The operator welcomes listeners to the Booking Holdings Third Quarter 2023 Conference Call and reminds them that the call may contain forward-looking statements. These statements are not guarantees of future performance and may be subject to risks and uncertainties. Booking Holdings undertakes no obligation to publicly update these statements. The company's earnings press release and financial supplement can be found on their website. Glenn Fogel and David Goulden will be speaking on the call, and Fogel expresses optimism about the strong results and demand for leisure travel.

In the third quarter, the company saw significant growth in both room nights and gross bookings, exceeding expectations. Revenue and adjusted EBITDA also increased, and non-GAAP earnings per share grew by 36%. In October, room night growth was estimated to be 8% year-over-year and 20% versus 2019, with some negative impact in Israel. However, there is continued resilience in global leisure travel demand and strong bookings for the first quarter of 2024. Customers and consumers are expected to prioritize travel over other discretionary spending in the coming year.

The company is confident in its ability to attract customers and partners while focusing on important initiatives such as advancing their connected trip vision, integrating AI technology, growing alternative accommodations, and building direct relationships with customers. They have seen an increase in connected trips and a significant growth in flight bookings through their partnership with Etraveli, despite the proposed acquisition being blocked by the European Commission. The company remains committed to developing their flight vertical at Booking.com.

Booking Holdings has extended their partnership with Etraveli through 2028 and plans to continue improving their flight offerings. They believe offering a comprehensive travel booking experience with flights, accommodations, ground transportation, and attractions will benefit both travelers and partners. The company is also investing in AI technology, incorporating it into their platforms and seeing promising results in lower customer service contact rates and increased productivity. They plan to use AI tools more widely in the future to improve products and operations.

Booking.com aims to be a trusted partner for all types of accommodations and is focused on delivering incremental demand and developing products to support their partners' businesses. They experienced delayed payments due to a planned upgrade but have now cleared the backlog and will provide compensation to affected partners. They are also focused on increasing supply and awareness for alternative accommodations, which saw a 24% growth in room nights and now represent 33% of total room nights. They plan to continue improving the product for supply partners and travelers, with a focus on increasing loyalty and direct relationships.

In the third quarter, there was a high level of direct bookings in the mobile app, accounting for over 50% of room nights, which was a significant increase from the previous year. The company will continue to improve the app experience. The CFO then reviewed the company's results for the quarter and discussed their expectations for the rest of the year, with a 15% increase in room nights exceeding their expectations.

In the third quarter, Booking.com saw a 24% increase in global room nights compared to 2019, with Asia experiencing the highest growth at 35%. The average booking window expanded and mobile apps accounted for over half of total room nights. Direct bookings also increased, while international room nights remained consistent with 2019 levels. Cancellation rates were slightly higher than 2022 but lower than 2019. Alternative accommodations saw a 24% increase in room nights and a global mix of 33%. Gross bookings increased by 24%, with a 9% increase in ADRs and positive impact from FX movements and flight bookings. However, ADR growth was negatively impacted by regional mix.

In the third quarter, excluding regional mix, ADRs increased by 7% year-on-year. There has been no change in the mix of hotel star-rating levels or length of stay, indicating that consumers are not trading down. Airline ticket bookings were up 57% due to Booking.com's flight offering. Revenue exceeded expectations, increasing 21% year-over-year. The outperformance was driven by bookings for future quarters, resulting in lower revenue as a percentage of gross bookings. Accommodation take rates remained consistent with 2019 levels. Marketing expenses increased by 13%, but were lower as a percentage of gross bookings due to higher ROIs and a higher mix of direct business. Performance marketing ROIs also improved. Sales and other expenses were slightly higher than last year, but better than expected.

In the third quarter, 51% of Booking.com's gross bookings were processed through their payments platform, an increase from the previous year. The company's more fixed expenses were up 24% year-over-year, but were managed carefully. Adjusted EBITDA was $3.3 billion, up 24% from the previous year. Non-GAAP net income was $2.6 billion, resulting in non-GAAP EPS of $72.32 per share, a 36% increase from the previous year. The company's cash and investments balance decreased to $14.3 billion in the third quarter due to share repurchases, but they still generated $1.3 billion in free cash flow. They have also repurchased $7.7 billion of their shares so far this year. The company plans to spend more on buybacks in the fourth quarter than they did in the third quarter.

The company is confident in completing their share repurchase program within 4 years, assuming no major downturn in the travel industry. They estimate an 8% year-over-year room night growth in October, down from 15% in Q3 due to a tougher comparison and the Middle East war. When compared to 2019, October room night growth was 20%. Asia saw a 15% growth, Europe 10%, and the U.S. and Rest of World slightly down. The war in the Middle East had a significant impact on cancellations and new bookings, but room night growth recovered towards the end of the month. The company predicts a 9% year-over-year growth in Q4 and a 20% growth when compared to 2019, assuming no further expansion of the war.

The company expects Q4 gross bookings to grow 5% faster than room nights, with higher ADRs and flight bookings contributing to the growth. Revenue as a percentage of gross bookings is expected to be higher than last year due to timing benefits. Marketing expenses are expected to be slightly lower, while marketing and merchandising expenses are expected to be slightly higher. Sales and other expenses are expected to be in line with last year. Adjusted EBITDA for Q4 is expected to be just over $1.4 billion. For the full year, the company expects room nights to grow in the mid-to-high-teens and gross bookings to grow over 20%. Revenue as a percentage of gross bookings is expected to increase by 10 basis points, lower than previous expectations due to higher bookings growth and a longer booking window. Marketing and merchandising expenses are expected to be slightly below 2022, and more fixed expenses are expected to grow 25% year-over-year.

The company is managing fixed costs carefully and expects them to grow at a lower rate next year. They anticipate expanded margins in 2024 and are pleased with their Q3 results and early 2024 bookings. The speaker is not seeing more visibility into the March quarter, but is reassured by the resiliency in global leisure travel demand and strong bookings for 2024. They attribute the room night growth in the quarter to the overall health of travel and bookings for 2024.

During the quarter, the company saw strong room night growth due to increased travel demand and a longer booking window. This resulted in a stronger Q1 on the books situation for the next year. The overperformance was seen in all regions, not just one. One analyst asked about the potential financial impact of the company's Connected Trip vision and the pace of progress, while another asked about the company's expectations for Europe comps next year.

Glenn Fogel, CEO of the company, believes that the Connected Trip is a differentiator for their business and will attract customers in the long run. They have seen benefits such as higher direct bookings and more frequent returns from customers who book multiple elements with them. The company is also investing in generative AI and other AI technologies to enhance the travel experience and accelerate growth. While this process will take time, the company has been hitting milestones and showing growth, with air ticket bookings 5 times greater than in 2019.

The company is moving forward with their plans to improve travel experiences for customers and partners. They have seen growth in room nights in the U.S. compared to 2019, and they expect further recovery in the coming years. The company also believes that travel will continue to be a priority for consumers, leading to potential growth opportunities.

In the paragraph, the speaker discusses the strong growth in alternative accommodations in the third quarter and attributes it to the team's efforts to improve the product and increase awareness. They also mention the need for continued improvements in the product to maintain this growth.

The company has worked hard to improve their growth rate by continuously improving their properties and marketing strategies. While they have seen a 9% increase in listings and have achieved good results, there is still room for improvement, particularly in the United States. The company sees a lot of potential for growth and plans to continue working towards it in the future. A question was asked about the deceleration of growth in the U.S. and the CEO discussed the keys to reaccelerating growth in that market to meet their goal of surpassing pre-COVID growth rates.

Glenn Fogel discusses the progress of Genius and the Loyalty program over the summer and into the fall. He mentions that the key elements for growth are providing a better product, easy booking process, and excellent customer service. He also mentions the impact of COVID and advises to compare numbers to 2019. Fogel believes that continuing to focus on these elements and developing the Genius program will lead to increased share in the US and growth in alternative accommodations. He also mentions the importance of the Connected Trip and Generative AI in achieving greater value for both travelers and partners.

The speaker discusses the company's strategy for growing its share in the US market, emphasizing the need to be nimble and agile. They also mention a lean marketing posture and the increasing importance of mobile app bookings, but do not go into specific details to avoid giving away competitive information.

The speaker discusses their approach to achieving growth and profitability, stating that they view all aspects holistically. They mention their current lean-in position and their willingness to adapt to changing circumstances. They also mention their increased spending on marketing and merchandising in 2023, as well as the correlation between mobile app bookings and direct bookings.

Glenn Fogel, CEO of Booking Holdings, discussed the company's expected deleverage in marketing for Q4 and the decision to invest in additional programs to finish the year strong and build momentum for 2024. He clarified that this decision was not driven by any external factors, but rather a conscious choice to position the company well for the future. CFO David Goulden added that they will discuss the 2024 outlook in February and mentioned the strength of on-the-books bookings for the first quarter.

The speaker cannot disclose specific details about the vacation rental business, but mentions that the best way to predict future growth is to look at past numbers. It is clear that there is a need to expand the supply of homes in certain areas of the U.S.

The speaker believes that there is a lot of potential for growth in properties managed by larger groups. They are focusing on improving their product and marketing it effectively to continue their current growth. They also mention the potential for growth in the APAC region, but do not use the term "premium growth."

The speaker discusses the current state of outbound travel in China, which is significantly behind other parts of the world. They express hope for the region to catch up and explain that the term "premium" refers to faster growth relative to the core. They also mention an appeal regarding a travel decision from the European Commission and state that it will take some time to resolve. They defer to another speaker to discuss the impact of Air on checkout baskets and return on trip side.

The speaker is pleased with the new agreement with Etraveli, which will last until 2028. They also mention other successful partnerships in the air travel industry, but express disappointment about the European Commission's decision to block a potentially beneficial transaction. However, they are still seeing growth in their air business and are attracting new customers who are also booking accommodations.

Glenn Fogel discusses the adoption of AI tools by consumers, stating that it is encouraging and has helped lower customer care costs. David also mentions milestones for the company's recovery from COVID-19, but does not provide specific details.

The speaker believes that while new technologies are exciting and have the potential to be transformative, it will take a long time for them to fully develop and be widely used. However, there are already some benefits being seen, such as improved efficiency in customer service and coding. The speaker also mentions Priceline's Penny product as an example of how AI can benefit customers. Overall, it is still very early in the development of these technologies.

The company is using chatbots and AI technology to improve the customer experience and increase conversions. They have noticed that one common question is about bringing pets to hotels, and they are using this information to create a more personalized and conversational chat experience. These efforts are still in the early stages, but the company is hopeful that they will see a positive impact in the future. They are also working on integrating their hotel condos into their AI product for easier booking. The ultimate goal is to increase efficiency and attract more customers to their services.

David Goulden discusses a framework for post-COVID recovery, stating that the company will be larger and faster-growing in terms of top and bottom line. This is due to the significant progress made since 2019, including the addition of alternative accommodations, expansion of payments, development of air taxi and car capability, and improvement of performance marketing and merchandising tools. The company has also enhanced its Genius program.

The company has made significant progress since 2019, with a stronger and more competitive business that is better positioned to achieve its vision of the Connected Trip. They are confident that they can grow faster and have a bigger business than in 2019. The analyst asks about repeat rates among recent cohorts using the app and demand for higher priced hotels, but the company does not disclose this information. They continue to see strong demand and no decline in star rating or length of stay.

The speaker discusses why they believe discretionary spending on travel will continue to grow, citing survey results and the fact that as people become wealthier, they tend to spend more on experiences and services rather than physical possessions. They also mention the importance of long-term growth and their goal to capture a larger share of the growing travel market. The speaker also briefly mentions a question about apps, but it is not clear what information they can disclose.

The speaker discusses the various ways customers can book on the company's platforms, including through the app, mobile web, and desktop. They emphasize the importance of the app in creating a seamless "Connected Trip" experience and mention that higher value customers tend to use the app and direct booking more frequently. They thank their partners, customers, employees, and shareholders for their support in achieving the company's long-term vision.

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