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

So the question then becomes 30% of your active customers are Level 2 and 3 high 30 more than 30 -- can we get to why can't -- why aren't we at 50%? Why are we not at a greater level than that?

Yes. And that's something that we absolutely should know. Part of the issue, though, is it was 100% our partners may not feel so special. And they might feel. They may have a little problem say, if I really get an incremental now or not. So there's a balancing there and how you're going to do it or not. One of the things I really want to make sure we're doing is given the increment are incremental for our partners. They really do believe they're getting a true value out of the programs they work with Again, it shouldn't be that hard to do, but sometimes you do feel that do they understand that we really are giving them more value, and it really is worth participating I'm concerned. We're not doing explaining it well enough.

Something to certainly watch as we go forward for sure, connected trip and Genius. Maybe shifting gears a little bit, talking regionally U.S.-specific I think the comment, it's a long-term growth opportunity in the U.S., but we are adding more supply, I think. And we're seeing supply drive high single-digit growth in room nights and certainly outperforming what appears to be the broader market. Just talk just a little bit more where are we on adding the supply on building the brand of booking and how do you manage or balance the brand of booking to the performance of that makes sense. It's more of a marketing question, I guess.

Yes. And they obviously intersect. We talked about today with some of our investors, and this is an old story for us because Bookings started in Europe. We have incredible brand awareness in Europe. And our alternative accommodation business in Europe is really great if you're in Paris is the summer, and you're saying, "No, I want to go to the south of France, I needed an apartment though, I want to part me in nice, okay? Where should I go? -- and people on the street at parasol tell you, well, you go to Booking.com, of course. And that would be absent top of mind. If I was outside this building -- and I said, I'm thinking about going for the weekend of South Hampton I like a home near the ocean. -- or where should I go? I can almost guarantee you not a single person go say Booking.com, -- that's a problem. And that's something that we need to work on. Well, we don't have a lot of homes on the ocean and it's out happens. That's the supply issue. We've got to make sure to get that up, which is a great opportunity. It's something I see as something that is great because we haven't done it yet, and we're still doing really well. And then you have to get the awareness around that, that people know, hey, I need a home in South Hampton. I'm going to go to book not one, there's not that awareness, so we need to get the market got chicken and egg go, you got to have the supply before you start marketing and you get the marketing, you got to have the spot moves back and forth. We're working on that. I'm pleased with the progress we've made to date. I'd like us to do more, and I've been talking about this for some time and people have seen the numbers over the last few years. Our home business has been growing very well. Our number of combinations. And that area has been growing very well. but I wanted to do even better. I particularly want to do better in the U.S.

And so how do we -- I think we've been talking about adding alternative accommodations in the U.S. specifically for some time. I think there was partnerships with maybe professional services firms to do that. We've been talking about going in the Hamptons or what have you. What needs to happen so that when you walk outside, you have the supply, so people can start talking about this.

Yes. There's no magic -- it's just grinding grinding it away, grinding away, going out doing now, we did a -- I don't know how to fill knows, but we're a couple professionally managed companies had some problems recently, but Casa and Sunder. There's some blowups there. It caused some -- there are some issues there in terms of supply. We got to get that back on. Again, it really is just a ground -- it's basically a ground war. You just go on, go out, you got to sign them up and you got to then provide with volume.

And how do we make the experience superior to others. So you have this maybe supply is the right answer -- but then you need the great experience that you can be that competitive.

Yes. You got to make sure that your product is matching up with other people for even better and that may be something like do you offer the same type of insurance that you're offering a homeowner? Are you offering the same type of services that they want. And those are things that -- again, the great thing is it's not a secret because you can just go on to the website of a competitor and see what are they offering they pretty much know. So that's really good. We just have to grind it out and Rome not built in a day, neither will our ability to get to where I want to be in the America home business, but we are on the right path and it is growing.

Okay. Perfect. Let's switch gears a little bit and talk about Asia and another area, I think. I think bookings integrating bookings reach with Agoda it seems to be resonating with the results there. I wanted to understand a little bit more about the Asia market and specifically how booking is attacking it across the board, but let's call it AI specifically.

So of the important things we always like to remind ourselves is that -- we say Asia.

It's a long market -- many different markets in there.

Exactly. Exactly. Very pleased, though, Agoda has done a great job of really becoming one of the absolute leaders pan-Asia. Many different markets, they're doing very well in many of them. It's one of the things where we have the localization of Agoda, it's really helpful. Our headquarters there in Southeast Asia to allow people there who are actually knowledgeable they are working with all the time, and they localize those sites, localized as really fits. And they are different if you got to go to Korea, it looks different if you go to Japan, looks different, if go to Vietnam, loose you go to India, it's all different. So that's great. But then you can combine that and work with. We are booking, which is the global with the scale and breadth and we get the benefits from both working together. It's really on 2 points that I think has been very effective so far. And I absolutely it's encouraged because we know look at the demographics of Asia, they are very positive for travel over the very long term.

So let's see, I've got so many more questions. We'll open up to the audience here in a little bit as well. So we can get our questions ready. Let's see. Maybe switching gears somewhat going to B2B. B2B is something that comes up in many of our conversations that we have on booking. And I think we just condensed leadership, combined leadership to have 1 solid leader here just talk just a little bit about the incrementality, if you will, to bookings business overall. So this a new -- this is a newer thing, I guess, that we're talking about, not newer for you because the business is sizable, but talk just a little bit about how the organization is now structured to really go after this market.

Yes. So the B2B business is interesting for us. It's been there all the time. We've been doing this for a really long time. So it's a bit of a surprise when we hear other people are surprised because we decided to bring together the 3 units. So we had separate B2B units at Agoda, Priceline and Booking. And looking at and thinking about it, there are plus and minuses having different units during a very similar business now. One of things that we said, you know, there's duplication going on here. Each 1 of the 3 units has some really good things, but they're not the same for each of them. So we'd end up with going out to a client, and we have 2 teams calling on the same potential client, and the client might say, so, I may like that part from Agoda? I like that part from booking? Can I have both and say, we it works and they're .net, this is not the best thing. Let's combine them into one, which goes live January 1. Let's have 1 leader -- let's avoid which you'd be surprised. Sometimes there's competition among internal groups when they call the same client, you maybe reshot bigger that. should never have as a city, right?

Never.

No. Right. So by doing that, it'll be more efficient, be more effective. I believe we'll be able to get even more business, and it is a sizable business and such. It's one of those things that I -- maybe we should have talked about it more in the past, but okay, we'll talk about it going forward in next year.

I'll try to get something like -- so you said sizable business. Any way to frame it or think about that from our perspective.

Well, it's bigger, they're not sizable.

Bigger than not sizable -- that's a fair comment. Fair.

You can see I'm not actually going to tell you.

I didn't expect it to be that -- now we can dissect with that word.

We'll come back to you.

Let's talk about like stick with B2B the differentiated approach here that booking offers on January 1 compared to others out there or not even compared to others, such that a partner will choose to work with Bookings, is that partner an and or an or?

Many times, it's in hand because many, many very large partners, clients, they'll take supply from anybody they the anybody. And then they'll choose what they want to show or not, depending on price, et cetera. They're a lot like that. which makes sense to me actually, why wouldn't you do that if you can, right? So some of them are unique. Some sat I only want to work with you for a particular reason, but -- so you get both. It's an or. But I will say that, yes, officially, we go live January. But we've been working on this bringing them together over the years off. But then going forward, it's going to take even more as we create that 1 technology platform. So I will never have that client who says, "I like that one from him and I like that one from her. And what can it do together, that will be gone, but it won't be on January 1.

Right. And now we can operationalize it -- so more questions coming be prepared. Okay. So let's say, there's about 6 minutes left or so. If there's any questions in the audience. I think there's mics in the back, of course, I can keep going here. Maybe as we think of ideas.

There's 1.

There's one over here. If there's a mic, or you can just say we can repeat it.

[indiscernible]

Which yes, exactly. which partnerships protect Bookings role in discovery. Did I get that right? .

Yes, proprietary data.

Proprietary data. What proprietary data protects Bookings role in discovery.

All right. So I've been here 27 years. There's almost no proprietary data of any kind and that may seem somewhat negative why would a CEO of this company, say something that it's not look at all these exclusive stuff we have because it's true, okay? You can get data from almost any source. -- hotels, somebody says like, "Oh, can you get hotel information? Sure, you can. But is it live -- is it accurate? Is it right away? And it's even more so, is it what the customer is going to want. So when I say customer, we're talking about the partner. So for example, 1 of the great things that we do is working with our partners, which is a huge number. But sure, somebody can go find a channel manager and had hookup, they have it, but they're not working the way we work with them to help them build their business better. So for example, we see they're having a problem with their sales for a month or something. And we come back to them. But I guess maybe what would be right now is you should enter into our preferred program right now? Or maybe you're not participating in Genius right now and you lost out on this amount. So it's really using the data that's proprietary. And what we learn, what we know. That's the real secret sauce is then being able to use that working with the partners to be able to construct things that enables them to improve their business anymore. That's why they like to work with us. they would never work got they didn't have to. If they could get all their business themselves, they would very happily do that. If they could, they work with us because it's a good ROI for them to work with us, and that is maybe while not proprietary, is symbiotic relationship that improves both of our businesses and being able to do it globally around the world, there's nobody people do it the way we do that. That's one of the reasons we've been able to build the business that we've had -- and sometimes there's a naive belief that Well, I just set up an MPC server, I'll get the diets going to work that way at all.

And so we often get the question, a lot of -- we'll come to your question in a second -- a lot of -- I think 1 of your largest -- 1 of the largest vacation rental competitors out there is going into hotels doing this -- so -- but your answer is, is it live -- do we have the inventory, the supply, the integration, Talk to us about how you think about.

Well, I think even more important is -- and this will be interesting how it plays out over time. So 1 of the interesting questions may be if somebody who is thinking about getting a home goes to a site, sees a hotel instead says, "Oh, okay, I'll get that hotel -- buy. Now the hotel doesn't get that sale instead. So over time, we start getting to scale. Right now, there's no scale at all. I mean like less than like I'll find a microscoping -- maybe you'll see it. but may go, good. Why not? If it does, though, does that just mean then that the holes aren't getting as much business they used to from that person, that partnership -- and then does that give us even more opportunity in the home area because now the homes who maybe in the past might have said something like, yes, I think about working with you, but I got a lot of business right now, paying I'll come back to you next year. Me now would be a little different like, "Yes, my sales are down now. It seems that a lot of people now are going to hotels instead -- so that could actually be an advantage for us and could be a benefit. We'll see.

We had a question over here.

Yes. How do you assess the risk of social media app for search engines using AI themselves to -- because they have customer base or to try to get business and international customers and using their data and so.

How do you assess the risk of AI apps and social media was included to potentially doing your business?

So forever, people have used many different ways to discover, travel, learn about travel, explore travel, have fun looking at travel pretty picturous things that may want to do in friends do things that people I don't even know to, but it looks really cool. Okay, that's been goal forever. That's not new. There's nothing to know about or at all, just a different way to do that. Some people say that, but then won't they then go directly to the supplier et cetera. Well, if only it was so simple as we just talked a little bit, it's a little bit harder than that. and even more so and that's where the connected trip really comes to the forefront. Being able to provide what the customer really wants, which is a much easier way to construct and execute and feel the trust they'll be taking care of that my money is being put in a place where it's say that when things go wrong, somebody will fix it for me, that the persons abate all the rules and regulations that the property actually exists -- all those things that people -- it's that trust issue. Why do we get the numbers that we do because people believe booking with us makes a difference. There's no shortage -- no's ever had a shortage of ways to do their booking ever, nobody, no matter what a government say about dominant position -- the truth is every day, you can go on and you can go out and get booking anywhere -- people come to us at 60 -- approximately 60 -- mid-60% of people are coming to us directly on the B2C lot and our peopls, why do people do it? Why? Because they are getting -- we are providing them a better service, a better way to do it. I don't believe that the fact that somebody can go to social media and there's some AI thing or whatever. I don't see that is really going to change much in the long run. I really don't. However, we will continue to have to do very well in improving the product, improving things for the customers because there are a lot of other very big players who are very good, and we recognize competition never ends.

Potentially as we get into an agentic world where agents can be booking agents on your behalf and everything else. Maybe the trust issue is the.

Trust issue comes up and how does the customers, the trials agent think we should use booking because it's better.

That should be a tagline Booking because it's better. Any other questions I got maybe 1 more over there, and then we're close to over time. .

When you look at the dispute resolution process, how much more improvement do you think you can get through usage of AI, et cetera, make it a little less clunky because it still feels like you're still like to talk to a human at the end of the day, something.

Beat the question -- so the question, I think, is around customer service and specifically dispute resolution and can AI help to.

So look, 1 of the wonderful uses of AI as many, many companies have been able to prove out, and we certainly are very proud of how we've been able to use AI to lower our costs while increasing our customer satisfaction numbers for the customer service area. And the truth is there are many, many, many issues that are being solved by AI, absolutely no human intervention, which enables the human then to be able to spend more time on it, and the human can also use AI to be able to come up with what the right answer is how to deal with it much better, much faster and able to do their own job even more effectively because they have all these AI tools. It will get better and better, absolutely. I agree, there are a lot of things where you really do want to talk of the human being right now. However, over time, that will continue to decrease, decrease, decrease. And I know for a fact for some people, they absolutely do not want to talk to a human. They -- in fact, they just want the darn thing solved. Whenever sells it fastest it fixes it immediately. I don't care if you use whatever are 2 tin cans in the string, just fix it and we're seeing it.

I mean I think we've seen double-digit reductions in customer service costs. while Bookings continues to go up.

Yes. And the CSAT going up, too.

And CSAT continues to go up as well.

Yes, it's great.

Would you argue maybe AI adoption the customer services further along than on the discovery or the front end?

Say again.

Would AI adoption or AI benefits that are on the -- further along on the customer service side than maybe on the Booking side, discoverability?

So to make sure I say using AI, will we see similar types increased satisfaction, et cetera, using that I think people right now are already seeing it right now. using it right now. Absolutely.

Great. Any other questions? We have 1 more over here, and then I think we're in over time. So -- but Glenn, we can go on and on. It's up to.

We're keen different drinks -- you are keeping everyone from the U.S. Open watch party. Hopefully, you'll join us, but...

You've really scaled and grown your margins significantly the last, I don't know, 3 to 5 years as you make all these investments in the next-gen technology. Just how do you think about margins for the firm?

Yes. That question comes up an awful lot -- people are always asking, well, could you please increase your margins in the same time should you lower your margin and invest more? So my thinking is not raise margins at lower margin. I see what are the opportunities. We have free cash flow, how do we want to put it to work? What do we think will increase the value of the company over the long run, where should we place it? How should we place? Are there opportunities or not? And that's the way we're looking at it. And it certainly starts with organic growth. And then we'll be looking here anything we could acquire inorganic things that will make it better for the long run. And then at the end of the day, if we don't have use that, then it's up to the shareholder. You guys probably have a better use of the money if I can do it better let's turn it to the shareholders and let's let them invest it the way they want to invest it, right? So it's not looking specifically to a target margin? It's where are the opportunities? How much should we spend out? What do we think the ROI? What is the probability it will be successful or not.

That's great. Any other last questions or. With that, I think we'll wrap it up. Glenn, thank you very much for your time. Super insightful. Very helpful. Appreciate it.

Thank you.