Booking Holdings Inc. Q2 FY2025 earnings call

• Strong quarter with solid top line trends, room nights, gross bookings, and revenue exceeding expectations. Adjusted EBITDA increased 28% year-over-year due to revenue growth and disciplined expense management.
• Strategic priorities: Expanding alternative accommodations, enhancing the Genius loyalty program, growing presence in Asia, advancing the Connected Trip vision, and investing in AI capabilities.
• Alternative accommodations: Booking.com's alternative accommodation listings reached 8.4 million, a 8% year-over-year increase, with room night growth of 10% outpacing the core hotel business.
• Genius loyalty program: Over 30% of active travelers are in higher Genius tiers (Levels 2 and 3), booking mid-50% of total room nights, with higher direct booking rates and booking frequency.
• Asia: Central to long-term strategy, with low double-digit room night growth in the quarter, driven by localizing user experience, expanding flights and attractions, tailoring payment methods, and having dedicated employees.
• Connected Trip: Progress towards long-term vision, with transactions growing over 30% year-over-year, non-accommodation verticals showing strong growth (flights up 44%, attractions up over 100% from a modest base).
• AI initiatives: Priceline's AI assistant Penny enhanced, KAYAK.ai improving product, OpenTable's AI Concierge launched, Gen AI reducing live agent contact rates across brands.

During the second quarter, Booking Holdings delivered strong results. Room nights reached 309 million, an 8% year-over-year increase. Gross bookings were up 13% and revenue up 16%, both above the high end of prior guidance ranges. Adjusted EBITDA increased 28% year-over-year. Alternative accommodations room nights grew 10%, outpacing the overall business growth. Connected Trip transactions grew over 30% year-over-year and now represent a low double-digit percentage of Booking.com's total transactions. Flight tickets were up 44% and attraction ticket growth more than doubled year-over-year. Revenue contribution: Revenue as a percentage of gross bookings was 14.5%, up about 40 basis points year-over-year.

• Third quarter: Expected room night growth between 3.5% and 5.5%, gross bookings increase between 8% and 10%, revenue growth between 7% and 9%, adjusted EBITDA between $3.9 billion and $4 billion.
• Full year 2025: On a reported basis, gross bookings and revenue expected to be up low double digits, adjusted EBITDA up mid-teens, adjusted EPS up high teens. Adjusted EBITDA margins expected to expand year-over-year by about 125 basis points, higher than prior expectation of 50 to 100 basis points.

• Geopolitical and macroeconomic uncertainties. Impact from events in the Middle East in June, estimated to have impacted global growth by about 1% in June and 1/3 of a percentage point overall in the second quarter.
• U.S. market challenges: Lower ADRs, shorter length of stay, and booking window suggesting U.S. consumers are being more careful with spending in the current economic environment.

Q: On Asia, can you give color on particular markets performing well? And on LLMs, any current signs of impact?

A: Glenn D. Fogel said they don't break out individual countries in Asia but are pleased with overall Asia performance, noting Asia as the fastest-growing region. On LLMs, Glenn mentioned it's an early technology with great potential for better service to travelers and partners, and Ewout Steenbergen added it's too early to give precise impact on traffic diversification but direct channel is growing, and they're diversifying performance marketing channels including social media.

Q: On U.S. growth initiatives and technological hurdles for Gen AI?

A: Ewout Steenbergen said U.S. growth is from small initiatives adding up, with global diversification as a strength. Glenn D. Fogel discussed Gen AI's potential to improve traveler service, with examples like natural language search on Booking.com, and mentioned it's an incremental process with long-term potential but technical hurdles to clear.

Q: On 3Q outlook and alternative accommodations deceleration?

A: Ewout Steenbergen said 3Q guidance considers tougher comps from 2024, but overall full year guidance is strong. On alternative accommodations, Ewout said growth still outpaces traditional accommodations, reaching approximately 75% market share in alternative accommodations room nights, and it's an important driver of future growth.

Q: On Connected Trip key investments and go-to-market?

A: Glenn D. Fogel said they want more of all travel verticals for Connected Trip to offer what customers want, using data and personalization. Ewout Steenbergen added payments are a strategic underpinning of Connected Trip, and bringing together Connected Trip increases economics as travelers book more often with them directly.

Q: On U.S. behavior trends and Europe/APAC customers?

A: Ewout Steenbergen said U.S. consumer has top end stronger but lower end more careful, with Europe's high end traveling to Europe and Asia's markets doing well. Glenn D. Fogel added the global diversification is a strength.

Q: On Q4 guidance and advertising?

A: Ewout Steenbergen said Q4 2024 was strong due to real growth and low comps, but not factoring into current guidance. Advertising revenues up 11% in the second quarter, with KAYAK and strategic investments in advertising scaling up.

Q: On natural language tool conversion rates and P&L evolution?

A: Glenn D. Fogel said natural language tool is working as it's still in use, with many Gen AI initiatives across brands increasing benefits. Ewout Steenbergen discussed the double discipline of pursuing operating leverage and reinvesting in the business, with $150 million in-year savings from transformation and $170 million reinvested this year, aiming for higher top line growth in the future.