Edit Close. Toggle navigation. Sign Up Log In. Dashboard Logout. Food Things to Do What the Tech? Home News News. We are of course closely monitoring the impact of the Delta variant on the rising COVID case counts around the world as well as some newly imposed travel restrictions, which have led to a modest pullback in our booking trends in the month of July relative to June. The July booking trends were improved from our full Q2 results. While the worries of the Delta variant demonstrates the volatility and uncertainty around the exact timing and shape of the recovery for travel, we remain confident that we will eventually see a strong recovery in travel demand globally.
The sharp return to growth initially in the US and then the European markets that we have witnessed this year shows us clearly that leisure travelers are eager to get back to booking trips on our platform when restrictions are lifted and customers are able to travel.
We expect to be much closer to our revenue levels in Q3 than we were in Q2, driven by the strong booking improvements we have seen in the last few months. As we've done throughout the pandemic, we'll continue to build on the strengths of our core accommodation business and support its long-term growth. The strength of our core business comes from the flywheel effect we get from our two-sided marketplace where we drive benefits to our traveler customers and our supply partners alike.
For our customers, we strive to deliver the best choice of accommodations, offer the most value and provide the easiest booking experience, all backed by excellent customer service and support. By addressing these critical needs of choice, value and ease, we create a superior booking experience and strengthen the relationships with our customers.
I'm pleased to report that at Booking. One of the ways we drive value to our large customer base at Booking. This program provides discounts for Genius members at hundreds of thousands of properties on our platform and also offers value with other benefits like complementary breakfast, free room upgrades and, more recently, discounted airport taxes, just to name a few.
We will continue innovating and adding to the ways we provide value to our Genius customers who have historically had a higher repeat rate and a higher mix of direct bookings when compared to non-Genius customers.
Our app is an important way we deliver an easier booking experience to our customers. Globally, in Q2, Booking. In the second quarter, we again saw a higher mix of our customers booking directly with us than in the comparable period in It is encouraging to see these gains even as we look for opportunities to lean into performance marketing channels where we see attractive ROIs.
We have a long history of effectively managing our performance marketing channels to bring bookers to our platform profitably. We plan to continue with this proven approach in the future.
In addition, we're leveraging our marketing expertise and ROI focus as we test into other channels like social and digital media as well as when we deploy promotional campaigns like our Back to Travel campaign, which we ran first in the US and then launched in the UK and across Europe.
We will continue to expand the diversity of our marketing and customer acquisition channels as we aim to drive incremental traffic to our platform and increased consumer awareness of our brands. While we will remain focused on our efforts to grow and retain our customer base, we believe we will continue to benefit from the secular tailwind of more people booking their trips online instead of offline.
Historically, the accommodation industry has seen a steady increase in online share each year. And looking ahead, we believe this trend will continue for the foreseeable future. In April, McKinsey published a country survey with results showing that across 11 major consumer-facing industries, travel had the greatest percentage of customers that plan to increase their usage of digital channels after the pandemic. On the other side of our marketplace, we are focused on helping our supply partners reach a broader audience of potential customers.
Our scale and global reach allows us to connect to our supply partners with a significant amount of demand around the world demonstrated by the million room nights booked across our platforms in In addition to being a large demand channel for our partners, we add value to our accommodation partners in other ways by providing customer service support for travelers over 40 languages, localized partner service support teams, market intelligence and data, product innovations in response to new traveler trends and fraud liability shipped [Phonetic] and access to alternative payment methods for payment-enabled transactions.
With an alternative accommodation or independent hotel or a large global hotel chain, we strive to be a valuable partner to all types of accommodations on our platform. In the second quarter, we saw the first sequential increase in the number of properties on Booking. As of June 30, we had over 28 million reported listings on Booking. Within alternative accommodations in the US, Booking. While these are positive early developments, we recognize there is much work ahead to improve and grow our alternative accommodations product in the US market.
Our alternative accommodations business in Europe was strong in the quarter and represented an increasing share of our European accommodations business. I want to move to our key strategic priorities of expanding Booking. On our integrated payment platform at Booking. We recently announced the organization of all of our payments initiatives and efforts into a new fintech unit as Booking. First, the fintech unit we focused on enabling bookings core business to run better, faster and more efficiently for both customers and our supply partners.
In addition, we recognize that we have opportunities to better monetize our overall transaction flows. On our Connected Trip vision, I mentioned on our last earnings call that the development of the Connected Trip this year will be focused on enabling travelers to book the major elements of their trip in one place on Booking.
The top priority on this front has been to scale up a robust flight platform on Booking. Since our last earnings call, we have launched our flight product in six new markets and now live in 24 countries.
Air tickets booked through Booking's flight offering have continued to meaningfully exceed our expectations. While it remains early days for Booking's flight product, we are seeing positive data indicating we are getting entirely new customers for booking. In addition, we are seeing an encouraging attach rate of a combination bookings from these new customers. These early data points help demonstrate that our flight offering creates a new funnel to bring incremental customers to the platform and they cross-sell an accommodation to these new customers.
We expect to continue to build on the early success we are seeing with flights at Booking. In conclusion, I'm encouraged by the signs of recovery we are seeing in some parts of the world. And I'm confident that we will eventually see a strong recovery in travel demand globally.
We continue with our most important work to strengthen our company's position and execute against our strategic priorities and our teams are working hard to support the strong summer travel season this year in North America and Europe. As I said before, we are thinking about our business beyond just getting back to levels of demand and we are focused on building a larger and faster growing business that generates more earnings after the full recovery and for the long run.
Thank you, Glenn, and good afternoon. I'll review our operating results for the second quarter and provide some color on trends we've seen so far in the third quarter. To avoid comparison to pandemic impacted periods in , all growth rates will be relative to comparable periods in , unless otherwise indicated. Now, onto our results for the second quarter. On our last earnings call, we discussed the improvement in trends in Q1, which continued into April, driven by strong results in the US and improvements in Europe.
Europe showed the greatest level of recovery in the quarter and actually achieved slight room night growth versus in June. Booking trends in Europe clearly benefited from a notable improvement in vaccination rates as well as loosening travel restrictions. The US was again the strongest performing major country in Q2 and head very strong room night growth versus for the full quarter.
Asia partially offset improvements in other regions with greater room night declines in Q2 than in Q1 due to the increase in COVID outbreaks with related travel restrictions. As Glenn mentioned, we are pleased to see the solid rebound in our customer base at Booking. Our app continues to represent an increased percentage of our mobile bookings.
Our direct channel increased as a percentage of our room nights year-on-year and relative to Q2 Domestic room nights grew in the mid-teens in Q2. Our cancellation rates improved in Q1 and were in line with Q2 levels in the quarter. The percentage of our Q2 bookings made with flexible cancellation policies remain significantly higher than in Q2 The booking window at Booking.
However, the booking window contracted less than it did in the prior three quarters. The mix of alternative accommodation room nights on Booking. In June, our alternative accommodation room night growth was flat versus June , the first time we've reached levels for this segment since the start of COVID. The sequential improvement from Q1 to Q2 was due primarily to the overall improvements in room night growth in Europe in the quarter. As we noted last quarter, Europe is where we have our highest mix of alternative accommodations.
Within Europe, our mix of alternative accommodation remained about the same as Q1 and this represents continued increase from to and into The increase in North America were driven by high level of demand for beach-oriented leisure destinations and in Europe were driven by a higher mix of summer bookings, which have higher ADRs. We are encouraged to see another record-breaking quarter for air tickets booked through our flights business, which is a key component of our multi-products connected trip strategy.
Revenue in the quarter declined meaningfully more than gross bookings due to bookings made in the quarter are expected to check in the future quarters, at which point the revenue will be recognized. As you recall, we discussed the impact of timing on take rates in Q1, Q2 and for the full year during our last call. We continue to expect these timing factors to impact full year take rates, although the second half of the year will be less impacted than the first half of the year.
Removing the impact of timing, our take rates on accommodation bookings in Q2 were stable versus Q2 Marketing expenses declined more than gross bookings due to higher ROIs in the pay channels and the increase in our direct mix. Sales and other expenses in Q2 were significantly higher than they were in Q1 on a dollar basis. Sales and other expenses has a percentage of revenue in Q2 with better than our expectations due to lower than expected bad debts and customer service related expenses.
Excluding this repayments, personnel expenses in Q2 would have been in line with our expectations. Now onto our cash and liquidity position. We'll continue to focus on maintaining a strong liquidity position, given the continued uncertainty created by the COVID pandemic.
While return of capital to shareholders will be an important component of our value creation strategy in the future, we remain on pause and we'll wait to reinitiate until we believe each of our three major regions is beyond the risk of a significant reversal in trends due to COVID.
We're not there yet, given the current trends we're seeing in Asia and with our current close watch on how things are developing in Europe. Now onto our thoughts for third quarter. With the recent rising case counts driven by the Delta variant in many countries, some governments around the world have responded with new travel and leisure restrictions as well as some stricter vaccination and testing requirements for tourists.
However, there are indications that authorization rates are lagging the recent increase in case counts, particularly in countries with high vaccination rates, which could be an important factor in how governments plan their responses to the recent increase in COVID cases.
With closely watching the UK where the vaccination rate is high and the government moved forward with relaxing travel restriction despite rising case counts in the country, which are among the highest in Europe. We're encouraged by the recent declining new case counts and by the continued low level of hospitalizations in the UK compared with other outbreaks. We saw booking trends improved in the UK in July leading up to an after travel restrictions lifted on July Looking within Europe, we saw reductions in room nights in July across several of our key countries including Germany, France and Italy.
But despite the recent pullback in these countries at the end of July, we had a high amount of gross bookings on the books for the remaining summer period in Europe than we did at this same point in time in Outside of Europe, the US continued to have a very strong room night growth in July, although modestly below Q2 levels, while Asia and rest of world room night declines were about the same in July as they were in June.
Asia continues to be the least recovered region in July and continues to be down significantly from levels. The changing growth rates from June to July were similar for domestic and international room nights, with domestic remaining positive and international room nights remaining down significantly versus Turning to the income statement, we expect Q3 gross bookings to decline several points less than room nights, driven by expected improvements in reported ADRs and by flight bookings.
We expect that the Q3 revenue decline will significantly improve from Q2, reflecting the strong improvement in bookings in the last few months. I just mentioned, we have more gross bookings for summer than this time in for Europe, the same is also true for North America. We expect our Q3 revenue as a percentage of gross bookings will increase meaningfully from Q2 due to the high concentration of check-ins expected in the third quarter and will be about in line with Q3, As a reminder, the exact relationship between revenue gross bookings in Q3 will be impacted by how our bookings trend in August and September.
We expect marketing expenses in Q3 will decline several points less than gross bookings as we expect to invest in capturing demand and increasing awareness during the peak travel season and ahead of the continued global recovery of travel demand.
We expect sales and other expenses in Q3 to be up significantly versus Q2 on a dollar basis due to higher gross booking volumes in the third quarter as well as an increase in the mix of gross bookings processed on a merchant basis. However, we expect sales and other as a change of revenue in Q3 will be a bit lower than in future.
We expect our more fixed expense categories in Q3 in aggregates to be about in line with Q2 on a dollar basis. In conclusion, we are pleased with our better-than-expected results in Q2, which benefited from a recovery in travel demand and also reflects the strong fundamentals of our business and the good execution by our teams.
We remain confident in the eventual full recovery of travel demand globally and we're looking forward to a strong summer travel season this year in North America and Europe.
We will continue to responsibly invest in our business to ensure we are well positioned for the full recovery of travel and for building a larger and faster growing business that generates more earnings than prior to the pandemic.
We will now take your questions. Your line is open. Thanks a lot. Could you talk more about the key drivers of your competitive share gains that looks like you're seeing in the US and would you see a growth in US over the past few months has been driven more by a traditional hotel or more by alternative accommodation? So, Kevin, why don't I take a little of this.
I'll let David add anything that he thinks, I didn't put in that I should have said. So we are very pleased with the strong results that we're seeing in the US. And that is a result of a lot of hard work by our team. There's no silver bullet, there is no sense of this as the magic key to unlock extra demand in the US. It's just a lot of very good work. Now in terms of alternative accommodations, talked a little bit about how we're pleased to getting more inventory there. We're pleased with gaining some share with some of our professional managers, that's going well.
But overall, it's everything that we do to improve our business, provide a better service to both sides of that marketplace, both the customers, giving a great offer and working with all of our suppliers from the biggest international chains to the small alternative accommodation, everything in between to make sure we're providing them with the demand they need to make their business successful.
David I. Oh, Glenn, I think you summed it well. I just -- in response to your last part of the question, Kevin, as we said, our business in the US is a more heavily mixed to hotels and alternative than our global average. So therefore the growth rate has to be driven by both. We don't have levels of growth that we're seeing without seeing strong growth in the hotel business. Thanks for taking the questions. I have few on alternative accommodation. So I believe you mentioned you're gaining share on the managed properties globally.
So, can you provide some color on so what drove the share gain, whether it was just mostly geo-based or specific actions that you guys made on year end? I'll go a little backwards on that. So we don't disclose the breakdown of all the different categories of our alternative accommodations, how many are professionally managed, how many are single property owners and everything in between.
I have said in the past and a I'll repeat it that one of the areas that we do need to add more to is the single property owners. We know this is an area we need to focus on. In regard to your other questions about how we're doing adding share, I think we spoke a little bit about that when I did the prepared remarks and what I just said now is a lot of this is just working hard with people or the property owners or the managers, people who have inventory, they want to get it filled.
Thank you, sir. Your line is now open. Thank you for taking my questions. Great to see Europe recovering. What areas still need to come back strong? I imagine it's Asia, but your thoughts on that? And David, maybe you could talk about core business margins versus '19? Let's ignore payments and Connected Trip for now, but how are you thinking of the puts and takes on the core business versus '19?
Hi, Justin. So I don't think it's a very hard answer really what we need. What we need is obviously more of a recovery against this pandemic, because that's clearly what's driving the problem in many industries, ours particularly. For us, we've talked about this a few times. We talked about our business has done well with international, and international generally has been hard hit, albeit, we are seeing some better things, but that the long haul is still a problem.
Yes, we're seeing some numbers coming up in Asia. I love it. The fact that people are getting more vaccinated in Asia, that's great. The fact that vaccines are being distributed more broadly and getting around, that's great. The fact that the pharmaceutical companies are coming out with new ways to combat against this terrible virus with pills now that can help people who have caught it, but end up being hopefully healthier quicker.
All good things. But what we need really is for everyone who can get a vaccine to please go out and get that vaccine if you are medically able to and you're capable of getting it, please get it. That will help hasten the recovery for not only the travel industry, but the entire world, and that's what we hope will happen. Obviously, we're doing everything we can, so we're prepared. When that day comes, which it will, we can't say when, but we know it will come and we're preparing by do all the things that Dave and I have been talking about.
Preparing with our partners and getting our marketing prepared and doing all the steps that you know we've been doing to make sure that when travel comes back to above , we're getting the share we want to be getting.
Yeah, sure. No, I won't add to yours, Glenn, I think it was great. Justin, we've actually been [Indecipherable] relatively quick on the puts and takes in the core accommodation business.
Our underlying take rates have been solid, and obviously, the reported take rates are a function of timing. So that continues to go well for us. As we get back to levels, there will be some inflationary pressure on the personnel line. Everybody knows there is a walk of tech talent out there and we've had two, three years with that merit increases and other expenses and other increases in our cost base.
Of course, we did take expenses out, but there are variable expenses. So they will come back with some efficiency over time, but there will be some pressure on the personnel line. But there are other things that are in the model that we can use to offset that pressure. We can get extra economies of scale as the business grows beyond levels on both the fixed costs and on the variable cost side as well.
There are opportunities in our direct mix, which of course is very important. And of course, the key elements of this will be what happens to our overall ROIs. On the front marketing side where we saw some increases in the first half of the year.
We saw some small compression in the second half of this year. And those markets are very variable and very dynamic, and we're pleased to how we're doing in those markets. The last thing I want to leave you with on that topic is that within our core business, there's always a trade-off between growth market share and profitability.
So to the extent we see opportunities we're leading in, we want to try and drive market share increases where we think that we can. That will pressure the business in the short-term as we lean into making that investments. And also the investment in marketing and other areas will basically be a leading indicator relative to revenue. So there will -- and we do believe that there are opportunities for us to gain share in accommodations through this recovery and beyond.
So that would be an additional factor in the mix and how we're thinking about the long-term business margins in accommodations. Thanks so much. Hoping to dig into ad spend trends a little bit. So spend is going up a little. How much of that is booking getting more aggressive as demand picks up versus a more competitive overall ad environment? And then compared to has the distribution in brand and performance changed meaningfully? And lastly, can you give us an update on the kind of merchandising and promotion, some of the merchandising and promotion tests that you've done over the past couple of quarters?
So David, why don't you take the first two about the ad competitiveness and I think some brand question and I will talk a little bit about some of the merchandising. Thank you, Glenn. Let's do that. Actually our direct mix was slightly better than we expected in Q3. And that's why there was less of a compression in the difference between gross bookings and marketing than we actually expected in Q3.
So that's positive. It was really something that we -- I'd say that was more what we did because we expect that to be the outcome. Of course, these markets are dynamic. And as recovery continues, more and more players will come back into the marketplace. But based on what happened in Q3 was very much in line with what we told you a quarter ago would happen.
The mix in between brands and the performance have not materially changed. We are looking to move up -- to move the brand spend up a little bit over time, but brand has been very much shut down in , it's not coming back on in So we're not in a very different position than where we were in , but we do see the opportunity to continue to trend a little bit more toward brands, some of which might go at the mid-funnel market opportunities that Glenn talked about.
So Kevin, obviously, merchandising is very important. The reason why we built out and are continuing to build out our payments platform at Booking.
And what's really important is not doing just out of our own pocket, but working with our partners, coming up with the right time to the right consumer with the right offer and helping them. Our supply partners also provide some of that, let's say, added value. So for example, we may do flash sales, you've seen some, we've gotten some, we actually booked some of the them, that's an example.
One of the things, for example, when somebody is getting an accommodation and we are able to offer them either a lower cost or even free sometimes ride from the airport to the hotel. And they're all different variations that we can do with the different verticals and coming up with the best combination, trying to do as much as we can with our suppliers' money, but sometimes using our own too to come up what really is an attractive offer. So the consumer knows that when they come to our site, they're getting the best value because value really is one of the key strategic objectives for us always to providing that.
This is Zach on for Deepak. Thanks for taking the questions. First on pent-up demand, obviously, it's been a nice tailwind to your business over just general travel demand over the last few quarters.
But just curious how you're thinking about whether there's another leg to run on the level of pent-up demand? Asia is still kind of depressed, as you noted, and cross-border restrictions are kind of easing.
So as we look into next year, how are you guys thinking about the level of pent-up demand? And then second, when we kind of dig a little further into the current trends, is there any kind of reversal in terms of urban versus suburban or shorter versus longer term speeds you can call out? Zach, so just to make sure I understood your first part of your question. You're just ask a little bit about how we're going to get the demand that's coming in the future.
Do I have that correct? Just I guess like understanding whether level of pent-up demand that you guys kind of expecting as we move into next year given there is still current travel restrictions, especially on the cross-border side, Asia is still -- remains depressed.
So as we look into next year, should we see another leg to kind of boost your Got it. I got it. Well, I'll answer the first half, and I'll let David say whatever what we feel we can disclose regarding any of the trends regarding different parts of the business.
So we absolutely know there is huge pent-up demand because anytime any government lets go a restriction, we see immediate pent-up demand. So for example, the announcement, the November is opening for people to come to the U.
So we know it's there, absolutely. Now how much, we don't have a way to quantify it. But we do know, if you look at, particularly in the U. And one of things people have not been able to do as much they wanted to is go travel. So I believe there is a significant amount of demand there just waiting to come out. But of course, it has to -- we have to have these restrictions for the long haul international travel open up. And we also -- we know that it's important that we always provide the best value so that when they do travel, they come to us.
Yeah, Zach. Q3 saw strong recovery across the geographies that we talked about. So I'd say there's still a bias toward more leisure outdoor-oriented activity, particularly beach-oriented properties did very well in the summer months in the Northern Hemisphere. But we do see some recovery into the cities as well, and I think this -- we all know that anecdotally, if you want to book a hotel room night in a city, it's becoming increasingly hard.
So, we are seeing recovery across the board, although still more entry toward the outdoor beach-oriented leisure locations. Three quick ones, please.
Any impact at all from IDFA? Secondly, those million mobile app MAUs, do you have enough history to know if those are -- they act materially different? Are they more or less profitable? Are they more or less loyal than -- more or less likely to convert than the users that you had coming at you from other platforms? And then third, please. But it all sounds like that's a really good product addition.
So I guess, the action question is, why aren't -- how long will it take you to roll it out fully across all markets given how positive it's been so far? Thanks, Mark. And I'm not sure -- I'll let him be as free if he wants to be or not about what we see in terms of profitability, etc.
So you're absolutely right about the air business. Very exciting for us, of course, and we worked on it. And it's interesting because I happen to have noticed that in the first quarter call in just as things started going very bad for the whole world, we were talking about the just starting out in the air business at Booking. I was looking forward to hopefully doing that for And of course that didn't quite happen exactly we wanted.
Yes, we're 27 countries, of course, we want to get to every single country to anybody we currently deal with. We want to be able to provide them with an air ticket, but it takes time. It's not something you just flip a switch. You have to actually go through regulations to get licensing and all sorts of things. So I am pleased to where we are with that. I also want to say though, it's still so early. We're not doing big marketing yet, real big marketing.
There are a lot of opportunities to get a much higher number of people come into this air product. And again, that's something we have not optimized yet. There is a lot of opportunity there to optimize that and get an even higher attach rate. And that's part of the overall vision of being able to bring new customers in from different verticals, different ways than we've done in the past, which we primarily pay for performance marketing and be able to bring lot more customer.
And as we talked a little bit earlier in previous answer about being able to provide them with a lot more value. And your first question about IDFA, look, these privacy-related changes, they only impacts a small part of our marketing and it's obviously not unique to our company.
We know that we're very confident we can manage through this. And as we know -- as you know, most of our marketing primarily it's a paid marketing channels like PPC and Meta and that's not going to be directly impacted by any of these kinds of changes. Our focus is always the first-party data. We want to leverage the data in the marketing.
And any of these changes to privacy like the IDFA thing this does not really impact us, and I think you would know. We chose not to show us the app tracking up back in April of '21 this year, April, while the IDFA specifically decided not to do that, and of course, you've seen our results since then.
So I really don't think this is a big deal for us. I'm very proud of the team in our whole marketing thing. They will be able to work and come up with, I would say, privacy-oriented ways to continue to be able to market with good tracking in our lives.
Yeah, I got number two. And Mark, what I can tell you is we kind of watch very carefully how different types of direct user response. And obviously, the more direct we can get, the better. And the more those direct customers returned, and there are three types of direct customers. The direct customers using the app, the direct customers that come to us on the mobile web, the direct customers who comes to us on desktop.
And perhaps not too surprisingly, the direct customers on the app measured by the metric I just talked about, are almost loyal cohort of direct customers. So it's a good thing. We will get more of that. And a lot of our marketing that we do these days is oriented. I'd getting people to download and use the app because it's sticky. Thanks so much for taking the question.
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