Booking Holdings Inc. Common Stock 2026 Q2 Earnings Call

Go ahead, gentlemen. Good afternoon, thank you for joining us today.

I am pleased to report that our teams delivered another quarter of strong execution. We exceeded the high end of our guidance across all of our key financial metrics while continuing to invest in the strategic priorities that we believe will drive long-term value. These results reflect the strength of our diversified global platform, disciplined execution across our businesses, and our ability to deliver strong returns to our shareholders while also investing for future growth. As you know, the world remains an uncertain place. With the Middle East conflict and related macroeconomic developments continuing to affect travel demand, both directly and indirectly through the impact on major Middle East transit corridors and higher travel costs.

These dynamics create near-term volatility, yet we know from decades of experience that the underlying desire to explore, connect, and experience the world is remarkably resilient, and travel demand recovers once the underlying disruption subsides. This resiliency was clearly evident during the second quarter. While long-haul international travel remained pressured by elevated airline prices and reduced capacity due to the conflict in the Middle East, domestic and intraregional travel remained relatively healthy across many parts of the world. As I have stated many times, we remain focused on creating long-term value and look beyond near-term uncertainty. During the quarter, we further increased our capacity to invest for future growth as the expected annual run rate savings enabled by our transformation program continued to increase. These savings provide us with additional flexibility to accelerate innovation, enhance our products, and strengthen our business over the long run.

Our focus is on what we can control, delivering strong value, reliability, and great service through differentiated solutions for travelers and partners. This focus is reflected in the strategic investments we are making across our business, starting with our Connected Trip vision. Travel remains a fragmented experience, often requiring multiple providers, transactions, and customer service interactions. Our Connected Trip vision is about fundamentally improving that experience, making travel easier while creating greater value for travelers and partners. We're encouraged by the progress we are making. During the quarter, Connected Trip transactions where travelers booked more than one travel vertical with us for the same trip grew in the low double-digit range and represented a low double-digit percentage of Booking.com's total transactions. Importantly, these transactions continue to grow meaningfully faster than our overall transaction growth.

As travelers increasingly choose to book accommodations, flights, rental cars, attractions, and other travel services with us, we are creating a more seamless end-to-end journey which strengthens our offerings for both travelers and partners. Our Genius loyalty program is a key enabler of this strategy. We continue to see strong engagement from our higher-tier Genius members, who plan their trips further in advance return more consistently, and have a higher direct booking rate than non-Genius travelers. During the second quarter, level 2 and level 3 Genius members represented more than 30% of our active customer base and accounted for a high 50% share of room nights, both up from the prior year. Given the importance of loyalty and the success of Genius so far, we see additional opportunities to further strengthen the Genius offering going forward. Another important strategic priority is strengthening our presence in the U.S. and Asia.

The U.S. remains one of our largest long-term growth opportunities. Over the past several years, we've made disciplined investments across product, supply, brand, marketing, and technology, and we're encouraged by the progress we are seeing. These investments continued to deliver encouraging results during the second quarter. U.S. room nights grew in the high single digits, supported by healthy domestic demand. We also saw continued growth in our direct channel and increasing engagement across multiple travel verticals. While we still see significant room for growth, some of which will come from further product improvement, we remain encouraged by our consistent progress and remain confident in our ability to continue strengthening our offering in this important market. We are also continuing to invest in building our presence in Asia, which we believe represents one of the most attractive long-term opportunities in global travel.

Despite a dynamic competitive environment and indirect impact from the conflict in the Middle East, underlying domestic demand remained healthy during the quarter. By combining Booking.com's global reach with Agoda's deep local expertise, we are continuing to invest in localized products, payments, and distribution capabilities that position us well for long-term growth across the region. The final strategic priority I'd like to discuss is AI. AI's rapid and continuous development is having a profound impact on all areas of society. Our approach remains focused on deploying this technology in measurable ways and scaling when we see clear benefits. The combination of trusted brands, proprietary travel data, broad supplier relationships, and global reach creates a differentiated foundation as AI reshapes how travelers discover, plan, and book travel.

As travelers increasingly begin their journeys through AI-powered experiences, trusted brands will play an even more important role in where they ultimately choose to book. That's why we continue to work closely with leading AI organizations to ensure travelers can engage with our brands wherever their journey begins. We're also encouraged by the early progress we're seeing in AI-powered discovery. While AI-driven referrals remains a relatively small contributor to our overall business today, we are seeing encouraging momentum that reinforces our belief that the strengths we've built over many years, helping travelers find the right travel options with confidence, positions us well as travelers further gravitate towards AI-powered discovery. At the same time, we're embedding AI across our own platforms to make every stage of the travel journey more personalized, seamless, and intuitive.

During the quarter, we continued advancing AI capabilities across our portfolio, including beginning to roll out testing of Booking.com's new AI-powered discovery experience, which helps travelers in the early inspiration phase of planning a trip. For destination searches, the experience combines flight prices, real traveler reviews, and AI-generated insights, including the best time to visit, travel tips, and itinerary suggestions to make it easier to move from inspiration to booking. We're also deploying the next generation of Priceline's agentic AI travel assistant called Penny, and we're launching Agoda's new gallery view, which gives travelers a more visual way to browse search results by pairing hotel images with relevant guest reviews. We're already seeing how AI can transform the customer experience.

For example, initial testing of Penny's integrated hotel checkout experience has shown that beginning more of the booking journey into a single seamless experience has the potential to improve traveler engagement while delivering stronger business outcomes. These innovations are just a few examples of how we're using AI to reduce friction throughout the travel journey while advancing our broader Connected Trip vision. AI is also strengthening our partner value proposition. We are investing in tools that help partners better engage with guests, improve their property content, and operate more efficiently. For example, our AI-powered messaging capabilities enable accommodation partners to respond to guest inquiries more quickly and consistently, reducing operational friction and improving the traveler experience.

These partner innovations were a central focus of our recent Booking.com Click conference, where hospitality partners from around the world explored how AI, personalization, and data-driven insights can improve both guest experiences and business performance. This conference also reinforced our collaborative approach to innovation, including co-developing new AI capabilities using direct partner feedback. Finally, we're increasingly applying AI across our own business to accelerate software development, enhance customer service, and streamline internal workflows. One area where we continue to see meaningful benefits is in customer service. Our AI initiatives are reducing customer friction, lowering contact rates, and improving operational efficiency. We have now scaled voice AI support across the majority of eligible inbound traveler calls while continuing to expand digital automation. At the same time, AI-powered analytics and real-time agent assistants are helping our teams resolve issues faster and more effectively.