Booking Holdings Inc. (BKNG) Earnings Call Transcript & Summary

Great. Good morning, everyone, and thank you so much for joining us this morning at the BoA Consumer Conference. Very pleased to have Glenn Fogel and David Goulden here today. We'll do a Q&A on many of the issues that we're hearing from investors. So Glenn, David, thank you so much for joining us today.

Well, thanks for having us.

Great to be here, Justin.

Great. So why don't we start off in our virtual conference? It would be great next year when we're sitting together. And let's think about that. And the #1 question I get is how should we think about a realistic time line for a travel recovery to 2019 levels? Why don't we just start with that broad picture.

Well, it's interesting because that's the same question I get all the time, too. As you know, we've consistently said that the recovery recovering, going back -- get back to 2019 levels, we've always been saying it was going to take years, not quarters. I started saying that a year ago. So at least, we're a year done there. Look, we continue to believe that we're on this kind of time line. It's going to take time to get back to 2019. We're always looking at all the factors, how fast are these vaccines rolling out, how fast are the governments going to lift travel restrictions, what kind of support for the governments are going to come in, how quickly is this virus being spread and mutating. The one thing I absolutely am sure about, I am very confident the travel is going to recover, and I'm absolutely, absolutely confident that there is pent on-demand there. What we just need is we need these vaccines to get rolled out. We need the virus to be repressed so we need government to start lifting. We can't find that. It is very hard to call precise timing in all these variables that we don't control.

Got it. And is there any reason to believe or anything you've seen of permanent issues for travel, whether you see airline capacity or hotels struggling financially? Any permanent changes to the travel industry or concerns?

Well, the 2 things you mentioned are not -- would not be permanent. Government -- airlines, they've got to bring the planes back, so that's not a permanent type of thing. And hotels, I don't think so either. The one thing that I do think is going to be very interesting is when you look in the corporate managed travel area, the business travel. And I think that, one, it's going to be a lower share of the total business -- the total travel business for a long time and possibly forever a lower share of the total travel. But the other thing is, what does that mean? It means that the -- from the bus, those incredibly expensive airfares that were first-class and business class that were being done by business people are going to be less so, and that's going to change also the economics for the airlines. And then the hotels that were not dependent perhaps, but certainly had a larger portion of their profits came from the higher ADRs and the 4-stars and 5-star hotels, that's also going to be changing and what's going to happen there. So I think both airlines and hotels who were looking at what am I going to do, they're going to be saying where am I getting demand from? Well, we have the demand. We are the largest platform for demand and travel. And so, I think we're going to have a more cooperative way just because we are more valuable to that part of the business.

Got it. One question, maybe a quick follow-up maybe for David. What have you told people about your exposure to business travel? I know I get that question and I think you brought it up before. But David, just a quick exposure to business travel?

Yes. Justin. So first of all, understand it is a it is a self-reported measure by customers. So when they log on our platform, we ask them if they're traveling for business or for leisure. So it's not kind of a firm data point. Last time we disclosed that, it was a few years back. It was less than 1/5 of our business was business-related travel. But also important to understand the type of business travel that it typically is. It's typically the unmanaged business travel, very different from the kind of corporate travel management platforms. it's smaller companies. It's individual maybe doing a combination of business and leisure. And it's actually held up relatively well in this time frame.

Got it. One more maybe on travel recovery. Glenn, what did you see in China? I know they had got through the virus quicker. So maybe some -- any implications from there and anything you're seeing in Israel so far?

Well, we haven't talked a lot about China. And of course, China, like everywhere else, has a lot of restrictions for international travel. We've never been really big in the -- really huge in the domestic travel market there. But Israeli stuff that's happening is very interesting. Because Israel, as we all know, has been leading the world in terms of getting their population vaccinated. And we saw that when Israel, the government started easing the restriction in early February, we saw domestic bookings swing to a solid. And it's a good double-digit growth versus 2019, which just goes back to what I said earlier about there is pent-up demand. We know there's pent-up demand. Look, in the U.K., we saw something happen there. When Boris Johnson put out the announcement about what the schedule be to lift restrictions, we saw bump up in bookings. We see in Germany, even where people are looking at summer gross -- their summer bookings, they want to start doing it. U.K., Germany, you look at some of the numbers again in 2019, it's down the summer gross bookings, what, maybe 25% for 2019. That's relatively good compared to what you're seeing in other parts of the world. So I think the whole idea that we know that when these vaccines get distributed widely and when the government starts lifting the restrictions, I think that's when we start feeling better about where we're going.

Got it. Last year, obviously, you mentioned in some of your competitors, a pickup in alternative accommodations and also people taking longer stays, obviously, away from their office able to stay longer. Does that change your business strategy? Or are those more short-term trends? How are you thinking about how the world might have changed since COVID?

Yes. So I think we all saw people interested in the home or alternative accommodations more than they did in the past. And certainly, like you were talking about, we saw some number -- I'll let David talk about in a couple of seconds, some of the things we've seen in terms of the numbers and such. But in terms of going forward, I believe what's happening is people who maybe never thought about using alternative accommodation to home, now they've tried it last summer or in the fall. Or certainly were looking at it and now it's in their consideration set. So they're always going to be looking at this going forward. Now what does that mean? What that means is more competition for hotels. Hotels will always compete against other hotels and such. And over time, there had been an increase in people going more and more looking at the alternative accommodations. But the pandemic created this giant step functional change in the demand for the alternative accommodations. And that doesn't go back, that stays. So again -- this again -- this is something that helps us as a distributor as a source of demand for hotels. Now hotels have more issues, how do we get customers. Again, it helps us. And one of the great thing about us is we have hotels. We have alternative accommodations, homes and such. We're in a very good position for customers to come to us and they're trying find what to get, what do they want and they can choose right from there. So I think we're well positioned. And Dave, you talk a little bit about some of the numbers with things changing a little bit.

Yes. Sure, Glenn. So if we think about alternative accommodations, if you just step back and think about the entire year, we did see a relatively modest increase in the mix of a percentage of our total business. But the pattern was a little different during the year. So early in the pandemic, we saw a larger mix towards alternative space. And that interest may be more temporary response to social distancing. As we moved through the summer last year, we think people got more comfortable with staying in the hotels. And as a result, that mix shift kind of moderated compared to what we saw in the second quarter. And in the fourth quarter, just to remind you, we actually saw a slight decline in mix in the fourth quarter, which is driven by the higher geographic weighting to Europe where that's our strongest alternative accommodation business. Within Europe, the alternative accommodation business continued to increase in mix in the fourth quarter.

Got it. One more mix question. Obviously, a shift towards domestic travel versus international. And we're seeing that clear in our airline data and other data. Is that mix change permanent? And is it good or bad for Booking or neutral? How would you think about that?

Dave, why don't you take that and tell where our numbers are on that.

Yes. Just so we have seen a mix of -- a mix shift. We've seen the mix of our domestic travel from being less than half in 2019 to being actually about 85% in Q4 2020. So obviously, in the current environment, it's very difficult. And in some cases, it's not possible to travel internationally. So this shift in consumer behavior isn't surprising. Now again, we are well positioned because we have a wide range of properties and allow our customers to book on whatever type of trip that they want to take. From an economic point of view, prior to pandemic, international trips were typically higher value with longer length of stay and higher ADRs relative to domestic travel. We do expect international travel will come back. But the domestic travel will be what leads the recovery, and we'll be ready to capture it as it comes back, both on the domestic and international side.

Got it. And it doesn't really change profitability one way or the other? Is that fair?

Well, I think longer value stays and higher ADRs are basically economically better for us, right? So it's a profitability mix weighted also towards international travel.

Got it. Okay. Good. And one of the things you mentioned on the call was kind of a focus on U.S. share. And obviously, your competitor is doing a big reset on business practices and also cost-cutting and doing some repositioning. Any change to your marketing message in the U.S.? Or anything -- obviously, you have a competitive issue, so you don't want to give away the playbook. But anything we should know about the U.S. market and strategy changes there?

Well, yes, we don't want to give away playbooks. But from the beginning of this crisis, when we did our first earnings call, we talked about what's the situation? What are we going to do? The thing that we said is the first thing we had to do is stabilize the business. And then we said we're going to then optimize the business because we knew there's going to be a decrease in the travel demand. And then we said we're going to position the business to capture the travel demand when it returns. And so I feel really good about how we have positioned the company right now. I mean we are absolutely getting ourselves set up for that pent-up demand for when it comes back. And I can talk about things like marketing, like getting ready, how are we going to come out with the right messages at the right time to be able to capture that demand as it comes back. And so we always -- region-by-region, we're always taking account of what's safe? What's not safe? What are the restrictions? What are not restrictions? And we can tell by searches when the things starting to pick up, so we get a little bit -- not a lot, but a little bit of a sense of, aha, this area looks like it's going to start accelerating and start doing things there. So I do believe that we've got ourselves set up the way we want to set ourselves up. Now in terms of the actual resetting our cost. And so Dave, why don't you talk a little bit about -- because I think we talked a little bit about that in terms of our cost reductions, where we are.

Yes. Cost reduction are really part of that optimized phase that Glenn talked about. And we, as you know, took some restructuring actions, focused more on the volume-related functions of the business to try and rightsize them for the demand environment we think we're going to see in 2021. And that resulted in about $370 million of run rate cost savings, certainly more of an alignment with our headcount with demand a big reset on costs. But -- and of course, prior to the pandemic, we came in, I think, operating fairly lean and efficiently as a business with industry-leading margins. In the future, we will look for further opportunity to be more efficient with our costs.

Got it. Maybe we'll cover costs a little bit more. I think I had a lot of questions on that in the questions. But back to strategy. Two areas that I think you've probably made a lot of progress, but hard to see in bookings or your financials last year were payments and connected trip. So Glenn, let's think about connected trip. Can you talk about some things that happened last year that make you feel like you're making progress there? And then -- and secondly, what is your vision? And what does the connected trip mean for Booking?

Right. And we talk about this a bunch about the connected trip, and that's a long-term vision. There's a long-term journey to come to what we want. But just so everybody understand this. This vision is, this is a multi-product offering. When we bring together the accommodations, the flights, the ground transportation, attraction and such, we connect it all using a very frictionless, seamless payment network and we use our -- all the artificial intelligence, all the machine learning, all that so we can personalize, we can use all the intelligence to provide a truly superior experience, a frictionless experience for bookers. So all the way from the beginning when they first start thinking about doing a trip all the way to actually experience the trip and being with them in their trip, so offering up things like attractions and things like that. And we're doing this because we think it's going to help drive loyalty. We think it's going to drive frequency. It's going to enhance the most important part of our business, the accommodation business because people come to us for all of this, and we get the benefit from all the more accommodation business. We're going to get it because always going to be merchandising opportunities for our suppliers who can come in and put in different types of offers that can be put in very much in a closed user group type way, keeping it away from the public pricing, all sorts of things that provides value to both the customer side and the supplier side. And I really believe that this is the way to go because I'm a traveler, I travel, it's still frustrating. It's still annoying how hard it can be. And anything we can do to make it easier is something that I think will be a superior competitive advantage against our competitors.

Got it. Is the financial benefit -- I don't know, David could maybe take this. Is the financial benefit more direct traffic, less paid traffic? Or is there actually a business around attractions that you find interesting?

Well, the connected trip, all the things that Glenn talked about will help us drive loyalty and repeat business. But also the verticals that we move into in the connected trip, whether they be air attractions, et cetera, are also businesses that themselves will kind of -- will produce revenues and profitability and -- sorry, and profit dollars and drive the overall growth of the business. We also think it's a virtual circle because the more value we provide to customers through these extra verticals, that will also help drive growth back in the core accommodations business, which is kind of the real profit driver for the company. So it's very complementary. But absolutely, we believe that the key -- one of the key benefits of the connected trip is to drive loyalty, repeat traffic and also drive extra profit dollars in the business.

Got it. Then moving over to the payments platform. Pre-pandemic, there was a pretty big shift in merchant revenues, bookings growing faster than agency. And I think it was enabled by the payments platform, and I don't think the Street was talking about it enough. But Glenn, can you talk about that shift? And is it positive for Booking?

Well, payments is really important. But let me let David talk a little bit about some of the shifts and some of the numbers, and why this is actually beneficial, but also understanding it.

Yes. So it moves -- actually, payments continue to increase its mix of Booking.com even in -- even during the pandemic last year, we increased from 15% of the mix in 2019 to 22% mix in 2020. We also basically took the payments platform into basically a breakeven point of view and kind of looking at the revenues we get for the vertical payments platform and offset by the variable costs we have within our payments platform. So it's no longer a drag on profitability. But most importantly, it's very strategic for a number of reasons. It does tie back to the connected trips that Glenn spoke about. But just even before that, having that merchant platform, it gives us benefits to both our supply partners and our bookers in the individual verticals themselves, whether it be hotels, alternative accommodations, clearly quite important, cars, flights and attractions. It does enable us to do merchandising which, historically, we haven't been able to do at Booking.com. We expect to use that selectively to drive future growth. As I said, and in the -- and at the bottom of it all, it's a foundation for enabling the connected trip. You don't want to have a connected trip and you have a disconnected payment experience. You want to basically play -- pay in one place. Also, even beyond that, it just takes friction out of the system. It lets it accept alternative payment travel methods from travelers. Even if the hotel itself can't accept that form of payments. So paying it one currency or one payment form of payout in different forms. So it lets it broaden the audience. In terms of where it's all going, we do think that the increase -- the merchant business will increase in mix over time. We don't think it'll ever get to 100%. The merchant platform offers several benefits that aren't available in the agency model. But a number of our customers and partners do like the flexibility as it goes with agency. We think that will also continue to be a meaningful part of the business.

Got it. All right. Maybe one follow-up on the U.S. share question because we do get that a lot. And obviously, people are thinking about Booking versus Expedia. What have been the challenges for Booking? You're so strong in Europe obviously, in the U.S. And what are the opportunities post the pandemic?

Well, I agree with you, so we are very strong in Europe. Though I'd like to make a point, any regulators listening, we're still extremely small in Europe, a very small share. I just want to make sure we get that across. Obviously, in the U.S., there are -- there's another player who's bigger than us. But, it's not as though we're tiny. We're a good player, but we're underindexed. And so a share -- we want to gain share there, absolutely. Booking.com has been doing it. Priceline is doing it. But we want to do because it's such a big market. There's a huge opportunity for us. I like to look at this glass -- forget about this half full, half empty thing. We've got a lot of the glass we can fill up here, which is great. Now we've got to do it in certain ways though. Look, we got to give great value to the travelers. That's the most important thing. People are not going to use our service if we're not giving good value. And the thing that David was just talking about, for so long, we didn't have a payment product for Booking.com. So you couldn't do a lot of the things that actually provide value for both sides of the equation, by the way, suppliers and and the traveler. So we're doing that. The other thing is awareness. Look, you walk down the street and you say to somebody, I need to rent a home on the beach and whatever. Well, you got a place? Not a lot of people. First thing off their head is going to be Booking.com, which is unfortunate because we do have products, we do have -- first, we got to make the awareness. We've got to get that customer aware, hey come to Booking.com, it's great. And then of course, we've got to have the supply. If we're going to be doing that, we're going to be pushing out the idea that we're a great place to come for their alternative accommodation. We got to make sure we have all the right products. And yes, we do have home. We do have it on beaches. We do have it in-house. But we don't have enough yet. And we've got to keep pushing that real hard. So when somebody comes here, they don't say, "Oh, there's nothing on the shelf. Why did they come to the store? There's nothing to buy." Can't have that. It's stupid. We spent the money to get them to come in the door, we got to have the product to sell it to them.

Got it. And in the U.S. and globally, the situation has changed so much in the last year as far as occupancy and ADRs. How are the -- how are your supplier relationships? How would you characterize them? You obviously provide so much distribution for hotels that maybe don't have a strong brand. But how are the supplier relationships right now? And are the relationships or the inventory availability or anything changing of note that we should be aware of?

Yes. I don't think we should differentiate between somebody who has a great brand, let's say, and somebody who has no brand, the single individual, small place in the middle of the islands in Greece versus a giant multinational. They all -- it's the same thing. They want more demand. When you end up in a situation like everybody is in right now where demand is so far down from where it was before, everybody is looking. How can I get some more customers? We're the people to help. We're having good conversations. We're finding people who may not have been as interested in the past of some of our programs. For example, the Genius program, which we think is just fantastic. Some people may say, "Yes, I don't need that right now. I got my occupancy rates right where I want them. I don't want to be diluting my RevPAR." It's a different theme now, different situation. And we're having very cooperative ways how can we help each other. How can we help you? What can we do? So I mean look, nobody wants to do better because the world has had this horrific crisis. On the other hand, there are things, I'm not going to deny it, we're in a better position because of the fact that we are needed more.

Got it. On the call, you addressed the digital -- European Digital Markets Act. And it's hard. It's obviously several years out. But how do you think about what implementation could mean for Booking?

Look, the thing I said on the call and so it's so important is that it's not final at all. This is legislation. They're working on it. They're negotiating. It's all going -- it's a [ Bismarck ] remark about how sausages were made. We don't know what the impact is going to be because we don't know what the law is. They just go -- first get the laws done, then we'll try and talk about what's the impact going to be in that. The critical thing I keep on pushing over and over again, very publicly because I really am trying to get this understood by everybody, Booking.com is not a gatekeeper in Europe. It absolutely is not. There are so many ways a traveler can book a hotel. I mean it's infinite. Everybody knows this. Even the regulators know this, which is so bizarre. Because when I talk to Lauren infront of anybody, I said, "When you got your last hotels, who would you use?" Okay, what about of the time before that and the time before that? And so many people say, "Yes, right, yes, I do look at a lot of it. And then they say, but maybe you're a gatekeeper?" That's ridiculous, okay? But laws are laws and regulators are regulators. We've got to try and negotiate and try and make sure everybody understands this all. And hopefully, it'll come out the way we want it to, but nobody knows.

Got it. David, maybe this one is for you. Let's go over the expense commentary on the last call. We're getting a lot of questions on that. You mentioned the 39% margins achieved in 2019. And it sounded like there could be some incremental costs related to that. And then you have to think about layering on the airline business and some of the other payments business on top of that. So David, do you want to just kind of revisit the comments? And do we have it right in our interpretation that maybe margins for the quarter could be a little bit below the 39% and then you think about adding on air on top of that?

Yes. Justin, at a high level, you have it right. Let me kind of walk you through the moving parts. So to be clear, though, we expect our business will continue to have very attractive margins when demand fully returns. We expect these margins to be industry-leading. But let's now look at the pieces. So within our existing, if you like, core business, there will be some added costs versus 2019, which you should expect to run rate impacts, including things like merit increases for our workforce and also just investments to continue to grow our business. So compared to -- if you could freeze frame to 2019 and have another year of 2019 revenues, the cost would be a little bit higher. Of course, you expect the business to continue to grow. So it's a kind of timing factor. But yes, there are all those cost impacts due to run rates and due to the investments to continue building out things that we spoke about. But on top of that, we believe it's important to maintain healthy top line growth rates in the business and really seek out opportunity to increase our market share. So some of these growth opportunities will come at lower margin rates, as you talked about, but still deliver incremental EBITDA dollars, which is an important distinction. So for example, as you mentioned, product we're building like the flights business will be dilutive to margin rates, but will be important to our business, our strategy, our growth in the future and also generating incremental margin dollars.

Got it. With Airbnb and Expedia kind of refocusing over the pandemic, it seems like there's more disciplined marketing spend out there. Could that be something that provides some upside down the road? How do you think about that?

Well, yes, the way you say it, rational, disciplined spending, yes, across the industry, that could be positive. On the other hand, though, there are a lot of players out there participating in these channels. It's not just the ones that you think of. There are a lot. And these markets are efficient and transparent, and I think they're going to continue to be competitive. The thing that is always important to us is that we have been working in these jobs for a very long time, and it's been working very well for us, and we're going to just keep doing it the way we've been doing it. We're going to look for the high-quality traffic. We're going to make sure it's the right price, the right ROI. We're going to say, is this traffic going to convert for us? Is it then not canceled? Is the person going to come back to us direct? Same we've always done. If it the world becomes "more rational disciplined," I'm not going to complain about it. But also I'm not going to depend that there's going to be some giant change in the way these markets are going to work in the future. I'd be surprised if they do.

Got it. David, the payment in the air business on top, any way you can help us think about sizing those? And are they going to be margin positive overall to the business?

Well, they'll be margin dollar positive to the business. Absolutely, EBITDA margin dollar. As I mentioned before, there'll be an impact to EBITDA margin rates. Just to kind of let you know where the -- obviously, I said the payment is currently around about breakeven on an operating cost basis. And air, as you know, is a low-margin business. And both of them are going to be much lower-margin business than the traditional accommodation business we have right now. We do expect both these businesses will scale up to be a meaningful part of the overall business. And at that point in time, obviously, it will be dilutive to margin rates. But as I say, incremental to margin dollars, incremental to earnings per share. It really is a mix shift within the business.

Got it. So maybe we'll pivot over to China. And can you just remind us of your assets in China? And how does Booking think about the opportunity that China growth could provide for the company?

Right. So we have Booking.com and Agoda both work in China. And as I think everybody is well aware that biggest part of our China business has been -- the most important part has been the outbound part, which as we all know and I just said recently, there's not a lot happening right now in and around right now. So -- and there's not inbound either right now, either. Those 2 are kind of like dormant right now. So we do know, though, that the world hasn't changed in terms of China being important for the long-term growth of the travel industry. In fact, it's one of the most important ones. It is very important. There are a lot people in China. Travel, certainly, domestic but are -- more and more and more are traveling. Outbound is becoming an extremely large market prepandemic. That will come back when the virus is suppressed and people can travel again. I would say we can't do a lot there right now, but I would expand actually entirely around Asia in general. And we are doing a good job, we have been doing a good job, and we will continue to do a good job in the general Asia area, both Agoda and Booking having good amount of business there, working well. It's very, very, very competitive. But we've been doing okay there.

Got it. And Trip.com has mentioned trying to expand outside of China. How do you think about their competition? Obviously, they have a brand name within China. But how do you think about competition versus Trip?

Look, people there are very, very confident, very good managers. It's a good company, as you know. we invested in it. And it would of course, make the perfect sense that they would want to have global ambition, too. Why wouldn't they? Everybody does. Everybody wants to be big and huge. Well, I welcome the fact that everybody likes to be competitive, they just make us that much better.

Got it. Maybe we'll move over to alternative accommodations. Obviously, we've all seen Airbnb stock and interest -- investor interest over there. Expected to be very strong this summer. So I don't know if you have any comments about alternative accommodations, how you think they'll perform versus hotels this summer. But how are you thinking about traffic for your host this summer and your position in Europe for alternative accommodations?

Well, so we talked about this already a little bit. Look, I am pleased that we have 6.5 million alternative accommodation listings. That's pretty huge. Feel pretty good about just in general about our scale worldwide, like I point out in the U.S., it's a little bit where we want to increase. In Europe, we're better off. And David's talked about that. In terms of what the summer is going to be like, I don't know yet. I think nobody knows. I think there definitely is -- and I'm talking about globally. There's definitely, I believe, some correlation between how safe people feel and then what kind of a accommodation they may want to stay in. So who knows? Because we don't know what the safety factor is going to be in the next few months and what's going to -- where we're going to end up. I would say, look, we just need to keep doing what we've been doing, which is continue to add more and more inventory, high-quality inventory in the alternative accommodations, getting those whole homes, making sure we have it in the right places, the vacation destinations, the beach, the lake, the mountains, the rural areas. Keep doing that in places where we need to increase more. And in the long run, we're going to end up in a situation where we'll go back to normal, and people will be choosing between home and hotels, and somebody who has the greatest amount of both of them will be in a very good position.

Got it. And I know you've gotten this question before, but we constantly think about it. Your take rate is around 15% for the host. Airbnb has a slightly different model. Do you get any pushback from host about the take rate? And how do you think about that? I think overall, the take rates are pretty similar. But how do you think about that?

Yes. So more and more of the business, as I think everyone's aware of, is becoming professionalized is a way to talk about it, where you have property managers who are doing managing of the alternative accommodations. And these people are sophisticated business people. They understand how this thing is. At the end of the day, the amount of money that ends up in the pocket of the owner, it ends up being the same because you end up -- everybody knows that. Now how this stuff is displayed, how it ends up going across or not, I believe and I've read or such is that Airbnb, I believe, had been moving more and more towards the host or the professional paying upfront and not being in the travelers pocket pay. Well, another thing very important is the regulatory environment, where in some of the regulatory environment, you are not allowed to hit somebody at the end of the funnel, at the end when you're ready to check out, then you get hit with a traveler's fee, which is I believe a horrible experience for the traveler. That's why some jurisdictions have put out rules that you have to have the full price upfront right at the headline. That's the way it should be. Not everywhere is it like that. And I believe that is the way it should be. For our position, the way we believe, we want to do something so the customers don't feel they're a fooled and they get hit with that thing at the end of the day, that traveler's fee. I think that, that is the right way it should be done.

Got it. Let's move over to the balance sheet and cash flows. I think prepandemic, the company -- I have to compliment, you did quite a good job shrinking the share count, consistent buybacks. And we do have cash getting back to some pretty healthy levels next year if bookings return. So I guess are there attractive opportunities in travel to deploy your cash for growth? Or do we think about just using it to keep shrinking the share count over time? How are you thinking about that as a company?

Well, I'll say a little bit and then I'll let David talk a little bit about capital allocation. Look, one thing we always want to do is grow the business. So we're always looking how can we use our money in a way that's going to give the greatest return to the future value of the franchise. And David, if you want to talk specifically about our capital allocation strategy?

Sure. As Glenn said, job #1 is to make sure we support the growth of the business, both organically and potentially if opportunities go up on inorganic basis. And then beyond that, then the excess cash available is something we can look to return to shareholders. And I believe that the program we have pre-COVID to return via buybacks was an efficient mechanism. And we would look to sum that up again in the future when we have better visibility into the size and shape of the recovery.

Got it. I think we'll conclude with a couple of questions on maybe your relationship with the advertising industry. So obviously, you do depend on direct marketing to help traffic. How do you think about IDFA? And could that have any impact on Booking? It certainly is an issue we hear a lot about for the online media companies. Any thoughts around that?

So the changes that we're really hearing about to help protect the privacy for consumers, it's not just IDFA. There are other things changing, too. And we're aware of these. We are aware are these changes that are being made or are going to be made in the future. And I would say that I am confident in the ability of our marketing team to make adjustments for these changes. The way we manage our primary paid marketing channels like PPC and meta, that means that they're not going to be impacted by these changes that we're reading and hearing -- just heard about. The changes are only going to affect a small part of our marketing spend. And I'm confident we're going to be able to manage through this. And who knows, this potentially could be to our advantage. The primary focus -- our primary focus is the first-party marketing, and that's not impacted at all by this.

Got it. And then I don't think we can have a discussion without discussing Google. And they're constantly evolving their changes, and I'll talk about a specific change next. But on a high level, can you just tell us about your relationship with Google? It's kind of a competitor, but also obviously a very valuable partner. So Glenn, how are you thinking about your Google spend and kind of getting more direct and less on search over time?

Well, we always want to get more direct. That's our -- that's what we always want to do. And of course, not surprisingly, Google would like more people to be going to them, and then we have to pay to get them. Of course, that's the nature of the business. Like over the years, Google's constantly made changes. And they keep on doing that to drive more traffic or increase their monetization. And our team, our marketing team will react to the changes. We need to act and we need changes. And I'll say that, look, it's a symbiotic relationship. And of course, we'll also try to -- means we both want to get more more money out of the economic pie of travel. And that's what it is. We're going to continue to do that. And I believe it's worked very well over the whatever 20-something years I've been at this company. And I hope it will continue to work and advantageous to us.

Got it. And then there was a change yesterday where I think they're giving free price listings within Google travel search, not core Google search. I don't know if you had a chance to go through those yet. But any impact? It could be positive. But how -- I think,in that -- I know they're going to take pricing both from OTAs and hotels and put them in there. How are you thinking about that?

Yes. Free. The addition of the 3 things. Look, it's another example of a change, and we'll have to look at it and adjust to it, react to it, and we'll see what happens and we'll see what happens.

Got it. And we're almost out of time. Maybe 1 conclusion question. It's been a really interesting year for you as a company. How do you feel about the company's position? Obviously, quite a lot of cash on the balance sheet. But how do you feel about Booking's position right now and your 2 to 3 outlook -- 2- to 3-year outlook for a travel rebound?

So in terms of timing, we said years, not quarters. And that would certainly fit in that years type of thing. But again, nobody knows. Because -- so I feel somewhat like I did a year ago when the pandemic was really starting -- first really roaring up. I'm in the New York area. And I saw, "Oh, this is not looking good at all." But I was very confident even then that this would pass. Why? Because pandemics have come before. They have always come before. This is not a new thing for the human species. We have pandemics and then they go away. And I was very confident a year ago it would disappear, and it will go away. And thank god that the pharmaceutical companies were so incredibly advanced and able to create these new vaccines. So we're going to get out of this sooner than perhaps we would have some years ago. But who knows? The point really is the, long-term, the long-term future, this franchise of this business is, I believe, very, very sound. I am very, very -- I just absolutely believe that the world hasn't changed in terms of people wanting to travel. People are always going to want a travel. They always have wanted to travel, and we saw it last summer, we saw that when the restrictions went down, people wanted to travel. That will happen again. Don't know when, but it will. As you pointed out, we are well positioned. We've got capital. We've got great people. We've got a brand. I think, actually, I just feel very, very positive about long-term future as much as I had before, the pandemic hasn't shaken that in the least.

Great. I think that's a great question to end on. So thank you so much, Glenn and David, for joining us today and being at our conference today. I really appreciate your time and being with us.

Well, thank you for having us.

Thank you, Justin.

Thank you.