to be neutral year over year. We expect our sales and other expenses to grow faster than revenue in the second quarter, driven by a higher merchant mix. We expect our more fixed OPEX to grow faster than revenue in the second quarter, due primarily to faster IT expense growth as we have been investing in new tech platforms and in line with the full year guidance we provided last quarter. We expect second quarter adjusted EBITDA to be between about $1.7 and $1.75 billion down low single digits year over year due to about seven points of pressure from the shift in Easter timing and about two points of negative impact on growth from changes in FX. Normalizing for Easter timing and changes in FX, our expectation for second quarter adjusted EBITDA would be for mid to high single digit growth. In closing, we are pleased with our first quarter results and the healthy leisure demand environment we are seeing. In terms of our outlook for the full year, we're not updating our previous full year commentary at this time. We want to see how the next few months develop before considering any updated commentary. We continue to expect 2024 to be a strong year for the company. Lastly, I would like to thank all my new colleagues across the company for their hard work and dedication to make these strong first quarter results possible. And thank you for your continued commitment towards our shared vision of making it easier for everyone to experience the world. We'll now move to Q&A. And Kathleen, will you please open the lights?

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to answer a question, simply press star 1 again. And if you are called upon to ask your question and listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, please press star one to join the queue. Your first question comes from the line of Kevin Koppelman of TD Cowen. Please go ahead.

Great. Thanks a lot. So a quick one on the guidance. Can you talk about what changed in terms of the shape of the year that you're seeing versus what you expected on the February call and walk us through the kind of changing booking window trends that you're seeing. And then if you could comment on whether it's giving you any concern about the back half or you see it as more of a neutral change. Thanks.

Yes, good afternoon, Kevin. This is Eiboud. If you think about the second quarter guidance that we have provided to you, I think a couple of elements that you have to take in consideration. One is we are expecting a less expanded booking window in the second quarter than we have seen in the first quarter. So there has been a little bit of a pull forward of room nights from the second quarter into our first quarter results. We are expecting more of an impact from the Middle East from what we have seen so far. But in the opposite direction is that Easter is a slight benefit for the second quarter. There is a little bit of noise, so to say, in the results. quarter by quarter, particularly from Easter and the booking window. But if you look at the combined first half year results that we are expecting, so the actuals in the first quarter and the guidance for the second quarter, we believe that the results are really strong and very consistent with the full year guidance that we have provided. In terms of the comps that you're referring, actually first quarter and second quarter comps are a bit tougher for us. And the second half of the year, the comps will become easier. So that is actually going to be a benefit during the course of 2024.

Excellent. Thank you very much. Thank you.

Your next question comes from the line of Mark Mahaney of Africor. Please go ahead.

Can I try two questions, please? First, why do you think the ROI is higher in paid marketing channels? Is that... just efficiencies you found or you find at overall performance marketing channels, platforms that are out there, or just providing a better return on ad spend to their customers in general? And then secondly, could you quantify at all what percentage of total transactions now are connected? Thank you very much.

So why don't I say the first part, Mark, and I'll let Ava talk a little bit about why I think we gave away that very generic term. I'll let him repeat it. So look, we are pleased with what we're doing with our marketing. programs all around everything. And you know, Mark, we've talked about this for many, many years. We view this all holistically. And we're always looking for what is the best use of the money, what's the best way to put it to work. And when we find things that work, we put more into it. When we find things that are actually are not incremental and are actually duplicative, we pull it out and we say, well, let's not spend the money there. And that's really what we've been doing. And I'm not going to get into specific things because obviously it's a competitive advantage to have these things are better. But I definitely, definitely love the fact that we are producing some very nice ROIs on our marketing programs. It's really a lot of hard work by a lot of people. So I'm going to send a shout out to them because I know they've done some really good work. And Ava, do you want to repeat what we've already said once? But go ahead.

Mark, so the percentage of connected trip as a mix of total transactions at this moment is high single digits, and that is growing very rapidly. I think the way we look at it is really in combination with multiple other elements. We're seeing that we're delivering more value for our customers. Therefore, we see higher loyalty, customers moving up to higher levels of genius, more repeat customers coming to us. We can provide them more benefits over time. They're buying more from multiple verticals and therefore the connected trip is growing as well. So this is really a flying wheel that we're having here and we're seeing all of these metrics moving in the right direction and they're all interrelated. So we're actually really encouraged by the total pattern of what we're seeing in terms of the added value delivered to the customer and how it is being recognized by those travelers.

Thank you, Ebert, and thank you, Glenn. Thanks, Mark.

Your next question comes from the line of Justin Post from Bank of America. Please go ahead.

Great, thank you. I was wondering if you can give us an update of your regional mix. We get that question all the time, and just how it's changed, you know, any regions growing faster than others at this point and how it's changed maybe since pre-pandemic. And then second, the Digital Service Act in Europe has taken hold. And I'm just wondering if you're seeing any changes in performance marketing channels around that or any disruptions or any opportunities. Thank you.

Thanks, Justin. I kind of missed the second part. Let me start with the first part and then I'll let Ava pick it up on the other. So, Regional mix and 1 of the things that we've been talking about for some years, because of the pandemic, the issue has been depending on when the pandemic was in its worst parts and then people coming out of it. definitely impacted how we're doing different regional ways. So as we talked in the last year's calls last year, we talked about how Asia had been behind in coming out, but, of course, we're getting a good comp because they were farther behind, and now we're still benefiting somewhat from that. The U.S., if you recall, came out first. So, of course, we had a harder comp, so to speak, when we were looking last year. But one of the things I've said, though, in terms of regional mix, and one of the things is you know we are very strong in Europe. You also know that I have prioritized that we should be better in the U.S. And that is something that we have been spending money, time, energy, and I am really pleased, I've mentioned a couple times in our previous calls, how well we have performed in the U.S. going back to pre-pandemic numbers. And it's just wonderful to see that the effort that we've put to work is actually producing results. We are going to continue to put priority in the U.S. I said that. And one of the areas where I think we've done extremely well is in our alternative accommodations. As you know, we have a very strong alternative accommodation on a global basis. But I've also talked in the past about us being a little bit further behind in the U.S. in alternative accommodations, particularly in types of properties that I think will be helpful in the U.S. And we are making good progress. And we're improving the product. And it's giving you a reason that people have supply, the people who own the homes are willing to come now and put them onto our platform too. And you've seen some of our marketing where we've been mentioning more about the Alternative accommodations all those things together are things the reason I believe we have a great opportunity to continue to increase our share in the US and so now I'm looking forward to If I'll let you pick the rest in because I didn't catch the second part Yeah, and and quickly to give a couple of numbers around the regional mix that Europe high single-digit growth in the first quarter that was above our expectations very important and

that we see even Europe continue to do better than our own internal expectations. Asia mid-teens growth particularly very strong. China, Japan, Korea, India, and Indonesia. And then U.S. low single-digit growth, as Glenn already mentioned. But we believe that we have done better than the market in the first quarter with our U.S. growth and our great trajectory and have many additional opportunities to grow faster in the future in the U.S. With respect to your second question regarding the DMA changes, actually, if you look at the higher ROIs for our paid channels and the marketing leverage that we're seeing in the first quarter, that is all coming from our own actions, from the improvements we're making, the continuous optimization of our paid marketing approach, as well as the growth of direct channels. We don't see really an impact from the Google DMA changes And I would say that is more neutral for us as a total effect.

Thank you. Very helpful.

Thanks, Justin.

Your next question comes from the line of Doug Anmuth of J.P. Morgan. Please go ahead.

Thanks for taking the questions. Glenn, just hoping you could perhaps quantify anything on genius frequency or bookings versus non-members. And maybe you can just help us understand what you see in the path of customers as they move into upper genius loyalty tiers. And then, Ava, just to follow up on your U.S. comments from a few minutes ago, the low single-digit room night growth. above market, is there anything to point to in that region in particular relative to the faster growth you've seen elsewhere? Thanks. Hi, Doug.

We don't give away numbers in our Genius membership. We don't talk about how many are in different tiers. I can say, though, how pleased I am and how the whole program continues to grow. And that's why we're continuing to expand it. As I mentioned in my prepared remarks about we're now testing additional verticals, flights, attractions. The idea is that to give more value to the traveler, but it also provides a great opportunity for our supplier partners to get incremental demand when they need it. It's really a symbiotic relationship here. We're working together with our partners to both increase the value of our business, but also increase the value of their business. Genius is not something somebody has to do. a partner decides to participate and decides how they want to participate because they believe they are actually getting true value out of that and we're going to continue to experiment with in terms of different ways and sometimes we'll even put value in ourselves to make sure that we are providing the best alternative for any traveler they should come to us and then they start to come back and we talked about that in my fair remarks about as people and maybe i just mentioned it too As people get more value, as they get more benefit, they see the reason to come back. And then they come back not only again and again more frequently, but it's the coming back direct. And that's the great thing. And I see this as another reason. I love Ava using the term, I think he said flywheeling. I use flywheel, but it's the same thing. It's the idea that giving more value will get people to come back more often. And that is something I see great opportunity for us. And I'll let Abel talk a little bit about the low single digit for the US. Any more comments he wants to make on that?

Yeah, a couple of additional insights around the US. So what we like particularly is the sequential improvement from the fourth quarter in terms of our growth. Particularly within the growth, we saw the highest growth for alternative accommodations, which is really encouraging. If you look at U.S. bookers, more international growth than domestic growth. And then again, we really very much believe that U.S. is for us a growth market opportunity. It's fantastic with the skill that we have already today, with all the strategic expansions we're doing in multiple verticals and going more direct to connect the trip, generative AI, and many of the other strategic initiatives that we're having, that we're actually having an opportunity to expand our position over the next few years in the U.S.

Great. Thank you both.

Thanks, Doug.

Your next question comes from the line of James Lee from Mizuho Securities. Oh, sorry. Your next question comes from the line of Brian Nowak from Morgan Stanley.

Great. Thanks for taking my question. Maybe to come back to the last discussion you were having about the U.S. Over the last 10 years or so, you've had a lot of strategies in the U.S. between branded spending, paid search spending, the merchant product, and now AI. I guess maybe for either of you, as you sort of think about the next couple years, what do you sort of think the largest unlock will be to differentiate yourself to drive continued outsized growth within the online travel category in the U.S.?

Hi, Brian. A couple interesting things about that question. It's interesting what you said, online, you kind of limit it to online. I just had the benefit of looking at a research report by an industry report that talked about how much business there is that's not online yet. And seeing that, I was thinking, wow, this is still a tremendous opportunity for us. I'm speaking specifically about U.S. But directly to your question, so You're right. We've been doing a lot of things, and I will say they all have worked out fairly well, given the numbers, the share that we have increased over the time, again, going to pre-pandemic. And I love the way we're doing the way it keeps going. And we're going to continue to grind it out. And I've talked about that. I've used that word a number of times in previous calls about we're grinding it out, just doing incremental changes that are getting us a little bit more, and it continues to grow on itself. But I think your question, Maury, is there going to be something down the road that is going to be transformational instead of just incremental? And I believe that is possible. I believe the things that we are doing with AI, the things that we can do with technology, the way we can do it so that it really is different. And I think I hear your question a little bit of, is there enough differentiation between us and our competitors? And I believe over time, we will be doing that. And I believe the things that we can build will make it different. And I talked about how the frustration that travelers have nowadays, even though it's become so much better than it used to be, it's still not good enough. And I believe the use of AI, particularly gen AI, and what I'm seeing down through, I'm seeing testing and things that are being done. I believe that over the next few years, it will become much better because of these technological advancements. Our job is to make sure we get it out fast, And we are able to provide it to both sides of the marketplace, to our supplier partners and our travelers, such that they see the value and they continue to come back. And then we begin. And I love it. I'm going to be using flywheeling from now on. Thank you.

Thanks, Glenn.

Your next question comes from the line of James Lee of Mizzou Securities. Please go ahead.

Thanks for taking my question. Two over here. Can you guys comment about ADR by region and kind of what you're seeing, you know, among different markets that you're operating? And also, can you update us on ADR expectation for 2024? Maybe any changes on your prior expectation? I guess lastly, any trend that you see in terms of summer travel season, I guess, especially in Europe, how's that compared to last year? Thanks.

ADR by regions, James, in the first quarter, what we have seen is ADRs were up in Europe and were flat in North America and in Asia. So therefore, on a constant currency basis, 1% overall growth in ADRs as we have reported today.

In terms of summer, as I said earlier, I said that we have a healthy growth for travel on the books that's scheduled to take place during the peak summer. And that's where we're feeling that, why I'm feeling pleased about the summer. I'm not going to quantify it though. Okay.

Thank you. Thank you.

Your next question comes from the line of Stephen Ju of UBS. Please go ahead.

Okay. Hi, Glenn. Thank you. So I was wondering if there is anything you can share about how the folks who have access to a trip planner might be behaving. It seems like there's a lot of potential application here, because if they're doing research, then there's top-of-funnel implications. And then, you know, you could theoretically recommend other pieces of the trip as well. So this could theoretically drive greater connected trip activity. Just wondering, you know, this has been out, you know, for a little less than a year. So I'm just wondering what you guys are seeing so far. Thanks.

Yeah. So it's low numbers of people who are using it and such. And we're continuing to develop and learn all the time, the interactions and seeing how people are using it. So it's a very small number of people compared to the number of people who use our services. But we are continuing to advance it. And I agree with you. This has tremendous potential down the road, and I think a lot of people believe that too. In fact, it's very hard to read any article about generative AI and not have in the first paragraph the use case of travel. It's always right there because we all see how complex the number of permutations, trying to understand what is the best way to do it, and using Gen AI to simplify it. It's really something that I believe will make a huge difference, albeit it's going to take time. You're not going to see tremendous changes over the next couple of quarters. But I do believe over time, this will create a much better way for people to do their planning, their booking, executing, and helping them when they are in destination, which is a really important thing. Because nobody goes on travel so they can sit in the hotel. They want to do stuff. And we want to be able to provide that to them, too. And bringing, as I said, about all the elements we've talked about, all the initiatives into one holistic system that enable it to be a better experience for our traveler customers, I believe that just has tremendous opportunity for us.

Your next question comes from the line of Lee Horowitz of Deutsche Bank. Please go ahead.

Great. Two, if I could. Eva, there remains sort of a robust debate on sort of what the structural growth algorithm is for online travel at this point. I guess in your early experience of booking, what strikes you as perhaps the most compelling area that you could put a dollar of investment to work in order to drive faster revenue growth for longer that maybe comes in above investor expectations? And maybe one on fixed OPEX. Obviously, your fixed OPEX base is up materially relative to 19, particularly when you compare it to bookings growth relative to 19. So I guess maybe what has shifted in the business that has perhaps made it a bit more capital intensive at this point or necessitating sort of greater headcount to sort of accomplish the goals that you guys want? Thanks so much.

Yes, thanks, Lee. So first, your question about structural growth. So I am really super positive about the outlook for the company. Why? This is, of course, a phenomenal company, super high quality, very successful. And I very much believe that we will be able to grow in the future faster than GDP. Shift of offline to online bookings. I think overall also consumers that will spend more on experiences than on material goods. And then a number of areas that I believe actually in my view, now being six, seven weeks here in the position that are really underestimated for the company. So first let me talk about direct. Uh, I think this is a company now that is completely has a complete game changer with respect to the share of direct. We're not only dependent on page channels anymore, and that it is now in the low 60% range for the B2C business is really important. And we are keeping those customers with us. And we have talked about it now before in previous questions of really adding more value and more of those travelers coming back to the app, booking direct to us and the benefit we are having with that. The other is the opportunity we have with respect to alternative accommodations. I think, again, this is completely not well understood and underestimated. We are actually in terms of size, two thirds, two thirds of the largest player in this space. And we're growing faster in most of the last eight quarters. And we still have a lot of opportunity to further develop our offering. But the fact that we are combining traditional accommodations and alternative accommodations on a platform and having travelers really being able to go from one to the other. Sometimes they go in and want to book one type of accommodation and they end up booking a completely different type of accommodation. And then the last is gen AI. Glenn was just commenting on this. I have to say, I think the strategic benefit we have in terms of our capital investments we can make, as well as the quality of the data, because in generative AI, it's not so much about the language models. The data that go into the language models is strategically probably the biggest differentiator. And we have really advantage with respect to the data because of all the different ways that we touch travelers and partners and other stakeholders in the travel industry. So therefore, I'm really very positive and optimistic about the structural growth opportunities for the company over the next couple of years. Quickly about fixed OPEX, I think that has to do with a couple of strategic expansions that the company has done, multiple verticals, moving in payments, but that is actually linked to your previous question that will help drive future growth for the company. So that's actually a good thing. But as we have said, we're targeting to lower the growth of fixed OPEX from 2025 onwards. And you will see more operating leverage from that over the next few years. So this year, we'll still have some end finalization of some of the investments, for example, about some of the tech platforms. But then from next year, you will see more operating leverage coming in from all of those investments we have been making.

Helpful perspective. Thank you. Thanks, Lee.

Your next question comes from the line of John Colanzoni from Jefferies. Please go ahead.

Great. Thanks for taking my questions. I just wanted to ask about underlying road night trends. Just talk about in the first quarter the size of some of the transitory impacts that you called out, like Easter shift, geopolitical disruption, and the booking window and sort of how that shakes out to how you think about underlying trends in the business. And second, on the attractions offering, can you talk about the investments that you've made so far and how your supply is today versus where you need it to be over time to sort of open up the full potential of that opportunity? And our understanding is that, you know, attractions are often booked closer to the trip date, which requires getting the traveler back to the app. You know, talk about how you're sort of looking to drive a solution to that dynamic and how the connected trip offering could help drive that behavior over time. Thanks.

With respect to your first question, room nights dynamics in the first quarter, So positives here, compared to our original guidance for the first quarter, were the fact that the booking window was expanding and that we were able to pull some routinized bookings from the second quarter into the first quarter. Healthy demand in Europe, and Europe was stronger than we anticipated, as we mentioned before, and less of an impact from the Middle East. And you saw, excluding the Middle East impact, actually the result was exactly the same. So there was no material impact from the Middle East. Easter was a negative, a small negative, but that was, of course, anticipated in the guidance that we provided before.

So on attractions, and it's a good question to ask because we haven't talked about it a lot in the past. Attractions is mostly supplied through third parties. So we have arrangements with companies like Viator or Kluge or Amusement, and we get the supply that way. In addition, and we don't talk about this much at all either, we also have Fair Harbor, which if you may recall, we acquired that, thinking of it as sort of the open table for small and medium-sized attractions because it's a good loop into those attractions. We have priorities, though. We can be anything, but we can't be everything, and we definitely can't be everything all at once. So the priorities have been get the flight stuff up. Get that one. It's the biggest thing. Get that going well first. And then we have making sure that we have the ground transportation, make sure all that stuff is. Now our people attractions, they also want to have a lot of, you know, emphasis too. And they are doing a great job building it out. We've talked a little bit about that. And that's going to come in as part of the overall connected trip because, as you point out, people don't generally book their attractions far, far in advance. In fact, a lot of them want to book it when they're actually in destination. And that's why I love the fact of the increased amount of use of our app because that's like having your travel agent in your pocket and being able to – we're able to send them great offers, great ideas, or they go right to it and check something out. And can they get something better? And that's why we're bringing that in to our Genius Program. For people who have an attraction business and want to get that incremental demand, we can push something to a customer who's in destination and give them something that will bring them to that particular supplier. All over, it's a tremendous opportunity down the road. We have yet to even really scratch the possibilities with that. And that's just another reason why I see just tremendous opportunity for us as we continue to roll on.

Thanks so much.

Your next question comes from the line of Ron Chosey from Citi. Please go ahead.

Great. Thanks for taking the question. I want to ask maybe a follow-up on alternative accommodations here, just given how much faster overall room nights are growing. And Ava, you talked a little bit about this as well as Glenn, but I wanted to hear more about the supply side, the 7.4 million properties on the site. Are these higher quality than maybe what you've seen in the past? Are they differentiated from other platforms? given, you know, that are available out there. And Ava, you made a good mention earlier just that with booking offering both alternative accommodations and traditional, you know, that's an advantage. I'd love to hear your thoughts or what you're seeing from a consumer perspective, those that book both, and then the mix between that going forward, between those two bookings. Thank you.

So let me first take the second part of the question in terms of alternative and traditional accommodations. We're actually not so much separating in our thinking one versus the other because we believe that our unique proposition is that we're putting both in the same way on our platforms because it is an artificial separation as we are seeing many consumers are looking for both and They want to look at different alternatives. They want to compare. And often, if they start to look for a traditional hotel, they maybe end up with an apartment they want to rent as an alternative accommodation or the other way around. So actually, the way we look at it is we think it's actually really strong to bring all of these propositions together and have really a combined offering to our traveler customers.

In terms of quality, and I like to think that the inventory we have is high quality. Obviously, it comes at different price points. It's a complete range. And you may not be surprised that lower-priced things may not be as luxurious as the higher-priced things. But I think we cover the gamut. But we don't have enough of certain types in certain areas. And I've talked about this before. We're entering close to the summer, and I live in the New York metropolitan area, and I'm looking, do we have enough of these high-end homes in the Hamptons? And I don't think we do. And if I look at some of our competitors, I see more. I look at that as opportunity for us, though, because we're doing so well, yet we don't have all the different types of accommodations and the quantity that I want to have it at. It's great that we are as big as we are, but I absolutely see no reason we shouldn't be significantly bigger throughout every geographical area. Look, our base was Europe, so we are very, very competitive. We have great inventory of all types there. But I've talked about the U.S., and that's an area we continue to do more work, and I mentioned earlier, ICS making great progress there.

Thank you. Thank you, Glenn. Thank you.

Your next question comes from the line of Chad Kelly of Oppenheimer. Please go ahead.

Hey, great. Thanks for taking my question. Just following up on that last point, Glenn, how do you think about getting more of that single unit inventory? Is it connecting more with property managers, the PMS systems? And then my second question is, just how should we view the big events in Europe this year, this summer in travel, particularly around the Olympics? impacting demand or how people travel? Thanks.

Sure. So, yes. And we definitely have, you're not surprised the fact that it's easier to get more inventory when you go to some of the managers who have significant number of the inventory you're looking for. And those multi-property managers are the place where we definitely have some more emphasis. And we have not until very recently really spent a lot of time trying to do it in the low, you know, try and go for individuals and try and bring them in too. There's no doubt, though, over time, we have to make sure to make an effort to everybody. And that means making sure that we are providing a platform that a supplier really likes to use. And I saw something recently, just to give you an example. Turns out that until fairly recently, it was hard for some of our big managers to be able to reconcile the payments with individual properties. And we improved that significantly recently. And that's a reason. So it was, okay, now I'll do that. And I can go through a whole bunch of different individual things that while by themselves may not be so big as a whole, they end up saying, yeah, I will now be more than happy to get in incremental demand from booking.com because I find it easy and helpful. If somebody's in to make business, to make money, you definitely never want to have your property empty. That's zero revenue. You're never going to get back. That inventory expires. So that's why people are always looking to try and get more demand. As long as we provide them with demand and we provide them with a platform that they find easy and helpful, they will come to us. In regards to the summer and things like Paris and the Olympics and stuff like that, Well, it's always a mystery what's going to happen with the Olympics. I've been here now 24 years, so I've been through a whole bunch of Olympics and thought it was going to be this is what's going to happen and then something else happens. Here's the big point. Let's not concentrate too much on one individual event that lasts for a couple of weeks. I continue to say the important way to view value of this company is the long run. What have we done? What have we done over the last 24 years here? Continue to increase the value, bring in more customers and more suppliers and continue to improve more cash flow for our investors. That's the way we've done in the past. So what we do in the past and how the Paris Olympics go, I really, I can guess, but I guess as good as yours. And I don't think that's something that I'd spend a lot of time worrying about.

Thank you. Thanks, Chad.

Your next question comes from the line of Tom White from DA Davidson. Please go ahead.

Great. Thanks for taking my question. Just one. I wanted to follow up on some of the prior questions on the U.S. market. I was hoping you could kind of comment on maybe the relative unit economics of your U.S. accommodations business today versus... in Europe. Obviously, the Booking.com brand here is well-known, but less well-known than in Europe. So maybe there's like a heavier kind of marketing load per room night here. But the ADRs here are nice and high. But then again, maybe the take rates are lower. So I'm just kind of curious directionally how accommodation kind of unit economics in the U.S. stack up versus Europe at the moment and maybe where you kind of see that going over the next few years. Thanks.

We don't disclose much more than giving you these regional growth rates. We don't go any further than that in terms of detail. And I don't think we'll be starting that right now. I understand your reasons for asking, but for a reason of competitiveness and such, we're not going to break this down any further than that.

Okay.

Thank you. That concludes our Q&A session. I will now turn the conference back over to Glenn Fogel for closing remarks.

Thank you. I want to thank our partners, our customers, our dedicated employees, our shareholders, and I especially want to thank Avout for joining the team. Avout, thank you very much. We greatly appreciate everyone's support as we continue to build on the long-term vision for our company. Thank you and good night.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.