Booking Holdings Inc. (BKNG) CEO Glenn Fogel Presents at Bank of America Securities 2021 (Transcript)

Mar. 10, 2021 1:54 PM ETBooking Holdings Inc. (BKNG)
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Booking Holdings Inc. (NASDAQ:BKNG) Bank of America Securities 2021 March 10, 2021 8:30 AM ET

Company Participants

Glenn Fogel - President & Chief Executive Officer

David Goulden - Chief Financial Officer

Conference Call Participants

Justin Post - Bank of America

Justin Post

Great. Good morning, everyone, and thank you so much for joining us this morning at the BofA Consumer Conference. Very pleased to have Glenn Fogel and David Goulden here today. We'll do a Q&A on many of the issues that we're hearing from investors. So, Glenn, David, thank you so much for joining us today.

Glenn Fogel

Well, thanks for having us.

David Goulden

Yes. Great to be here Justin.

Question-and-Answer Session

Q - Justin Post

Great. So, why don't we start off in our virtual conference? It would be great next year when we're sitting together. And let's think about that. And the number one question I get is how should we think about a realistic timeline for a travel recovery to 2019 levels? Why don't we just start with that broad picture?

Glenn Fogel

Well, it's interesting because that's the same question I get all the time too. As you know we've consistently said that we're recovering. Going back -- get back to 2019 levels we've always been saying it was going to take years, not quarters. I started saying that a year ago. So, at least we're a year done there.

Look, we continue to believe that we're on this kind of timeline. It's going to take time to get back to 2019. We're always looking at all the factors, how fast are these vaccines rolling out? How fast the government is going to lift travel restrictions? What kind of support the governments are going to come in? How quickly is this virus being spread and mutating?

The one thing I add to -- I am very confident the travel is going to recover and I absolutely, absolutely confident that there is pent-up demand there. What we just need is we need these vaccines to get rolled out. We need the virus to be repressed, so we need government to start lifting. We can't find that. It is very hard to call precise timing in all these variables that we don't control.

Justin Post

Got it. And is there any reason to believe or anything you've seen of permanent issues for travel, whether you see airline capacity or hotels struggling financially? Any permanent changes to the travel industry or concerns?

Glenn Fogel

Well, the two things you mentioned are not -- would not be permanent. Government -- airlines they've got to bring the planes back, so that's not a permanent type of thing. Hotels either. The one thing that I do think is going to be very interesting is when you look in the corporate managed travel area the business travel. And I think that one it's going to be a lower share of the total business -- the total travel business for a long time and possibly forever a lower share travel.

But the other thing is what does that mean? It means that the -- from the bus those incredibly expensive airfares that were first-class and business class that were being done by business people are going to be less so and that's going to change also the economics for the airlines. And then the hotels that were not dependent perhaps but certainly had a larger portion of their profits came from the higher ADRs and the 4-star and 5-star hotels that's also going to be changing and what's going to happen there.

So, I think both airlines and hotels we're looking at -- what am I going to do they're going to be saying were demand trend. Well, we have the demand. We are the largest platform for demand and travel. And so well I think we're going to have a more cooperative way just because we are more valuable to that part of the business.

Justin Post

Got it. One question, maybe a quick follow-up maybe for David. What have you told people about your exposure to business travel? I know I get that question and I think you brought it up before, but David just a quick exposure to business travel?

David Goulden

Yes, Justin. So, first of all, understand it is a self-report measured by customers. So, when they log on our platform, we ask if they're traveling for business or for leisure. So, it's not kind of a firm data point.

Last time we disclosed that it was a few years back. It was less than one-fifth of our business was business leisure travel. But also important to understand the type of business travel that it typically is. It's typically the unmanaged business travel, very different from the kind of corporate travel and platforms. It's smaller companies. It's individual maybe doing a combination of business and leisure and it's actually held up relatively well in this timeframe.

Justin Post

Got it. One more maybe on travel recovery. Glenn what did you see in China? I know they had got through the virus quicker. So, maybe some -- any implications from there and anything you're seeing in Israel so far?

Glenn Fogel

Well, we haven't talked a lot about China. And of course China like everywhere else has a lot of restrictions for international. We've never been really big any really huge in the domestic travel market there. But Israeli stuff that's happening is very interesting because Israel as we all know has been leading the world in terms of getting their population vaccinated. And we saw that when Israel, the government started easing the restriction in early February, we saw domestic bookings swing to us solid. It's a good double-digit growth versus 2019, which just goes back to what I said earlier about there is pent-up demand. We know there's pent-up demand.

In the UK, we saw something happen there. When Boris Johnson put out the announcement about what the schedule be to lift restrictions, we saw bump up in our bookings. We see in Germany even where people are looking at summer gross --summer bookings, they want to start doing it. UK, Germany you look at some of the numbers again in 2019, it's down the summer gross bookings what maybe 25% for 2019. That's relatively good compared to what you're seeing on the parts of the world.

So I think the whole idea that we know that when these vaccines get distributed widely and when the government starts lifting the restrictions, I think that's when we start feeling better about where we're going.

Justin Post

Got it. Last year, obviously, you mentioned in some of your competitors, a pickup in alternative accommodations and also people taking longer stays obviously away from their office able to stay longer. Does that change your business strategy, or are those more short-term trends? How are you thinking about how the world might have changed since COVID?

Glenn Fogel

Yes. So I think we all saw people interested in the home or alternative combinations more than they did in the past. And certainly like you were talking about we saw some number -- I'll let David talk about in a couple of segments, some of the things we've seen in terms of the numbers and such.

But in terms of it going forward, I believe what's happening is people who maybe never thought about using alternative accommodation at home, now they've tried it last summer or in the fall or surely they're looking at it and now it's in their consideration set. So they're always going to be looking at this going forward. Now what does that mean? What that means is more competition for hotels. Hotels, we're always competing against other hotels. And over time there had increase in people going more and more looking at the alternative combinations.

But the pandemic created jubilant step functional change in the demand for the alternative combinations. And that doesn't go back. That's status. So again, this again this is something that helps us as a distributor as a source of demand for our hotels. Now hotels have more issues how do we get customers. Again, it helps us. And one of the great thing about us is we have hotels. We have alternative combination, homes and such.

We're in a very good position for customers to come to us and they're trying find what to get, what do they want and they can choose right from there. So I think we're well positioned. And Dave, can you talk a little bit about some of the numbers we've seen things change in a little bit.

David Goulden

Sure. Thanks, Glen. So if we think about alternative accommodations, if you just step back and think about the entire year, we did see a relatively modest increase in the mix of a percentage of our total business. But the pattern was a little different during the year. So early in the pandemic, we saw a larger mix to our alternative space. And that interest may be more temporary responsive to social distancing.

As we move through the summer last year, we think people got more comfortable with staying in the hotels. And as a result that mix shift can moderated compared to what we saw in the second quarter. And in the fourth quarter, just to remind you, we actually saw a slight decline in mix in the fourth quarter, which is driven by the higher geographic weighting to Europe where that's our strongest alternative accommodation business. Within Europe, the alternative collections business continued to increase in mix in the fourth quarter.

Justin Post

Got it. One more mix question. Obviously, a shift towards domestic travel versus international. And we're seeing that clear in our airline data and other data. Is that mix change permanent? And is it good or bad booking or neutral? How would you think about that?

Glenn Fogel

Dave, why don't you take that and tell where our numbers are on that?

David Goulden

Yes. We have seen a mix shift. We've seen the mix of our domestic travel from being less than half in 2019 to being actually about 85% in Q4 2020. So obviously in the current environment it's very difficult. And in some cases it's not possible to travel internationally. So this shift in consumer behavior isn't surprising. Now again, we are well positioned because we have a wide range of properties and allow customers to book on whatever a type of ship that they want to extend.

From an economic point of view prior to pandemic, international trips were typically higher value with longer length of stay and higher ADR relative to domestic travel. We do expect international travel will come back. But the domestic travel will be what leads the recovery and we'll be ready to capture it as it comes back both on the domestic and international side.

Justin Post

Got it. And it doesn't really change profitability one way or the other? Is that fair?

David Goulden

Well I think longer value stays in higher ADRs are basically economic better for us, right? So it's a profitability mix are weighted also towards international travel.

Justin Post

Got it. Okay. Good. And one of the things you mentioned on the call was kind of a focus on US share. And obviously your competitor is doing a big reset on business practices and also cost-cutting and doing some repositioning. Any change to your marketing message in the US, or anything -- obviously you have a competitive issue, so you don't want to give away the playbook. But anything we should know about the US market and strategy changes there?

Glenn Fogel

Well yes we don't want to give away playbooks. But from the beginning of this crisis when we did our first earnings call we talked about what's the situation? What are we going to do? The thing that we said is, the first thing we had to do is stabilize the business. And then we said, we're going to then optimize the business because we knew there's going to be a decrease in the travel demand.

And then we said, we're going to position this to capture the travel demand when it returns. And so I feel really good about how we have positioned the company right now. I mean we are absolutely getting ourselves set up for that demand for when it comes back. And I can talk about things like marketing, like getting ready, how are we going to come out with the right messages -- the right time to be able to capture that demand as it back.

And so we always -- region-by-region we're always taking account what's safe? What's not safe? What are the restrictions? What are not restrictions? And we can tell by searches, when things starting to pick up a little bit not a lot, but a little bit of a sense of aha this area looks like it's going to start accelerating and start doing things there. So, I do believe that we've got ourselves set up the way we want to set ourselves in terms of the actual resetting our cost. I said Dave why don't you talk a little bit about -- because I think we talked a little bit about that in terms of our cost reductions where we are.

David Goulden

Yes. Cost reduction part of that optimized phase that Glenn talked about. And we as you know took some restructuring actions focused more on the volume-related functions of the business to try and right-size them for the demand environment we think we're going to see in 2021.

And that resulted in about $370 million of run rate cost savings certainly more of an alignment with our headcount with demand a big reset on costs. But -- and of course prior to the pandemic we came in I think operating fairly lean and efficiently out as a business with industry-leading margins. In the future, we will look for further opportunity to be more efficient with our costs.

Justin Post

Got it. Maybe we'll cover costs a little bit more. I think I had a lot of questions on that in the questions, but back to strategy. Two areas that I think you've probably made a lot of progress, but hard to see in Bookings or your financials last year were payments and connected trip. So Glenn, let's think about connected trip. Can you talk about some things that happened last year that make you feel like you're making progress there? And then -- and secondly what is your vision? And what does the connected trip mean for Booking?

Glenn Fogel

Right. And we talk about this a bunch about the connected trip and that's a long-term vision. It's a long-term journey to come to what we want. But just everybody understand this. This vision is this is a multi-product offering. When we bring together the combinations of flight -- the ground transportation attractive we connect it all using a very frictionless seamless payment network and we use our -- all the artificial intelligence, all the machine learning, all that so we can personalize, we can use all the intelligence to provide a truly superior experience, a frictionless experience for bookers.

So all the way from the beginning when they first start thinking about doing a trip, all the way to actually steering the trip and being with them in their trip so offering up things like attractions and things like that. And we're doing this because we think it's going to help drive loyalty. We think it's going to drive frequency. It's going to enhance the most important part of our business accommodation because people come to us for all of this and we get the benefit from all the more accommodation business.

We're going to get it because we're going to be merchandising opportunities for our suppliers, who can come in and put in different types of offers that can be put in very much in the user group type way keeping it away from your public pricing all sorts of things that provides value to both the customer side and the supplier side. And I really believe that this is the way to go because I'm a traveler, I travel, it's still frustrating. It's still annoying how hard it can be. And anything we can do to make it easier is something that I think will be a superior competitive advantage against our competitors.

Justin Post

Got it. Is the financial benefit I don't know David, could you maybe take this. Is the financial benefit more direct traffic, less pay traffic, or is there actually a business around attractions that you find interesting?

David Goulden

Well, both, the connected trip all the things that Glenn talked about will help us drive loyalty and repeat business. But also the verticals that we move into in the connected ship whether they be air attractions, et cetera, are also businesses that themselves will kind of – will produce revenues and profitability and profit dollars and drive the overall growth of the business. But we also think, it's a virtuous circle, because the more value we provide to customers through these extra verticals that will also help drive growth back in the core accommodations business, which is to real of driver for the company. So it's very complementary. But absolutely, we believe that the key – one of the key benefits of the connected trip is to drive loyalty, repeat traffic, and also drive extra profit dollars in the business.

Justin Post

Got it. Then moving over to the payments platform, pre-pandemic there was a pretty big shift in merchant revenues bookings growing faster than agency. And I think, it was enabled by the payments platform, and I don't think The Street was talking about it enough. But Glenn, can you talk about that shift? And is it positive for Booking?

Glenn Fogel

Well, payments is really important. But let me let David talk a little bit about some of the shifts and some of the numbers, why this is actually beneficial, but also understanding it.

David Goulden

Yeah. So it moves – actually, payments continue to increase its mix of Booking.com even in – even during the pandemic last year, we increased from 15% of the mix in 2019 to 22% mix in 2020. We also basically took the payments platform into basically a breakeven point of view, and how looking at the revenues we get for the growth for the payments platform, and offset by the variable costs we have within our payments platform. So it's no longer a drag on profitability. But most importantly, it's very strategic for a number of reasons. It does tie back to the connected trips that Glenn spoke about. But just even before that, having our merchant platform, it gives us benefits to both our supply partners and our bookers in the individual verticals themselves whether it be hotels, alternative accommodations is clearly quite important cars, flight and attractions.

It does enable us to do merchandising, which historically we haven't been able to do at Booking.com. We expect to use that selectively to drive future growth, as I said – and at the bottom of it all, it's a foundation for enabling the connected trip. You don't want to have a connected trip and you have a disconnected payment experience. You want to basically pay in one place.

Also, even beyond that, it just takes friction out of the system. It lets us access alternative payment travel methods from travelers even if the hotel itself can't access that formal payments. So paying in one currency or one payment form out in different forms. So it's less the roam the audience. In terms of where it's all going, we do think that the increase – the merchant business will increase mix over time. We don't think we'll ever get to 100%. The merchant platform offers several benefits that aren't available in the agency model. But a number of our customers and partners do like the flexibility as it goes with agency. We think that will also continue to be a meaningful part of the business.

Justin Post

Got it. All right. Maybe one follow-up on the US share question, because we do get that a lot. And obviously, people are thinking about Booking versus Expedia. What have been the challenges for Booking? You're so strong in Europe obviously in the US. And what are the opportunities post the pandemic?

Glenn Fogel

Well, no, we are very strong in Europe. So I'd like to make a point any regulators listening, we're still extremely small in Europe, a very small share. I just want to make sure we get that across. Obviously, in the US, there are – there's another player who's bigger than us. But it's not just that we're tiny. We're a good player, but we're under indexed. And so a sheer – we want to gain share absolutely. Booking.com has been doing it. Priceline is doing it. But we want to do, because it's such a big market. It's a huge opportunity for us. I like to look at this glass and how it's half full half empty thing. We've got a lot of the glass we can fill up here, which is great. Now, we've got to do it in certain ways though.

Look, we got to give great value to the travelers. That's the most important thing. People are not going to use our service. We're not getting good value. And the thing to David was just talking about for so long, we didn't have a panic product for Booking.com. So you couldn't do a lot things that actually provide value for both sides of the equation by the way suppliers and – and the customer traveler. So we're doing that.

The other thing is awareness. You walk down the street and you say to somebody, I need to rent a home on the beach and whatever. Well you got a place? Not a lot of people. First thing off their heads is going to be Booking.com, which is unfortunate because we do have products, we do. But first we got to make the awareness. We've got to get that customer aware that Booking.com is great. And then, of course, we've got to have the supply.

If we're going to be doing that, we're going to be pushing out the idea that we're a great place to come for that alternative accommodation. We got to make sure we have all the right products. And yes, we do have home. We do have it on beaches. We do have it in-house. But we don't have enough yet.

And we've got to keep pushing that real hard. So when somebody comes here, they don't say, oh, there's nothing on the shelf. Why did I come to this store? There's nothing to buy. Can't have that. It's stupid. We spent the money to get them to come in the door; we got to have the product to sell it to them.

Justin Post

Got it. And in the U.S. and globally, the situation has changed so much in the last year as far as occupancy and ADRs. How are your supplier relationships? How would you characterize them? You, obviously, comprise so much distribution from hotels that maybe don't have a strong brand. But how are the supplier relationships right now? And are the relationships or the inventory availability or anything changing of note that we should be aware of?

Glenn Fogel

Yes. I don't think we should differentiate between somebody who has a great brand, let's say, and somebody that has no brand, the single individual small place in the middle of the islands and Greece versus a multinational team. They all -- it's the same thing. They want more demand.

When you end up in a situation like everybody is in right now, where demand is so far down from where it was before, everybody is looking. How can I get some more customers? Where are the people to help?

We're having good conversations. We're finding people who may not have been as interested in the past of some of our programs. For example, the Genius program, which we think is just fantastic. Some people may say, yes, I don't need that right now. I got my occupancy rates right where I want them. I don't want to be diluting my RevPAR.

It's a different thing now, different situation. And we're having a very cooperative ways how can we help each other. How can we help you? What can we do? So I mean, look, nobody wants to do better, because the world has had this horrific crisis. On the other hand, there are things I'm not going to deny it; we're in a better position because of the fact that we are needed more.

Justin Post

Got it. On the call, you addressed the digital -- European Digital Markets Act. And it's hard. It's obviously several years out. But how do you think about what implementation could mean for Booking?

Glenn Fogel

Look, the thing I said on the call and so, it's so important is that it's not final at all. This is legislation. They're working on it. They're negotiating. It's all going -- it's a Bismarck remark about how sausages were made. We don't know what the impact is going to be, because we don't know what the law is. Well, first get the laws done, then we'll try and talk about what we would say impact is going to be about.

The critical thing I keep on pushing for over and over again, very publicly, because I really am trying to get this understood by everybody. Booking.com is not a gatekeeper in Europe. It absolutely is not. There are so many ways a traveler can book a hotel.

I mean, it's infinite. Everybody knows this. Even the regulators know this, which is so bizarre. Because when I talk to lawyer and -- anybody says, when you got to your last hotels who would you use? Okay, what about of the time before that and the time before that? And certainly people say, yes, I know, yes I do look at a lot of it.

And then they say, but maybe you're a gatekeeper? I mean, that's ridiculous. Okay? But, laws are laws and regulators and regulators. We've got to try and negotiate and try and make sure everybody understands this all. And hopefully, it'll come out the way we want it to, but nobody knows.

Justin Post

Got it. David, maybe this one is for you. Let's go over the expense commentary on the last call. We're getting a lot of questions on that. You mentioned the 39% margins achieved in 2019. And it sounded like there could be some incremental costs related to that.

And then you have to think about layering on the airline business and some of the other payments business on top of that. So David, do you want to just kind of revisit the comments? And do we have it right in our interpretation that maybe margins for the quarter could be a little bit below the 39% and then you think about adding on air on top of that?

David Goulden

Yes. Justin, at a high level you have it right. Let me kind of walk you through the moving parts. So to be clear, though, we expect our business will continue to have very attractive margins when demand fully returns. We expect these margins to be industry-leading.

But, let's how look at the pieces. So within our existing, if you like, core business, there will be some added costs versus 2019, which you should expect to run rate impacts including things like merit increases for our workforce and also just investments to continue to grow our business.

So compared to -- if you could freeze frame to 2019 and have another year in 2019 revenues the cost would be a little bit higher. Of course, you expect the business to continue to grow. So it's a kind of timing impact. But yes, there are all those cost impact future run rates and due to the investments to continue building out things that we spoke about.

But on top of that, we believe it's important to maintain healthy top line growth rates in the business and really seek our opportunity to increase our market share. So some of these growth opportunities will come at lower margin rates as you talked about, but still deliver incremental EBITDA dollars, which is an important decision. So for example, as you mentioned product we're building like the flights business will be dilutive to margin rates but will be informed to our business, to our strategy, our growth in the future and also generating margin dollars.

Justin Post

Got it. With Airbnb and Expedia kind of refocusing over the pandemic, it seems like there's more disciplined marketing spend out there. Could that be something that provides some upside down the road? How do you think about that?

Glenn Fogel

Well, yes, the way you say it rational, despite disciplined spending, yes across the industry that could be positive. On the other hand though, there are a lot of players out there participating in these channels. It's not just the ones that you think of. There are a lot. And these markets are efficient and transparent and I think they're going to continue to be competitive.

The thing that is always important to us is that we have been working in these jobs for a very long time and it's been working very well for us and we're going to just keep doing it the way we've been doing it. We're going to look for the high-quality traffic. We're going to make sure it's the right price, the right ROI. We're going to say is this traffic going to convert for us? Is it that even not canceled? Is it the person going to come back to us correct? Same with the world. If the world becomes "more rational disciplined" I'm not going to complain about it. But also I'm not going to depend that there's going to be some giant change in the way these markets are going to work in the future. I'd be surprised if they do.

Justin Post

Got it. David, the payment in the air business on top, any way you can help us think about sizing those? And are they going to be margin positive overall to the business?

David Goulden

Well, they'll be margin dollar positive to the business. Absolutely, EBITDA margin dollar. As I mentioned before, there'll be – there'll be an impact to EBITDA margin rates. Just to kind of let you know where the – obviously, I said, the point is currently around breakeven on an operating cost basis. And Air, as you know, Air is a low-margin business. And both of them are going to be much lower-margin business than the traditional accommodation business we have right now.

We do expect both these businesses will scale up to be a meaningful part of the overall business. And at that point in time, obviously it will be dilutive to margin rates. But as I say, incremental to margin dollars, incremental to earnings per share. We really make sure within the business.

Justin Post

Got it. So maybe we'll pivot over to China. And can you just remind us of your assets in China? And how does Booking think about the opportunity that China growth could provide for the company?

Glenn Fogel

Right. So we have Booking.com and Agoda, both work in China. And as I think, everybody is well aware that biggest part of our China business has been – the most important part has been the outbound part, which as we all know and I just said recently, there's not a lot happening right now in and around right now.

So – and there's not inbound either right now. Either of those two are kind of like dormant right now. So we do know though that the world hasn't changed in terms of China being important for the long-term growth of the travel industry. In fact, it's one of the most important ones. It is very important.

There are a lot people in China. Travel, certainly the measurement are more and more and more are traveling outbound from an extremely large market pre-pandemic. That will come back when the virus is suppressed and people can travel again. I would say, we can't do a lot there right now but I would expand actually entirely around Asia in general.

And we are doing a good job, we have been doing a good job and we will continue to do a good job in the general Asia area both Agoda and Booking having good out business there, working well. It's very, very, very competitive. But we've been doing okay there.

Justin Post

Got it. And Trip.com has mentioned trying to expand outside of China. How do you think about their competition? Obviously, they have a brand name within China. But how do you think about competition versus Trip?

Glenn Fogel

Look, people there are very, very confident very good managers. It's a good company, as you know. You're invested in it. And of course make the perfect sense that they would want to have global ambition too. Why wouldn't they? Everybody does. Everybody wants to be big and huge. Well, I welcome – I welcome the fact that everybody likes to be competitive to just make us that much better.

Justin Post

Got it. Maybe we'll move over to alternative accommodations. Obviously, we've all seen Airbnb stock and interest -- investor interest over there. Expected to be very strong this summer. So, I don't know if you have any comments about alternative accommodations, how you think they'll perform versus hotels this summer. But how are you thinking about traffic for your host this summer and your position in Europe for alternative accommodations?

Glenn Fogel

Well, so we talked about this already a little bit. Look, I am pleased that we have 6.5 million alternative accommodation listings. That's pretty huge. Feel pretty good about just in general about our scale worldwide. I'd like I point out in the US, it's a little bit where we want to increase. In Europe, we're better off. And David's talked about that.

In terms of what the summer is going to be like, I don't know yet. I think nobody knows. I think there definitely is -- and I'm talking about globally. There's definitely I believe correlation between how safe people feel and then what kind of accommodation they may want to stay in. So, who knows? Because we don't know what the safety factor is going to be in the next few months and what's going to -- where we're going to end up.

I would say look we just need to keep doing what we've been doing. We'll continue to add more and more inventory, high-quality inventory. Any alternative accommodations getting those whole homes making sure we have it in the right places the vacation destinations, the beach, the lake, the mountains, the rural areas. Keep doing that in places where we need to increase more. And in the long run we're going to end up in a situation where we'll go back to normal and people will be choosing between home and hotels and somebody who has the greatest amount of both of them will be in a very good position.

Justin Post

Got it. And I know you've gotten this question before but we constantly think about it. Your take rate is around 15% for the host. Airbnb has a slightly different model. Do you get any pushback from host about the take rate? And how do you think about that? I think overall the take rates are pretty similar. But how do you think about that?

Glenn Fogel

Yes. So, more and more of the business as I think everyone's aware of is becoming professionalized is a way to talk about it where you have property managers who are doing managing of the alternative accommodations. And these people are sophisticated business people. They understand how this thing is.

At the end of the day, the amount of money that ends up in the pocket of the owner it ends up being the same because you end up -- everybody knows that. Now, how this stuff is displayed how it ends up going across or not I believe that I've read or such is that Airbnb, I believe, have been moving more and more towards the host or the professional paying upfront and not being in the travelers pay.

Well, another thing very important is the regulatory environment where in some of the regulatory environment, you are not allowed take somebody at the end of the funnel at the end when you're ready to check out then you get hit with a traveler's fee which is I believe a horrible experience for the traveler. That's why some jurisdictions have put out rules that you have to have the full price upfront right at the headline. That's the way it should be. Not everywhere is like that. And I believe that is the way it should be.

For our position, the way we believe, we want to do something to the customers don't feel they're a fooled and they get hit with that thing at the end of the day that traveler's fee. I think that that is the right way it should be done.

Justin Post

Got it. Let's move over to the balance sheet and cash flows. I think pre-pandemic the company -- I have complement you, you did quite a good job shrinking the share count, consistent buybacks. And we do have cash getting back to some pretty healthy levels next year if bookings return. So, I guess are there attractive opportunities in travel to deploy your cash for growth, or do we think about just using it to keep shrinking the share count over time? How are you thinking about that as a company?

Glenn Fogel

Well, I'll say a little bit and then I'll let David talk a little bit about capital allocation. Look, one thing we always want to do is grow the business. So, we're always looking how can we use our money in a way that's going to give the greatest return to the future value of the franchise.

And David you want to talk specifically about our capital allocation strategy.

David Goulden

Sure. As Glenn said, job number one is to make sure we support the growth of the business, both organically and potentially if opportunities go up on inorganic basis. And then beyond that then the excess cash available is something we can look to return to shareholders. And I believe that the program we have pre-COVID to return via buybacks was an efficient mechanism. And we would look to sum that up again in the future when we have better visibility into the size and shape of the recovery.

Justin Post

Got it. I think we'll conclude with a couple of questions on maybe your relationship with the advertising industry. So, obviously, you do depend on direct marketing to help traffic. How do you think about IDFA? And could that have any impact on Booking? It certainly is an issue we hear a lot about for the online media companies, any thoughts around that?

Glenn Fogel

So, the changes that we're really hearing about to help protect the privacy for consumers, it's not just IDFA. There are other things changing too. And we're aware of these.

We are aware are these changes that are being made or are going to remain in the future. And I would say that, I am confident in the ability of our marketing team to make adjustments for these changes.

The way we manage our primary paid marketing channels like PPC and META that means, that they're not going to be impacted by these changes that we're reading about, and hearing that I just heard about.

The exchanges are only going to affect a small part of our marketing spend. And I'm confident. We're going to be able to manage through this. And who knows? This potentially could be to our advantage. The primary focus -- our primary focus is the first-party marketing. And that's not impacted at all by this.

Justin Post

Got it. And then, I don't think have a discussion without discussing Google. And they're constantly evolving their changes. And I'll talk about a specific change next. But on a high level, can you just tell us about your relationship with Google?

It's kind of a competitor, but also obviously a very valuable partner. So, Glenn, how are you thinking about your Google spend? And kind of getting more direct and less on search overtime?

Glenn Fogel

Well, we always want to get more direct. That's our -- that's what we always want to do. And of course, not drastically, Google is -- like more people keep going to them. And then, we have to pay. Of course, that's the nature of the business.

But over the years, Google's constantly changes. And they keep on doing that to drive more traffic or increase their monetization. And our team -- our marketing team we are react to the changes. We need to act. And we made changes.

And I'll say that, look, it's a symbiotic relationship. But of course we'll also try to -- we both want to get more, more money out of the economic pie of travel. And that's what it is.

We're going to continue to do that. And I believe we've worked very well over the, whatever 20-something years, I've been at this company. And I hope we will continue to work and advantageous to us.

Justin Post

Got it. And then, there was a change, yesterday, where I think they're giving free price listings within Google Travel Search not core Google search. I don't know if you had a chance to go through those yet.

But any impact? It could be positive. But however, -- and I think, -- I know they're going to take pricing both from OTAs and hotels and put them in there. How are you thinking about that?

Glenn Fogel

Yeah. Free. The addition of the three things, look it's another example of a change. And we'll have to look at it. And adjust to it react to it. And we'll see what happens. And we'll see what happens.

Justin Post

Got it. And we're almost out of time. Maybe one conclusion question, it's been a really interesting year for you as a company. How do you feel about the company's position?

Obviously, quite a lot of cash on the balance sheet, but how do you feel about Booking's position right now and your two to three outlook, -- two-to-three year outlook for a travel rebound?

Glenn Fogel

So in terms of timing, we said, years not quarters. And that would certainly, thinking that -- years, I think, but again, nobody knows. Because -- so I feel somewhat like I did, a year ago, when the pandemic was first started first really roaring up. I'm in the New York area.

And I saw "Oh, this is not looking good at all." But, I was very confident even then, that this would pass. Why? Because pandemics have come before, they have always come before. This is not a new thing for human species.

We have pandemics and then they go away. And I was very confident a year ago it would disappear. And it will go away. And thank god, that the pharmaceutical companies were so incredibly advance and able to create these new vaccines.

So we're going to get out of this sooner than perhaps, we would have some years ago. But who knows? The point really is the, long-term -- the long-term future this franchise of this business is, I believe, very, very sound.

I am very, very -- I just absolutely believe that, the world hasn't changed in terms of people wanting to travel. People are always going to want a travel. They always have wanted to travel.

Like we saw last summer, we saw that when the restrictions went down people wanted to travel. That will happen again. Don't know when, but it will. As you pointed out, we are well positioned. We've got capital. We've got great people. We've got a brand. I think actually I just feel very, very positive about long-term future as much as I had before. The pandemic hasn't shaken that in the least.

Justin Post

Great. I think that's a great question to end on. So thank you so much Glenn and David for joining us today, and being at our conference today. I really appreciate your time and being with us.

Glenn Fogel

Well, thank you for having us.

David Goulden

Thank you, Justin.

Justin Post

Thank you.

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