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

All right. We'll go ahead and get started. Thanks, everyone, for joining us. Very happy to have Booking with us here both CFO, David; and CEO, Glenn Fogel. And always a pleasure to have you here. I know we've -- I think we did virtual last year, and it's great to have you in person here. So really appreciate it.

And of course, Ukraine conflict and gas prices have come up in every consumer meeting, But there's a human side, too, so Glenn, maybe we just, before we dive into the financials, how you're thinking about reacting to things as a company and how you're feeling about the overall employee situation at Booking.

Yes. Well, obviously, it's just tragic what's happening there. We all see it on the news, and it's horrific. And I -- first thing always is safety for our employees, and we have employees in Kyiv. And first thing was always thinking, what can we do to make sure they're safe, make sure they are, and they are safe now. Thank God for that part. And then the other thing is thinking about, okay, what can do to be helpful? And I hope people have seen that we made a $1 million contribution to the International Committee of Red Cross to help with the refugee situation there. And then, in addition, we'll give more money based on the amount that our employees are contributing. We're going to match our employees'. So hopefully, we'll be able to give a significant amount more than I hope. And of course, I think everybody saw the news we announced and we laid out that we have suspended our accommodation, our travel services in Russia and Belarus, and we did that. So those steps are where we are right now, and we only hope and pray that things will get better much faster.

Great. Well, I really want to dive into the long-term trends and the market share and the business fundamentals, but probably should address Ukraine and the gas price impact. So you did file an 8-K, which was very helpful, this morning. But I don't know if this is for you, David, maybe talk about the impact you're seeing in the quarter and how you think about it lasting as we go through the year.

Yes. Justin, I appreciate being here as well. So just to kind of update people who haven't had a chance to read that 8-K yet. There's been a lot of questions, obviously, since the invasion about our exposure. Our earnings call is literally a few hours before the invasion occurred. So as you probably recall on the earnings call, we said that on a destination basis, Russia and Ukraine combined were a very small single-digit percentage of our total gross bookings. Obviously, since things have developed, there's been a bit more question around that. So we provide 2 more pieces of disclosure. We said that on a booker basis, Russia and Ukraine together are low single-digit percentage of our total bookings, and we've also had questions about what's the spillover effect likely to be. And there's been a lot of question about Eastern Europe and how that might look. We said that Eastern Europe, as defined by the UN on a booker basis, is high single-digit percentage of our total bookings. We then kind of just updated people upon how things have trended or traded since our earnings call. Recall, we said in the first half of February, we got back to basically flat bookings on a room night point of view relative to 2019. If you look at all of February, it was also about flat. What happened was we saw a continuous improvement through that third week invasion, then things start to pull down again a little bit. But in total, February was flat. That kind of brought us to reach kind of last week, which I think the first real kind of at-war comparison point of view, where we said that compared to that flat booking we saw in February, for the last week, week ending on Sunday, our bookings have moved down modestly. They moved down to minus 10%. Our impacts are mainly in Eastern Europe, not too surprising with Russia being the biggest part of that because we announced that we're pulling out those cancellations, all the things associated with that. But also some spill-on effects into Western Europe, not too surprisingly, but Western Europe stayed moderately higher than it was in 2019 for that last week. So that's the kind of the disclosure which we gave. A little color around that is typically what we've seen happen in these situations is there's obviously a little bit of a hard-shock reaction to people seeing news like we've all been seeing, which is terrible, over the last few weeks. So typically, we see a bigger pullback driven by cancellations. And then as things develop, there's some form of normalization happened in prior situations.

Got it. Glenn, you've maintained a pretty positive view on travel eventually coming back. Any similar situations to this you could call out? And how does the effect last? Is there a lasting effect?

No. I've had the pleasure of being part of this industry for a long time. I've been in my current company for 22 years. And I've seen events happen and whether natural disasters or human-driven disasters like we're currently seeing, unfortunately, travel has -- things happen that do impact travel. Usually, it's local. The only thing that hasn't been local was the pandemic, and that's the one that was global. This is a terrible, tragic, local event. I do not believe that people in the United States, as much as they are empathizing and sympathizing and feel angry and sad about the event, are going to change their travel plans at all. The family in Des Moines that was planned to go to Florida where to take the kids to Disney World is not going to change it based on this. The same thing in Asia. People in Asia are -- I talked to my colleagues, I talked -- people are, of course, horrified, many, but they are not changing their travel. And they are much more concerned to travel right now with the pandemic because Omicron in Asia is still a problem, and there are still significant hindrances to travel there, particularly internationally. That's more of inhibition to travel there than there is this terrible situation in Ukraine. In Europe, certainly, the closer you are to the events, the more you may be slightly. So somebody who is currently located in the eastern parts of Poland may feel more conscious about, should I travel? I'm absolutely sure that the summer bookings from Western Europe are not going to be impacted by what is going on in Ukraine.

Got it. And then last one before we move on, gas prices. Those are not in people's control. And people, I think, are worried. It could squeeze out a lot of discretionary spend. Any historical data or thoughts about how gas prices affect plane airfares or travel intentions?

Historically, when the price of an air ticket went up, you would see people who may change their travel habit perhaps. Right now, though, there's something that's unique, I believe, happening. And that is the significant amount of travel that did not happen over the last 2 years. It has built up this incredible amount of demand. This latent demand just wants to burst out and travel. So people are going to spend whatever amount of money they had budgeted for their travel. And prices may be up. And then maybe what they'll do is they'll say, okay, we are going to go with a different vacation in terms of maybe destination or maybe lower star rating or maybe not as many days. They are still going to spend all the money they had set aside to travel. They are not, not going to travel.

Got it. Okay. Well, very good. That covers the current trends. And a lot of interest and questions about the last earnings call, so hopefully, we can dive into some of that. But before, I know you're kind of reengineering the company with a lot of interesting product initiatives, and connected trip has been a big theme, started pre-pandemic, probably derailed a bit. But can we go into your biggest connective trip initiatives right now and how that could impact the business model over the next 2 or 3 years?

Sure. So really, not just connected trip, but we have a couple of very important strategic things that we want to get accomplished. And they particularly go together somewhat. So to get the connected trip, which is the ultimate North Star to get there, we got to have a couple of foundational things done first, and that is payments. So we have working on the payment platform. We've talked about this at length. We've been building it and continue to build it out. We're seeing the increased utilization of the payer platform, and that's necessary to have the connected trip. So we get -- as for building on that, though, we're not doing it serially. This is done in parallel. So we had to build out the connective trip. We had to have the foundational things there. What are they? Well, flights, for example. So we are building a flights product, which we started a couple of years ago, and now it's finally beginning to really -- glad to use this, it's beginning to take off. And that is something that is part of a connected trip. Now we're also going to -- obviously, we always had ground transportation for some time with the Rentalcars, but it's more now. It's more than just Rentalcars. It's all sorts of ground transportation. It's getting a taxi from the airport to come or any type of -- we're also putting in share rides. We're putting in all sorts of ways to get people ground transportation. Then attractions, and we've talked a little bit about on our earnings call, how we now have a lot more coverage building that in. These are all the elemental parts of the connected trip, but it's really nothing in terms of what's different, what's new until you tie it all together and you start using all the AI capabilities, the data that we have. So we can personalize and really offer up the right trip for the right person at the right price, at the right time, put it all together, so it is so much easier, so much holistically better than it's ever been. That's what we're building, and we're making progress, and I see it. Now you couldn't -- we haven't -- we don't have enough of that. That's a vision done yet, but I see just the parts of the elemental part. So our flights business, for example, getting that up and seeing not only the growth in tickets that everybody is seeing, because we announced them, but seeing that 25% of our flight bookers at Booking.com have never bought anything at Booking.com in the past. In addition, what we said is an encouraging percentage of those are buying hotels, which is great because that's kind of the point. But that's without having done any of the sophisticated AI data-driven stuff. This is just simple cross-sell stuff that's happening. We're not even doing it as well as we can. So I see tremendous upsides available there.

Great. Maybe 2 follow-on questions. Are you doing a lot of AI and ML, a lot more than you were before? And maybe this is for David. What does this mean for the business model, if this really works? Is it more bookings? Is it more direct traffic, so you save some on the marketing side? How do we think about it?

Well, we're definitely doing more and more ML because that's [indiscernible]. It used to be every -- your mobile first. And now it's everybody AI first. And that's the same. And the truth is, you have to do that to be able to use your data effectively and be able to call what's the right pricing? What do we offer? What are we -- so something as simple as making sure that when we're setting out what our sort -- or the right sort for accommodations, make sure that matches up to the right person, what the historical data we have and what the trends are with that type of a person. So this is just scratching the surface, though. What I really want as a traveler, somebody uses our own product, and I'm sure everybody can travel is, I want something that doesn't give me all the stuff that I have no interest in at all, would never buy ever. Why are you showing that? You're just clouding up the screen with stuff, and I have to search through for what I want. I really want it to come to me directly as it should be right off the bat. That's the vision.

Yes. And the business model impact kind of builds upon what Glenn talked about. So we want customers use us more frequently, high share of wallets, high loyalty. That's what is driving because we want to make sure we are, of course, focused upon the transaction, but most importantly, focused on the customer and giving them the value that they're looking for. So in a consumer marketplace like us, that leads to 2 great things. Basically, we're talking about building a better product, right? One that solves a better, more complete product customers' need. So their top line growth, better leverage on all of the assets and faster -- larger and faster bottom line growth than we have pre-COVID. That's what it's all about.

Got it. Okay. Let's maybe move on to the bookings recovery. The February data, which you reiterated today, was kind of flat on room nights. Where do you think you are in the bookings recovery given that we're now flat? Are we all the way back? Or is there still areas of the world that have a lot of room to go? And was there anything -- because Omicron was so bad, was February artificially positive, I guess? How would you think about those things?

I don't think that there was an artificial rebound effect in there. I don't think so. I think there's a tremendous amount of latent demand, correct, but I don't think then it snaps back. I think that's been going to go on for some time, in fact, because people want to travel. They have the frustration. Not being able to travel is now being led out depending -- as restrictions go off, we see it. In certain area, that's obviously behind is Asia. I just mentioned that. And that is something that is not come back nearly as fast as North America, the U.S. has, because of Omicron, I said it. That will, it will, they will go through that cycle. We know it's just biology, just what, eventually enough people caught -- catch it, then they don't get it again, and we see it go down, there will be travels. That will happen. The U.S. was further ahead in Europe in the middle. So what we need to see is Omicron can go away, and then restrictions are going away, that will bring back, because international has been so repressed. And that's really an important part of our business, is the international part. When that comes back, we'll see that's -- so I don't see ourselves back at all. I know we see the numbers flat with 2019, but don't forget, it's been a couple of years. We want to do even better than that, of course, because we're missing out on that. And I'll give David a little -- if you want to give some more flavor to anything, ADRs or anything like that?

Yes, I think Glenn, you touched on the major points. If you think about them back to that February data point, that is flat with Asia down 35 points, with international travel still lagging where it was before. So that's a pretty good situation. And of course, by definition, there is some level of pent-up travel here, right? People have been sitting, locked up in some cases for a couple of years. But again, we look at what we see on the books for the summer, and that's a good sign as well. So subject to things staying reasonably under control in the Ukraine and Eastern Europe, I think we're looking at a good recovery this year, which is kind of what we talked about during the year, we want to lean in to try and take advantage of.

Got it. And then we have the room nights for February, and we have to come up with our own assumptions for the summer. But on top of that, there's ADRs, there's air and some acquisitions. So maybe you could go through some of the drivers on top of room nights that we should be thinking about when we model bookings.

Yes. So ADRs have held up nicely for us. If you look at essentially what we saw in the first half of -- sorry, Q1, they're up roughly the same as we were in Q4. And Q4, that was about 13% of ADR, increase normalized after mix because, obviously, we still got Asia lower -- ADR region lower, it's still about 9% increase, and that held into the first part of this year. So that's pretty good. In terms of the flights, nice growth number, still a relatively small part of the overall business, not having really much of an impact upon the metrics yet, but will do as time will move forward. Acquisitions, one's closed, one hasn't. So Getaroom closed right at the end of the year. Etraveli, yet to figure out whether that's going to close later this year. But that was a nice business, very complementary with what we have before in the B2B space before. And we'll have a small positive impact on the P&L this year, top line and bottom line.

Got it. Did I miss anything in that list of things to think about?

I think it's a pretty good list.

Got it. Great. All right. And then let's move over to the other areas, take rates. And a lot of moving pieces there. Timing is a big part of it. But how do we think about structural take rates, hotel like-for-like and then with payments impacting that? And where should they come out once we're through with the timing differences?

Yes. Great question, Justin. So let me kind of walk us through the parts, right, because there are a few moving parts here. So look at 2021 for the time -- as the starting points. The major impact on the difference in take rates 2021 versus 2019 was timing. That was 130 basis points of difference. In 2021, bookings grew at over 110%. So the fact that that's growing much faster than revenue creates this timing difference. So we said the take rates for 2022 will be somewhere between the 14.3 they were last year and the 15.6 they were in 2019. Biggest impact, again, will be timing. So let's put that to one aside because you said that was one of the factors. But underneath all that, what's going on? So the key point is that our underlying accommodation take rates are solid and have been for a period of time. And we're adding to those underlying take rates by adding in payments. And by adding in, in the future, things we can build on top of payments like fintech and insurance are dependent upon payments itself. So payments plus the things on top of payments will add to take rates over time. We're also pleased with something else we've built recently as well, which is our ability to do more merchandising with pricing incentives and other things. And we do that when we think we can lean into those and get good ROIs. Those have some offset to the take rate increase. Now how are those pieces relate to each other? So in 2021, the amount we spent on incentives offset some of those gains from payments, not all but some. Going forward, that incentive is completely variable, right? We spend more or we spend less. 2022, they're likely to offset each other more completely because 2022, because of our view on market recovery, it's going to be a good time to driving -- leaning to opportunity to pick up market share in a recovering marketplace. And the final piece of that impact take rates is air because air is the much lower take rate business. The impact that it has in 2022 relative to 2019 is relatively small, quite small right now. But over time, again, you can mathematically figure out what that's going to do. So those are the moving parts. Solid timing is a factor that's there and will normalize out. We'll add to the underlying take rate through payments and things on top of payments, a variable up and down on merchandising based upon how much we spend.

Do you think long term -- I mean, I'm guessing payments 2% benefit, but you can correct me if I'm wrong. Could that be more than the merchandising impact and that take rates maybe could be higher than '19? Or is it just still to be determined?

A little bit to be determined. That merchandising, the payments take rate -- the payments benefit -- payments costs are very different all over the world, right? So 1.5% to 2%, everything shifted to the merchant model, right, which hasn't happened yet. And we'll never have to 100% of the business is certainly a number that we'll add to the take rate. Incentives, much more variable based on what we want to basically do.

Got it. And then let's dive into the payments business a little bit. I don't think you fully built it out. So what work still needs to happen on the payments business? And is that going to go -- I think you've mentioned in prior calls, it's kind of a breakeven business now. What could that look like if it achieves your expectations?

Well, first thing, you're right, it's not completely built out at all. In fact, we have -- what we -- I am pleased with we call the number of hotels -- hotels that are taking on our payment platform, I want to have, of course, all practically at the end of the day, which we have to do. Then there's the issue of, okay, just because they have the platform within their systems and our systems, there's also the issue of utilization. And that's convincing hotels that offering our product and making products so that people will use the payment method versus the agency methods. What we're doing is really -- and this is very much so use the carrot, not the stick. And this come with incentives, and this may be a little bit why maybe we could "make money on payments", but maybe not doing it now is an encouragement of making sure. A lot of hoteliers really don't -- the ones who aren't that sophisticated, there are a lot of them, they don't understand how much the cost of payments really is to them. And us have to demonstrate and show them how using our product will actually lower their cost of payments because we, as a very large international, we can do things they can't possibly do, and it's cost us a lot less. We can do it for them, less for them, but we'll still have a spread between the 2. That's one. Second thing is method of payments. Most of the people, I'll look around, probably here are -- many, not all, probably use a Visa card, a Mastercard, American Express [indiscernible]. I don't think a lot of us in this room, there may be a few, who are using WeChat Pay or Alipay or Union card pay. And I can go through 40 different payment methods. Those things have to be built out because there are a lot of people around the world who want to pay that way. Now the problem is a lot of hotels can't possibly take a payment that way. We need to build all that out, so that we are then providing a benefit to the hotelier who wouldn't be able to get that customer if they're only willing to pay in Alipay. We take Alipay. So that's another thing, but we have to do that everywhere and make sure that valuable -- make sure that they understand the value of that [indiscernible]. There's a lot of work that needs to be done on that and then building out the way we make money on this. Things not only like pay in your own currency, but maybe we'll make a little spread on the FX and do that. And then there are new financial products that we can bring out, the buy now, pay later. There's a lot of work to be done. It's long term, but I absolutely know this is what we need. First, they get the foundations done. So then we can tie together for all these other things, we're talking about connected trip, so it's one payment. It's not a bunch of multiple payments, and that's really important.

Got it. And from a consumer perspective, the benefit would probably be better inventory because you're attracting more hotels. Or would it be better merchandising because you're having unique deals and offers? Or how are...

It's merchandising because -- you can't merchandise an agency product. Can't do it. It's a payments at the hotel or where the vendor is. You don't get to say what the price is, you don't get to add on something else. I can't offer somebody a discounted car service from the hotel to -- from the airport to the hotel, if it's not done as a pack -- as part of a payment product thing where I can then put that all in that way, one product and stuff, really important to be able to do that. And then the convenience, they, again, customer wants to pay in their own way to pay. And we've seen data that shows we can increase conversion by having those alternative payment methods out in the website. Even if somebody doesn't use it, they still appreciate having it there.

Got it. Okay. Let's move on to margins, and that probably was the controversy after the last call. Of course, the Ukraine conflict broke out that evening as well. But let's talk about margins. And so, David, maybe revisit your guidance. Where you finished EBITDA last year? What your guidance was? And kind of what the drivers are this year and -- temporary versus long term?

Sure, Justin. So let's kind of unpack that. So just below 27 points of EBITDA margin last year. We said we would be a few points better than that this year. That was lower than people were expecting. I think part of the reason for that is the next factor that I'm going to tell you is the mention -- the fact that we still have a big timing effect this year. So that timing effect is also another few points of EBITDA margin. So now we're going to take last year's margin, add a few points of EBITDA margin twice, and you're back closer to where people were before the call. Though I don't think that was well understood. So then let me kind of walk you from that number, call it, low to mid-30s, back up to where we were in 2019, just to kind of bridge the gap, so people understand what the drivers are. First of all, that timing gap, by definition, is temporary, right? That's something that when the growth rates normalize, you kind of get back to that. So when -- because you asked about which one's temporary, which one's permanent. So there are 3 things that are driving the difference between that normalized timing view of margins this year and where we were in 2019. The first and by far the largest is our desire to lean in this year to the recovery of travel, spend more marketing, spend more merchandising, which we think is a very smart thing to do. We think we will be doing everybody deserves if we didn't. This could be the biggest chance to lean into a recovering travel marketplace in decades. And we've been kicking ourselves and we're sitting here in 2025, and we look back and said, boy, we should have spent more in 2022 when all this travel demand was recovering. That's a once in a lifetime potential opportunity. So that's our choice to want to lean in, and that's driving a few points of margin down -- a couple to a few points of margin down compared to where we were in 2019. The next 2 factors are both worth mentioning, they're smaller. They're roughly the same size as each other. One is the fact that the payments business is now that much bigger in 2022 than it was in 2019. Payments, of course, are growing operationally breakeven compared to the combination market, much more profitable. So that's just a mathematical deleverage but gladly explains all the right reasons why we want to have payments in the mix. So that is a driver. And the final one is -- and that one, of course, is one that will just continue because that's math, right? Because as we build new businesses, whether it be payments or flights, with lower margins on a combination, that's just going to go through. But again, those businesses produce incremental EBITDA dollars over time. And of course, they provide value to the overall franchise in terms of either new capabilities, cross-selling, et cetera, et cetera. The third factor to bridge you back to 2019 margins is when you look at the combination of our personnel expense, plus that part of sales and other, which is related to a partner customer service, together, those represent a little bit of deleverage compared to 2019. Not too surprisingly, because we had 3 years of wage inflation, particularly this last year where tech and product wage inflation has been particularly high. And we expect to -- we want to make sure we're competitive with our workforce. We're still adding in the realms of tech and products to build all the things that we've been talking about. And then if you get back to where we expect to be back in 2022, volumes are now back in the same ballpark as we were in 2019. So those variable costs that we took out in 2020 have now come back in again, but more efficiently, because a lot of it is done through third party. We add all that together, and there's some deleverage there in '22. Now of course, going forward, we expect there's leverage on personnel and fixed cost investments. So that provides the moving parts and which ones are temporary, which ones are more structural.

Got it. I think we understand the payments being added, and we'll come up with estimates on that, and we'll estimate air maybe slightly very small. But the core lodging business, so you're leaning in on marketing, and I guess, I'm trying to get at whether the margins there are going to be back where they were or marketing is going to be a little lower. So maybe talk about marketing ROIs this year and how you're judging whether that marketing spend is being put to good use.

Well, I certainly hope so.

Yes.

So look, David just talked about leaning it, right? So we are always going to -- and this is how we run this company forever is we are disciplined in our marketing approach. And we believe in having a positive ROI on our marketing, on our performance marketing, make sure we'll end up overall positive ROI. But we absolutely want to lean in. We want to make sure that this -- and David said, once in a lifetime, hopefully, we'll have a couple more in the future, too. But it's a really good opportunity to grab share, grab customers who may have forgotten who they use the best [indiscernible] hey, I'm going to try some of these other ones. This is the time to lean in and be aggressive on it. And I absolutely [ lose ] if we don't take advantage of this with that in going in there. In addition, you have seen where -- look, I'm pleased with what we did with our Super Bowl ad. And it's not just one and done. We're doing a whole campaign based on improving what we are offering to the consumer in the U.S. But it's not just the U.S. We are expanding that campaign elsewhere. I am actually very encouraged by the data I'm seeing coming back so far. And I believe this is the way we're going to go out and get those customers.

Got it. There was news out that Google might be discontinuing book on Google. I don't...

No, they said it. They announced that.

So it's out there.

It's done.

What does that tell you about the value of OTAs? I mean it certainly sounds like a positive data point. But does that mean anything to you? And how do you think about that?

It doesn't -- I don't take a lot. Probably, it was a hard product from the beginning. It didn't work out so well. But Google has tried a lot of things in the past that hasn't worked out. I mean, in fact, we haven't had -- the Google question yet, always, it's always like, what's Google going to do to you?

It seems like a step back.

Yes, yes, like a totally different question. It's like, look, for 22 years I've been with this company, we've been dealing with Google. And there are things we've done very fine with in the past. We'll continue to do fine with in the future. Our job is continue to build out a great product. At the end of the day, improve the product, so it makes so people actually have a better experience and they come back again, repeat loyalty, all the things, lowers the cost of your marketing, make sure marketing more efficient. That's the path we're on right now. And yes, we're leaning in, in terms of marketing, get them here. We also, as David said and we've said in the past, we've been spending money on building a better product.

Got it. Maybe one more question on marketing, I follow Airbnb and Expedia. One definitely has brought their marketing spend down from pre-pandemic probably in the 30s down to the teens as Airbnb. And Expedia is also hoping for some marketing efficiencies down the road by consolidating all their brands and centralized approach. So how do you think about the competition among your direct competitors right now in marketing channels?

Well, first of all, these are all good competitors, right? They're all good competitors, right? I am very pleased with what we have accomplished so far though, in the way we've been doing it, and marketing is one part of it, but there are other parts, too. But when you see how we're doing in the U.S. versus our competitors there and see what we've done, look, we came out and we said, compared to 2019, 2021, we had strong room night growth above 2019, and we had very strong growth in gross bookings. That implies we are doing really well in the U.S. So it's not -- and they say, well, is it all marketing? No, marketing is one portion. We have one way. They have another way. And everybody chooses their own method. Look, Airbnb is very fortunate to have a very well-known brand for what they do. And I understand where -- why they would do what they're doing. I understand -- experiencing what they're [ experiencing ]. We're saying this is a time for us to lean in and get some customers.

Got it. I'd say about 8 years ago when the app started really taking off and you were disclosing your percent and every company was, there was some optimism that your direct traffic would grow over time from that. And I think you've confirmed, we don't know the numbers, but you've confirmed that direct traffic is growing over time. I mean is there ever a tipping point where it could really make a difference to the marketing margins? How should we think about the benefit of the direct traffic?

So one of the things, of course, is a little bit of a function of how much nondirect you're trying to get new customers who haven't come for may not know who you are and somehow you're going to get them to come and you had to spend money in certain channels, so it's not direct perhaps to come. So we can have 100% direct albeit we stopped doing a lot of marketing again, new customers and everybody just came who is a repeat direct. So it's always a balance. And we want to do that as balancing. But certainly, getting people over to that app, the app is the center of the connected trip. That's where it really is all going to come about. When you're in destination and you got your phone in your pocket and we push out to you, hey, you are right near this attraction, let's say, Disney and let's say, whatever it is, and you can just click a button and you will get a discount. You won't have to stay on the line. You can go right on -- right in or whatever. That's a great thing. It only works. So if you're carrying your phone and you're in the app. And that's where we really see it. We do see more and more people using the app. It really is an incredibly powerful way to be communicating with that customer and help build that relationship long term. I don't know, do you want to -- are you going to talk about the number? We've said some things about it.

I think that's, by definition, an increasing direct mix is going to help with the marketing efficiency. And you've seen that in recent years. If you look at 2018, 2019, you saw our marketing efficiency improved. The ROI didn't change much in the pay channel, but the direct mix shift gave us that mathematical improvement in marketing leverage. You saw a little bit to the same happened in 2021. First half of 2021, we saw basically marketing leverage in the first half. In Q3, we saw some deleverage, as we said that we would, as we again pushed into what was apparently and actually practically was a rapidly recovering summer season. You saw a little bit of deleverage in Q4. That was more to do with bookings as booking cancellations came in because of Omicron. So we see periods of time when that is absolutely happening and has happened. This year, 2022, with us really pushing across all cylinders to drive much more opportunity to bring customers on to our platform, we'll probably see less of a mix shift to direct than we have seen before. But again, that's what we're choosing to do. We've seen the benefit of what happens when that mix shift changes in prior years.

And the hope -- I'm assuming as these people come back direct the second time and the third time, are you seeing kind of data that suggest that there's more likelihood of them doing that?

Yes. Well, actually, it's -- and you wouldn't be surprised. I'll bet this is for a lot of businesses that the more you go to that site or buy from that vendor, the more propensity you will to repeat in that place. I bet that's common among many companies. And we do see that. And we did -- we have disclosed some numbers about the percentages that are coming for our mobile product than we say within the mobile of the apps.

Yes, it's about 2/3 coming from mobile with app being the significant majority of that.

Right.

Got it. We're getting into the lightning round time. So there's a few more I definitely want to get in. Going after U.S. share, and I know people are watching you versus your competitors. How are you going to measure that? What are the biggest challenges in the U.S.? And how are you going to measure whether you're gaining ground?

Right. So we've already stated, and just so everybody's clear, we're gaining share, just to make sure that we got that right. So look, how are we going to continue? So what do we have to do? And it's some of the things we already talked about here that are really, really important. The first thing is, obviously, we got to get that payments thing up. Why is that so important for just -- why the U.S. more than anywhere else? Let's say, it's going everywhere, why in the U.S.? Because we need to build on our alternative accommodation business. We -- I admit this, I say our product is not as good as some of our competitors are. But here in the U.S., it deals with the way we do the payments product. And that has to be fixed and done well and done right and then getting it. So we get that. And then we do much more to have a better alternative accommodations product to be competitive with that. Another thing that we've just begun building up really is the flight business, which is part of that connected trip, which is really important to have that. We've talked about the numbers, how good they are, 25%, now all the things I talked about that, get that up. That's all part now of the connected trip. Get that going up and spend the money in the marketing brand, make people -- make the awareness. Let's face it. If I walk down the street, and I said, "Tell me a place where I can get home to rent, the answer they're going to say Booking.com in New York City, they're probably not going to mention that first. I need to get that awareness out, but I got to have the product ready to go. And then the rest of it, I want to make sure when people think about travel, they think about us, not our competitors.

Got it. On accommodations, I want to discuss that a little bit. Went after the professional managers, is there going to be a greater push on the inventory side? And do you think there really will be a different experience in a couple of years on booking?

Yes, I think there will be a better -- and yes, we do need to get to those nonprofessional host, we need to get to them. We've got to get all the professional stuff done first. Let's get that on right. Let's get the payments thing right. Let's get all those things right. Get all the attributes of the product, so it is as good or even better than it is for anybody else. And at that same time, let start bringing in the nonprofessional ones. But again, everything has to be done in a priority. Everything has to be done in order. And the bigger opportunity right now is to continue to finish off, get as many of those professional hosts as possible.

Got it. We have been able to compare your -- could you give us disclosure on percentage of room nights, right, on alternative accommodations and comparing them to Airbnb looks like a slower growth rate over the last 2 years. But I think part of that is the Europe positioning. So how do you think about your European share on alternative accommodations?

Well, first of all, in terms of -- you're right, just our mix of business, our mix of alternative in Europe has picked up a few percentage points in '21 versus 2019, perhaps more in line with an industry trend, pause our growth rate. That's a little bit masked in the consolidated numbers because Europe has underperformed relative to the overall business. Our business in Europe is very complete, very competitive, and it represents a much higher percentage of our bookings in Europe than it does of the global average.

Got it. And maybe time for one more, and this is definitely I want to ask you every time you come, Glenn, CEO, Board vision for the company, where will Booking be 5 years from now versus today? What are you thinking about will be the biggest changes for the company over the next 5 years?

Look, I've been talking about this connected trip for some time. And 5 years from now, if it hasn't really come to fruition in 5 years, I don't think we'll be having this conversation at that point. And to do that, that means that payments has been done, gone and is making money and it's all the things we talk about. And I -- again, connected trip, I talked about already, I said it's going to coming through the app. A lot more stuff coming through the app, very, very important there. And the awareness of that brand marketing and all the people becoming aware, that will be much higher, too. I really believe that the whole thing is if we -- and we said this, we have a better product, people come more often, they'll be more loyal, they'll repeat more to us. All the things that virtuous cycle will be kicking in. And then we'll have a product that I really admire so much more. Look, I like what we do. I like my product. But we all travel. Everybody here who does their own travel, organizes themselves, books it themselves, deals with the problems themselves because, God knows, there's always problems when you travel, there are, it's just the nature of the industry. If we can't make that a heck of a lot better, then we always also bring in some new people because the fact is the technology is there. It's not like we've got to come up with a vaccine and save the world because of a pandemic. This is blocking and tackling management, bring the people, do the right things in the right order, spend the money at the right level and then we'll have a much better experience. And that will be good for all the customers. And if it's good for the customers, it's good for the partners. If it's good for the partners, it's good for us, and it's good for the shareholders, and we all win.

Great. Well, thank you so much for attending. I really appreciate your time today.

Thank you.

Thank you.