Peter Kern
Chief Executive Officer and Vice Chairman at Expedia Group
Thanks, Harshit, and good afternoon, everyone, and thank you for joining us today. Let me begin by saying that we were very pleased with our financial results in the quarter on the back of a continued recovery in all markets and products and our expanding margins. We've seen strong consumer demand for travel this summer and are encouraged that travel remains a top spending area even as other parts of the economy seem to be showing cracks. We posted our highest ever lodging bookings this quarter on the highest revenue and adjusted EBITDA for any second quarter. And we continue to further strengthen our liquidity with a strong free cash flow and the early redemption of an additional $1 billion of debt. We delivered these strong results despite the current macroeconomic backdrop and the limitations and disruptions we've seen in air travel around the world. Of particular note, while domestic flight capacities have recovered close to 2019 levels, international flight capacity is lagging, with long-haul capacity still down roughly 30%.
While these disruptions and shortages don't appear to be abating soon, we do look forward to when these long-haul capacities return, as this has always been a relative strength of ours. Now moving on to my main topic of the day. For the last few quarters, we spent a lot of time talking about the transformation of our technology platform and how that will enhance both our B2B and B2C businesses going forward. And last quarter, I took time out to explain in greater depth how we were pursuing our B2B strategy, driving travel as a service to partners of all sizes. But as investors digested our Q1 results, it became very clear to us that we needed to clarify our B2C strategy and begin to provide incremental data to help you understand what metrics we think are important to measuring our success in pursuit of this strategy. In particular, there's been a lot of interest in the shifts in room night share as travel has recovered and whether something has changed in the market or if it is just a temporary shift as we put more of our attention into our technical transformation and attracting the right mix of consumers.
Today, we hope to answer this more directly and give you a better understanding of our strategy and tactics as we evolve our consumer business. As for the backdrop, I think by now, you all have a decent understanding of how the mix effect, domestic versus long-haul international or geo mix, for example, with the robust recovery of EMEA in Q2 can cover share results. And I also believe you are well acquainted with the fact that we've divested or shut down a number of noncore businesses, shedding certain volume over the last two years, whereas some competitors were buying business and thereby adding volume. So today, I'm going to focus more narrowly on how our long-term consumer strategy is impacting these short-term share issues. To be clear, we have been evolving our consumer approach from being largely transactionally focused, where we and the industry spent virtually all of our time tuning our products for maximum arbitrage and performance marketing channels and spending more and more money on intermediaries, to a future where we build longer-lasting direct relationships with loyal high-lifetime value customers.
This means that we have not chased all traffic available in performance marketing, no matter the cost, and instead have focused on the pockets of consumers we think will derive the highest long-term value and the best future shape of our business. To give you more perspective on why it is so valuable to focus on these types of consumers, I'd like to give you a few facts about our biggest OTA brands. Over the last 18 months in our Expedia and Hotels.com brands, loyalty members drove approximately 3 times the gross bookings per customer and over twice the gross profit per customer and twice the repeat business as compared to nonmembers. Similarly, app users drove over 2.5 times the gross bookings per customer, 2.5 times the gross profit per customer and 2.5 times the repeat bookings versus non-app users.
And of course, when we combine the two and have loyalty members who also book through the app, you get the highest production of any customers. Given these core drivers, our entire company is focused on getting the right customers in the funnel and then turning them into loyalty members and app users. And while both will accelerate as we deliver on our platform with better features, better personalization and with one overarching loyalty program, I'm pleased to highlight that we are already seeing strong traction. For example, in Q2 '22 alone, we grew new loyalty members 33% compared to Q2 '19. Similarly, on the app side, new app downloads grew 58% in Q2 '22 versus Q2 '19. Not surprisingly, therefore, our direct business continues to grow with almost 2/3 of our B2C gross bookings in Q2 generated from traffic that came to us directly. And really, this is just the beginning.
With improving products and features, including our price tracking product for flights, which has been a huge engagement driver in the app, and with the rollout of loyalty to all of our customers next year, we will be able to drive much more direct engagement with our customers. That being said, it's also important to remember that lifetime value and travel does not come through the numbers instantly because of the frequency of travel for most consumers. While we have been gaining ground, building up our base of high lifetime value customers and are confident in their ability to drive future velocity, it is not as quick twitch as buying transactions through Google and other meta channels. In the coming quarters, we will continue to update you on these important core drivers of our future success and provide any additional disclosures that may help you measure and understand our progress. For example, starting today, we have added an incremental disclosure of room nights on a booked basis. This disclosure should not only give you a better sense of our trajectory, but should also help you better understand our marketing spend. But to be clear, it is not the complete picture.
Ultimately, what you need to understand is that we are spending against the profit we derive from the market. And while we may currently look less efficient on even a booked room night basis compared to booked gross profit, we are still spending below historical levels. We have done this while allocating more money to channels that drive direct traffic and the kind of high lifetime value consumers we seek. It is early days even for this, but we know we have the best creative in the category and a great plot to acquire app customers and believe strongly in these veins of opportunity. Now lest anyone forget, while we've been making the transition from volume at all costs to the right volume with the right long-term characteristics, we have also been going through a massive technical transformation as we move to a single platform. Transitions like this always entail certain short-term versus long-term trade-offs. The perfect example of which is our migration of Hotels.com onto the Expedia stack. We accelerated this over the last two quarters because the benefits of being able to optimize across our largest two OTA brands on the same stack are massive. But to be clear, migrations generally disrupt customer patterns and can impact conversion in the short term.
And we were no exception. We had to make some choices to prioritize speed over perfection. The really good news is that Hotels.com front-end is now nearly fully migrated, and we've been freeing up engineers who can now turn their attention to optimizing the full stack. This is just one example of the many choices we make every day to trade modest short-term disruption for significant long-term growth. And frankly, we are more excited every day by our progress, the acceleration of the transition and what is still to come. So in summary, we know we are massively improving our technical position. We know we are engaging more customers in our membership programs and our apps, and we know both will drive significant improvement in our business.
And in general, we are willing to give up short-term unprofitable volume for longer-term sustainable growth. Because we know that at any given moment, a large portion of the traveling public is up for grabs, searching around for the best travel options. The industry literally serves billions of searches and customers every year and rarely has engendered true loyalty. Traffic has never been an issue in travel. It's always been a question of retention. We mean to once and for all change that dynamic by providing a product and set of services worthy of customer loyalty. And ultimately, we intend to spend much less of our time and money chasing them over and over again in the wild. Of course, in the meantime, we will look for every opportunity to grab back share where it makes sense and where we are bringing the right kind of traffic at the right value. As fixated as some of you may be on share, I can assure you we are more so. Our competition has been very promotional and highly geared to performance marketing, but we are determined to build our business in a better way. And we fully believe that as we build our base of high lifetime value customers, we will be able to buy the right customers more efficiently and grow revenue and share far more quickly and profitably than we ever have.
Let me end by reverting to our core theme. We are evolving all things in the business to a place of better customer-oriented products and capabilities, better service and understanding of our customers, personalization and ultimately building what we believe will be the best and stickiest product in the industry. And all of these advancements also benefit our B2B business, which continues to grow at an accelerated rate. Just this quarter, we had a variety of wins. We now power Delta Air Lines car rental offering, along with hotel, which we have powered for some time. And we've already seen significant benefit to our partner. We've become the exclusive provider of hotel supply to Avios, the rewards program for all the airlines under the IAG flag. And while we continue to find new ways to add value to classic travel partners, we have also expanded into emerging pools of captive consumers.
To wit, this quarter, we proudly partnered with Bilt, which has the first-ever loyalty program for renters, and we now power their travel portal. And as we continue to power old and new partners, we are also looking for new capabilities to externalize to expand our Open World platform product suite. Late last year, we externalized our TravelAds platform that allows travel suppliers to advertise to our consumers. With this externalization, we are expanding our reach for our travel advertisers and the scope of what we power for our demand partners. This quarter alone, we added TravelAds to multiple template partners. We continue to see enormous potential for travel as a service, and the continued growth of our product lineup will help fuel our ambition to power the whole industry. So in closing, we had a record financial quarter, and we added more loyalty members and app customers than ever before, all while continuing to make huge progress on our technical transformation. We're grateful to our employees, our customers and our partners who are helping us change the industry.
And with that, I'll pass it on to Eric for financials.
