All right, we're gonna go ahead and get started. I'm Doug Anmuth, JP Morgan's internet analyst. Very pleased to have with us today, Booking CEO, Glenn Fogel, and CFO, Ewout Steenbergen. Booking is the global leader in online travel, with the mission to make it easier for everyone to experience the world. Last year, the company booked more than 1 billion room nights and had over $150 billion in gross bookings. Glenn has been with the company since 2000. He previously served as head of Worldwide Strategy and Planning, also EVP of Corporate Development, and became CEO in 2017. Ewout joined Booking, all of two months ago. He was previously CFO at S&P Global for 8 years, and President of Engineering Solutions there, and prior to that, CFO at Voya Financial.
Welcome, Glenn and Ewout.
Thank you.
Thank you, Doug.
All right. Let's start with the state of overall travel. You recently reported strong 1Q results, room nights growing 9%, bookings growing 10% against some tougher Easter comps. You've noted resiliency in global leisure travel and healthy growth in summer travel on the books, but perhaps also less expansion in the booking window and, and also just ongoing geopolitical situation in the Middle East. So maybe with that as backdrop, if you could kind of give us a little bit more on how you're thinking about the current state of travel.
So, as you know, Doug, we don't give any updates to what we said in our call very, yeah, not that long ago. We were very pleased about the first quarter. We liked the coming in above expectations. We liked the fact that we said things about, we looked at a healthy amount of travel for the summer, and then I gave the little bit about, which I give every quarter, about however, of course, these, many of these are cancelable.
Mm-hmm.
And somebody did ask me, "Well, do you have more? Are you expecting more?" I'm saying, "No, we say it every quarter." But, you know, people, they try and read the tea leaves into every single word we say, which is why I'm very careful and don't say anything that we haven't already said. I am pleased with the strength of travel in general, but I really... And I say this all the time about how important it is to look to the long term. You know, you mentioned, I've been here now since 2000.
Mm-hmm.
It's been 2000 years I've been in this business at this company, and we've had ups and downs and all sorts of exogenous events, you know, some that you knew would happen at some point, a recession or something. You didn't expect something like 2008, and the global financial crisis. Sometimes there are local events that can be really horrific, tsunamis, volcano. Volcano hit actually that quarter that it happened very badly, shut down travel. I tell everybody, "Look to the long term, though." The long term is travel will continue to grow and slightly better than GDP. If you believe GDP is going to grow, then we have an industry that is gonna continue to grow. In addition, we got a tailwind.
Approximately, depending on which expert consulting company you wanna look at, maybe half globally of travel is not done in a digital way in terms of buying it. That's a lot of opportunity for somebody who's in the digital space like us. So there's still a lot of opportunity there. And then you look at the other thing, just specifically us. And I tell people, I say, "We are gaining share. Look at what we've been doing. Look at the expansion, things we didn't have pre-pandemic." Pre-pandemic, Booking.com, you know, it was essentially a hotel-only type company. Now all the verticals, see what we're doing in flights. See all the different things we're building up. And then I've been talking about this Connected Trip for a long time.
I believe more than ever, particularly because of the technological changes that we are seeing, seeing what can come through with Gen AI and the stuff we are working so hard on, I believe there's tremendous opportunity for us to do even better. That's what I wish people would look at. So many times people tell me, "What's gonna happen this quarter? What's gonna happen next quarter?" I say, "Would you stop focusing on that? Focus on what we've done. Look at the track record. Look with all the changes that happened over these 24 years that I've been here, and then we have continued to outperform.
Great. With that backdrop, maybe, Ewout, you can talk a little bit about what attracted you to Booking and the opportunity that you saw across the business. And maybe some of the things in your first couple months that have either surprised you or some of the things you really wanna take on at the business.
Sure. And I think actually both of you already touched on, on this so far. So being a global leader already today, but then at the same time, having so many still opportunities to further improve in the future, I think that's fascinating. Booking Holdings has been highly successful, as we all know, has been really growing rapidly, has had very strong financial results, added a lot of value for all the stakeholders, for the travelers, for the accommodation partners, for shareholders. But look at all the growth opportunities. So we're not a company that is sitting here and say, "Okay, with our size and scale, we're just riding the wave of the markets in the future." Think about the opportunities. Glenn was mentioning the different verticals, how we still have alternative accommodations as a growth opportunity.
The U.S., think about some of the growth markets in Asia, where we are very well positioned, both with Agoda and Booking.com. India, Indonesia, Korea, many of those markets are going to be high growth areas in the future. Think about just the number of aircraft that the Indian airlines recently have ordered. All of them want to travel, and we, Booking.com and Agoda together, are already a very sizable player in that market. Think about the Connected Trip and the added value that we can deliver, add Gen AI on top of that. Payments, I think actually payments is a strategic underpinning of all of our strategies, but it is a revenue component as well in the future, and so on and so forth. There are so many of those elements.
So actually, that makes me really excited to come here. Moreover, a super high quality company, very conservative in the way how it presents results, how it does the accounting, and I like the culture. The culture was, for me, a very important element of the culture. Down to earth, very low ego, very low politics, very high intellectual challenge for everyone really to do the right thing and to come to the right decision. So I'm super happy to be here and very much every day think that I made the right decision.
Okay, great. Let's hit on some of those areas that you talked about. Alternative accommodations. So those room nights grew 13% in 1Q, I think up to 36%. Now, of total room nights, you've come a really long way on alternative accommodations, and it is obviously a very big business for you. What's the current area of focus for you there, and how do you feel that you're positioned competitively?
Yeah. So it is an important priority, as Ewout mentioned. It's one of, of several priorities, and we have, we have made great progress there. But one of the great things I see is that there's still so much more to... so far to go. The U.S., for example, is an area where we continue to under index in the alternative accommodation space. When you look at the largest player there, you see they do a significantly greater number of transactions in the U.S. than we do. That's opportunity for us, and one of the issues is if we walk, and I've said this in some of the one-on-ones we've been doing earlier, if you go outside this building, hit somebody on the street and say, "I need a place out on Cape Cod for my family.
I want a home near the beach. Where should I go?" Not a lot of people are gonna say Booking.com. Some people say that's a negative. I say that's an opportunity. Look at, look at the numbers. In the last 12 quarters, 11 of them, we've grown faster than the leader in that space in terms of growth alternative accommodations. And, and as you point out, we have a sizable business now. Our alternative accommodations business is two-thirds the size of the leader, so two-thirds the size and beaten it 11 out of the last 12 quarters, and in the US, for example, we're still just such a tiny thing. That is all big opportunity for us. Now, how are we gonna get that opportunity? What are we gonna do?
We're gonna do what we've been doing throughout the world, and that's continue to improve the product, increase the supply, make sure that the traveler is aware of us, and offer them great value. And we offer great value to both sides, offer great value to the traveler, and offer great value to the people who are expecting to get money for renting out their homes and apartments, et cetera. This is something that I have no doubt can be accomplished, and sometimes I wonder, maybe it's because we're so big in other parts of the world, like Europe, for example, and that's it, the people here don't know about it.
Because if you did that same experiment I just said, instead of walking outside this building, walk outside a building anywhere in Europe and ask that same question, not about Cape Cod, but someplace there, like, you know, south of France or something, Booking.com will be the first thing that comes to them. So my... One of the things I wanna do is, in the future, when people walk anywhere in the streets of Boston, that we are said of in the same way.
So what does that mean for your marketing strategy and how you think about it? I mean, you've been pushing Booking.com obviously more as a brand, certainly in the U.S.
Right. Right.
I mean, you have the brand, but then you also need to drill people down, like focus on alternative accommodations and that opportunity as well.
Correct. And you've seen our ads, Super Bowl ads, et cetera, slowly building out the brand of the alternative accommodation stuff we got. The critical thing on this, though, is you gotta match up the supply and the demand. If you add on a tremendous amount of supply, but you don't have the demand, the people on the supply side say, "Why did I go to the trouble of doing this? You're not giving me any business. This doesn't help." You gotta maintain a balance, so you bring them up together. You know, not exactly the same, but you bring them up together so that both sides are happy. Somebody who's looking for a place can find a place, somebody who has a place gets a customer, and that's what we're doing.
What about supply? How do you, how do you drive that? How do you become the place to go for homeowners?
Yeah. You don't need... It sounds almost unique in one. You don't have to do that. In fact, in our hotel business, our hotel partners, they use lots of different distribution ways to get customers. It's no different really. It should not be any different for the great majority of the professional alternative accommodations. What do they want? They want to make money. They want to be profitable. They want to fill up their space. You know what the value of a, of a empty home is in the next morning when nobody showed up? Zero for that revenue. Zero. But if somebody came in, most of it flows right to the bottom line.
The idea is continuing to build up the service and the product such that people who are on the supply side recognize that it's a good place to get demand, it's easy to use, and they feel that it's a good relationship. That's what we need to continue to build, which we have been building, and that is why our growth has... You know, we increased. We have 7.4 million listings of alternative accommodations around the world at Booking.com. That was about an 11% increase over last year, approximately. And I'll tell you, that's something we're gonna continue to do.
It's again one of these things where I sometimes wonder, maybe we're not telling the story well enough... maybe that's the issue, because I see the numbers, I see how much we're growing it, and I'm just so pleased that the path we're on.
Let me add one other aspect to this. I also believe the proposition that we have to the market is really unique and differentiating, because on our platform, you can find traditional accommodations and alternative accommodations at the same place. We're not thinking about it in a compartment here, in a compartment there, and that's actually also helping very much the growth that we're seeing within the company. Because in many cases, a consumer goes in, for example, a family needs two hotel rooms and finds also an alternative accommodation and ultimately books a home in that same place, and that is ultimately the transaction or the other way around. We see that the way people are originally searching is not always the way how they end up actually booking a certain form of an accommodation.
So for us, that this is seamless and altogether on the same platform, we think is really a benefit, and that helps to drive the growth in this, this space as well.
Okay, great. Let's talk about connected trip. A question and kind of a discussion that we have often with investors is: What differentiates Booking's vision of the connected trip from packages which have been around in the travel space for a long, long time? So Glenn, maybe you can talk about that, how your vision is somewhat different, and what's the ideal use case in your view for connected trip?
Okay, let me take it... Well, it ties together, actually. So if you were to go out and buy a standard, quote, unquote, "package," old style, the way it was done, you'd be offered a set number of choices, relatively small, with perhaps, you know, you have an air trip, and you have a hotel, and maybe there's some ground transportation, et cetera. And it looks like, okay, there's a package, and what's the difference? The biggest difference for the connected trip is connected trip will be personalized. So when you're looking in that old style package, you know, you go to a travel agent in the way back times, and you get a brochure with them all. There was no differentiation between me. I got the same package that anybody else got.
In the world of the connected trip going forward, what I wanna do, using all the data we have, all the capabilities we have, everything we know about this customer, and all the knowledge we have about what's out in the travel space, coming up, because there are obviously a huge number, permutations are incredible, the numbers are enormous. Being able to present to that customer what would be optimal choices for that person, given who they are and what we believe their needs are at that time, that is very, very different than a brochure package trip, one. Two, though, there is some similarities, and the similarities are, what people want is ease of use.
Every person in this room travels, and I'll say a lot of you do your own travel, though I also suspect there are a couple of you have somebody else. I try and push it off to my wife, myself, because it's hard, it's frustrating, it's annoying. You know, sometimes people, you know, we talked a little bit about our beautiful increase in our flight business, loving it. People go: "So how's the - how's the, you know, how many accommodations?" We say a healthy amount of cross-sell on the hotel part of it. And people sometimes have asked me: "Well, why doesn't everybody who buys a flight then buy a hotel?" Man, all the time. And the answer is, have you bought the flight on your own?
Do you do it with two kids, and you wanna make sure the seats are together, it's the exact right time to wait, you know, to get out, which way is the connection, all this? It's really hard. When you are done with that flight, you don't wanna buy another thing in the old style. You're like: "This is exhausting. I'm done. I'll come back tomorrow or the next day." And the idea of a Connected Trip, though, you make it easy, you make it frictionless, seamless, and you make sure you're getting more value for it. See, the Connected Trip is not only for the demand side, the traveler, it's also very important for the partner, the partner supplier. What does the partner supplier need? What? They want incremental demand.
You know, a lot of times, what they like to do is they like to offer something up that's not gonna cannibalize their current channels. They wanna offer up something without that. Well, using the Connected Trip, we'll be able to do that. I'll be able to have a car rental company offer us special deals, et cetera, that we will put into a personalized way to a traveler who's going to a certain place that this car rental needs the business. And doing all these things, using all the AI techniques that we have and all the things we will be able to do in the future, is gonna create something that is just more value for the traveler, more value for the supplier, and will help us have a better business.
Ewout, any thoughts there? I think when we've talked over the last couple months, you've kind of pointed out that you wanted to bring more attention to connected trips and the opportunity there.
Yeah, and when we look at the metrics around Connected Trip, what I really find fascinating is, if you look like the number of unique customers we have, the repeat of those customers, how many trips they book per year with us, how many verticals they then use when they come back to us, and then how many times it's a Connected Trip, and how much also goes direct to us versus the, the pay channels, you see all of these metrics going up at the same time. So I'm not only looking at Connected Trip as a standalone objective.
I mean, all of these elements are reinforcing each other because we will have customers that we know better, they trust us, they know we have a fair deal, ease of use, they go to the app, the credit card is there-... They know that it is easy to cancel. They come back, book more with us. You become the standard. You become basically the go-to in their way, how they operate. They are not going to compare anymore. And all of that, therefore, is that flywheel we were talking about during the call. And if that flywheel is really there, and it is reinforcing, I think that's a real positive. So we put, for the first time, a number out on Connected Trip.
I think that was also in our earlier discussion, and with some of your colleagues, that came out of it, of making it a little bit more tangible. And I think high single digits is a good number. It grew by about 50%. It's the beginning, but it's real. All the other metrics then around that, that are also supporting that means that this is really a, a strategy that is taking off and is getting traction.
Okay, great. Let's shift gears, talk about AI, an area that you've certainly been investing in for many years. If we and there's multiple products across Booking, Priceline, Kayak certainly has some as well. What have you learned, I guess, so far from the early stages of these products? And as you look across, you know, more broadly, how travel is booked, what kind of changes do you think are in store going forward?
Right. So what Doug's talking about is some of the products that we've come out using generative AI. Obviously, we've been a company that's been using AI for a very long time. I mean, your search results more than a dozen years ago was coming off of a AI machine learning model that said what you should see. But what we're talking about here is a little different. So at Booking.com, we have a product called our AI Trip Planner, which a person going in, totally free form, you go in, you can say, "I wanna go on a trip to Europe. I live in New York.
What do you got for me?" And then you have an interactive going back and forth, and the AI Trip Planner will be able to present to you some interesting suggestions and things you can do, and you can book the hotel right off of that. It's not dissimilar thing over at Priceline. They call their product Penny. And you can then go to other areas where the generative AI benefits come not from the traveler side, but from making our company more efficient. So Agoda's talking to us about how much increase in software development, efficiency, things, things like that. In all of our companies, how much better customer service is becoming and will become down the road, all these issues.
The interesting thing down the road, Doug, and you, your question sort of leads to this, is the issue of that AI agent. When we say AI agent, what are we talking about? Well, essentially, when I used to talk about the connected trip, I would talk to people about, well, you remember, there's a human travel agent. What we wanna do is we wanna use technology to recreate that human travel agent that you love so much. But that human travel agent didn't know everything about you. They knew a lot, but they didn't know everything, and they had a limited set of information themselves to decide on what may be possible for you, et cetera. Technology makes that so much larger because technology does not forget about your past. The database remember...
We know all the things you used to do and can use that. Similarly, the number of permutations of things that are possible on the other side, enormous. And then the generative AI, being able to create all the different possibilities, come up with the optimization there is really... And then being able to execute it for the person, and then, very important, if something goes wrong, being able to fix it. And customer service, that generative AI, instead of being on hold for God knows how long with some companies, not ours, others, it won't happen at all because the computational power is such that you can have 1 million customer service calls all at once and be answered right away by something that sounds like a human, only it's not. It's generative AI.
Now, maybe the regulators require you to actually say, "This is a generative AI voice," well, who knows what? But the point is you'll be so much better served in the future. Everybody knows this, I think, because any single article you read about generative AI, almost the first paragraph or second paragraph, there's always something where travel is a primary use case, and we all know that. For us, it's important to get out there fast, get out there ahead of anyone else. And we have some advantages. We have scale. We have the capital. We have tremendous number of people who've been working with AI for a very long time to help build all this out.
This is a case where scale matters, and it's not that different than technological changes in the travel industry in the past, where bigger was better, and it did produce a result faster, which is good for both sides of the marketplace. I am just thrilled with where we're sitting, some of the things are coming down, but I'm really excited about what we will be doing down the road.
So, let's see. More specifically, if there's. So I put into any number of different gen AI services. I'd like a four-day itinerary for the South of France. Is that positive for you or negative for you?
It is-
Will you be able to offer the same or better capabilities over time?
Yeah, and here, this is really important. It's being able to answer that better is what would be better for us. And now, why would we do that better than someone else, and what we are able to do? Do we have more information on that person's history, and can we match that up against other similar cohorts so we can be able to provide the right things that would probably be best for them? And then do we have the best value? Because are we getting the best prices from the hotels and the ground transportation, the flights and all that? And is this part of our Genius program, we'll get special things for this particular thing, all these things. Again, this is where scale matters.
Getting out faster, putting it out is absolutely the right way to go on this. I can't guarantee that we will be the, quote-unquote, winner in this, but I certainly like our position where we sit right now and where we're growing.
What about internally, your usage of generative AI in terms of customer service and just kind of internal operational opportunities? What are you seeing there, perhaps carve out room for efficiencies?
Yeah. This is exactly the two worlds, how we think about Gen AI and the application within the company. So Glenn just talked about the proposition, the personalization, the benefit of the data we have to run through the models and to make it really personalized, which is, by the way, good for both the company and the traveler. But then there's also the big part around efficiencies and operating leverage, and I truly believe that is going to be a very large positive impact. By the way, for many companies, some will be a front runner, some will be late in this game. In the end, it will probably become table stakes. But customer service, think about, we probably all have experiences, bad experiences in customer service around travel.
You need some change of a flight, and you're in the wait for a very long time, and you get someone on the phone and said, "Oh, I need to connect you with a colleague." And you are, again, a very long time on the in the wait, and it is just really annoying and, and difficult. So if now it can be done by Gen AI that is human-like, can have human-like speech, reasoning, can find information immediately, there is no waiting time. If 1,000 people call or 1,000,000 people call at the same time, I think that's it can find information so much quicker. It doesn't have to You don't have to be put on hold anymore. I mean, this is much better experience, but of course, therefore, also much, much more efficient in terms of operating it.
Another example is the whole area of system development. Gen AI is already proven to write much higher quality code than humans can do. Still, humans are needed to test the code, to ultimately implement it, to monitor it, but this is another area where we will see a really benefit of higher productivity coming out of it. So those are two examples. So I really believe both are ultimately going to be very beneficial. With respect to implementation around customer service, we definitely are quite advanced with the development plans around it.
Okay. Glenn, Google last week introduced some significant changes in their search engine results pages with AI Overviews. There's been just broad-based concern, I think, that some sites could lose traffic from Google. Just first, what's your view on that more broadly, for the internet and for Booking and your brands more specifically?
So I read those things. I can only speak to our company. I can't speak of others, and I'm surprised some other people do make claims about ours. I'm not sure what data they have of ours, but so be it. And we said, very publicly, we said we've seen no benefit, no gain of any size from any changes that Google made due to trying to adhere to new regulations. That's what we've said. Other people have said some things. I always say, "Gee, I wonder why they say that," but I'll leave that up to others to try and understand motivations.
Okay. You hit on Genius, the loyalty program, a little bit. Maybe you can give us an update on what Genius looks like today, how you think it's really differentiated from other programs in the market, and how will it evolve? How will it continue to get better over time?
Yeah. All right. You know, this is always a fun thing. How many people here are actually part of the Booking.com Genius program? Just raise a hand. All right. Now, keep them up if you're two, if you're a Genius level two. Keep them up if you're a Genius level three. A lot. Okay, so not nearly as many. If we were in Europe right now, it'd be a very different story, just letting you know. The great thing about Genius is it enables a way for our suppliers to get incremental demand when they want it.
Because what they do is they offer special benefits that we're gonna offer to a closed group, Genius level, and that thereby preserves some of their either pricing or benefits things, and at the same time enables great benefits to the traveler, who is part of the program, who will get wonderful things, like significant percentage off what the price would be if you're not Genius, or maybe you get early check-in, or maybe you get late check-out, or maybe you get free breakfast, all sorts, depending on things, and working that with the hoteliers. And now we're starting to pilot it. We have it now with rental cars, and they're doing a lot of things, and we're testing it with flights and attractions. And this is a great thing because it gives a reason.
Somebody, I'm using Booking to get my travel because it's better value. I get tremendous better value than I would going somewhere else. And the really great thing is that we're not paying for it out of our own pocket. It's coming from the suppliers who are happy to do it because it's getting them additional demand. And remember, like talking about before, if you have an empty room, a hotel that goes empty overnight, zero revenue. If you filled it even a little bit of discounted price, the fact is, almost all of that's gonna go to the bottom line. They already paid for the mortgage. They already paid for the house, you know, cleaners. They're already all the fixed costs are there. Very little variable costs. They give us a commission.
That's why this works so well, and that's why so many suppliers are participating and, and enjoying it, and that's why so many people on the demand side, the travelers, are saying, "This is great. I'm gonna book, and I do five transactions in two years, and I am now Genius level two, or 15 times in two years, I'm Genius level three, and I really get a lot better now."... We want to expand it even more. I want to make sure that, first of all, we got to make more people aware of it, 'cause I'll bet if I'd ask how many people in this room have never heard of Genius, I'll bet we would have gotten a not insignificant number. So we got to make sure people are more aware of it.
And then what we need to do is use this with a Connected Trip, and use this in all the different ways with the modeling that we do, and using with generative AI to make sure we're bringing all the powers together so that the traveler really feels they are getting a differentiated, better experience by using us. And on the other side of the marketplace, the suppliers say, "Using Booking as my main distribution channel is better for me." And doing that, doing better service, a better way to do things for both sides of the marketplace, it what will achieve long-term success. It's what we've been doing for the 24 years I've been at this company, and it's why we have been able to achieve the results that we have been able to achieve.
Okay. Ewout, maybe you can talk about margins a little bit. I mean, over the last few or maybe several years, the investments you've made, certainly around flights, around payments, for example, investing, of course, to grow the business, but they've put some downward pressure on margins. How do we think about that going forward and kind of over a little longer term period?
Yeah, that's, that's fair, because a lot of the expansion were in businesses, if you purely look at it standalone, are lower margin businesses. At the same time, I think that's now in the baseline of the company. And the good part is that the company, in terms of future growth, should be able to get a lot of operating leverage from the scale. So we believe that we will be able to grow the top line faster by a few points than the fixed OpEx line over the next few years, and therefore creating a margin expansion. The incremental margins that we are able to accomplish is more what I'm looking at, because think about it in a way of the next traveler that books an accommodation, the next traveler that books a flight.
The fixed infrastructure cost we already have, so the incremental margins on those bookings are going to be very high, and that's, I think, the benefit. Plus, if it is becoming more a Connected Trip, so we see more verticals within one trip being booked with us, that is also margin-enhancing. So I very much believe, plus, of course, what we discussed a few minutes ago, the efficiencies coming out of Gen AI, all of that is going to help the margin profile in the future. There's only one caveat. There might be something going in the opposite direction, but it's a good thing. Opportunities to reinvest in the business.
Mm-hmm.
For new growth initiatives in the future. That's, of course, completely separate. You need the discipline to drive operating leverage, and then you need to look separately to the business cases of what do we get from those business cases? Where does it show up? What additional growth does it help with the, with the company in the future? And that's going to be the most value-enhancing way that ultimately we can steer the company over the next few years.
Okay, great. We're gonna leave it there. Thank you, Glenn. Thank you, Ivar.
Thank you, Doug.
Thank you, Doug.