Okay. I think in the interest of time, we're going to kick off. I know everyone's moving from room to room. It's my pleasure to welcome back to the conference the team from Booking. I'm going to read a quick safe harbor, and then we're going to get right into it. Some of the statements made today by Booking Holdings may be considered forward-looking. These statements involve a number of risks and uncertainties that could cause actual results to differ materially. Any forward-looking statements made today by the company are based on assumptions as of its most recent earnings call on August 4, 2026, and Booking Holdings undertakes no obligation to update them. Please refer to Booking Holdings Form 10-K for a discussion of the risk factors that may impact actual results. Ivan, thanks so much for being part of the conference again this year.
Good to see you, Eric.
I always like to dive in with a little bit more of a how did the summer go. So you're a travel company. You're an experiences company. How was your summer? Did you do anything interesting?
Of course, a lot of travel. By the way, happy to be here live in the room, so not on the screen. So I think that makes it much more engaging. Yeah, lots of travel, but I'm very passionate about travel. A lot mostly for business. I had to be a few times in the Netherlands for Booking.com that is headquartered there. I was early summer in Bangkok for Agoda, had to go to France, a couple of other places, and had a few days after the earnings call. Usually, it's a sprint, of course, until the reporting of the second quarter results, and then, I had a few days afterwards with the family, which was also nice.
Okay. Well, always good to know that you
What is great to see is, by the way, when you are in places across the world and you see a lot of tourists, it is very busy out there.
Yeah.
In the past, I would think, "Ooh, it is busy," and now I think, "Ooh, it is a lot of business." I see it now as a clear positive.
Okay, good stuff. We certainly have a lot of people here in the Palace Hotel this week that came from all over the world. So travel continues to We are playing our part at Goldman Sachs to some degree. Maybe just to level set, I always love to take a step back before we take a step forward. You guys have been on this journey as a company talking more about Connected Trip, some of the investments you have wanted to make. Talk a little bit about the evolution of the company and the platform and the journey you have been on, and how that level sets with where you guys are today.
Yep. The way I look at us as a company is, I think we have really evolved from a transactional platform to a marketplace, a convenient, sophisticated, highly engaging marketplace. Let me explain that. I think when the company started, let's say, 20 years + ago, it was very transactional. We were bringing travelers and traditional hotel owners together. It was all through paid traffic, the traditional Google Search, and it was all only traditional hotels and mostly the agency model. In the end, someone was still paying ultimately at a check-in at a hotel. I think how the company has evolved is, I think, in a tremendous way. We have added alternative accommodations. We have added a lot of other verticals, flights, attractions, rental cars, rideshare, restaurants, and so on. We are now having two-thirds of the traffic coming directly to our marketplace.
Yes, we are still paying for one-third of the traffic. We like that because it's, of course, bringing new customers to us, but two-thirds is coming direct. We are facilitating the payments at a low 70% of all those transactions. And we see people moving up in the Genius loyalty program, coming back more frequently to our marketplace. I think we are a very different company today than we were many years ago.
Okay. We're going to get into a lot of those details as we talk today. But maybe just to level set, you obviously did report earnings as we referenced just about a month or so ago. Paint the picture or the framing you wanted to leave investors with around that earnings as the demand dynamic or the demand environment that the company found itself with in the middle of the year. Because there were some currents around the Middle East, as well as some of the pockets of international that you saw. Just repeat some of that framing so people know what the key messages were.
Yeah, I think for us, really the word that is describing the theme of the quarter was resilience. I think if you look in general, travel is probably one of the most resilient categories in consumer discretionary. And why is that the case? Because you see if there's something happening across the world, a natural disaster, a geopolitical event, you have, at the beginning, a reaction of the consumer. They're careful. They don't know what's going to happen. They see the news every day, and they decide to wait. But at some point, I think that first shock effect is gone. Of course, the news is also sometimes moving on. And then you see that demand really coming back. So what we saw was, of course, at the onset of the conflict in the Middle East, March, April, May, consumers, travelers were very careful to get their bookings in.
But then, actually from June onwards, we saw that travelers were saying, "I'm not going to give up on my summer holiday. I still want to make that trip." And we saw actually the demand picking up in a very strong way. That was very encouraging. What we saw was actually the direct impact of the conflict of the Middle East was starting to normalize, so both Middle East inbound and Middle East outbound. What we saw still continuing at the same time was more the indirect impact of the Middle East conflict. And what I mean with the indirect impact, mostly the impact on oil prices, jet fuel prices, airline capacity, and therefore airline ticket prices. So definitely there was a change in terms of behavior, what we saw that travelers were picking different kind of destinations.
So far less long-distance travel, intercontinental travel, more intra-regional travel or domestic travel because people were stepping less on a plane. But in the end, the alternatives are great for us as well because we're still picking up on the demand, even if people ultimately go to other destinations. And therefore, I think our results were very solid for the second quarter. So we were very pleased with the results we're able to report.
Okay. And maybe just one follow-up that I know we talked about around earnings, just different behaviors you're seeing globally. Are you seeing different behaviors of travels of the way consumers are sort of interacting with travel brands in different geographies of the world?
Well, the U.S. as a market was the strongest travel market in the second quarter, which is great to say because for a couple of years, actually, the U.S. was the weakest of all the large markets in the world. So it's nice to see that U.S. is doing very well. We have been speaking, by the way, about the K-shaped economy or the bifurcation that last year and the year before, we saw the top end of the market doing much better than the lower end of the market. It's hard to prove that at this moment. So we actually see the strength across the board. So that's good from a U.S. perspective. The shift to more intra-regional or domestic travel, we were more observing in Europe and in Asia because those two regions are more impacted by the Middle East situation.
For example, most of the oil that comes from the Strait of Hormuz actually is going to Asia. Asia, there was definitely the most pressure on airline ticket prices. But again, there was just a shift in terms of the destination and not so much a shift in the absolute level of demand. That was good for us as a company.
Okay. Let's get into some of what you laid out in your first answer and talk about how the strategy has evolved and the platform's evolved. Talk to us a little bit about alternative accommodations. It's become a much bigger part of the business today than it was a couple of years ago. Talk to us a little bit about the scope for supply growth going forward on the alternative accommodation side, and how the company's positioned to take a variety of supply across the hotel and the alternative accommodation and match it against the demand signals and the demand scale that you guys have as a company.
Yeah. First of all, we see alternative accommodation still as a great opportunity for us and really an idiosyncratic growth driver for the next few years. Why is that the case? If we again look at it more from a regional basis, we're already very strong in Europe from an alternative accommodations perspective, and really in a market-leading position. I think in Asia, we're also quite strong. Alternative accommodations is less in demand today in Asia, but that will probably come as just in general for the industry. People are still more focused on traditional hotels, but that will probably shift over the next few years. We will take some advantage from that growth. Our position in the U.S. is still relatively the smallest. We see it as a clear opportunity to push harder and drive more growth over the next few years.
We're working on familiarity. We're working on supply. We're working really on getting the product in a better place. We expect that the U.S., our position will improve, over the next couple of quarters and years. In terms of supply, which is really encouraging, is that we were able to report 8% listings growth in the quarter year-over-year to 9.1 million listings because that is an early indicator of future growth that we're able to deliver in terms of room nights. We're still working very hard to expand the supply, and that will ultimately be a clear catalyst then for the growth.
Okay. Understood. Widening out the conversation to the broader Connected Trip initiative. Talk to us a little bit about similar dynamic, growing the supply base of experiences that you can put in front of consumers, as well as, again, how you can build scale and marry it with the demand side. You are already getting people that are booking the travel to go to a specific location, and then marrying what they are going to do there and widening out the basket size and what that presents as an opportunity, but also how you build scale.
Yeah. I just want to say today, Connected Trip is already real. It is a low double-digit percentage of our overall transactions, and it is growing faster than just the single individual bookings that we are seeing within the company. It is definitely adding value already for travelers today. The way how we do that is the expansion of our offering. The fact that we can combine an airline ticket with an apartment or a rental car with a hotel, add an attraction on top of it. We know where travelers are going based on the booking they are making with us, the first booking, which is usually a flight and an accommodation, and then we can offer attractive propositions on top of it. We usually have to pay only once for the acquisition, and then the cross-sell happens then afterwards. From a unit economics, it is also very attractive.
Therefore, we see this demand. I think this is not something that stands on its own. This is a part of the overall flywheel that we are seeing because we are seeing customers coming more direct to us. We see more repeat of those customers. They are moving up in the loyalty program. They get more benefits in terms of discounts, and therefore they are booking more across multiple verticals and coming back to us more frequently. That is really a self-reinforcing flywheel that we are having within the company. The numbers were a little lower, again, due to the conflict in the Middle East in general. But we would expect the same with alternative accommodations, also Connected Trip, to see that re-accelerating again in the future. The most important and most exciting thing for Connected Trip is the AI layer that we can put on top of it.
Because now we can put an intelligent layer on all those elements to connect the dots. Think about it in a way of, the airline has announced that they are changing their flight schedule, and the flight is now departing later. We can automatically inform the hotel for a late check-in, or we can automatically update the restaurant reservation and shift it to a later date. We are seeing that it is bad weather on Thursday of next week, and we can now immediately suggest to change your itinerary, and let us move the museum tour to Thursday and do the outside walking tour to Wednesday. There are so many of those things that we can now logically put together as part of that Connected Trip package that we can deliver to travelers, that experience.
This is what we are exactly building, and we are making, I think, great progress in that. I think that experience is going to be only better, and therefore, it's going to be only more attractive for our traveler customers to put more of their elements of a trip with us.
Okay, let's build on that theme because I think, obviously, we're at a technology conference. AI has been the dominant theme over the first day plus so far of the conference. Maybe go a little bit deeper for us on how you see AI changing the discovery process for the consumer. How you're going to layer elements of AI into what consumers see on your site, in your app, and how that might translate into higher conversion, less friction, all the things where discovery turns into action.
Yep. We see customer-facing generative AI tools as a clear opportunity for us as a company. Let me explain the different ways how we are going to do that. First of all, it's going to help to expand the total addressable markets, because still about 70% is online, but 30% is still offline of travel. We would expect that more people would move faster to really make bookings in a digital way. That's good for us. The second is what we would expect is that our paid channels, so our performance marketing channels, we would see a more diversified set of providers, set of auction platforms. You could say the last decade, we're very much dominated by one very big party, traditional Google Search. More of those platforms is good for us because we are running very large optimization algorithms.
If we have more platforms where this PPC is happening, that will be good for us because we can diversify and really increase the optimization and get to higher returns. I also need to say that the core of our strategy is to make sure that the two-thirds of the travelers that come direct to us today, that we want to make sure that they continue to come direct to us today. We are introducing a lot of AI planning tools on our own marketplace itself. So the people that know us, that trust us, that like to come direct to us, that know if something goes wrong, we will fix it for them, that are part of our loyalty program and see the benefits of that they will say, "You know what?
Yeah, I can do that AI trip planning with that standalone LLM, but I can do the same thing in your environment. And actually, I like that because then it's interconnected to everything I have there with you, and I know it's taken care of, and I know who's handling my money, and I know things get fixed if things go wrong. We're very much protecting the direct channel, taking advantage of the diversification of more performance marketing channel. And then we also think there will be a benefit of the total addressable market that will be expanded.
Maybe just to ask a follow-up there that comes up in a lot of investor conversations I have about the industry broadly. How do you make sure as a company, and we've talked about this on some earnings calls, protecting what comes to you from the LLMs is good traffic and doesn't eventually become another proxy for Google and expensive traffic over time while continuing to grow and scale? Probably your most valuable experience is when consumers are coming direct and have higher conversion than they did in prior periods. How do you make sure you continue to strike the right balance?
Yeah
In those relationships?
Let me then dive a little bit deeper in what I just explained. If we look at the LLM traffic that is coming to us today, that's still very small.
Yeah.
We said during our last earnings call, still significantly below 1%, and that's both the paid and the unpaid traffic. What we see is a lot of consumers are doing research on LLMs. By the way, people have always done and used five different platforms on average to do research before they actually make the booking. People do that research also today on ChatGPT or on any other platform, LLM platform. But then, in the end, that's not where they do the booking, because booking travel is high stakes, high emotions, high value, and it can't go wrong. So they still very much would like to go to the platform they know and trust and they rely on. But we are working together with all of these LLMs, and we are launch partner with all of these LLM providers because we learn a lot.
We learn where they're moving from a technology perspective. We can observe the behavioral aspects from consumers because we don't know really what has tractions. Because it doesn't have a lot of traction today from a generic e-commerce perspective doesn't mean it won't have traction in the future. But what we are seeing is that they are all migrating, converging to a PPC type of monetization model. We think that in the end, it will be like PPC. By the way, we are a launch partner with OpenAI for their testing of that, and they are expanding those tests to several other countries at the moment. So it will be very much Google-like auction models in many different platforms. Again, given our optimization expertise, we think that is going to be a positive.
But we are so focused on making sure that people that ultimately start through a paid channel migrate to become a direct customer, and that doesn't happen on day one. That is, you first have one time an experience with us, a second time experience, and then third time someone might come direct to us. We are therefore introducing so many of those AI customer-facing trip planning tools in our own environment. We have today five different of those initiatives going on. Two are startups, so quite innovative concept that are developing, not part of any of our existing organizations, so not really constrained by any of the existing thinking. We will expect that those will see some launches in the fall of this year.
Then we have two initiatives which are more starting at the planning phase, if you think about the funnel, and then working down to the booking and the in-trip phase. One is today live, and this is Penny, which is launched by Priceline. By the way, we have on our investor relations website a video of Penny. I would strongly recommend you to look at that because this is actually seen by many research parties as the best AI trip planning tool that is out there today. So really look at that. Then also Agoda will launch something similar in the near future. Booking.com is actually working in the other direction. Instead of top of the funnel down, they are working on their existing place in the funnel, their existing UX, are working themselves up because Booking's platform is so optimized.
You don't want to mess up with customers, confusing customers, and impact conversion. They're adding AI tools in their existing UX and then slowly moving themselves up within the funnel. We're taking different approaches there.
Yeah.
In the end, that's all focused on making sure that consumers will have the same experience in our environment as they can get with standalone tools.
Okay. You've also been very upfront and talked a lot about how AI is also driving internal efficiencies and savings in the organization.
Okay.
You've been one of the few companies that have actually articulated some of the returns you've gotten from deploying AI internally. Talk to us a little bit about what you've learned about the cost structure of the company and deploying AI inside the company, and where that might go over the next couple of years.
I think this nature of AI is deeply embedded in our DNA because even before GenAI, of course, traditional AI, machine learning, we were already applying that as a company in a very early stage. We have started to apply more of the newest GenAI tools maybe about two years ago in customer service, and that's still further being enhanced and improved. What we are seeing is that more and more of customer service tasks can be solved by agentic interactions. The time for resolution is shorter, and the customer satisfaction is higher. From a cost perspective, actually, we are in a better place. We see the actual customer service cost, total customer service cost for the company coming down. We have, of course, unit growth.
In other words, the customer service cost per booking is coming down in a very meaningful way, more than 10% already year-over-year. That's a huge benefit. Another area, as an example, is in our engineering groups. We're applying a lot of the AI tools for software development and for coding. We have introduced a number of specific metrics around it, so adoption levels. We're looking at productivity. Not just the amount of code written by AI, but ultimately, which of the percentage of merge request that is being put in production, what is the increase there? We see about a 30% uplift in terms of merge requests that are being put in production.
It's not only writing the code, there's of course also the quality controls and the checks and all of that needs to happen before it can be put in production, 30%. Then we're also looking at the total cost per merge request, because, yes, we have AI token costs that are going up and AI license fees that are going up. But because of the 30% merge request productivity uplift, actually, the average cost per merge request are coming down in a meaningful way for us as a company. That's including the people cost and the AI cost at the same time. Clearly, very positive ROI we are having there, and we're looking now at implementing many other tools in many other parts of the company.
The other part where it's also very positive from an ROI perspective is very early stage, but in the consumer-facing part of the AI tools, we show shorter time to booking, we see higher conversion rates, and we see also lower cancellation rates. All of that is, of course, also very positive in the end from a unit economic perspective for us.
Understood. Okay. I want to come back to what you said before about direct bookings and the mobile app. Can you talk to us a little bit about personalization and loyalty and building scale around those offerings and how that builds more momentum around direct traffic and direct mobile traffic? The second part of the question would be how do you think about the optimal mix? Because interestingly, before you said, "We want direct traffic, but we also want some indirect traffic because those also can generate newer customers for us." Against the efforts of building scale and direct, how do you also think about the optimal mix?
Yeah. I love that you're bringing this up, Eric, because this is, of course, a very important part of where we are focused on. Because what is our strength? The data that we have of our travelers. I think the trust that we have, that people know that we are taking care of their data, of their payments, of their booking in a very careful way. The loyalty, the fact that people are coming back and the benefits they get from the loyalty, the brand recognition that we're having, the investments we can make around it, and that we can connect to this very broad set of very fragmented supply. So we have 4.7 million properties, 4.7 million properties that we have real-time data about availability, pricing, what kind of rooms, and so on.
We have a lot of benefit on that marketplace and that value proposition that we have for the suppliers there, because how can that small hotel, family-owned hotel really reach the world and market itself? And particularly in a busy world with AI and everything that's happening from Astra to any new tools, like they are confused, so they need players like us to help them to really get that demand to them. And please don't forget, just to throw one more statistic out, from the number of room nights that is being booked on our marketplace, almost 90%, almost 90% is coming from alternative accommodations, independent hotels, and smaller chains. So smaller chains is not the top 10. So people here in the U.S. are often confused. They think the whole market is dominated by Marriott, Hilton, and IHG.
That's not how the accommodation market looks in the world. It's actually very fragmented. And we have only just over 10% coming from the top 10 chains, and almost 90% is coming from all these small supply partners that we're helping to really get the reach in the world. So what does that mean for us? We are therefore explicitly investing and will be investing in the near future in even more benefits coming from the loyalty program, even more in the brands, even more in the AI tools, so that we can really strengthen, further strengthen all those assets we have around our marketplace for travelers and suppliers.
Okay, understood. You've laid out the goals around your transformation program. Can you just go a little bit deeper into the building blocks of what drives some of the efficiencies you're finding in the business, and how investors should think about the skew of it reinvesting some of those savings back in all these growth initiatives we've talked about today, and how much of it will inform the potential for margin trajectory going forward as well?
Maybe first it's important to frame this particular point by stating that we already have today industry-leading EBITDA margins, and that's on a fully loaded basis, including stock-based compensation and so on. It's about 70% higher than our largest peers. It's already, we have a very strong starting point. It's definitely in our DNA that we are always focused on managing our expenses in a disciplined way. We're always trying to drive efficiency, both marketing leverage, and fixed operating leverage. We do that through, for example, that transformation program. We announced during the last earnings call that we found another $100 million of savings opportunity. This was in the existing categories that we put out. In this case, it was mostly in procurement, because think about the procurement.
In the past, each of our brands were doing their own procurement at their own, buying their own cloud compute at AWS, for example, or their own servers from HPE and so on. We have really started to put that together, take advantage of the scale we have as a company. We have found more opportunities, and so therefore we could increase it by another $100 million. We're always trying to drive the top-line growth faster than our fixed operating expense line. Travel is a scale business. We are the largest player, so we should take advantage of that. We have a fixed cost base that shouldn't really step up with more volume. That's another benefit that we have there. We will find other opportunities.
For example, none of this, except for customer service benefits on AI, none of this is really taking into account the GenAI benefits in terms of internal productivity yet. That's still what comes on top of it. Eric, you make a very other important point around reinvestments, because, yes, we have a lot of opportunities to reinvest in the business. From our perspective, there's so much more we can do in growing the company in the future. We are reinvesting in the business, but that's a separate mechanism. On the one hand, driving the efficiencies, taking really the cost benefit out, freeing up resources, and then reinvesting it in other areas where we can really drive growth in the future and with very clear business cases we have around that.
Every year we make decisions around how much we want to reinvest and what are the best opportunities we have there. these are two very separate mechanisms, and basically what is seen in the margin line is basically the net of those two effects.
Okay.
There's a lot of self-funding, in other words-
Yeah
In our system.
Understood. Speaking about how that translates into external, talk to us a little bit about capital allocation. You guys have returned a lot of capital to shareholders over the last couple of years. Talk a little bit about the journey you've been on with capital allocation and how investors should think about the balance you're trying to strike between growth investments, capital returns, and potentially, if it ever presents itself, maybe M&A or external investments as well.
Yeah. I think the way to look at our capital approach is I always think about three words. It's disciplined, it is predictable, and it is consistent. I think the benefit we are having is very strong balance sheet, very strong cash position, very strong free cash flow generation, north of $9 billion. Overall, that gives us a lot of opportunity to do a few things. As I already said, organically reinvest in the business. That's always our priority. We know our businesses, we know our management, we know our opportunities the best. Secondly, if there are attractive M&A opportunities to step into that, but generally we don't do a lot of M&A because we are very careful always from a valuation perspective, and it has to be really attractive from a strategic perspective. But we could definitely find opportunities there we want to also invest inorganically.
There's always a lot of room also to return capital to shareholders. We are definitely taking advantage if there are certain periods where there is a dislocation of our share price, that we're actually scaling up our buyback activity. In the first half of this year, we bought back $7.3 billion of our own stock, so at a very attractive level. When those opportunities arise, we will continue to do that as well.
Very clear. We only have a few minutes left. When you talk to investors and you look at where the company's going over the medium to long term, any messages you want to leave investors with in terms of what you think might be underappreciated or misunderstood about Booking as a company?
Yeah. I would say, I think what is misunderstood is the underlying durability of our marketplace, the underlying durability of our marketplace. Because this is a marketplace where a lot of value is added on both sides. On the one hand, we have those 4.7 million properties where we provide them with marketing, with sales, with insights. We provide them with data protection, with regulatory, with the payments, with customer service. As I said before, almost 90% are those individual property owners, family owners or the smaller chain. They need that help and we can provide that to them. We have a very strong value proposition on the supply side. Then we have this value proposition on the traveler side, where people like our platform, come back more frequently. We have about two-thirds that comes direct.
We have high 50% of the bookings are coming from our Genius levels 2 and 3. It's about the 30% of our customers, but they do almost 60% of our actual bookings. It's that really we have a lot of loyal customers that like to come back and do more of their trips with us, and we see that frequency therefore going up. I think that's the value we're adding there on the traveler side. Plus, of course, the data we have and the personalization. The investments we're making on that whole marketplace, I think in the future will make it only more durable. We're not just the owner of an antiquated search engine, because I think that's a real misperception.
I think we run a very sophisticated, very high value add marketplace, and we will continue to invest in that in order to really strengthen that value proposition. We very much believe this flywheel will stay into effect for a very long period of time.
Well, look, I always appreciate the opportunity to have a conversation. Thanks so much for being part of the conference. Please join me in thanking Booking for being here this year.