Booking Holdings (BKNG) Q2 2026 earnings call transcript

Good afternoon. And thank you for joining us today. I am pleased to report that our teams delivered another quarter of strong execution. We exceeded the high end of our guidance across all of our key financial metrics while continuing to invest in the strategic priorities that we believe will drive long-term value. These results reflect the strength of our diversified global platform, disciplined execution across our businesses, and our ability to deliver strong returns to our shareholders while also investing for future growth.

As you know, the world remains in uncertain place with the Middle East conflict and related macroeconomic developments continuing to affect travel demand, both directly and indirectly through the impact on major Middle East transit corridors and higher travel costs.

These dynamics create near-term volatility. Yet we know from decades of experience that the underlying desire to explore, connect, and experience the world is remarkably resilient and travel demand recovers once the underlying disruption subsides.

This resiliency was clearly evident during the second quarter, while long-haul international travel remained pressured by elevated airline prices and reduced capacity due to the conflict in the Middle East, domestic and inter-regional travel remained relatively healthy across many parts of the world.

As I've stated many times, we remain focused on creating long-term value and look beyond near-term uncertainty. During the quarter, we further increased our capacity to invest for future growth as the expected annual run rate savings enabled by our transformation program continued to increase. These savings provide us with additional flexibility to accelerate innovation, enhance our products, and strengthen our business over the long run.

Our focus is on what we can control, delivering strong value, reliability, and great service through differentiated solutions for travelers and partners. This focus is reflected in the strategic investments we are making across our business, starting with our connected trip vision.

Travel remains a fragmented experience, often requiring multiple providers, transactions, and customer service interactions. Our connected trip vision is about fundamentally improving that experience, making travel easier while creating greater value for travelers and partners, and we're encouraged by the progress we are making. During the quarter, connected trip transactions where travelers booked more than one travel vertical with us for the same trip grew in the low-double-digit range and represented a low-double-digit percentage of booking. com's total transactions.

Importantly, these transactions can change and grow meaningfully faster than our overall transaction growth. As travelers increasingly choose to book accommodations, flights, rental cars, attractions, and other travel services with us, we are creating a more seamless end-to-end journey which strengthens our offerings for both travelers and partners. And our genius loyalty program is a key enabler of this strategy.

We continuously strong engagement from our higher tier genius members who plan their trips further in advance, return more consistently, and have a higher direct booking rate than non-genius travelers. During the second quarter, level two and level three genius members represented more than 30% of our active customer base and accounted for a high 50% share of room nights both up from the prior year.

Given the importance of loyalty and the success of genius so far, we see additional opportunities to further strengthen the genius offering going forward. Another important strategic priority is strengthening our presence in the US and Asia. The US remains one of our largest long-term growth opportunities. Over the past several years, we've made disciplined investments across product, supply, brand, marketing, and technology.

And we're encouraged by the progress we are seeing. These investments continue to deliver encouraging results during the second quarter. You just room nights grew in the high single digits supported by healthy domestic demand. We also saw continued growth in our direct channel and increasing engagement across multiple travel verticals. While we still see significant room for growth, some of which will come from further product improvement, we remain encouraged by our consistent progress and remain confident in our ability to continue strengthening our offering in this important market.

We are also continuing to invest in building our presence in Asia, which we believe represents one of the most attractive long-term opportunities in global travel. Despite a dynamic competitive environment, an indirect impact from the conflict in the Middle East, underlying domestic demand remained healthy during the quarter. By combining Booking. com's global reach with a Goda's deep local expertise, we are continuing to invest in localized products, payments, and distribution capabilities that position us well for long-term growth across the region.

The final strategic priority I'd like to discuss is AI. AI's rapid and continuous development is having a profound impact on all areas of society. Our approach remains focused on deploying this technology in measurable ways and scaling when we see clear benefits.

The combination of trusted brands, proprietary travel data, broad supplier relationships, and global reach creates a differentiated foundation as AI reshapes how travelers discover, plan, and book travel. As travelers increasingly begin their journeys through AI-powered experiences, trusted brands will play an even more important role in where they ultimately choose to buck. That's why we continue to work closely with leading AI organizations to ensure travelers can engage with our brands wherever their journey begins.

We're also encouraged by the early progress we're seeing in AI-powered discovery. While AI-driven referrals remains a relatively small contributor to our overall business today, we are seeing encouraging momentum that reinforces our belief that the strengths we've built over many years helping travelers find the right travel options with confidence, positions as well as travelers further gravitate towards AI-powered discovery.

At the same time, we're embedding AI across our own platforms to make every stage of the travel journey more personalized, seamless, and intuitive. During the quarter, we've continued advanced AI capabilities across our portfolio, including beginning to roll out testing of booking. com's new AI-powered discovery experience which helps travelers in the early inspiration phase of planning a trip.

For destination searches, the experience combines flight prices, real travel reviews, and AI-generated insights, including the best time to visit, travel tips, and I can't erase suggestions to make it easier to move from inspiration to booking. We're also deploying the next generation of price lines and agent AI travel assistant called Penny. And we're launching a gotis new calorie view which gives travelers a more visual way to browse search results by pairing hotel images with relevant guest reviews.

We're already seeing how AI can transform the customer experience. For example, initial testing of Penny's integrated hotel checkout experience has shown that beginning more of the booking journey into a single seamless experience has the potential to improve traveler engagement while delivering stronger business outcomes. These innovations are just a few examples of how we're using AI to reduce friction throughout the travel journey while advancing our broader connected trip vision.

AI is also strengthening our partner value proposition. We are investing tools that help partners better engage with guests, improve their property content, and operate more efficiently. For example, our AI-powered messaging capabilities and enable accommodation partners to respond to guest inquiries more quickly and consistently reducing operational friction and improving the traveler experience. These partner innovations were a central focus of our recent booking. com click conference where hospitality partners from around the world explore how AI, personalization, and data-driven insights can improve both guest experiences and business performance.

This conference also reinforced our collaborative approach to innovation including co-developing new AI capabilities using direct partner feedback. Finally, we're increasingly applying AI across our own business to accelerate software development, enhance customer service, and streamline internal workflows. One area where we continue to see meaningful benefits is in customer service. Our AI initiatives are reducing customer friction, lowering contact rates, and improving operational efficiency.

We have now scaled voice AI support across the majority of eligible inbound traveler calls while continuing to expand digital automation. At the same time, AI-powered analytics and real-time agent assistance are helping our teams resolve issues faster and more effectively. As a result of these combined AI and human capabilities, customer service cost per booking continues to decrease at a double digit rate while overall customer satisfaction remains high.

We're also seeing promising early results in our technology organization where AI is accelerating software development and improving developer productivity. These signals give us confidence that AI will continue to be an increasingly important driver of innovation, operational efficiency, and better experiences for both travelers and partners.

Looking ahead, we recognize that the external environment may remain dynamic. We believe consumer preferences will continue to evolve, technology will continue to advance, and competition will remain as has always been competitive. These changes create challenges, but they also create opportunities. What gives us confidence is not the expectation that the world will become more predictable. Rather, it is our confidence in our ability to execute our strategy to address our customer's long-term needs.

Whether it's advancing the connected trip, strengthening our offering the United States and Asia, deepening our partnerships, or harnessing AI across our business, we are making the investments that we believe will create better experiences for travelers, greater value for our partners, and a stronger company for the long-term.

With that, let me turn the call over to Avat to walk through our financial results and outlook in more detail.

Thank you, Glenn, and good afternoon, everyone. I will now review our results for the second quarter and provide our current thoughts for the third quarter and full year. All growth rates are on a year-over-year basis, and the reconciliation of non-GAAP to GAAP financials can be found in our earnings release. Room nights, growth bookings, revenue, and adjusted EBITDA all exceeded a high end of our guidance for the second quarter.

These results reflect the resilience of our global business in an uncertain travel environment and the disciplined execution of our teams. Glenn covered many of the underlying travel trends, so I'll focus on what they meant for our financial results and our outlook. Overall, consumer demand remained resilient in the quarter, although we observed some modest shifts in travel behavior.

Constant currency ADRs increased approximately 2% year-over-year, demonstrating continued pricing strength, primarily driven by Europe and the US. Globally, we saw a modest contraction in booking window and length of state during the quarter, although both began to normalize in June. Importantly, in Europe, our largest region, both metrics were approximately flat for the quarter.

Now, let's turn to our second quarter results. Room nights grew 5%, exceeding the high end of our guidance by about 1% each point. Globally, domestic room nights representing travel within the same country grew high single digits. In contrast, international room nights increased slightly, reflecting continued pressure on long-haul travel to primarily to the indirect impacts of the situation in the Middle East.

Looking at room night growth by Booker Region, Europe grew mid-single digits with domestic room nights up high single digits. Asia grew mid-single digits with domestic room nights up low double digits. US grew high single digits, driven by domestic demand, were also pleased to see an other quarter of direct-channel growth in the US. Rest of world grew mid-single digits, improving from a low-single digit decline in the first quarter due to stronger bookings from Middle East Booker. Over the past four quarters, our B2C Direct Mix remains stable in the mid-60 range, while Direct Room nights continue to grow.

This performance came despite the continued pressure on SEO, which we're seeing across much of consumer internet. SEO remains a small component of our overall room nights. The mobile at mix of total room nights over the past four quarters remained in the high 50% range, but the mix of booking. com room nights booked by travelers in genius levels two and three was also in the high 50% range. Both metrics increased year-over-year.

Alternative accommodation room nights at booking. com were also affected in part by the Middle East conflict growing four percent. This growth was slightly lower than our overall five percent room night growth due to brands and regional mix as we saw higher growth from Agoda and Price Line and also in the U. S. , where our alternative accommodation offering is relatively smaller. Alternative accommodations represented approximately 37 percent of booking. com's room nights, similar to the second quarter of 2025.

In our other travel verticals, attraction tickets grew double digits, while flight tickets increased four percent year-over-year, despite pressure from the Middle East conflict, including reduced capacity on certain international routes and higher flight ticket prices. We believe this growth continued to outpace the broader market. Connected trip transactions grew low double digits, more than twice the rate of booking. com's total transaction growth. This matters because our data shows that travelers who book with us across multiple travel verticals return more frequently. Our total margin growth bookings represented approximately 73 percent of total growth bookings up about four percent points year-over-year. Our margin payments platform is foundational to our connected trip vision, enabling a more seamless customer experience while generating incremental value and contribution margin dollars.

Total growth bookings increased nine percent year-over-year, or approximately eight percent on a constant currency basis, exceeding the high end of our guidance by about three percent points. Constant currency growth bookings growth was approximately three percent points higher than room night growth, primarily reflecting the approximately two percent increase in constant currency ADRs and the contribution from flights and other verticals. Revenue increased eight percent year-over-year, or approximately seven percent on a constant currency basis. Revenue growth was lower than growth bookings growth, primarily due to elevated cancellations in March that affected second quarter revenue.

Marketing expense increased 11 percent year-over-year, modestly faster than growth bookings, driven by changes in traffic mix, incremental investments in paid marketing at attractive ROIs and a shift of merchandising spent to performance marketing. As always, we aim to grow our top line metrics faster than marketing investments but are willing to lean in when we see positive long-term value for the business through both attractive ROIs and repeat rates. Adjusted sales and other expenses were 1.9 percent of growth bookings and provided a leverage despite the higher margin mix, as higher payment expenses were more than offset by customer service efficiencies. Additionally, payment expenses grew less than margin growth bookings due to a one-time benefit from processing fee reversals.

Adjusted fixed operating expenses increased six percent year-over-year, including one percent higher adjusted personnel expenses and were a source of leverage as a percentage of revenue, reflecting the targeted cost management actions we implemented last quarter and our continued focus on managing our fixed expense base while investing in key strategic priorities to drive long-term growth. Adjusted EBITDA of approximately 2.6 billion dollars grew 9 percent year-over-year, exceeding the high end of our guidance. Adjusted EBITDA margin expanded nearly 40 basis points, reflecting disciplined execution and cost management. Adjusted EPS of $2.54 per share increased 15 percent year-over-year, faster than adjusted EBITDA growth, held by a six percent reduction in average share count.

Beyond the quarter's financial performance, we also continue to make meaningful progress in proving the efficiency of our business. As we continue to execute on the transformation program, we identified additional opportunities, increasing our expected annual run rate savings from approximately $550 million to approximately $650 million. We expect the approximately $100 million of incremental annual run rate savings to be realized primarily in 2027. We incurred approximately $30 million of transformation costs in the second quarter, the majority of which were excluded from our adjusted results.

Now, onto our cash and liquidity position, our second quarter ending cash and investment balance increased sequentially by $1.2 billion to $17.7 billion. During the quarter, we generated strong free cash flow of $3.6 billion, raised $3 billion of debt, paid down $1 billion of debt, and returned $4.1 billion to shareholders, including $3.7 billion of share repurchases, marking another record quarter of capital returns. During the first half of 2026, we repurchased $7.4 billion of our common stock at an average price of approximately $173 per share. We remain committed to a disciplined capital allocation framework, first infesting behind the highest return growth opportunities across our business, while also returning meaningful capital to shareholders and maintaining a strong balance sheet.

Moving to our thoughts for the third quarter, global travel demand has remained resilient so far in the third quarter, supported by healthy domestic travel trends. As we look ahead, we remain mindful of the situation in the Middle East and continue to monitor the direct and indirect impacts on travel demand. Our guidance assumes stability in the broader travel environment in line with recent trends. It also assumes that the indirect impacts of the conflict, including elevated flight ticker prices, reduced flight capacity on certain routes, and softer long-haul international travel demand, persist through the third quarter. In terms of the direct impact of the conflict, we continue to assume some pressure on inbound travel to the Middle East, while travel demand from Middle East bookers remains largely normalized.

Our guidance also assumes recent effect rates for the remainder of the quarter and year, including the US dollar exchange rate at 1.15. We estimate changes in FX will weigh on our third quarter reported US dollar growth rates by about 1% of this point for gross bookings and revenue. For the full year, we estimate changes in FX will positively impact the full year reported growth rates by about 1.5% of this point for gross bookings and about 1% of this point for revenue. We currently expect third quarter room nights to increase between 3 and 5% and for gross bookings, revenue, and adjusted EBITDA to each increase between 4 and 6%.

On a reported basis, our full year expectation is for gross bookings, revenue, and adjusted EBITDA to each be up high single digits and for adjusted EBS to be up high single digits. Our expectation for gross bookings is lower than our prior expectation, primarily due to lower flight ticket growth while our accommodation outlook remains largely unchanged.

In conclusion, our second quarter results demonstrate both the resilience of our global platform and the disciplined execution of our teams. Despite the external environment, we delivered robust results and exceeded the high end of our guidance across our key financial metrics while continuing to invest in the strategic initiatives that we believe will drive long term growth. Our strategy remains unchanged. We are continuing to invest in the connected trip, expanding our presence in key markets, advancing our AI capabilities and strengthening the value we create for both travelers and partners. At the same time, we remain disciplined in how we allocate capital, balancing these investments with strong operational execution, solid free cash flow generation, and meaningful capital returns to shareholders.

Together, these strengths give us confidence in our ability to continue creating long term value. Finally, I would like to thank my colleagues across the world for their continued dedication, passion, and execution throughout the quarter. Their commitment to serving our travelers and partners in such a dynamic environment is what continues to strengthen our business and positions as well for the future.

With that, we will now take your questions.

Hi, Mark. I think that's a great question, and we've talked about this a little bit. Penny, especially, we've mentioned how people using it do come back with more satisfaction, and we talk about how we want to increase conversion. It makes sense, common sense. If you provide somebody with a better way to do the business, they'll be happier doing it. And the whole idea of giving personalization, well, I certainly as a customer, I prefer something that actually matches up with I need versus a large mortgage board, most of which I want to ignore. So all these things are good, but, and this is important, is still very small, and we're not at a stage, we're going to start giving away percentages, numbers, increases in CSAT or anything of that nature.

However, I am very pleased with it, and I will say, what makes it so exciting now with this technology is the ability to do things we never would have been able to do before. If you recall what I first started talking about, for example, the connected trip, bringing it together, and we were talking about AI-antism and machine learning models, so ending up with different types of mathematical predictions of what we thought they want. But now, using Gen-I, we'll be able to do it so much better. Can I envision, in the future, we're going to get even more personalized than I ever thought we could, which will lead to what you're asking about in terms of a much better way to actually complete a transaction.

And then, got to a bit, something goes wrong, a much better way to solve the problem. Is that anything to add?

Yeah, Mark, let me add one other dimension to your question. So, if we look at traffic, we're currently receiving from large language models. So, this is not what we are receiving directly in terms of traffic, but from large language models, both on a paid and an unpaid basis that is still significantly below 1% of our room nights.

And that hasn't moved so much recently, so no material change over the last few months or over quarters. I'm not saying that that will never change in the future. This, of course, at some point might go in the different trajectory, but at this moment, it's still very minimal, and it's not really moving so much. Going a little deeper, the organic traffic, what we are receiving from the LLMs, we believe the vast majority is coming to us, according to third-party data sources.

And if I look at the paid traffic, we are part of the test group of OpenAI for CPC. We like that from a diversification perspective in terms of our paid channels. And it's very much playing to our strength, the optimization models that we are running in order to convert at an optimal way traffic into bookings. But as Glenn said, strategically, we are, of course, very much focused on learning ourselves, diversifying our channels. But then in the end, focus on keeping the direct traffic to us by investing AI tools to customer-facing AI tools in our own environment.

Thank you, Glenn.

Could you just talk about how they have evolved? Thank you. Alex, on the first one, everybody would like to know what's the secret sauce? So they'll show up in any sort of prompt regarding travel. The results will be their property, or their OTA, or their sort of everybody wants to, well, how do you do it? What's the right way to do it? One of the things that we believe is very helpful is to have tremendous amount of content that is very reliable and has been around for a very long time. Now, we don't actually have any sort of handbook saying exactly how we can show up more often than others. However, and I think they may have just mentioned about the fact that third-party people are saying, hey, we're showing up an awful lot, which is great.

On the other hand, he also mentioned we're showing up a lot, but the referrals aren't showing much, so that's an interesting difference between the two. That being said, we hope it actually reminds people when they do get ready to book, they are still thinking of us having seen us show up in the results of their prompt.

We believe that in the long run, it's very important to continue to work very closely with all of the frontier players, which we are doing. We've talked about this a lot in the past. In fact, most recent things, I believe, maybe today even, I think Google may have come out today, a small percentage of the traffic, seeing their agentic booking, which we are one of the first with them. We've been working very hard with them as we have for many years, but working hard on this one.

And we believe that I think it's out. I didn't see it myself yet, but I think it's out there. And we'll see how that one does. Point of this all up in that area is that we are working hard with the third-party frontier players to make sure we're properly placed when somebody wants to book, if they want to start there. But even more important to me is making sure that we are offering our own opportunity for people to come to us to wreck. And that's why we talked a little bit about, in the prepared remarks, about booking has come out with their way to do discovery.

We've got Priceline Penny, we got the new thing we mentioned about a go-to and their gallery thing. And we're going to keep on working with that so that people, when they think of travel, they think I can go to one of our brands and they will get everything they knew that could get from any of the large language models, but get even more because we're able to personalize it from what they've done with us in the past, either give them value that they could not get because we're going to work with our partners to provide incredible opportunities to help them get incremental business.

So we see this as a win-win-win-win, as it's always been. We've always worked with third parties to bring in customers, but we also like them to come to direct. And regarding your second question, I don't know if I really entered that or not, if you want to restate it, please do.

Or have you seen anything that surprised you that? Well, I'll say we continue to work with them when they change, we change too. And you know, there have been many changes over the last couple of years in the way they were going to go and things will come up. Personally, I like to take a little pride in the fact that I thought that one of them would start going for a performance marketing advertising platform, which is right in our wheelhouse that we're very, very good at, and they have, and we're working very hard on that, so I'm pleased about that. But again, the important things are make sure we work with them closely. One, two, being the big player that we are, we have the expertise, the knowledge, the people who can work with them.

We can spread it across all of them and make sure we're not letting anybody out. And the last thing is, if they want to change to something else, we'll work with them.

So, there are different issues, clearly. One, I take the first one, talk about Connected Trip in general, and Ava has some really good thoughts on why those numbers have diversion, and really why you should understand that's not a big deal, very much of exogenous factors. But in terms of Connected Trip, all these elements are important for the long run, and that means having all of the verticals being able to work together, and that's all ideas, to bring something that is actually better than the way people just buying individual verticals that aren't connected at all. And one of the critical things, of course, is our payments platform, which I was very pleased that we were able to announce how the percentage going through is even higher, up 4%.

73% is a great number, because that is critical. That's the glue that brings it all together. And by the way, then, as we bring in genius, too, it's a flywheel that keep on increasing. Now, you would say, but wait, yeah, your flywheel, you had two little parts here, seen a little bit of a hiccup here, what's up with that?

And Ava, you have some good thoughts on that. Why? Yes, specifically, Justin, with respect to flights. Our flights business continues to outperform the market, even in a challenging overall airline environment.

So if you look at global demands, that was clearly impacted by airline capacity and also higher flight ticket prices during the second quarter. So therefore, our 4% growth of tickets is actually higher than the global airline industry. And if you then add 8% of ticket growth on top of it, so we had actually 12% growth, booking's growth for tickets.

We saw in Europe, a couple of carriers actually have a contrarian strategy to the rest of the airline world, so they were more focused on lowering prices to increase demand, but the airlines in the rest of the world were actually doing exactly the opposite. And Asia was particularly hit hard because of the direct dependency on the Strait of Hormuz. So we expect the capacity of the airline industry gradually to come back over the next few months.

But most importantly, if we think about travelers, what have they done in the quarter? They have found alternative options. They have been looking for travel domestically for intra-regional travel. We saw some healthy pick-up of still people that want to get their summer bookings in, so that is happening. Therefore, the shorter booking window with the higher ADRs that we are seeing. And please keep in mind that the biggest part of our economics is actually coming from accommodation bookings. And that wasn't so much impacted by those dynamics with respect to the airline industry. And even with that, we're still very pleased with the growth of our connected trip, that low double digit number, the percentage of our total transactions, the low double digit, these are still very good numbers, even with this incredibly exogenous impact of the Middle East War.

Kevin is out very early. I don't have any data to come back to you. I'm sure I would right now. But we don't have enough to say anything, except certainly looking at it as it's being put together, I was very pleased with what I saw. I find it adding convenience, making it easier for people to go through their ideas or inspiration, working from that all the way through to be doing their booking.

It looks sweet to me. We'll see when in the end, my opinion is not the important thing. The important thing is seeing how the customers use it. If we need to make modifications or not, certainly I think last quarter I mentioned to people, how I stressed out, if you want to see what we're building, what's going on, just keep using our products and services and see it. Now, this is testing so you may not see some of it because obviously we're not rolling out to everybody at once.

But I am pleased with what I'm seeing. But I recognize that that's not the important thing. The important thing is the data.

Could you just tell us where that ended up and what you're assuming for the third quarter there? Thanks. Kevin, if we look at the impact from the Middle East, we said that it was about a two point impact on the first quarter, but keep in mind that was actually only from the month of March and the elevated cancellations we had in March.

If you look at the second quarter, the impact was actually a bit higher than in the first quarter because we saw the impact continuing in April and in May. But as we said, then in June, actually the situation started to normalize more and that continued in the month of July. If we look now forward to the third quarter, we expect that there will be a little bit less of an impact than we have seen in the second quarter because I think of the normalization.

But as we said, we still expect that the indirect impact, particularly on airline capacity and flight ticket prices, will continue until the end of the third quarter in our assumptions and guidance. But overall, we are encouraged by the resiliency in demand, including in July, the healthy pickup of the summer bookings. And overall, if I also made point you to our full year guidance, actually if you look at our full year guidance, we are at a high single digit level for growth bookings and revenues and at meetings level for EPS at a high end. And that is still in line with our long-term algorithm and is also in line at the constant and current basis with our original guidance for the year.

Despite the fact that in our assumptions, we have seven out of 12 months in impact of the Middle East. So overall, I would say, great resilience of the market and demand and very strong execution by our team.

Thanks, Ron. And I am very pleased with the overall progress we have made in the U. S. over the years. And I talked about this last quarter also, but I'll repeat it because I think it's important. You know, we talked some years ago. I said the U. S. is an important strategic goal for us. And we're going to put time, energy, effort, money to work.

And if you look over the last quarters, go back a bunch of them. And you'll see us doing very, very well. You know, we come down to a high single digit, and that's less than some of the other ones last quarter. But it's still really, really good numbers compared to how the market overall was doing. So we're doing something right. And I'm really pleased to shout out to the team for what they've been accomplishing. And how we've been doing it, doing it, you know, the way we do everything is grind it out. Improve the product, improve the service, get more inventory, make the marketing better. Do all the things that are necessary to so that people, when they're thinking about where they're going to book, they think of us, they use us, they like us, they come back to us.

If they got a problem, we solve it fast. That's business. And that's what we've been doing forever. But we had to make a little bit of a concentration of it to make sure that we fixed some things that perhaps weren't the best. When you're a global player like us, sometimes things that are localized are not being addressed and need to be addressed. And we've been doing that. Now, what are we going to do going forward? It's exactly the same stuff. Continue to improve it. Get more product. Get more inventory.

Make sure we're doing a better job of marking it out. I still say, and you know, and look at 4% growth in alternative accommodations. Well, went like that to be a lot higher. I want to be a lot higher in the U. S. And this sounds like a broken record. I know about how much we need to make sure we have the right inventory and we need to make sure that the U. S. customers aware of it. We got to make sure the partners like we're doing. But we are working on that and I see different things. We are going to be improving. And I think that will enable us to continue this very good path we've been on.

Then run with respect to your question, your second question on the additional 100 million savings from the transformation program. So first of all, philosophically, I think you know how we run the company.

We are focused to optimize for long-term shareholder value. So very happy that the team has done so well. We found additional savings opportunities within existing categories. So no new categories. So this is all existing categories to go deeper in some of those areas. And the additional 100 million mostly came from the procurement work stream. So we are happy because now we raised the overall target to 650 million dollars from 550. But you probably remember originally when we launched this program, we were at 450 million dollars. So what we are doing in the end is creating capacity to self-funds and invest ultimately in our strategic initiatives that then will help to drive long-term growth for the company.

I do believe that some of the change that were made in the display at Google definitely put some pressure on SEO, putting in that AI overview probably has done it. Now, here's the important thing to keep in mind. So our direct, our direct mid-60s hasn't got down at all. In fact, total number, absolute number, obviously had to go up to maintain the same percentage share in the direct, because obviously we grew.

That's good. That says that we are doing a good job of making sure that people come to us, think, yes, losing SEO don't like it. It was never a big part of the business, small part of the business, but obviously I don't like that. Where did they go? Did they come to us directly? What happened? Because our direct number didn't go down. I don't know. I do know, though, however, that I am pleased, I am very pleased, that we continue to develop what we need to make sure people understand the better service we are offering to them to get them to come back direct. I mean, look at what we're doing with our app and that high 50s percent.

When you look back a year ago, there was mid-50s. You go back two years ago, there was low 50s people going to the app and they're coming direct like that. Now, your second question, are some of the people coming off of the AI whichever model you want? Are they going direct though, tell us more or not?

I don't know. They don't tell me. I will say, though, again, I doubt that anybody is getting a huge amount of business directly from what they're doing with their travel prompts, their discovery. I think what we are seeing, and I think this shows how we are still performing very well, is people are doing what they used to do always. They do a lot of search, a lot of looking, a lot of thinking, a lot of discovery it's called. But when they are actually ready to buy for real, that's when they get serious, and that's why we are seeing still nice growth rates.

Lloyd, if I just may clarify one additional thing, because you also made a comment about that you didn't believe we talked about SEO before. Yes, we did.

Last quarter, we also talked about it. And again, just to emphasize, it's a very small component of our overall direct mix. And we see some slight headwinds, but the overall direct channel is growing absolute numbers. So although that the ratio of direct mix is stable, that is because that's a ratio of two positives. So we are growing the absolute channel and the pay channel. So in absolute terms, both are growing up, but the ratio therefore is staying stable.

I mean, we talked to a lot of companies, you know, they're talking about how greater usage of AI. You know, whether we're coding or plot development, you know, seems to have accelerated the pace of innovation.

For folks that have, you know, kind of jumped into the pool. So I'm just wondering, you know, at booking, like what you're seeing in terms of your pace of product development. Whether, you know, the experimentation with new products, that sort of thing has picked up over the last year. So thank you.

Yeah, and it is an incredible great part of the story of AI is how it really is improving all aspects of our business. And we mentioned a few times about the internal improvements that we're seeing using AI. Certainly everybody talks about the improvements and coding. But of course, you got to talk about the whole software development lifecycle. And actually, it's improving all areas that we're working very hard and we are seeing real results.

You know, some people have talked about, well, we're not seeing much ROI in it. Well, I don't know what they're doing, but we actually are seeing benefit from it. And it's great. And I believe we will continue to improve. As we know, the models are going to continue to improve. And I believe when they improve, we will improve along with it. That's great. Then look to something else that's internal, but it's also external. Look at how we've improved our customer service.

So we've been talking about how our cost per book, you know, the cost per interaction with the customer going down. That's because of AI. That's using it. And we're getting that with better CSAT numbers. The customer likes it and it costs us less. This is a win-win. It's great. But it's not just those easy that everybody knows about. It's throughout the entire business is being used. It's being used in finance. It's being used in PR.

It's being used by our public affairs. They came back with stuff that they're doing. It's great throughout. It's done the right way. Now, here's the careful thing though. As I made this very clear to everyone. Ava's been echoing it fully. What we do not want is any surprise because people win bonkers with spending money on tokens or somehow doing something that costs a lot more than we thought it would. So Ava, I don't know if you want to talk about it. It's actually come up with some things to make sure that we are making sure when we are spending money on AI, we're going to get a good return on it or stop it.

So Ava, why don't you talk a little bit about that? Absolutely. And Steven, I think it's really important to emphasize what Glenn just said. So we are already seeing an ROI that is positive on our AI investments today as a company. So if I'm looking specifically about our AI cost, yes, they're going up. It could be token cost or license fees.

It's still at a low single digit level of our overall technology spent. So it's not really a driver of the growth of that line item, but it is going up. We have introduced very specific metrics to measure the benefit of this. So think about, for example, in the engineering world, metrics around adoption, metrics around productivity. But the most important one from my perspective is that we are having a cost-aware model routing. So that we make sure that for simple tasks, we are using cheaper models.

And that for more complex tasks, we're using more expensive models. So we're measuring that, for example, by looking at our AI cost over merge request and our technology cost over merge request. And actually those are coming down in a meaningful way. So again, very positive internal usage of AI.

So just make sure it be on the same page on this. So we have three brands, Agoda, Price Sign Booking, that all had separate B2B operations units. And last year, looking at how we could improve things, it was, let's put it together as one unit. All of them were very good. All of them were making good progress, lots of this. But you know, some of them had better aspects than others, different tools, different things that a customer wanted. And we said, why don't we put it together and get the best of all of them? And that when we go to a potential customer, we can all from the very best in class platform.

So that's what we're in the progress of doing, is being hit up by, we're not the Amre Morgan Stern, who is the CEO of Agoda, incredibly talented individual. And he's leading this, putting it together. Now, it's obvious the part of why it's better to put it together. Your question is, what do we think is going to happen? Well, it's a big business now. But I want to make it even bigger. And I want to make sure that no customer says, well, gee, I would have used you except you have these two things that I wanted, but you only have them in the different units. You don't have it as one platform. So by improving the platform, making it best in class, we'll be more competitive than we already are, which we are because we have a whole bunch of great big customers, small customers throughout the world.

But I am really looking forward to the future when you'll be saying, gee, wow, that B2B business is really going great. And I expect that to happen.

And then Ken, one other additional thought on that. It's very important to be focused in a B2B business on incrementality. Because it's easy to some extent to grow a B2B business very fast, but cannibalizing your existing B2C business, where the unit economics are much higher. So this is a business where you have to be very disciplined from that perspective in terms of being able to measure incrementality. So that is something that we are having real expertise in, are always doing.

And we'll continue to do that, of course, also when we put the B2B businesses together in the future.

Are you still going to, you know, power some leader focused brands too? Thank you. So Jed, it does it for everyone and anyone who needs inventory and supply. Of course, though, we want to go with the bigger players. You have a lot more with the big players like, for example, a U. S. bank. We have some of those.

Maybe an airline. We got a lot of those. All these bigger players are really, really the ones that are going to really move the dial. And that includes things like TMCs, which are the corporate travel players who are looking for inventory that we can supply to them. All of them. But that doesn't mean we're going to neglect the small players too. It's good. If it's easy to do it, if it doesn't take time, if it's easy, you know, self-service and be able to put it up, that's fine too.

Another thing, we want to make sure that we are always looking for what's going to be the most efficient use of our resources. Bring back the best return to us. And in the end, we'll make sure that we're absolutely looking to do the best thing we can in all areas so long as it does provide that positive return.

Great. Well, let me wrap up here. Listen, first, the thank you. And one thing I got to always put out is the thanks to our dedicated employees. Very important, obviously. It's not a business without the employees. And of course, I have to thank our stockholders too. But most important, the travelers and the partners whose trust and support has been instrumental to our strong execution and solid performance this quarter.

We remain mindful of the current macroeconomic and geopolitical environment. We've successfully navigated periods on certainty before, of course, and we remain confident in the enduring resilience of travel demand. And as always, we will stay focused on what we can control. We will continue executing against our long-term strategy. Thank you very much and good night.