The paragraph is an introduction to Booking Holdings' Fourth Quarter 2024 Conference Call. The operator provides a disclaimer about forward-looking statements, emphasizing they are not guarantees and involve risks and uncertainties. They note that actual results may differ from those forecasted. The paragraph introduces Glenn Fogel, the CEO, and Ewout Steenbergen, the CFO, who will be speaking about the company's successful conclusion to 2024 and progress on their long-term strategic plan. Glenn Fogel also mentions his upcoming 25th anniversary at the company.

The paragraph highlights the travel industry's excitement around generative AI and its transformative impact. The company has a history of leveraging technology and is well-positioned to benefit from AI advancements. Financially, the company exceeded its expectations with significant year-over-year growth in room nights, gross bookings, and revenue for the fourth quarter. Adjusted EBITDA and earnings per share also saw substantial increases. For the entire year of 2024, the company achieved key milestones such as enhancing AI capabilities, expanding offerings, and delivering more value to travelers and partners, which contributed to its strong financial performance.

In 2024, the company achieved significant growth, with gross bookings of $166 billion rising by 10% and revenue of $24 billion increasing by 11% compared to the previous year. Adjusted EBITDA grew by 17%, while adjusted earnings per share rose by 23%. On a constant currency basis, all these metrics grew about 1 percentage point faster. The company exceeded its long-term growth targets for the year and has set ambitious goals for 2025, aiming for at least 8% growth in gross bookings and revenue, and 15% growth in adjusted EPS. Looking forward, they see strong demand for leisure travel and remain optimistic about the travel industry's outlook. Further details on the fourth quarter, 2025 expectations, and capital return strategies will be shared by Ewout in his remarks.

Booking Holdings has a history of innovation, from early online travel to advanced machine learning. They believe AI, specifically AI-powered travel agents, will enhance the travel experience by integrating different travel elements seamlessly. The company is focused on integrating generative AI across its brands, including Booking.com's AI trip planner and Priceline's AI assistant, Penny. Other brands like OpenTable, Agoda, and KAYAK are also making AI advancements. They anticipate AI will improve customer and partner satisfaction and operational efficiency, potentially slowing fixed expense growth by 2025. Early benefits of AI are already being seen in areas like customer service and productivity.

The paragraph discusses the company's collaborations with leading generative AI organizations to enhance their platform, emphasizing the potential of agentic models to transform how users interact with their services. The company aims to deliver unique value through competitive pricing, rewards, and superior customer service, establishing trust with a growing share of direct bookings. They are optimistic about the benefits of AI in improving customer interactions and are focused on their connected trip vision to simplify and personalize the travel experience. This vision has led to significant growth in connected trip transactions, which make up a substantial portion of Booking.com's overall transactions.

The paragraph discusses the significant role flights play in the travel bookings on the platform, noting almost 50 million airline tickets booked with a gross value of $13.1 billion, a 38% increase year-over-year. The introduction of GenAI and machine learning aims to enhance value for suppliers, especially small and medium-sized businesses. Besides flights, merchant offerings at Booking.com have expanded, now making up 59% of gross bookings with increased contribution margins, though still early in their fintech expansion. The Genius loyalty program is also being broadened beyond accommodations to enhance customer loyalty and direct booking behavior.

The paragraph discusses the growth and success of Booking.com's Genius Levels 2 and 3 travelers, who represent over 30% of active users and book a significant portion of room nights. These travelers are more likely to book directly with the platform, a trend that is increasing faster than bookings through paid marketing. The company is expanding its alternative accommodations, with listings growing by 8% year-over-year, contributing to a 19% growth in room nights for these accommodations in Q4. Booking.com is committed to supporting accommodation partners, particularly small independent properties, by providing travel demand and developing supportive products and features. The paragraph concludes with a mention of a transformation program, with more details to be provided by Ewout.

In November 2024, the company announced plans to implement organizational changes, including modernizing processes, reducing the workforce, optimizing procurement, and seeking real estate savings. These changes, though involving tough decisions, are aimed at enhancing organizational agility and competitiveness. The company is reviewing workforce reductions with relevant organizations and believes reallocating resources strategically will lead to long-term growth. The speaker expresses pride in the company’s 2024 performance and confidence in leveraging AI for future advancements. The CFO, Ewout Steenbergen, will discuss the company's fourth-quarter and full-year 2024 financial results and provide an outlook for 2025, with all growth rates compared year-over-year. Relevant information will be shared on their Investor Relations website.

In the fourth quarter, room nights grew by 13%, surpassing the expected range by 5 percentage points, mainly due to strong performance in Europe. Regional growth included low double digits in Europe, mid-teens in Asia, about 20% in the rest of the world, and 10% in the US. Booking.com saw a 19% growth in alternative accommodations, with these accounting for 33% of room nights, a 1% increase from last year. Direct channel bookings accounted for the mid-50% range of total room nights, rising year-over-year, and mid-60% for B2C, up from the previous low 60% range. Mobile app bookings, particularly through the direct channel, also increased to the mid-50% range. The company focuses on enhancing travel experiences, alternative accommodations, loyalty programs, and expanding direct relationships with travelers.

In 2024, Booking.com saw a significant increase in activity from its Genius loyalty program members, particularly those in higher tiers, with a mid-50% booking rate. Their travel verticals also performed well, with 14 million airline tickets sold in Q4, marking a 52% growth compared to the previous quarter. Gross bookings rose by 17% year-over-year and 18% on a constant currency basis, exceeding guidance expectations due to strong room night growth, higher accommodation ADRs, and increased flight bookings. Revenue reached $5.5 billion in Q4, growing 14% year-over-year and surpassing guidance by 5 points. However, revenue as a percentage of gross bookings was slightly lower due to a higher mix of flight bookings and timing impacts.

In the fourth quarter, revenue as a percentage of gross bookings decreased due to timing issues and a rise in flight bookings, although this was partially offset by increased payment-related revenues. Marketing expenses rose 10% year-over-year but improved as a percentage of gross bookings, thanks to reduced brand marketing costs and a higher direct mix. Sales and other expenses remained stable at 2.0% of gross bookings despite a greater merchant mix, due to efficiencies in customer service. Adjusted fixed operating expenses grew 9% year-over-year, yet remained better than expected due to reduced IT and G&A costs. Adjusted EBITDA increased 26% to $1.8 billion, exceeding guidance by 12%, largely due to higher revenue and controlled fixed expenses. The EBITDA margin improved by about 320 basis points due to efficient management of operating and marketing costs. EPS rose 30% to $41.55 per share, aided by a lower average share count. GAAP net income was $1.1 billion, impacted by a convertible note adjustment, which was mostly offset by FX gains on euro bonds, with both excluded from adjusted results.

In 2024, the company saw a 9% year-over-year increase in room nights, with significant growth in Europe, Asia, and other regions. European bookers accounted for about half of the room nights, with Asians and Americans contributing a quarter and a low double digits percentage, respectively. This growth led to a 10% increase in gross bookings and an 11% rise in revenue, slightly boosted by currency exchange rates. Revenue as a percentage of gross bookings increased slightly to 14.3% due to a mix of higher revenues from payments but remained stable in accommodation take rates. Marketing spending decreased slightly as a share of gross bookings due to efficient marketing strategies, despite increased social media spending. Adjusted fixed operating expenses grew by 8%, below the initial forecast. The adjusted EBITDA rose by 17% to over $8 billion, reflecting profitable growth, margin expansion, and strategic investments.

The paragraph discusses the company's financial performance and strategic initiatives. The adjusted EBITDA margin increased by 170 basis points compared to 2023, reaching 35%, with adjustments for stock-based compensation costs. Adjusted EPS grew over 23% year-over-year, aided by a 7% reduction in share count due to a repurchase program. The company ended the year with $16.7 billion in cash and investments, supported by debt raising and free cash flow despite working capital changes. In 2024, $6 billion in stock was repurchased, $1.2 billion in dividends was paid out, and $23 billion worth of stock was repurchased since early 2022. The company concludes the year with a $7.7 billion remaining repurchase authorization. Looking forward, they plan to invest strategically and maintain their credit ratings, with their Board approving a new $20 billion share repurchase and a 10% dividend increase.

The company is confident in its financial performance, focusing on returning capital to shareholders. For the first quarter, it anticipates challenges including a 1% headwind from an extra day in February 2024 and calendar shifts like Easter moving from March 2024 to April 2025. Despite this, room night and gross bookings growth are expected between 5% and 7%, with minor impacts from foreign exchange rates and flight ticket increases. Revenue growth is projected at 2% to 4%, facing a 3% FX impact and another 3% from the Easter shift. Adjusted EBITDA is estimated between $800 million and $850 million but could be down 5% year-over-year at the high end due to Easter and FX impacts. The first quarter is typically the lowest for EBITDA. Normalizing for external factors, fourth quarter projections show potential for low double-digit growth.

The company aims for full-year growth, targeting at least 8% growth in gross bookings and revenue and 15% growth in adjusted EPS, driven by a strong business foundation and product offerings. They anticipate FX changes will reduce reported growth by around 3 percentage points for gross bookings and revenue and about 3.5 percentage points for adjusted EBITDA and EPS. This will result in mid-single-digit growth in reported bookings and revenue, with high single-digit growth on a constant currency basis. Marketing expenses will be leveraged to ensure revenue grows faster than adjusted fixed operating expenses by 2025. Adjusted EBITDA is expected to grow slightly faster than revenue, with low double-digit growth on a constant currency basis, expanding margins by under 100 basis points by 2025. Adjusted EPS should grow in the low double digits, reaching mid-teens on a constant currency basis. Capital expenditures are expected to be around 2% of revenue, consistent with 2024. The company also plans an organizational transformation to reduce complexity and increase agility, aiming for $400-$450 million in annual cost reductions, mostly realized post-2025.

By the end of 2024, the company has achieved over $35 million in run rate savings. They anticipate transformation costs over the next two to three years to be similar to the expected annual savings, and these costs will be clearly reported. For 2025, they project $150 million in cost savings from their transformation program, mainly in variable costs. Beyond this program, they aim to improve efficiency in ongoing operations. With these savings, they will reinvest $170 million above baseline to support strategic priorities, including advancing GenAI capabilities, the connected trip vision, and expanding fintech offerings, which they expect to drive future revenue growth and returns. The company is satisfied with its current results and optimistic about 2025, focusing on technological advancements and efficiency improvements for long-term value creation. They conclude by expressing gratitude to their team before opening the floor to questions.

In the paragraph, Lee Horowitz raises concerns about potential competition from AI-driven platforms that might bypass traditional booking services by connecting travelers directly with hotels. Glenn Fogel responds by acknowledging these concerns are not new, given past challenges like direct hotel websites and Google, emphasizing the company's resilience and adaptability. He highlights the importance of leveraging data and technology to evolve and maintain industry leadership, including developing a travel-specific AI agent, though he opts not to disclose detailed strategies.

The paragraph discusses a collaboration strategy involving major players in the tech industry to leverage AI advancements effectively. The speaker emphasizes the potential of generative and agentic AI models and expresses confidence in becoming successful through partnerships that offer better solutions than working independently. Ewout Steenbergen adds that developers of large language models are investing heavily and likely to collaborate with them, given the monetization opportunities their partnership presents, which is crucial for achieving solid returns on large capital expenditures. Additionally, a follow-up by Lee Horowitz suggests that the company is gaining market share in alternative accommodations.

The paragraph discusses the strong growth in the alternative accommodations business, with significant contributions from all regions worldwide. Ewout Steenbergen attributes this growth to the comprehensive offerings on the platform, which include both traditional and alternative accommodations, allowing travelers to compare and choose the best option. This diverse offering is resonating with consumers, leading to faster growth than competitors. Glenn Fogel commends the team for maintaining leadership in the space for 14 out of the last 15 quarters, highlighting that their homes business is substantial, comparable to the leading competitor.

In the paragraph, Mark Mahaney from Evercore ISI asks about the recent growth in the airline sector and its future potential, including the attach rate and market expansion. Glenn Fogel responds by expressing excitement over the 52% growth acceleration, noting it as a strong trend. He advises against assuming continuous acceleration but expects continued strong growth in the flight business. This growth is anticipated not just by expanding markets, but by enhancing traveler services and integrating flights into a connected trip experience to attract more users.

The paragraph discusses a strategy for enhancing the travel experience by incorporating technology into travel services, effectively creating a "travel agent in your pocket" accessible via smartphones. The goal is to offer more value to travelers beyond booking flights, encouraging them to share this new approach as a better way of planning trips. The speaker mentions that they are working with a respected AI partner to explore mutually beneficial opportunities in the travel industry. They acknowledge the current system's imperfections but emphasize the importance of starting somewhere and improving over time. The operator then introduces the next question from Brian Nowak of Morgan Stanley.

The paragraph discusses the challenges and considerations of partnering with emerging travel players, such as navigating the potential shift of travelers using partner platforms instead of direct services. Glenn Fogel acknowledges these risks but expresses confidence in negotiating beneficial agreements due to their trusted brand, extensive data resources, and global consumer network. He believes there are viable opportunities for collaboration in the evolving travel ecosystem, which positions them strongly for future success. Fogel also invites Ewout to add further commentary.

Ewout Steenbergen discussed the potential economic advantage from developing multiple agents, both horizontal and vertical, and forming partnerships, which could reduce the cost of acquisition over time. In response to Kevin Kopelman's questions, Glenn Fogel declined to comment on M&A activity, stating they only discuss transactions when they occur. Kopelman also inquired about advertising costs, and Steenbergen noted they expect continued marketing leverage into 2025, driven by increasing direct traffic and reduced brand spending, consistent with recent trends.

The paragraph discusses a company's marketing strategies and investments, particularly in social media channels, leading to higher marketing ROIs. The company has developed expertise in optimizing algorithms and has built a strong partnership with Meta to enhance monetization through personalized remarketing and prospecting strategies. This collaboration is yielding incremental travelers rather than those who would book regardless, leading to more attractive ROI. The company is optimistic about future marketing leverage. Separately, Stephen Ju from UBS inquires about the role of AI in driving revenue and reducing costs, noting that cost avoidance strategies appear to be more easily implemented than revenue-generating ones.

In this paragraph, Glenn Fogel discusses the expected impacts of AI on the company’s operations, particularly in customer service and coding efficiency. He highlights the potential for significant cost savings and improved productivity by automating tasks like call summarization and reducing wait times for customer service. Furthermore, Fogel hints at improvements underway within their sales and agent interactions, such as those at OpenTable, though specific figures or timelines are not detailed. He indicates that Ewout may disclose more specifics about these benefits.

The paragraph discusses the slower but promising revenue growth in the travel industry, emphasizing the importance of knowledge, expertise, and resources in navigating its complexity. It highlights regulatory challenges, such as the EU AI Act, and the advantage of utilizing large amounts of data with generative AI models. Ewout Steenbergen prefers discussing actual figures over percentage savings, noting that sales and other expenses remained flat at 2% of gross bookings in Q4, despite increased payment-related costs from growing merchant bookings, which were balanced by efficiencies in customer service.

The paragraph discusses how the company's flat S&O expenses as a percentage of gross bookings, despite a growing merchant business, demonstrate the efficiency benefits of generative AI. It mentions a transformation program with expected savings of $150 million by 2025, partly due to AI-driven efficiencies. A company representative also addresses questions about the merchant mix shift, explaining the advantages of moving beyond a simple agency model. This shift is seen as crucial for achieving a connected trip vision and enhancing payment platforms, which benefits customers. Additionally, the representative expresses confidence in the company's performance for the year, despite a deceleration in Q1 room nights, and hints at strong summer booking trends.

The paragraph discusses the importance of providing diverse payment options to accommodate travelers from different regions, highlighting the challenges faced when certain suppliers don't accept popular payment methods like Alipay used by Chinese travelers. The middleman, in this case, can facilitate these payments, making it cost-effective for travelers and suppliers while generating profit. It mentions a significant total transaction value of $166 billion in 2024 and speculates on potential profit margins. There is a focus on new products, like paying in one's own currency, to improve services for all parties involved. Lastly, Ewout Steenbergen is set to provide further details regarding room night guidance.

In the first quarter, the company is expecting low double-digit growth in gross bookings, revenue, and EBITDA, with room nights projected to grow by 5% to 7%. This growth is influenced by easier comparisons from the fourth quarter of 2024, due to factors like the October 2023 attacks and the expansion of the booking window, as well as a slight headwind from the leap year. Overall, the company is optimistic about the quarter and the full year, expecting to meet long-term goals on a constant currency basis. The company's representatives expressed gratitude to partners, customers, employees, and stockholders for their support as they work towards their long-term vision. The call concluded with thanks and good night remarks.

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