Glenn D. Fogel
Chief Executive Officer and Director at Booking
Thank you, and welcome to Booking Holdings Third Quarter Conference Call.
I'm joined this afternoon by our CFO, Ewout Steenbergenn.
I am pleased to report an improvement in top line trends in the third quarter, particularly in Europe that resulted in room nights, gross bookings and revenue all exceeding the high end of our prior expectations. The revenue outperformance combined with disciplined marketing spend and lower-than-expected fixed OpEx growth helped drive adjusted EBITDA that was 9% above the high end of our prior guidance range. We continue to be encouraged by the strength of our underlying business, the health of the travel industry and the attractiveness of our products.
In the third quarter, our travelers booked just under 300 million room nights across our platforms, an increase of 8% year-over-year. Revenue of $8 billion grew 9% year-over-year and adjusted EBITDA of $3.7 billion increased 12% year-over-year. Finally, adjusted earnings per share grew 16% year-over-year, helped by our strong capital return program, which reduced our average share count by 6% year-over-year. From a regional perspective, we observed an improvement in our room night growth in Europe in the third quarter, which was the primary driver of the sequential increase in our global room night growth.
In Asia, we continue to perform well with another quarter of double-digit growth and we remain optimistic in our outlook for this region, which I'll discuss in more detail later on the call. In the U.S., we see relatively stable levels of growth in our business so far this year, which we think continues to outpace the broader U.S. accommodation industry. As we look ahead to the fourth quarter, we expect to continue to see healthy levels of room night growth as demand for travel remains resilient. Ewout will provide further details on our third quarter results and our thoughts about the fourth quarter.
I remain confident in the attractive growth profile of the travel industry, our competitive position and our long-term growth and earnings model. We continue to see progress across several important initiatives, which include growing alternative accommodations, advancing our connected trip vision, continuing to develop our AI capabilities and continuing our progress in Asia. These initiatives contribute to our ongoing effort to deliver a better planning, booking and travel experience for our travelers while also benefiting our supplier partners. We remain focused on being a trusted and valuable partner to all of the accommodation properties on our platforms by delivering incremental travel demand and developing products and features to help support these businesses, the majority of which are small independents.
For alternative combination of Booking.com, we continue to see more properties connect to our platform with listings at the end of Q3 reaching $7.9 million, up about 10% from last year. The growing number of listings provide more combination choices for our travelers, which we believe contributed to strong alternative accommodations room night growth of 14% in Q3. We believe that we have a differentiated offering because we make all property types, hotels and alternative accommodations available on our Booking.com platform. We see benefits to this approach. For example, our data shows that a portion of our bookers landing on our platform with an interest in a hotel will instead end up booking an alternative accommodation and vice-versa.
We believe that this shows, in many cases, travelers are open to comparing hotel and alternative accommodation options when determining the best place to stay for their trip. Our objective is to make sure we continue to provide great choices for our travelers across all property types. On the connected trip, we continue to take steps towards our long-term vision to make the planning, booking and travel experience easier, more personal and more enjoyable while delivering better value to our travelers and supplier partners.
We believe the connected trip is strengthened by our growing merchant capabilities, which help bring the different elements of travel together in a more seamless booking experience. In addition, our Genius loyalty program at Booking.com has been expanding outside of accommodations and into our other travel verticals, which helps to deliver more value to our travelers as they book more components of their trips with us and to our partners as they receive incremental bookings. We continue to see growth in Connected Trip transactions, which means a trip that includes booking more than one travel vertical. These connected transactions increased by over 40% year-over-year in the third quarter and represented a high-single-digit percentage of Booking.com's total transactions.
We believe by making it easier to plan and book multiple elements of a trip on our platform, we are providing a better overall booking experience for our travelers and we have seen in past experiments that customers who choose to book a connected trip book more frequently with us and have a higher likelihood of booking directly with us in the future.
Turning to flights. They're an important component for many of the connected trips that our travelers are booking. In the third quarter, air tickets booked on our platforms increased 39% year-over-year, which was an acceleration from Q2 growth of 28% and was driven primarily by the growth of Booking.com flight offering, but we also benefited from strong growth in Agoda's flight business. We continue to see a healthy number of new customers coming to Booking.com through the flight vertical and are encouraged by the number of these customers and returning customers that also see the value of the other services we offer on our platform.
To achieve the easier and more personalized experience of the Connected Trip, we've always intended for AI technology to be at the center of this vision. At each of our brands, our teams of AI experts continue to draw on their valuable experience as they incorporate AI technology into our platforms. We believe that our proprietary data, along with our resources and scale, position us well to build compelling and personalized AI-powered offerings for our travelers and partners. This technology will also enable us to drive further efficiency in our own operations.
We have significant activity in this area across the company, and I'll briefly discuss just a few of the encouraging efforts that are underway across our brands. Last summer, Booking.com launched its AI trip planner. And since the launch, Booking.com has gained valuable insights from its millions of interactions with bookers as well as from the use of the Gen AI technology alongside our existing machine-learning models. The learnings from the AI trip planner are leading to new applications of Gen AI technology, including a recent launch of our smart filter, which makes over 200 potential search filters findable through a free text interface.
These innovations also extend to the partner-facing side of the business at Booking.com. Gen AI is being leveraged to help properties write responses to traveler queries, and this tool has led to an increase in response rates to traveler messengers. This improves the experience for our travelers and partners. Booking.com is also testing a Gen AI-powered partner Chatbot to help with questions during the onboarding process and accelerate sign-ups, starting with a focus on alternative accommodation properties. Booking.com is also working to incorporate Gen AI into its customer service function to drive increased efficiency and a better experience for travelers.
Initial testing shows meaningful improvements in topic detection in Booking.com's customer help center as well as customer service agent case summarization. Booking.com is still early in this journey and sees meaningful opportunities in improving customer service and driving greater efficiency by leveraging AI in the future.
At Priceline, travelers have now had over 3 million interactions with its generative AI travel assistant called Penny. This was launched last summer. While Penny was originally positioned at the end of the funnel on the checkout page, it's now available across the full booking experience and can address many types of traveler questions, including destination discovery, hotel search and trip support. In October, Priceline launched Penny Voice, which enables Penny to engage in verbal conversations with travelers and to assist them with planning trips, searching for hotels and servicing bookings.
As Priceline continues to enhance this offering, we envision that Penny will be able to anticipate needs based on preferences and past interaction, and then respond in a real-time voice. While there has been great progress in the development of Penny over the last year, Priceline is focused on further enhancing Penny over time by leveraging their valuable learnings so far. In Agoda, over 120 use cases for GenAI have been implemented across customer service, software development, content generation, product, finance and HR. Agoda is highly focused on leveraging Gen AI to automate product development using both externally and internally developed tools. This is leading to an increase in the share of code written by AI as well as measurable improvements in productivity per developer and development time.
In March, Kayak launched its Ask Kayak travel Planning tool, which improves and personalizes the search experience by allowing travelers to use free-form text entries to search and refine the results. At the same time, Kayak, also launched PriceCheck, a price comparison tool that allows travelers to upload a screenshot of a flight intinerary, which Kayak can then check against many different sites in order to determine if there is a better price available for the traveler.
At OpenTable, an AI voice bot has been recently integrated into its offering to help participating restaurants answer their phones. Diners can call these restaurants and perform tasks like making a reservation, altering their reservation, asking questions and noting dietary restrictions, which are then automatically updated into OpenTable software. OpenTable has also partnered with Salesforce Agent Force platform. This helps its customer service agents better serve its restaurants and diners. This platform is now handling restaurant web queries, which is helping agents focus on delivering great service in more complex situations.
It's exciting to see the work happening across our company to integrate Gen AI into our platforms and the knowledge hearing that is ongoing between all of our brands. We know we are still in the very early days of Gen AI and we have much more to learn about consumers, how they ultimately want to interact with this new technology, but I remain confident in our company's ability to benefit from AI development and to improve our products for our customers given our many years of experience in AI, our travel-related data, connections to our supply partners and our human and financial capital.
Over time, as we further incorporate this technology, we expect to see benefits in traveler and partner acquisition, retention and satisfaction. In addition, we expect it to improve operational efficiency, which will contribute to a deceleration of our fixed expense growth in the future.
Finally, as I mentioned at the start of the call, we continue to be optimistic about our long-term outlook for Asia. We see Asia as strategically important due to its size, growth potential and our positioning in the region. We estimate that the travel industry growth in Asia will be in the high-single-digits over the next five years, which is the highest market growth rate of our major regions. Our ambition is to continue to grow faster than the overall travel industry in Asia as we have done through the pandemic recovery. Over the last 12 months, about 24% of our global room nights were booked by bookers in the Asia region, which is a slightly higher mix than it was prior to the pandemic. Our business in Asia is diversified across the countries in the region with no single country representing more than a low-single-digit percentage of our global room nights. The success we have seen in Asia and our solid positioning in the region has been driven by operating two complementary brands, Agoda and Booking.com. Our approach is to utilize both of these brands across the region with an eye on profitable growth for Booking Holdings over the long run.
In conclusion, I'm encouraged by our strong third quarter results and the continued resilience of leisure travel demand. Our teams continue to execute well against our key strategic priorities, which helps position our business well for the long term. We remain confident in the long-term growth of travel and in the many opportunities ahead for our company.
I will now turn the call over to our CFO, Ewout Steenbergen.