Expedia (EXPE) Q3 2021 Earnings Call Transcript

Expedia (EXPE 0.55%)
Q3 2021 Earnings Call
Nov 04, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to the Expedia Group Q3 2021 financial result teleconference. My name is Johnny, and I'll be the operator for today's call. [Operator instructions] For opening remarks, I will turn the call over to SVP and CFO, retail, Patrick Thompson. Please go ahead.

Patrick Thompson -- Senior Vice President, Corporate Finance

Good afternoon, and welcome to Expedia Group's financial results conference call for the third quarter ended September 30, 2021. I'm pleased to be joined on the call today by our CEO, Peter Kern; and our CFO, Eric Hart. The following discussions, including responses to your questions, reflect management's views as of today, November 4, 2021, only. We do not undertake any obligation to update or revise this information.

As always, some of the statements made on today's call are forward-looking, typically preceded by words such as we plan, we expect, we believe, we anticipate, we are optimistic, we're confident that, or similar statements. Please refer to today's earnings release and the company's filings with the SEC for information about factors which could cause our actual results to differ materially from these forward-looking statements. You will find reconciliations of non-GAAP measures to the most comparable GAAP measures discussed today in our earnings release, which is posted on the company's investor relations website at ir.expediagroup.com. And I encourage you to periodically visit our IR website for other important content.

Unless otherwise stated, all references to cost of revenue, selling and marketing expense, general and administrative expense, and technology and content expense exclude stock-based compensation. And all comparisons on this call will be against our results for the comparable period of 2019. And with that, let me turn the call over to Peter.

Peter Kern -- Chief Executive Officer

Thanks, Pat. Thank you all for joining us today. Eric and I will make some brief comments and then, of course, take questions. Let me begin by saying we're very pleased with the quarter we had in Q3, nearly matching our adjusted net income and EBITDA from 2019.

But I would add that, but for delta, this would have been our most profitable quarter ever, and I think it's a tremendous milestone for the company to be here while we are still in the throes of COVID and still coming out. And a testament, really, to the work we've done to simplify the company, to focus on technology, and to run the business more efficiently. And with that performance and what we're seeing in the market, we have the confidence to further pay down our preferred stock, which we did a few weeks ago as you would have noted and which, of course, is not a big milestone for us in putting COVID behind us. As far as the trends for the quarter go, I'll do high level and Eric will give a little more detail.

But we went into the quarter following a strong Q2 and good momentum. But as we remarked last quarter, delta had begun to have impact. We saw it impact cancellations, we saw it impact booking trends. And -- but as we got through August and into September, the delta fears, particularly in the U.S., began to wane, and we ended stronger in the back half of September.

And that has continued through into the fourth quarter with even greater strength. We've seen improvement across all segments, really. Well, leisure and domestic have led even though segments which have been harder hit by corporate and international travel have been coming back. Cities have been returning as well.

And so all in all, it's been a broad-based recovery, but it has been led obviously still by leisure and domestic travel. And for us, Vrbo has been a particular highlight and beneficiary of that. Few highlights on Vrbo, since you've always asked. We've seen a strong share growth in our focus markets and in particular in the U.S.

About half of our customers so far in 2021, more than half have been new customers. We expect to book in excess of $2 billion of earnings for new Vrbo hosts who came on the platform this year. And looking ahead, we are already seeing better bookings for next summer than we saw this time last year. So the trends continue to be quite strong there.

And while the story will continue to be impacted greatly by mix effect, which I've talked about before, we are feeling more and more confident. And as international vectors open up, which you've no doubt all read about, this is a particular strength of ours historically. And we think, again, this is a mix effect which will generally benefit us. And COVID recovery, of course, remains somewhat bumpy and is unpredictable, to say the least.

But we are feeling good. And at every turn, we are seeing demonstrated that when people can travel, they will travel for business, for pleasure, and everything in between. And, you know, we are looking forward to seeing the rest of our business return. In terms of some of the details in the business, on the marketing and brand side, our focus continues to be on bringing customers efficiently back to the platform, and retaining those customers for the long term, and building those long-term direct relationships.

Obviously, the better our product is, the better our customer experience is and the proposition. All of those things add to that direct relationship, and we are feeling confident about the work we are doing on all fronts. But marketing, of course, is the tip of the sphere. And with our new focus on being a family of brands, we have launched -- announced that we will be launching one loyalty program which will actually cross all our brands and all our products.

We think it will be the most powerful loyalty program in the industry. And we are really excited about bringing that extra usability and added value to our customers through that loyalty plan. Because when we get to a place where people can use it across all brands, across all products, we think that just adds tremendous value to the customer. And you should expect to see us do more of that.

We will be looking for more ways to unify our brands in a united front of, you know, bringing value to the customer in every way we can. We spent the better part of the last six quarters building out the organization, and in particular, in the last few months, building our creative organization. We have improved, as I've talked about before, all our performance marketing tools and technology. And we're very excited about our position right now.

But, you know, we went into the third quarter and specific with a much more aggressive posture. Delta hit, we have -- we pulled back somewhat. And now again that we are seeing things growing and the recovery building again, we are winning back in. We intend to go on the offense with all the new tools we have in our arsenal and our marketing group.

And we expect to go on offense and expand share across the world. On the B2B front, which we haven't talked about a lot in the past quarters, I just want to highlight a few things here. We brought our groups together as I remarked. Last quarter, our supply team and our business suite called Expedia Partner Solutions, which is a business we have used to power other partners in the travel industry, we brought those together officially on the last few months.

And we're seeing lots and lots of opportunity for those businesses to build on the relationships we have with our supply partners, with our B2B partners, and find increasing ways to drive their business and drive their success on our platform. But in particular, EPS itself has done well even during COVID. We've won wallet share with our partners. We've had many new signings.

And for the first time in late October, we actually booked more business than we did in 2019 in that business and that has continued into November. So great signs there. And then finally, on the Egencia front, you've all seen earlier this week, we announced the conclusion of our transaction with Amex GBT. We have merged Egencia and the Amex GBT.

We will retain a significant equity interest. We feel really good about that corporate -- you know, we believe this will be coming roaring back. And Egencia, even during this time of transition, had its highest signings this year than it's ever signed in terms of new clients in the first half. So lots of good signs there.

But I think that deal is also emblematic, as I've said before, of our desire to power more of the industry. We want to power Amex GBT with our Expedia Partner Solutions business, with our technology, with our supply, and that is something we will continue to build on as the months and years unfold. So very exciting. And I just want to thank the Egencia team who did a tremendous job building that business, getting it to a place where we could find such a great transaction to put it together with someone else and in working through the time we had during the transaction and doing just a terrific job.

So, I thank them and our Expedia team to help close that transaction. And then finally, while I've talked a lot about technology in the past, and I will keep this brief, I am as excited as I've ever been since I started about a few months ago about where we are in terms of our technology evolution. We certainly have a lot of work left to do, but it can't be understated the importance of finally being aligned on our technology, on our roadmap, on our architecture. We have one plan, and everybody is rowing together, and our velocity is increasing.

And I think delivery, most importantly, to the customer will increase along with it. But just for clarity, on the front end, you know, we're focused on being at first, data and design-driven and focused really on personalization, and using all the data and machine learning. And the opportunity is great. Better and better experience for the customer and for our suppliers.

And on the back end, we're really rearchitecting everything, as I've talked about, with moving from this many technical stacks to one stack on one pool of data that serves all the outcomes, all our partners, all our customers. And it's really getting exciting. And finally, I just want to say, you know, this moment for us is really important as we move into 2022. Getting all of this aligned, getting the work streamlined, getting everybody on the same roadmap is a really powerful opportunity.

And it reminds us that we're finally getting to what we wanted to be getting to, which is delivering new value to the customer. We've been internally focused for a lot of COVID. COVID was a tough thing to get through. But we are now in a position where the entire company is aligned.

We can see the light at the end of the tunnel in terms of COVID. And the opportunity to innovate for the customer and bring great new products and value are really exciting to us, and we're looking forward to doing that. And with that, I will pass it over to Eric.

Eric Hart -- Chief Financial Officer

Thank you, Peter. I'm also pleased, as Peter mentioned, with the overall recovery of our business. As you will see, it includes two quarters in a row of positive-adjusted EBITDA. And in the -- in Q3, excluding Egencia, was roughly on par with the third quarter of 2019.

And with that, I wanted to start by providing an update on the booking trends that we're -- we have seen and we are seeing. Following a pullback we witnessed for much of the third quarter and into the first part of September due to the delta variant, we saw a notable broad-based improvement across geos and product lines. Overall, total bookings for all products, net of cancels, were down 30% versus third quarter of 2019, which was slightly worse than the 26% decline we saw last quarter. Given the continued volatility to recovery, we also are going to provide additional monthly detail on our total lodging bookings, net of cancels.

That, of course, includes both hotel and Vrbo. And those were down approximately 17% in July, approximately 25% in August, 19% in September, and further improved to now negative 2% in October. And again, that's -- September was also down, of course. The trends in October that we saw, again that was negative 2%, they did improve throughout that month.

So we exited at a much-improved rate relative to the start of that month. Moving to the P&L, starting with revenue, it was down approximately 17% versus third quarter of 2019, which was a meaningful improvement from last quarter with revenue down approximately 33%. We saw a significant improvement in both Vrbo and hotel revenue, which benefited from seasonally strong summer travel. Revenue margin for the third quarter was approximately 15%, up from approximately 10% last quarter.

This was primarily due to typical third quarter seasonality in the business and product mix weighted toward lodging. On sales and marketing, direct spend in Q3 was approximately 1.1 billion, which is down approximately 19% versus third quarter of 2019 levels. And as Peter mentioned, we've reduced spending, given a reversal in trends we witnessed in the third quarter. However, going forward, given the more positive recent trends that we've discussed, we are again leading into marketing expense in Q4.

Moving on to overhead costs, they totaled approximately $530 million, a slight decrease versus last quarter and below our expectations. We saw lower-than-anticipated discretionary spend, which was down roughly 90% versus the third quarter of 2019, as employees continue to largely work from home in the quarter. I would also call out slower-than-anticipated hiring as there continues to be a high degree of competition for talent, especially for technology roles. Looking ahead, we expect overheads increased by approximately $40 million sequentially in the fourth quarter, primarily due to lower capitalized labor due to the holidays, as well as higher-than-anticipated headcount and people costs.

In total, adjusted EBITDA was approximately $855 million, which is approximately $650 million improvement over the last quarter, driven primarily by typical seasonality. Moving on, free cash flow totaled negative $1.4 billion in Q3 on a reported basis. If we exclude the change in restricted cash, which was primarily driven by the change in Vrbo's deferred merchant bookings, free cash flow was negative for approximately $450 million. As a reminder, the third quarter is traditionally a low quarter for free cash flow due to seasonality.

In terms of the balance sheet, we continue to be investment-grade rated today and remain committed to deleveraging back to more historical levels, as well as further reducing our cost of capital. As you may recall, we refinanced some debt earlier this year which yielded $80 million in annual interest rate savings. And last month, as Peter mentioned, given the improving trends and continued confidence in our liquidity position, we paid off the remainder of the preferred stock. In total, paying off all the preferred stock this year, it will save us approximately $150 million in annual dividend payment -- payouts on board.

Finally, on the Egencia, I want to echo Peter's comments and thank the Egencia team, as well as all of those Expedia employees who were involved with Egencia for their dedication and hard work. I would also like to point out Page 17 of the earnings press release which provides details on Egencia financials. For the third quarter, Egencia generated $55 million in revenue and negative 18 million in adjusted EBITDA for, again, the third quarter. As it relates to Egencia costs in third quarter 2021, rough numbers, approximately $35 million was recorded in cost of sales, $20 million in sales and marketing, and the remaining roughly $20 million was spread across tech and content, and G&A.

Going forward, we will report our minority stake in the combined company within the other net line or income statement. And in terms of the 10-year lodging supply agreement with our Expedia Partner Services business entered with the combined company, we will account for it like any other standard EPS deal. As a reminder, at 2019 volumes, we expect this deal, the EPS deal, to be worth an excess of $50 million on an annualized basis for EBITDA. In closing, as Peter and I both mentioned, we're quite encouraged by recent trends.

And the pace for recovery is clearly improving. Things are getting better. And I remain truly and very optimistic about the future of travel and our company. And so, with that, Charlie, we are ready for our first question.

Questions & Answers:

Operator

Of course. [Operator instructions] Our first question comes from Naved Khan of Truist Securities. Naved, your line is now open.

Naved Khan -- Truist Securities -- Analyst

Yeah, hi. Thanks a lot. A couple of questions. Maybe, Peter, maybe you can give us some color on your thoughts around marketing spend.

Do you continue to see scope for more efficiencies here going forward? Where do we stand today on this? And then, the second question I had is just around the organization structure going forward. I think you guys had outlined cost savings from the reorg, 750 million in fixed cost and 200 million in variable. As we think about the organization bailout from here on, where do we stand with respect to the aids?

Peter Kern -- Chief Executive Officer

Sure. I'll go first and Eric can take on the cost issues. I would say, you know, we are still working toward a better marketing world for the company overall, which, yes, means more efficiently being able to get customers. But it's a many-pronged attack.

It's the performance marketing issues that I've talked about before. You know, we have come a huge way in terms of the tools, the data, and the algorithms, etc. But COVID has been a bumpy time, and you know, we have not found normalized times to really get everything tuned exactly how we want. So yes, we believe there's opportunity ahead for that.

We also believe there's significant opportunity for our brand teams to really be much more impactful than they have historically. And that has impact not only on driving direct customers, but it has impact on how people respond to performance marketing and other things. So, there's many places where those teams can have more impact and ultimately be more efficient in attracting customers. But it's not entirely on them, right? We've got to build better products.

We've got to have better engagement circles. With the customer, we've got to, you know, improve our service every week. You know, we need to improve in every part of our game to continue to make the customer stickier, and bring them back, and want them -- you know, make this their place to come for travel. So marketing can be more efficient, but it's really a virtuous cycle and how we would stream marketing together with the experience.

And that -- and with the new efficiency, that's your second question, it goes to -- all of that gives us more opportunity to reinvest in more profitable long-term customers. They create a long-term value for the enterprise.

Eric Hart -- Chief Financial Officer

Great. Thanks. I'll take the second part of the question regarding the cost. So just to remind everyone, the program is both fixed and variable costs.

On the fixed side, we -- the most recent update that we provided was 700 to 750, and we expect it to land in the higher end of the range. And on the variable side, we set to achieve greater than 200 million, but remember that's at, call it, normalized level of 2019 levels because we need the volume to come back to be able to see that fall into the P&L. I would say both of those are substantially complete. It's been a ton of work by the teams to simplify the business.

And I think we're feeling really good about the fixed and variable side. But I'll also add, we are a technology company. We're going to continue to invest and improve our services for our customers, and in the way that we operate this business. So while this program, I think, has been a tremendous accomplishment of ours in simplifying our business, we don't expect to stop there and we'll keep going.

But I think from a program perspective, I think we can put the billion dollars to go to rest.

Naved Khan -- Truist Securities -- Analyst

Thank you, Peter. Thank you, Eric.

Eric Hart -- Chief Financial Officer

Thank you.

Operator

Thank you. Our next question comes from Kevin Kopelman of Cowen and Company. Kevin, your line is now open.

Kevin Kopelman -- Cowen and Company -- Analyst

Great. Thanks so much. Could you dig in a little bit into this significant improvement that you saw in booking trends in October? If you could talk about kind of key segments, geographies, et al., maybe Vrbo versus hotel? Thanks a lot.

Peter Kern -- Chief Executive Officer

Yeah. Thanks, Kevin. I would just say, generally, I know it feels bland, but we've seen it everywhere. You know, cities are picking up, international has picked up, there are -- you know, virtually, every area has seen growth.

I will say that, you know, some of the benefit we have seen, I've talked about mix effects before, you know, when cities were forbidden places, that obviously hurt us. Cities have been a great market for us. And as we've seen cities come back, you know, there's greatly -- they're still greatly lagging, you know, major leisure destinations like beaches. But they're coming back.

And that return, you know, benefits us probably disproportionately compared to some others. So that mix effect thing, you know, we have some winners and some losers as always, but we've seen cities come back more. We've seen -- you know, relative to the growth, we've seen in sort of the consistently strong leisure areas. And the opening of international channels, you know, the announcements from U.S., from Singapore, etc., about allowing international travel, we see that whip up basically as soon as it's announced.

We see search queries go up. And again, in places like EMEA, where we're traditionally stronger in international travel as compared to domestic, those openings, you know, I think all go well for us going forward. So it really is a broad-based recovery. I mean, it is every -- I mean, not down to every country because there are blips in countries that have COVID spikes, etc., but down to every region.

And, you know, some regions are trailing dramatically, like APAC and Latin America, but they are improving, too. And so, it's really broad-based and it's just what the base you're building off of, and some are different than others.

Eric Hart -- Chief Financial Officer

Yeah. The only to add to that, that is, as we've talked about over multiple quarters now, there will be volatility in the recovery and the series of many stories in a lot of the intersection points that Peter just mentioned. So we'll continue to monitor, manage our marketing spend appropriately as we did in Q3. We have the brakes on some areas of that just because of -- we saw a bit of a slowdown.

But so far so good in October and going forward.

Kevin Kopelman -- Cowen and Company -- Analyst

Very helpful. Thank you.

Peter Kern -- Chief Executive Officer

You bet.

Operator

Perfect. Our next question comes from Deepak Mathivanan from Wolfe Research. Deepak, your line is now open.

Zach Morrissey -- Wolfe Research -- Analyst

Thanks. This is Zach on for Deepak. Just two questions. First, you know, you're kind of large main competitor in the space reported last night.

Your room rates are still lagging. I think it's down 33% in the third quarter versus 2019. That's lagging kind of bookings performance. I just -- is there any kind of, you know, driving force or explanation, driving that delta in performance? Is it, you know, mix, you know, certain market lagging? Is there a timing delay? I know there's, you know, a difference in reporting structure, so any kind of color there would be helpful.

And then, just on COVID restrictions, I know it's very dynamic and hard to predict, but are you seeing any differences in terms of travel restrictions and implications on demand when we see COVID cases rising in certain markets now versus, you know, six or 12 months ago? Thanks.

Peter Kern -- Chief Executive Officer

Yeah. Thanks, Zach. Lot of good questions in there. I would say, first off, yes, you have to remember that they report on book, we report on space, so it's sometimes challenging to compare.

But I would say, as I've said before, and I mentioned regarding cities, you know, the mix has helped them. They've always been better in smaller markets, long-tail markets, etc. We've always been really strong in big cities. When cities were dragging, cities get built by international travelers.

And we also have been strong in long-haul air for those travelers. Like, all those mix effects actually impact things. And so, you know, some of them we won in. You know, Vrbo has been a beneficiary.

Some of them we lost in big cities and international travels. So it's always been a balance. We are less focused on room nights rather than, you know, room dollars, if you will. I mean, it's a little misleading.

You know, we could book a million more one-star hotels, nights, and it wouldn't mean much to our P&L. You know, and we could book 100,000 5-star hotels and would mean a lot. So, you know, you have to take it all in balance. But we are feeling good about the recovery.

And in general, our numbers domestically are running ahead in lodging of where we were two years ago. So I think we're in good shape there, and we feel good about that. I mean -- and again, we have had a somewhat conservative bent along the game with COVID. You know, we've been, Eric mentioned, tapping the brakes.

We tried to respond. Sometimes we get over our skis, sometimes we're behind the recoveries. You know, It's a balancing act. But we are getting more confident, more aggressive, and I think you'll see us continue to lean in to gain share across the globe.

In terms of the COVID question, you know, it remains to be seen. And every -- as Eric said, every story is its own. But I will tell you, if you look at recent news, for example, of the COVID cases in the U.K. spiking from, you know, recent openings, and I was in London and it was amazingly open.

I would say that, you know, queries have remained elevated since the international announcements to the U.S., and they remain elevated and we have not seen a pullback from, you know, the caseload news. So I think that remains strong. And of course, science is helping us out along the way. You know, we just announced that kids will be able to be vaccinated in the U.S., which is a great, you know, benefit for society, let alone our business.

And likewise, the announcement today about the U.K. approving the Merck pill for treatment. You know, this, I think we all agree, is probably going to be an endemic, not a pandemic. And the more treatments we get, the more ways we get to deal with it, the better off we're all going to be.

Zach Morrissey -- Wolfe Research -- Analyst

Very helpful. Thank you.

Peter Kern -- Chief Executive Officer

You bet. Thanks.

Operator

Thank you. Our next question comes from Eric Sheridan of Goldman Sachs. Eric, your line is now open.

Eric Sheridan -- Goldman Sachs -- Analyst

Thanks so much for taking the question. Maybe following up first on the growth initiatives when you're looking out against the recovery. Are there any things we should be keeping in mind in terms of the ability to continue to grow supply, or align some of your supply priorities, especially outside of North America, to capture as much of that growth as you can? And second question, guys, you know, coming back to capital return and how you're thinking about a more normalized environment, booking called out the ability to possibly return capital to shareholders as we get into early 2022. Any updates there on how you're thinking about return of capital on the balance sheet over the medium to long term? Thanks so much.

Peter Kern -- Chief Executive Officer

Sure, Eric. I'll take the first one, and Eric can comment on the second one. But I would say that, you know, we continue to look tactically around the globe at what the right vectors are to focus on in terms of supply. I don't think we feel like we're terribly deficient, but we've been a little bit peanut buttered around the globe.

As we did with Vrbo during COVID, you know, we're very focused on those compression markets, freeing up a supply there, making that supply really successful right out of the gate. And that is the virtuous cycle that we think is most valuable. So we -- you will continue to see us do that for Vrbo, but you will also see us do that in a very targeted way around the globe. And that's where the focus that's tied into where we are marketing, where we are driving our brands, where we think we have the opportunity to win.

And again, remember, in many markets around the globe, our B2B business, our Expedia Partner Solutions business, drives those markets more than our direct relationship with consumers. And so, driving the right supply to feed those businesses as well is a critical piece. So we will continue to drive into it. I would say, if anything, we've been relatively modest in terms of supply growth during COVID, with a particular focus again on Vrbo, which was a different use case.

But as things are reopening, we're seeing more demand. You will see us go after, in a targeted way, more supply, and again in a very targeted end-to-end way, keying on the markets we're focusing on growing and where those markets want to travel to. So we feel very good about that opportunity. It's just a question of focus.

It wasn't a big focus during COVID, but as things improve, we will continue to roll that out.

Eric Hart -- Chief Financial Officer

Yeah. And thanks for the question, Eric, I'll take the second component of that. And I would say just from a macro level that our philosophy and strategy is consistent. First and foremost, want to remain -- we are going to remain investment-grade rated, and we'll commit to that, of course, going forward.

Second is our commitment to continuing to lower our leverage ratios and get our cost of capital down. We've taken some great steps on that this year and will continue to make progress as we move forward on it. And the third, you know, we as a company have traditionally been committed for returning capital to shareholders in different forms. I would say right now is, again, not necessarily the right time for us to do it, but it's certainly something that we're committed to doing over the long haul, and we'll just continue to observe and make what we deem to be, if you will, the right choices at the right time moving forward.

Eric Sheridan -- Goldman Sachs -- Analyst

Thanks, guys.

Peter Kern -- Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Mark Mahaney of Evercore. Mark, your line is now.

Mark Mahaney -- Evercore ISI -- Analyst

Thanks. Just two quick questions. You referred to those growth rates for the four months, July, August, September, October, I'm sorry, was that room nights or was that bookings? And then, secondly, I know you said that, generally, all the regions are recovering. Just to be specific about it, and I know that there are flareups in countries' markets here or there.

But in the major European markets, like Germany, you didn't see a -- you have not seen, whatever, a dampening of demand at the end of the -- at the end of October recently? Thanks.

Peter Kern -- Chief Executive Officer

Yes. I'll take the second part first, Mark. There are some blips here and there. For better or worse, I wish our business were bigger in domestic EMEA, but we don't feel those blips in quite the same way, and we had a countervailing issue of more interest in international.

So that has probably offset some of what others may have seen. But yes, there are blips here and there. But as I mentioned, you know, even in countries that are more COVID challenged, in general, we have seen sustained interest probably buoyed by the international factor as opposed to, you know, perhaps, what was going on in the summer.

Eric Hart -- Chief Financial Officer

And then, Mark, on the first question, it is lodging gross bookings, net of cancels.

Mark Mahaney -- Evercore ISI -- Analyst

Okay. Thank you, both, very much.

Eric Hart -- Chief Financial Officer

Thank you.

Peter Kern -- Chief Executive Officer

You bet. Thanks.

Operator

Our next question comes from Mario Lu of Barclays. Mario our line is now open.

Mario Lu -- Barclays -- Analyst

Great, thanks for taking the question. So I just wanted to ask you about your comment on continuing to gain share, and alternative accommodations, and your key markets. Can you expand on the initiatives that you guys have made on your end to allow you got the gain share and whether you think that is sustainable?

Peter Kern -- Chief Executive Officer

Yeah, thanks, Mario. Look, I think it's a combination of good work we've done and, you know, popular use cases. We know that the whole home solution has been a very popular solution during COVID, and that has helped us as compared to, say, apartments in cities where we might be less strong. But on the what-are-we-doing side, you know, we felt a tremendous amount to work on the brand, to land the brand, to make people really think about it as a primary source of -- Vrbo as a primary source of vacation options.

We've invested more than ever, much more than ever in that brand. And we've really driven it hard. And as I mentioned, you know, more than half our users so far this year, our customers have been new customers to the experience, and we think the experience is great. So we do think that we have sustainably landed, you know, the experience and the use case and the brand, and that will continue to benefit us, you know, for many years to come.

How share exactly shakes out when the market moves back or people who go into cities -- you know, things will change. We're not strong everywhere in terms of Vrbo supply. We are more focused on leisure destinations. But we think we have sustainably put Vrbo in the minds of many people.

And the other brands in other parts of the world that are strong, like Stayz in Australia, etc., and that is really a powerful long-term benefit for us.

Mario Lu -- Barclays -- Analyst

Great. And just a quick follow-up. In terms of the new users onto the platform, have those user behavior, you know, kind of matched those of prior users? Or have they been stronger during this time? How should we think about the new cohort? Thanks.

Peter Kern -- Chief Executive Officer

Yeah, I think it's early to say. You know, I'd like to tell you that people use Vrbo every two weeks, but they tend to need vacation time, and they tend to need school vacations, and other things. You know, we'll know more as things unfold, but again, as I said, you know, bookings for next year are already running well ahead of this time last year when there was a lot of pent-up demand for Vrbos already. So I think, you know, we are seeing the multiplication effect of adding new successful customers to the experience and piling those things up and people figuring out that they better book next summer, they better book next Christmas, they better book spring break.

And that's really a powerful wheel, you know, cycle that works for us. So we're really excited that, you know, we've added so many happy customers to the experience, and we believe there will be tremendous long-term value from them.

Mario Lu -- Barclays -- Analyst

Great.

Peter Kern -- Chief Executive Officer

Thanks.

Operator

Thank you, Mario. Our next question comes from Doug Anmuth of J.P. Morgan. Doug, your line is now open.

Unknown speaker -- J.P. Morgan -- Analyst

Hey, this is Daniel for Doug Anmuth. Thanks for taking the questions. First, Peter, you talked about improving the user experience a few times in your prepared remarks, so I assume, you know, combining the loyalty program is one of those. But curious to hear where you see the biggest opportunity looking ahead.

And then, secondly, could you guys talk a little bit about how your book to [Inaudible] looks like today and how that compares to what you saw earlier in the year and historically?

Peter Kern -- Chief Executive Officer

Sure. I'll take number one again and let Eric take number two. I would say, frankly, we see enormous opportunities across a wide swath of work to improve the customer experience. Some of that is, yes, things like loyalty, you know, things that we can do to enhance on what it means to be part of our platform.

But it's also in the product, it's also in payments, it's in our CRM relationship with customers, how we give them information, how we reveal and give them discovery and find the right products and the right value at the right time. All of those things are real opportunities and ripe for innovation. You know, we invented this industry 25 years ago. And, you know, I wish we had done more along the way to innovate for the customers.

We've done a lot, but there's tremendous opportunity ahead for us in virtually everything we do, from service to on the product, to how they discover and book multiple products in a trip, to how they get informed about cancellations or delays or other things in the trip and how the app becomes their companion in terms of the experience. We are working across all those fronts and, you know, determined to keep bringing innovation to the customer every, you know, week, month, quarter for the next many years in a way out of velocity, we haven't done in a long time.

Eric Hart -- Chief Financial Officer

Yeah. And then on that, your second question, just on booking [Inaudible], we continue to see it revert back in trend toward more of what we would have seen or expected in 2019 though it still is a bit skewed. For example, in the hotel side, it continues to be a little bit on the shorter-term side than Vrbo, a bit on the longer-term side of the macro level. So still a little bit impacted by COVID and booking patterns, but generally trending back to normal levels.

Unknown speaker -- J.P. Morgan -- Analyst

Great. Thank you.

Eric Hart -- Chief Financial Officer

Thank you.

Operator

Thank you, Doug. Our next question comes from Jed Kelly of Oppenheimer and Co. Jed, your line is now open.

Jed Kelly -- Oppenheimer & Co. Inc. -- Analyst

Hey. Great. Thanks for taking my question. Just what you mentioned on the loyalty program across all the brands, can you sort of talk about, you know, how your tech stack is going to be able to do that, sort of merchandise, say, flights with Vrbo and then developing more of like a vertically integrated tech stack around your loyalty program?

Peter Kern -- Chief Executive Officer

Yeah, well, I wouldn't describe it quite that way, Jed. But what -- the way I would think about it is we're building every domain where we -- you know, that we own. So think loyalty, checkout, etc., to be multi-tenant and to work across our brands and our partners because we have many, many B2B partners. And in doing so, we enable, you know, our brands or multiple of brands to live on one stack, to live in one currency if they wish, to allow you to burn that -- earn that currency and burn that currency wherever you want.

And, you know. this is one of the powerful things that -- you know, we talked about new Vrbo customers coming on the platform, but imagine when they're not only in the Vrbo product stream and enjoying that, but then they are earning value that they can use across air and other things when they have different travel needs. And likewise, the inverse, you know, the Expedia and Hotels.com travelers who might want to rent a Vrbo for a vacation. So, you know, that expansion of being able to spend across all those brands, that architecture for our technology, which is really building everything we do into multi-tenant ultimately having all our, you know, one app all on one stack, and one way.

That doesn't mean we want to separate brands, but they'll run on the same technical infrastructure. They'll have their own differentiation for brand, etc., or product, but it's all going to be built for multi-tenant. It's all going to be built for us and for our partners. And we have, you know.

the richest dataset, really -- travel dataset in the world. And that dataset powers all our machine learning, all our AI, and our ability to innovate constantly in terms of what the customer sees, how the partners participate. And that's just super powerful once we get it right. Now, there's a lot of work still to do, but we can see the path now and we're all aligned on that path.

Jed Kelly -- Oppenheimer & Co. Inc. -- Analyst

And then, any update on where you are in terms of having more Vrbo supply on Brand Expedia?

Peter Kern -- Chief Executive Officer

Yeah. I mean, it's tied up in the same question, Jed, which is, we have Vrbo supply on Brand Expedia, but the experience isn't terrific. It's a little disjointed for the customer. We can't do everything.

This is the -- one of the many things that are the power of bringing these tech stacks together that allow us to seamlessly move content around onto different stacks, make the checkout process seamless, make the servicing seamless, make it all feel like it's coming from the right place. You know, It's not just one piece. It's not just about getting the content up. It's got to work all the way through the customer experience because we're in the business of getting and retaining customers, not just getting transactions.

So, you know, that is a process we need to solve end to end, and it is more than just, you know, what you've historically heard about on, "Hey, can we get the contact on Brand Expedia?" Now we need to do it. It's a big opportunity. Frankly, it's one of a dozen of equal opportunity, but all of it is enabled by getting the tech right.

Jed Kelly -- Oppenheimer & Co. Inc. -- Analyst

Thank you.

Peter Kern -- Chief Executive Officer

Yup.

Operator

Thank you, Jed. Our next question comes from Andrew Boone of JMP Securities. Andrew, your line is now open.

Andrew Boone -- JMP Securities -- Analyst

Hi, guys. Thanks for taking the question. So with travel coming back and booking calling out, leaning into marketing channels yesterday, can you talk about any changes you're seeing to the competitive dynamics within performance marketing? And then, question number two is with -- it sounds like nice progress being made on the technology rebuild, kind of restacking. Can you help us just more tangibly understand what this amoks? Do you have any examples that you can call out? Thanks so much.

Peter Kern -- Chief Executive Officer

Yeah. You're on my favorite topic there, Andrew, on the second one, which is, you know, there are myriad opportunities. We have massive opportunities on the CRM front. We are not at first adequately, and the app is not a seamless product across all our brands.

That's a huge opportunity, the ability to sell multi-products, which we've been a leader in the industry for years, but honestly could be so much better at, in terms of how our checkout tabs work and how we get there. So there's -- I mean -- and everything I just said is measured in the billions or tens of billions of GBB opportunity, in my opinion. So I think they are really all over the place, and many of them unlock and enable really big opportunities on the B2B front and our ability to power our partners, power our suppliers, etc. So it's really -- you know, I can give a dissertation for the next two hours on it if you want to miss the Airbnb call.

But in the meantime, you know, suffice it to say that there are dozens of them around the company, and they are big rocks and big opportunities. As far as travel coming back and our friends leaning into marketing, you know, we've kept a pretty consistent model. We've leaned into brand marketing. And frankly, we've been leaned into brand marketing even when maybe our brand marketing could be better and sharper, and that's why we rebuilt that team.

We're bringing the creative teams in-house now and really going at it in a different way. But we expect to be balanced. We've seen our competitors move around and gyrate a bit. We've kind of kept to a balance between brand and performance.

We feel like there's opportunity to be more aggressive as our performance marketing machine gets sharper and better and all the tools right. We're seeing vectors of opportunity that we can lean into. So we definitely will have opportunities to lean in, and I'm really excited about what our brand teams are going to do. Our brand teams are, you know, second to none in the industry.

We will be the best in the industry. And our performance marketing is phenomenal and finally brought together in a way that will be really powerful. So I think what that balances -- you know, we'll have to -- as I mentioned, the market's got to normalize. We don't exactly know yet.

But it is a virtuous cycle, the better our brand marketing is, the better our performance marketing will do. And we believe strongly in both, and we'll continue to lean in, in a balanced way. I think our friends have gyrated a little more than us in and out of some of those things.

Andrew Boone -- JMP Securities -- Analyst

Thank you.

Peter Kern -- Chief Executive Officer

Yup.

Operator

Thank you, Andrew. And our penultimate question comes from Brian Fitzgerald of Wells Fargo. Brian, your line is now open.

Brian Fitzgerald -- Wells Fargo Securities -- Analyst

Thanks, guys. Very thorough call. We want to ask a little more color on the mechanics of the GBT Egencia deal. We think Egencia traditionally has gone to market with low air fees and make up for that by making margin on hotels, leveraging the supply footprint.

I just want to check on the mechanics and see if the margin there would be comparable to Partner Solutions as a whole, or any other color there. Thanks.

Eric Hart -- Chief Financial Officer

Hey, Brian. It's Eric. I'll take this. And thanks for the question.

And I don't mean to be flipping in my response, but ultimately, I think you've got to ask GBT and Egencia going forward what their ultimate strategy is around how they plan to monetize and develop customer solutions. I can say that they plan to run Egencia to be a core part of their offering, and in fact. they expanded into some of their existing customer base. So we see a great opportunity with that relationship that we have.

But we see a great opportunity. And the equity component that we have, we also see on that EPS side, not only for the existing Egencia volume but also potentially upside with some of their other volume as well.

Peter Kern -- Chief Executive Officer

And I would just add, Brian, that, you know, our goal longer term is to continue to export more of our technology to power more of our partners. And we think that is our true advantage. And so, you know, as a partner, we hope that, you know, we find more ways to help Amex GBT, you know, monetize their customers better long term and then serve their customers better. So we'll be working on them.

Brian Fitzgerald -- Wells Fargo Securities -- Analyst

Very clear. Thanks, guys.

Peter Kern -- Chief Executive Officer

You bet, Brian.

Eric Hart -- Chief Financial Officer

Thank you.

Operator

Perfect. Our final question comes from Dan Wasiolek of Morningstar. Dan, please proceed.

Dan Wasiolek -- Morningstar -- Analyst

Hey, guys, thanks for taking the questions. Just two. So on the verbal bookings strength you talked about for summer '22, wondering if you have any comments looking at rate and occupancy, the split between that. And then the second one, just direct mix, kind of maybe how that's been trending and how you see that direct mix evolving with the investments you're making in tech structure, Vrbo, and loyalty.

Thank you.

Peter Kern -- Chief Executive Officer

Yes. So I'll kind of take those in reverse, Dan, I think, which is, you know, Vrbo has consistently had a very strong direct business. I mentioned our continued investment in brand across the globe really on Vrbo, or its sister brands. The -- you know, we mentioned, I think, two or three quarters ago that we got out of performance marketing for Vrbo in the U.S., and it benefited from that with more direct traffic and having felt the effects of it.

So I think we feel very good about the direct nature of that business. As far as how the product will continue to improve, how loyalty will add to it, again, that's just other veins of opportunity for us across our Expedia, you know, customer base, our hotels customer base, etc. So we want to create that, you know, universe of people that want to move between our brands, and use them, and build value, and use that value. So I think we will continue to see that.

As far as rate and occupancy goes, you know, rates have been -- ADR has been very strong throughout COVID. There's been a lot of competition for the product. And owners and managers know that, and they have pushed price where they could. And so, we've seen a lot of, you know, price increases and those have helped.

You know, there seems to be no abating of those. And likewise, occupancy in those compressed markets. You know, if you want to be on a beach in the Southeast or on a beach in Hawaii at Christmas, good luck. It's -- can't be done.

So, you know, we're going to keep seeing that. I think that's why you're seeing this effect of, "OK. I want to get out in front next summer and get the house I want." And that's a great -- that's smart for the consumer and it's great for the business, and it gives us a lot of confidence going into next year that, you know, this use case will continue to be highly top of mind for many consumers. And we are well-positioned.

So with that, I will thank you. Thanks, Dan. Thanks, everybody. I hope you all stay safe.

Looking forward to watching travel recover, and feel free to start that corporate travel now that it's safe out there. Thanks for your time.

Eric Hart -- Chief Financial Officer

Thanks, everyone.

Operator

[Operator signoff]

Duration: 50 minutes

Call participants:

Patrick Thompson -- Senior Vice President, Corporate Finance

Peter Kern -- Chief Executive Officer

Eric Hart -- Chief Financial Officer

Naved Khan -- Truist Securities -- Analyst

Kevin Kopelman -- Cowen and Company -- Analyst

Zach Morrissey -- Wolfe Research -- Analyst

Eric Sheridan -- Goldman Sachs -- Analyst

Mark Mahaney -- Evercore ISI -- Analyst

Mario Lu -- Barclays -- Analyst

Unknown speaker -- J.P. Morgan -- Analyst

Jed Kelly -- Oppenheimer & Co. Inc. -- Analyst

Andrew Boone -- JMP Securities -- Analyst

Brian Fitzgerald -- Wells Fargo Securities -- Analyst

Dan Wasiolek -- Morningstar -- Analyst

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