Booking Holdings welcomed everyone to their second quarter conference call and reminded them that the call may contain forward-looking statements. The company also provided a list of factors that could cause their actual results to differ from the forward-looking statements. Glenn Fogel and David Goulden then reported that leisure travel demand was strong and drove the strong results of the second quarter.

In the second quarter, room nights booked and gross bookings both increased significantly year-over-year, with room nights increasing 9% and gross bookings increasing 15%. Additionally, revenue grew 27%, and adjusted EBITDA rose 64% year-over-year. July room nights also increased by 20% year-over-year. The company is encouraged by the strong performance in the first half of the year and is looking to make long-term investments in initiatives such as connected trips, AI technology, alternative accommodations, and direct relationships with travel bookers.

Booking.com's Connected Trip vision is a long-term project to make booking and experiencing travel easier, more personal, and more enjoyable, while delivering better value to travelers and suppliers. AI technology is at the center of the Connected Trip, and Booking.com has invested in AI experts and experience to optimize interactions with customers and partners. So far, the progress has been positive and is expected to result in increased engagement.

Priceline and Booking.com have both recently integrated AI technology into their platforms in order to provide more personalized booking experiences. Priceline unveiled Penny, an AI travel assistant that can answer questions and make bookings directly in the chat interface, while Booking.com launched an AI Trip Planner that helps travelers with the discovery and planning process. Both platforms are continuing to enhance their AI capabilities by leveraging customer insights.

Booking.com has developed an AI Trip Planner, which provides travelers with a visual list of destinations and properties, including live pricing information and deep links to view more details. The AI Trip Planner is powered by machine learning models and large language mall technology to create a conversational experience. The team is gaining insights from the interactions with bookers, and they are examining all areas of their company to take advantage of AI-created efficiencies. They are confident in their ability to benefit from AI development and improve their products for customers given their experience in AI, travel-related data, and connections to supply partners.

Booking.com has two main customers, travelers and supply partners, and they strive to provide value to both. Alternative accommodation room nights grew faster than traditional hotel room nights in the second quarter, reaching an all-time high mix of total room nights. Booking.com is looking to improve the product for both travelers and supply partners, particularly in the U.S. Additionally, 48% of their room nights were booked through their mobile apps, which is an important platform that allows them to engage directly with travelers and increase loyalty.

In the second quarter of 2023, Booking Holdings saw a 9% growth in room nights, with Asia experiencing the most growth at 40%. The rest of the world, Europe, and the US saw low-double digit, couple of point, and slight decreases respectively. However, compared to 2019, the global room night growth was 26%, which was in line with the first quarter. The company is confident in its long-term growth and opportunities.

In the second quarter of 2021, Booking.com's booking window expanded compared to both 2019 and 2022, and mobile apps accounted for 48% of total room nights. The international mix of room nights was fully recovered to 2019 levels, and cancellation rates were higher than 2022 but below 2019 levels. Gross bookings increased by 15%, or 16% on a constant currency basis, due to 5% higher accommodation constant currency ADRs and flight bookings, partially offset by FX movements. The accommodation constant currency ADRs were impacted by regional mix.

In the second quarter of 2022, ADRs were up nine percentage points year-over-year, and airline tickets booked increased 58%. Revenue was 27% higher than expected, and marketing expense increased 4%. Performance marketing ROIs increased year-over-year, and marketing and merchandising combined as a percentage of gross bookings was lower than expected. Sales and other expenses as a percentage of gross bookings were also up, but slightly better than expected.

Booking.com's gross bookings increased in Q2 2023, resulting in higher adjusted EBITDA and non-GAAP net income. The company's cash and investment balance also increased due to debt issuances and free cash flow. As part of its share repurchase program, Booking.com repurchased $5.1 billion of its shares in the first half of the year, leaving $19 billion of authorization remaining. The company is confident that it can complete the full $24 billion of share repurchases within four years.

In July, year-over-year room night growth was around 20%. The US was the most recovered region with growth of over 30%. For the third quarter, room night growth is expected to be up low double digits year-on-year, with gross bookings growing seven points faster. Accommodation constant currency ADRs are expected to be in line with Q3 2022. Revenue as a percentage of gross bookings is expected to be around 19%, slightly higher than last year, while marketing and merchandising combined as a percentage of gross bookings is expected to be slightly lower than last year.

In Q3, sales and other expenses as a percentage of gross bookings are expected to be 20 basis points higher than last year due to higher gross bookings mix and higher personnel and related expenses. Adjusted EBITDA is expected to be 20% higher than last year. For the full year, gross bookings are expected to grow slightly over 20%, room night growth is expected to be in the mid-teens, and revenue as a percentage of gross bookings is expected to increase by 20 basis points. Marketing and merchandising is expected to be slightly lower than in 2022 due to higher ROIs in off-paid channels.

Glenn Fogel will answer the first question about AI and David will answer the second question about marketing ROI improvements. The company is expecting its more fixed expenses to grow by 25% and its adjusted EBITDA margin to expand by a couple of percentage points. They are pleased with their year-to-date results and the momentum in the business and are unsure of how generative AI will play out in the long run.

Agoda is using Gen AI to become more efficient and the different brands of the company are learning from each other what works and what doesn't. The company is investing in new technologies such as the mobile form, AI Trip Planner, ChatGPT plug-ins, and more, in order to gain an advantage over other companies. History provides a good roadmap and those companies that can adapt quickly will benefit from the changes.

Glenn was asked about changes in the type of travel demand, such as short versus longer stays, rural suburban versus urban. He mentioned that they are still leaning in and looking to take share as the market continues to recover from COVID, and that they are consistently testing across their large marketing spend of $1.8 billion to optimize different channels and approaches.

Glenn Fogel, the CFO of a company, is asked about the potential financial impact of AI and Gen AI on the business. He states that he is always looking for changes in people's behavior, such as trading down in terms of star ratings or going for a lower length of stay, to see if something is happening. He does not see any of these changes yet. He also states that it is important to spread the bets around and experiment to see what works and where the return is coming from. This has been the company's DNA since its inception.

Glenn Fogel discussed the strong performance of Asia in the second quarter and how July is continuing to accelerate. He attributes this to the fact that travel restrictions were dropped later in Asia, allowing them to benefit from year-over-year comps. Fogel also mentioned that China is far behind in terms of outbound recovery and he does not expect a significant recovery there for some time. He concluded by saying that people in Asia still want to travel and are doing so.

Booking.com is focused on the North American vacation rental market, specifically the US, as they know they are underindexed in that area. They have been working to improve the product and have seen 11% growth in the overall alternative accommodations market. David Goulden gave some color on the direct mix and how they are looking at pockets of efficiency with their total spend on marketing.

Booking.com is doing things to improve the platform for people who own homes, manage apartments, and are in the space. They are investing in different areas to make progress, but they are not there yet. Connected trip is not producing material numbers increases yet, but Booking.com is still working on it. David will reveal specifics about the app users' loyalty and frequency.

The company is showing good numbers, but this is not due to the connected trip. They are working on flight products, attractions, the transportation, and payments in order to give benefits to both the traveler and suppliers. The mobile app is another way for people to interact with the company directly.

In the quarter, there was an acceleration in the direct booking mix improvement, which was driven by something specific that the company was doing. Going forward, it is possible that the direct mix may offset growth into lower-margin business, potentially allowing the company to restore margins to 2019 levels. Glenn Fogel added that the app and connected trip is an important part of the experience, as it provides advice and deals to travelers.

Glenn Fogel explains that the reason people keep coming back to their product is because it is the best price, the best selection, and the best customer service. David Goulden adds that direct mix is helpful for the business and they believe they can continue to improve margins from 2023, but not to the same level as in 2019 due to their large price and life payments businesses.

Glenn Fogel states that the priority for the company is to continue to build out the supply of alternative accommodations in the right locations. He also notes that attractions are less of a priority right now, as the company is focusing on getting the right combination of accommodations. He states that they are spending time, energy, effort and money in the places that will give them the best return.

Glenn Fogel and David Goulden discussed the mid-single-digit growth of their US business. This growth includes bookings made by US travelers traveling overseas. In July, the US market saw over 30% growth, which was due to a strong rebound from the previous year when the old player was declared in Omicron. It is too early to compare their performance to the market in a single quarter, but they will look at the year-end performance.

The full year guidance has been adjusted due to two positive factors: the business is growing faster than expected, which means that some of the timing recovery will be delayed into next year, and flight is growing faster than expected, which is putting some pressure on the margin. Glenn Fogel mentioned that there is still a lot of potential to push into the US marketplace.

David Goulden explains that the recovery of the timing of the business will take two years rather than one, and that the revenue line is difficult to model due to marketing dollars turning into merchandising dollars. He also states that the core accommodation business should be able to return to pre-COVID profitability, or even improved, due to an increase in direct mix, and that the EBITDA margins of the overall business will be affected by the mix of newer businesses, such as payments and flights, which were not major factors in 2019.

Glenn Fogel discussed the progress made in increasing the percentage of a customer's annual travel spend with their company. He acknowledged that customers sometimes use competitors, and they are working to build out products to meet customer needs. He noted that this is something he would like to see less of.

Glenn is discussing the importance of developing customer loyalty and providing customers with the services they need, such as alternative accommodations and different payment systems. He is also discussing ways to improve the customer experience and how much better it could be. He believes that the customer experience could be substantially better than it currently is, but he is not making any predictions.

Glenn Fogel discusses the difficulty of understanding travel seasonality due to the impact of COVID-19 and the emergence of remote work. He speculates that this could lead to more travel throughout the year, with people taking advantage of shoulder months for longer weekends or even a whole week. He admits that he cannot change any of this, so he is not worrying too much about it.

Glenn Fogel speaks positively of American Airlines' loyalty program, Genius, and the way it works with partners to benefit both the customer and the partner. He explains that the program has been improved from its original state to include three tiers, and that they are continuing to work on adding more benefits for customers and suppliers.

Glenn Fogel thanked everyone for participating in the call and expressed his satisfaction with the results. He thanked the partners, customers, employees, and shareholders for their support as the company continues to build on its long-term vision. He concluded the call by wishing everyone a good night.

This summary was generated with AI and may contain some inaccuracies.