Expedia Stock

Okay. I think in the interest of time, we're going to get going here. Hopefully, we'll get that door closed. Thanks, everyone, for being here for our next fireside chat. It's my pleasure to welcome Expedia to the conference this year.

Ariane has never been to the conference before. We love first-time guests to Communacopia + Technology. Thank you for making the time to be here. I've been looking forward to this conversation because the company has been on such an interesting journey since you took over a couple of years ago.

But first, let's get the legalities out of the way. Before we begin, I'd like to remind everyone that today's discussion may include forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ materially. Please refer to the company's SEC filings for additional information on relevant risk factors.

Okay. So the level -- now that I've got -- I do have a law degree. So I always joke that I've dusted off the law degree whenever I have to read these things. To level set for everyone, you've been CEO, you've been in this role now for a little over 2 years. What have been your biggest priorities for Expedia when you reflect back on the journey you've been on in the last couple of years? And how do you think that sets up for your priorities going forward, just to level set.

Yes. So first of all, thank you for inviting me. It's great to be here as a first-timer. So when I took on this role just over 2 years ago, the priorities were clear. It was bring the consumer business back to faster growth, continue the strong performance of our B2B business, a large, fast-growing business, and run the company more efficiently.

If you look at our company compared to some peers, you can see that there's a gap in the margin. So it was really about how do we accelerate the growth while running the company more effectively. We set out 3 strategic priorities to allow us to achieve that.

The first was about creating more traveler value because ultimately, travelers are our end consumers. And so we need to be obsessed with how are we making sure that we are spending our time and efforts on things that matter to them. And we've made great progress there.

If you look at our supply on Vrbo, we've got now 40% of our transactions that are happening on promotional rates. We now have -- we're the only OTA with a complete air marketplace in the U.S. We were the first with Southwest, then with Allegiant.

We're doing a ton of work on personalization in the product so that travelers can move faster from search to find to book. And that's reflected in the fact that, for example, on brand Expedia, we have the highest attach we've ever had. So the first thing is really deliver more traveler value through the products, through supply, through servicing.

The second is to continue to accelerate and to invest in where we see the fastest growth opportunities. And that translates into our investments in B2B. This is a business that's grown double digits for 20 quarters in a row. It means investing in these new AI experiences. AEO is small, but it's still our fastest-growing channel. And then our third priority was run the business more efficiently, make every dollar matter, whether that's in our marketing spend, whether it's in our cost base, it's really just having a mentality of making every dollar matter.

And if you look at where we are now 2 years later, we have accelerated the consumer business. We've expanded margins meaningfully. And we've actually doubled our free cash flow over the last sort of -- compared to 2 years ago and now, on a trailing 12-month basis.

So all of that brings us to where we are today. The strategic priorities remain the same. And you can just feel in the company, it's a simpler, faster, more agile company. There's still always much more to do, but those were really the foundational things we've done over the last couple of years.

Okay. That's a really great way to think about it. Against that backdrop, what do you think is the greatest opportunity to unlock growth when you think about going forward?

Okay. I'm going to surprise everyone, AI. One, I would say, you have to remember, travel is a massive industry. It's over $3 trillion. It's still fragmented. It's growing faster than GDP. And Expedia Group is a company that's got incredible assets in our B2B business. Brand Expedia is the biggest consumer OTA brand in the U.S. We've got these brands in Vrbo and Hotels.com that are wonderful brands as well. So we've got a market and assets that are really attractive and that are ripe for growth.

When I think about what's going to accelerate it, I do think about AI. And it's how are we using AI in our products? How are we using it to be more personalized? As we've introduced things like natural language search in the product, while it's not yet delivering better conversion, it's giving us so much more information about travelers that over time will allow us to have deeper relationships with them.

AI is allowing us to get more throughput. So the way our teams are using it internally, our tech and product teams are able to get 40% faster cycle times. Our marketing teams are using agentic solutions, both our own, and those of our big ad partners in order to have better creative, more campaigns, get better understanding of our returns so we can lean into where we see the best returns.

And then AI can deliver growth through these new interfaces, whether it's ChatGPT, whether it's Claude, whether it's new personal agents, we see those as opportunities for our brands to show up and go meet customers where they are and then bring them back into our brands directly.

Okay. And there's a lot in there that I want to probably unpack because I think there's a lot to discuss. One of the conversation points over the last 2 days of the conference has been the current state of the consumer. Travel, obviously, right at the forefront of that debate. Travel also has been an area where there's been gains in terms of wallet share by consumers as experiences in travel has started getting uploaded in the economy.

What is the consumer telling you today about the demand you're seeing in the travel industry more broadly? And are you seeing any differences by geography or anything else to call out?

So when we had our second quarter earnings about a month ago, we said that the consumer is resilient and that the trends we've seen in July were consistent with what we've seen in the second quarter. Despite oil prices, despite the fact that air ticket prices are up, people are still prioritizing travel. And it's probably one of the few good things that has stuck around after our experience in COVID, which was sort of this human need to want to travel.

Certainly, we're seeing more strength at the high end than on the low end. There was more strength in domestic travel. Still U.S. outbound is strong, but my interpretation is that with gas prices up, maybe people are choosing to stay a bit more local.

This summer was great. I mean you saw live events are big drivers of travel. People are spending on that. And even now, our searches for travel on Labor Day were up 35% for vacation destinations like Las Vegas, places in Mexico. And when we look out to where the most searches are in the fall, it's more cities. It's New York, Boston, Chicago.

So people are still traveling. One thing I would add, though, is that people are also looking for good deals. We see more and more use of our budget filter, of our all-inclusive filter. And to me, that's an indication of people still looking for deals and looking for their dollars to go further.

Okay. Very clear. B2B, which is something I feel like I talk to investors about all the time as part of broader education about the company.

You and me both.

Exactly. You came out of that business. You grew that business. Talk to us a little bit about the differentiation of the asset that you're building around B2B and how it can continue to scale in the years ahead.

Yes. So I started running our B2B business back in 2014. As you said, it's amazing if I think back then, I don't know that in my wildest dream, I would think we are where we are today, but it's really been fun to watch that business evolve and to watch us be able to help partners all over the world build their businesses and travel. For those of you who don't know as much about our B2B business, what we basically do is we take our assets, whether it's our technology, our supply, our content.

And we bring those to bear to partners who want to build their own travel programs, whether it's an airline that's looking to add hotels as part of their loyalty program because, actually, people use their airline loyalty points to burn on hotels, whether it's a bank that's using travel as part of their credit card program, whether it's an online travel agent in Indonesia who says, I'm going to source my hotels locally in Indonesia, but I'm going to use Expedia in order to access the hotels elsewhere around the world.

So as we think about sort of the asset that we were building or the business that we've built, it starts with, one, understanding who our partners are. And we're clear on the segments. There's the, as I said, the airline segment, the bank segment, the OTA segment, the corporate travel segment, understanding their needs.

There are some things that are constant. Everybody wants great technology with uptime. Everyone wants really good supply. Servicing, I think, is a real differentiator for us because if you're building a travel program, but you're a non-travel company, you want to make sure that the customer experience you're able to give is commensurate with your overall offering to that person. So we've done a lot of work taking the servicing technology that we use for our own brands and putting a partner wrapper around it.

So I think our -- I wouldn't say secret sauce, but what's made us successful is listening to the partners, the technology, supply, servicing, all the account management and financials, and the wrapper that goes around it, and just innovating based on what we hear from partners. And that is why over the last year, we've built out new lines of business.

We acquired a company in activities called Tiqets. We just closed a company in car called CarTrawler. And there, the idea is that as a partner is building their travel business, we want to be able to serve all of the needs that they may have, and these 2 lines of business were good opportunities.

Okay. Against that, when you think about how investors should think about the margin profile of the business. We talked a little bit about the compounding nature of the growth of the business and some of the new opportunities. How do you think about the output of the business in terms of profitability in B2B?

It is evolving. It is true. There are some investments that we are making that could put short-term pressure on margins, but we're thinking about it for the long term. Again, it will depend on what is the partner mix. But overall, I think you can have dollar additive where margin rate may not be as strong. But this is a business that, in the years to come, will continue to grow, we'll continue to add dollars. And I would add that at our company level, we continue to see opportunity for margin expansion.

Okay. That's helpful. Maybe turning to alternative accommodations. If we went back 18 months ago, you were sorting through different elements of tech replatforming and brand dynamics inside the company. And now there's some operating momentum at Vrbo. Talk a little bit about what are the opportunities ahead for Vrbo and how you think about continuing to grow supply measured with continuing to grow demand on the platform?

So we -- as you said, right before I stepped in, we had gone through a number of years of replatforming. So we're replatforming the consumer brands, both on the back end and on the front end. Because of that, it -- I would say it sort of kept us from getting to some of the things that we needed to do for individual brands.

So when I talked about my first pillar of the strategy, which is traveler value, it was all focused on, for Vrbo, what are the things we can do to deliver more traveler value. And one was clearly supply. We had not yet gotten to having promotions. So we had partners who would have been willing to give us promotional rates for our travelers, but we haven't done the build-out because we were working on replatforming.

We fixed that a little bit over a year ago, we got Vrbo promotions. And as I said last quarter, 40% of our bookings came from promotional rates. We have been able to do a lot of work around payments and various payment types, making the checkout flow easier. We've been able to do a lot of work in the funnel just through personalization, helping people better get to the property they want.

And then a lot of work on trust. Vacation rentals is actually a category where people have lower trust than other places in travel that what they have booked is what they're going to get. And we believe that Vrbo has a real opportunity to stand out there.

That's why we have our Premier Host program. It's why we came out with VrboCare, which is really telling a traveler, if there's something that goes wrong in-trip, we will be there to take care of you. Those were all things that we hadn't been able to get to as we were doing the replatforming.

And my last example, I'd say, is even on Vrbo partner support, last quarter, we rolled out agentic voice, and now 10% of our partner queries are resolved with agentic voice, which then gives us capacity to help them with other things.

All of that to say, we're still in early innings. We're very focused on the North America market. We have some Vrbo brands outside of the U.S. and outside of Canada that are smaller brands, that they're nice brands, but I'm focused with the team on how do we continue building the value proposition, creating traveler value, bringing value to our hosts because hosts love the Vrbo guest. And again, I would say we're early innings in the overall Vrbo story.

Maybe just one quick follow-up there is when you think about Vrbo as a stand-alone brand and a stand-alone operation and then part of the broader Expedia family, how do you think about alternative accommodations, both stand-alone but also more broadly across your multi-brand strategy?

It's actually one of the beautiful things about being a multi-brand company and also having a B2B business, is that we're able to bring demand to our partners, not just from one brand, but from multiple of our brands and from our partners. And what that means for vacation rentals is we now distribute vacation rentals on brand Expedia.

So if I'm a Vrbo host, I'm going to be able to get demand for Vrbo, and I can get it from Expedia. It's not just about having the supply show up. It's also about having a really good experience in product.

We're now on brand Expedia at a run rate -- or last quarter, I said at a run rate of about $1 billion of vacation rental bookings a year. That's up meaningfully from where it was a year ago. And it's a great value proposition if you're an Expedia traveler because it means you open the app, it's your one-stop shop for everything, including vacation rentals and hotels.

And as I said, Vrbo, we're very focused on North America. We have some business outside of North America. But if you think about Expedia, we're able to go in a lot of places and bring demand to our VR partners through that.

Okay. Very clear. You talked earlier about what excites you for the next couple of years, AI. I think one of the biggest investor debates right now with how the travel funnel might evolve as a result of AI. And what's been coming up at the conference so far has been the elements of how much of AI will take place on a platform like yours versus through agents that you might partner with. Maybe just level set with what your working view is about how to plan for any evolution or changes that might come through into the travel funnel as a result of AI.

So it's a big question for everyone. And it's funny because we were talking about it a year ago, we sort of said we're going to keep on experimenting, and we continue to experiment. What I am very confident of is that our consumer business today, 2/3 of it comes direct. These are people who are coming direct to us and booking.

We've got to make sure that our products and our brands and our apps have incredible personalized experiences, some of which are natural language conversations, some of which are AI for personalization without people even knowing that there's AI behind it. So we're doing a lot of work in our own products to make sure that they're sticky. They're helping people make their travel decisions well.

At the same time, the 1/3 of our business that doesn't come direct is coming from a number of places. And as you have these more horizontal agents or as you have chat experiences like ChatGPT or Claude, we need to make sure that our brands are showing up there.

What you saw over the last year us do is experiment, whether it's in organic with AEO, whether it was with agentic browsers, whether it was with the micro apps, we are constantly -- and more recently, with paid ads in ChatGPT, we -- I wouldn't say overinvesting, but we're actively investing to make sure we are learning and experimenting early in all of those.

And it's going to be the same thing with these horizontal agents. The reason I see these as ways to bring travelers into us is ultimately, people want to know when they're booking a trip that they can -- they're booking with someone who will take care of them if something goes wrong, someone who they can trust.

And so we have to keep on doing the work. As we're doing all these integrations and experimenting is to keep on doing the work for each of our big brands to build the brand value proposition, to have people understand what our loyalty program is, that when you book a flight on Expedia, if you're a Platinum member, you get price drop protection.

So if the price goes down, you get the money back in OneKeyCash. But if you buy a flight, you're going to get a hotel potentially for 20% off. But if something goes wrong on Vrbo, we're going to take care of you. So even if -- the way these agents evolve is that you conversationally discuss and then make the booking in the agent, it's still we want it to be with the Expedia brand or the Vrbo brand.

The last thing I would just say is what we've also learned over the last year in the work with some of these partners is that just a chat interface purely with text is not always the best way to shop for travel. As we were evolving the partnerships with a couple of these big players, as we started to add photos, as we added content, as we added descriptions, as we added multiple properties instead of just one property, you started seeing more engagement.

So again, what we've learned over the last year is these things are going to evolve. They're going to move quickly. We have to, on the one hand, continue to invest in our apps, in our brands and value propositions and be working with all these big tech players on how their interfaces will evolve.

Okay. A lot to look forward to and see how it all evolves in the year ahead. But one of the interesting things you mentioned there, though, was the direct traffic and the customer relationship part of your business today. Can we build upon that and talk a little bit about what you're trying to build around loyalty, personalization, app usage?

To your point, if you can build upon that 2/3 and solidify that 2/3, that obviously gives you a lot of room to experiment with where the world might go. Otherwise, talk about some of these initiatives that build upon the skew of the business that already relies on direct.

Yes. So we -- actually, last December, we hired a new Chief AI and Data Officer, Xavi. And he's been doing a lot of work on the underlying personalization in our marketplace because we have so much data that we can use to help a traveler make a better decision. By the way, people are happiest when they're planning. So it's not always about shortening the time to planning. It can be about how do you make planning delightful.

There's a lot of data that we might not have been using or like these natural language searches, we're getting 60% more information about a traveler, about their intent through that. So what I'm seeing is immediate impact from using the data from personalization, whether it's recommendations on attach, whether it's just recommendations in the sort order and ranking of the hotels, or whether it's which filters are we putting on the top or which filters are we prefilling for you.

So there's a huge amount of personalization that, I think, can help us not only with our direct business, but also getting better converting the traffic that comes from paid channels. That's a big one. Loyalty is another big one. We made some changes to the Expedia loyalty program earlier this year to put more value into our higher tier members and actually to remove some of the loyalty earn that we didn't think was having an impact.

But one important thing to keep in mind on our loyalty program is much of it is our partners actually providing discounted rates to our travelers. So that's partner funding, and they do it because they like the travelers they can get from us. So there's a part of our program that we're funding, and there's a part of the program that our partners are funding because of that sort of nice flywheel that they're getting of the demand that we can bring them.

Okay. A couple of more topics I wanted to hit before I lose you. Advertising media has increasingly become a larger contributor to growth to the business. How do you think about the scope for that to continue to be a healthy contributor to growth going forward? What's the opportunity set look like in advertising and media?

There's absolutely a big, big market opportunity in advertising and media, and it's got to be additive to the marketplace. When I think about the growth prospects, first, I should say, we brought in a new leader of advertising, who's amazing. I'm very excited for what he's working on.

But if you look at the advertising that comes from our supply partners, which is a big part of our ads, there are still many supply partners that aren't using any of our ad products, whether it's sponsored listings or our display products. So there's an opportunity to get further penetration there.

As an example, we just launched sponsored listings on Vrbo, where that was something that wasn't available before. And what I love about the advertising products when it comes to our supply partners is it's part of helping them get more out of our marketplace.

There's also real opportunity with non-endemics. If you think about the customers that we have, we know a lot about travel intent. We also know when people have booked. And so if there are ways that we can bring that qualified audience to advertisers in a way that's additive to our travelers, that's an opportunity. So I think you'll hear more over the quarters to come, but it's a big, important business for us.

Okay. And then bringing it all together, we've primarily talked about where you're going to go from a platform standpoint, from a growth standpoint. Obviously, you have healthy margins and you made margin progression since taking over, running the company day-to-day.

Talk a little bit about the balance you want to strike between making sure you're making the right level of investments in growth, but also continue to deliver on elements of what investors always want, which is profitability that goes alongside with that growth.

We -- again, as you look at the last 2 years, we've expanded margins quite a bit. And at the same time, we've continued to invest in our growth businesses. That was why on my sort of 3 strategic pillars, the second one was invest where we see the biggest opportunities for growth because no one wants to expand margins massively, but then in 2 years, you hit a wall because you haven't made the investments that you need.

We had the opportunity as we looked at our marketing efficiencies to not only get more efficient with the dollars that we were spending, but also to identify some of the money that just wasn't getting the returns that we wanted.

And I recognize that pulling away some of that marketing meant that there was some volume that we were giving up, and we made a choice that it wasn't something that we thought was going to be sustainable over the long term.

I don't at all feel like I'm depriving us of being able to invest. I think because we're managing our cost base, because we're using technology to be able to automate things, because we're getting smarter on understanding the incrementality of our marketing returns, we've been able to expand margins while investing for growth, and you're also seeing the acceleration of the business that's related to that.

But we will -- I think I see Derek in the back of the room, our CFO. We continue to manage very closely the expansion as well as the investments for growth.

Maybe just one follow-up. When you layer on the types of things you want to invest in against the strategic priorities you've articulated or laid out, what do you see as the most critical things you need to invest in to make sure the company capitalizes on the growth potential looking forward?

I think the #1 thing we need to do is make sure the company is moving fast, is agile, is getting great throughput in product and tech because ultimately, growth is going to come from innovation. We've just done some work with our product and tech team. I mean they've done a fantastic job in using AI really across the software development life cycle, from prototyping to building products and then deploying them.

But we've just recently moved more into a squad working model. So I think the #1 thing we need to do is just make sure we're moving fast and getting more throughput to innovate.

Okay. And then bringing it all together in the last few minutes, we have, obviously, you talked to investors about this business. You've laid out what you're most excited about. What do you see as some of the biggest gaps of underappreciation of what you're building and scaling that you want to try to close with investors so investors marry some of what you're excited about for the business going forward?

I think sometimes -- when I took this role and I talked to investors, they sort of said, Ariane, what's tough about Expedia is it's really complicated. And you tell us you're going to execute on something, and then there hasn't always been a consistency in execution. So we -- the management team have worked very hard on being consistent, like say-do ratio, tell you we're going to do this, we're going to deliver, and you continue to see that.

At the same time, to help investors get an understanding of we, again, operate in a large market, growing faster than GDP, we've got incredible assets with Expedia and Vrbo and Hotels.com and this amazing B2B business. The scale that we operate at and the diversification of our business, just all of that is sort of an unbeatable combination.

So you've got the right team, a great market, and some really great assets that is front-footed in a world of AI, and all of that equals opportunity.

Well, look, I really appreciate having had the opportunity to talk today. Thanks so much for being here. Please join me in thanking Expedia for being part of the conference.

Good day, everyone, and welcome to the Expedia Group Q2 2026 Financial Results Teleconference. My name is Holly, and I will be the operator for today's call. [Operator Instructions]

For opening remarks, I will now turn the call over to VP Investor Relations, Rob Bevegni. Rob, please go ahead.

Good afternoon, and welcome to Expedia Group's Second Quarter 2026 Earnings Call. I'm pleased to be joined on today's call by our CEO, Ariane Gorin; and our CFO, Derek Andersen.

As a reminder, our commentary today will include references to certain non-GAAP measures. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in our earnings release. Unless otherwise stated, all growth rates are on a year-over-year basis and any reference to expenses exclude stock-based compensation. We will also be making forward-looking statements during the call, which are predictions, projections and other statements about future events. These statements are based on current expectations and assumptions, which are subject to risks and uncertainties that are difficult to predict. Actual results could materially differ due to factors discussed during this call and in our most recent Forms 10-Q, 10-K and other filings with the SEC. Except as required by law, we do not undertake any responsibility to update these forward-looking statements.

This call is being webcast on the Investor Relations section of our website at ir.expediagroup.com. A replay will be archived on our site. A slide presentation containing financial highlights has also been posted to our website. Starting this quarter, we expanded the presentation to provide additional context on our performance. For today's call, Ariane will begin with a review of our second quarter results. Derek will then provide additional detail on our financial performance as well as our third quarter and full year guidance. After our prepared remarks, we will turn the call over to the operator to begin the Q&A portion of our call.

And with that, let me turn the call over to Ariane.

Thanks, Rob, and good afternoon, everyone. We had a solid second quarter, delivering strong financial results while making tangible progress on our strategic priorities. We exceeded the high end of both our top- and bottom-line expectations for the fifth quarter in a row, growing bookings 12%, revenue 14% and adjusted EBITDA 23%. We delivered new product experiences, expanded supply across our marketplace and took an important step in building our one-stop B2B travel shop. Based on our first half results and the ongoing trends we're seeing, we're raising our full year guidance, and Derek will cover that shortly.

Turning back to the second quarter. Consumer spending was healthy, in particular in the U.S. Consumers continue to prioritize travel with longer length of stay and longer booking windows, even as air ticket and hotel prices rose. The World Cup generated modest incremental demand late in the quarter. A lot of bookings happened after the tournament began, a pattern we anticipated and we're well positioned to capture. Total booked room nights were up 6% with mid-single digits in the U.S., low single digits in EMEA, and low double digits in the rest of the world. Europe remained pressured, particularly outbound travel as macro headwinds and reduced air capacity weighed on demand while APAC rebounded from the disruption related to the Middle East.

Our market-leading B2B team delivered its 20th consecutive quarter of double-digit growth, underscoring the durability and the momentum of this business. Consumer bookings were up 8%, driven by our fastest U.S. growth in 15 quarters. Active loyalty members increased low single digits with faster growth in our higher tiers. Over the last 2 years, we've executed on our 3 strategic priorities: one, delivering more value to travelers; two, investing in our biggest growth opportunities; and three, driving operating efficiency and margin expansion. As a result, we've accelerated our consumer business, expanded margins by 4 points, and more than doubled our trailing 12-month free cash flow over that same period.

We continue to progress these priorities in the second quarter: first, delivering more value to travelers. It starts with product experiences that make it easy for travelers to plan and book their perfect trip. And AI is unlocking new ways to make these experiences simpler and more personalized. Last quarter, we launched new and updated conversational experiences, introducing natural language search on the Vrbo homepage and updating Property Expert and AI Compare in the hotel shopping flow. Our AI-powered personalization and recommendations keep getting smarter across all 3 of our consumer brands. On Expedia, our fastest-growing brand, this translated into another quarter of record attach rates. So travelers are getting even more value from booking their trips with us.

Traveler value also comes from having the best assortment and price and we recently achieved a few big milestones. In July, we became the first OTA to distribute Allegiant flights and achieve full coverage of U.S. commercial airlines. This partnership further reinforces our position as the most complete travel marketplace in the U.S. On lodging, we expanded our supplier-funded promotions. More than 40% of Vrbo bookings last quarter included partner-funded offers, and our May sale was the first campaign to exceed $1 billion in bookings for participating properties. These are clear proof points of the strength of our 2-sided marketplace, where travelers get better value and our supply partners capture incremental demand across rooms, seats, and cars.

Turning to our second pillar, investing where we see the greatest opportunity to drive growth. In our consumer business, our sharper measurement and targeting capabilities are allowing us to invest in the highest return opportunities and leverage our marketing spend. We're investing in newer surfaces like AI and social platforms where more consumers are starting their trip planning. AEO and social are 2 of our fastest-growing channels. And while agentic traffic remains small, it's a promising channel with high purchase consideration. We're deepening our partnerships with leading AI platforms. And during the quarter, we were an early adopter of ChatGPT's latest ad product and expanded our work across Google's newer AI services. And last week, we announced the acquisition of Layla, an AI conversational planning app, allowing us to capture new types of travelers while bringing learnings into our core business.

Finally, in B2B, alongside investing in our existing partnerships, we continue building toward our vision of a one-stop travel shop for partners. And in May, announced our intent to acquire CarTrawler, the leading B2B car rental and insurance platform.

Moving to our third pillar, driving operating efficiencies and margin expansion. We expanded margins by nearly 2 points in the quarter, driven by tight expense management and the consumer marketing leverage I just mentioned. Importantly, we're continuing to deploy AI to innovate faster and operate more effectively. On Vrbo, we launched an agentic voice solution to support partner inquiries previously handled by human agents. Early results are promising with faster resolution and lower contact propensity. More broadly, our agentic technology stack is allowing us to design and ship products faster, ultimately unlocking new capabilities for both travelers and partners. As we scale these capabilities, we're managing token costs thoughtfully while giving broad access to our teams.

In closing, we delivered strong second quarter results and are raising our full year outlook. I want to thank our teams for their hard work and our partners and travelers for their continued trust in us.

With that, I'll turn it over to Derek.

Thank you, Ariane, and good afternoon, everyone. I've had an exciting first quarter as part of the Expedia Group team and look forward to engaging with you all in the quarters ahead. Before I walk through our financials, you'll see that we've expanded the earnings presentation this quarter to provide additional details in an easier-to-access format. I'll focus my remarks here on the headline financials and guidance, so we can get to your questions a little faster.

Our second quarter performance exceeded the high end of our guidance, reflecting a healthy macro environment, continued momentum in our B2B segment, improved consumer marketing returns and ongoing cost discipline. Gross bookings increased 12% year-over-year, and this was driven primarily by 6% room night growth as well as 5% ADR growth on an FX-neutral basis. Revenue increased 14%, which exceeded our expectations entering the quarter. Foreign exchange was a tailwind for the business, contributing nearly 0.5 point of bookings growth and 4 points to revenue growth.

Adjusted EBITDA was $1.1 billion in Q2, representing a margin of 25.9%, which is an improvement of nearly 2 points compared to the prior year. The margin expansion was driven by a combination of cost efficiencies, consumer marketing leverage and the flow-through of higher volume. Adjusted EPS grew 36% year-over-year, which reflects strong earnings growth as well as the accretive impact of share repurchases over the past year. We continue to generate strong free cash flow, which reached $4.5 billion on a trailing 12-month basis, and this has fueled the return of capital to shareholders.

During the quarter, we repurchased roughly 880,000 shares for $200 million at an average price of $226 a share. This brought our year-to-date share repurchases to $900 million, which is roughly in line with the first half of last year. Our capital allocation priorities remain unchanged, including investing organically in the business, pursuing disciplined M&A in support of our strategic priorities and returning cash to shareholders in the form of dividends and opportunistic share repurchases.

For our third quarter outlook, we expect gross bookings of $32.2 billion to $32.8 billion, representing growth of approximately 5% to 7% year-over-year. This assumes the growth in bookings and room nights moderates relative to Q2, reflecting tougher comparisons as we lap faster growth in the second half of last year and an estimated 1 point FX headwind at current rates. We expect revenue of $4.65 billion to $4.75 billion, representing growth of approximately 5% to 8% year-over-year, including an estimated 1 point FX benefit at current rates. We expect adjusted EBITDA of $1.51 billion to $1.56 billion, implying a margin of 32.5% to 32.8%.

Margin expansion is expected to moderate in Q3 due to the lapping of prior year cost actions, ongoing investment in B2B growth and unfavorable net FX impacts. We expect the pace of margin expansion to improve in Q4 as some of these pressures ease and as we continue to drive operating efficiency across the business. Based on the strength of the first half and our assumptions for the third quarter, we are raising our full year guidance. We now expect gross bookings of $129.5 billion to $130.8 billion, representing growth of 8% to 9%, and revenue of $16.05 billion to $16.22 billion, representing growth of 9% to 10%. Our guidance continues to assume foreign exchange tailwinds of approximately 1 point for gross bookings and 2 points for revenue. We are also raising our margin guidance for the full year and now expect adjusted EBITDA margin expansion of 150 to 175 basis points versus last year.

With that, let's open the line to take your questions.

[Operator Instructions] Your first question comes from the line of Eric Sheridan with Goldman Sachs.

Maybe just one building on the prepared remarks. Would love to go as deep as you're willing to go on how you're thinking about the interplay between AI-native channels away from the platform, some of the efforts you're making to build AI solutions that are consumer-facing on the platform and traditional advertising channels as -- in terms of thinking about driving return on ad spend and conversion over the medium to long term?

I'll take that. So I'll start with what we're doing in our product. And I really think about it, sort of, in 2 categories. There's what are we doing with AI and our product right now that is delivering results in our core business. And then the second is what are we doing in our product that's not necessarily delivering conversion right now, but we know is helping us better understand travelers and is going to have compounding benefits over time.

So in that first bucket, it's using AI for better recommendations, for better ranking, for personalizing the UX and the content. And there, we are seeing immediate impact, and it's not only just improving conversion, but you can imagine as we're getting traffic, whether it's direct traffic or paid traffic, that is improving. In addition, I would say, just as an aside is all the work we're doing in using AI in our technology teams in order to increase our cycle time is allowing us to innovate a lot faster. So that's what we're doing in the product to increase conversion now.

Also in the product, we're introducing these natural language experiences like Vrbo natural language search on the homepage or these agents like Property Expert or AI Compare. Those are not driving conversion right now. But what we're finding is that you get over 60% more information about traveler intent and that allows us to deepen the relationship with the traveler. And over time, I believe that, that's going to drive, sort of, deeper conversion. So that's what we're doing in our product.

I also believe there's a big growth opportunity in getting access to travelers who are starting outside of our brands in these AI experiences. As a reminder, 2/3 of our bookings in our consumer brands come direct. But of the 1/3 that is coming through paid channels, obviously, AI experiences, whether they are with ChatGPT or Claude, Google's new experiences are new opportunities for our brands to show up there. It is early days.

I would say that's an area that's fast moving. The algorithms, the search UXs, all of that is moving really quickly. And so we're staying close to it and vigilant. We are testing and participating everywhere that things are evolving. And I see that over time as opportunities to bring more travelers into our business. There's a lot of complexity of how do you understand what the prompts are so that you can land them well in our product. But again, I see that as a big opportunity.

Your next question comes from the line of Justin Post with Bank of America.

A couple just on the B2B side, there could be some more competition coming down. Could you talk about the advantages you offer your partners and also the stickiness of the contracts that you have? And then obviously, lapping some of really good marketing efficiencies that started in the third quarter. How do you think about the potential for further marketing efficiencies from here?

Sure. Well, I'll take the first one, and then I'll hand it over to Derek for the second one. The thing about the B2B space is it's always been competitive. I've been in it for over a decade, and it's always been a competitive space. The good news is there's a very large addressable market for B2B partners. When I think about what we bring to the table, obviously, we have great supply and content, strong technology, really great servicing, great partner accompaniment, sort of, as we think about the integrations. So obviously, I'm not going to talk about individual partners, but some relationships are exclusive, some are not exclusive.

My view is we have to be proving day in and day out to our partners that they can trust us to build their business on top of us. I think it's been important for us for many years that it's a stand-alone business, a stand-alone P&L that has resources that it can invest on its own. And I'm excited about the investments we're making to build out the one-stop shop value proposition so that we can offer all components that a partner might need to build their travel program. And that was the announcement of CarTrawler this quarter, the acquisition we did of Tiqets. It's really so that we can have that complete one-stop travel shop from supply to technology to servicing and beyond.

Justin, as it pertains to the contribution of marketing to the operating leverage and margins overall, you're right, we did make substantial progress over the last year in terms of driving margins. And we are going to begin lapping that in the second half of the year. We had the substantial reductions in marketing spend and driving out inefficient spend, but also redirecting spend to more productive channels. And that's been a big contribution over the last year, and you can see that in the margins.

We also made progress on overhead as well. So it's a broader picture than just marketing. As we go into the third quarter and the quarter ahead in the second half of the year, we will begin lapping those things. However, the structural improvements that we've made on the marketing program are going to endure and give us a base to drive further efficiencies off going forward.

We've also continued to make incremental progress on the rest of the cost structure. And I'd just point to the fact that overheads were flat year-over-year in the most recent quarter even as revenue rose 14%. So we're committed to continuing to drive our strategic pillar of operating efficiency and scaling up margins as we go forward. And I think you'll see that reflected in the update that we made to the full year guide where we took the EBITDA margin expansion range up to 150 to 175 basis points for the full year.

Your next question comes from the line of Doug Anmuth with JPMorgan.

I have 2. Can you just talk about how some of your views just around geos have changed over the past few months? In particular, you mentioned Europe remains pressured, especially outbound and then also what you're seeing with APAC given some of the rebound there from the Middle East disruption?

And then, Derek, if you could also just, kind of, walk through some of those back half dynamics on margin expansion where you talked about moderation in 3Q and then stronger 4Q?

I'll take the first part and then Derek can take the second one. Just in terms of the geo trends, I mean the good news is we have a geographically balanced business. Certainly, our consumer business is 2/3 in the U.S., 1/3 outside of the U.S. and our B2B business is really the inverse. But we have supply that is able to respond to whatever the traveler demand is. Obviously, we're going to lean in more where we see the most demand and so where we see the greatest returns. My view is what we've always seen is over time, demand rebounds, sort of, across the world. So we'll take advantage when there's strength in one geo versus another, but we have a long-term North Star with continuing to grow our business in the areas we're strongest and then identifying some geographies where our consumer brands have relevance but haven't yet in our mind, gotten to our fair share.

And then, I mean, as it pertains to the go-forward margin side of things. Number one, I would reiterate, we remain committed to our strategic pillar of driving operating efficiency and expanding margins over time. In Q3 specifically, there are a few factors that will weigh on the margins in the very near term. One, as you mentioned, that we're going to lap some very substantial reductions in the cost structure from a year ago that will weigh a little bit on the margins in the near term. The other is we've also made progress not just on marketing, but overheads there. And then, we have some FX net headwinds that will impact us in Q3 that are really a factor on the margin as well.

That said, if you look at what I shared earlier about the update to the full year margin expansion guidance of 150 to 175 basis points, that implies that in Q4 at the midpoint, we'd be expanding by about 50 basis points there. So that we'll see some of the pressures that are specific to Q3 ease there, but we'll also see the ongoing benefits of our efficiency initiatives continue to build over time. So the margin expansion won't always be perfectly linear, but it is a very important part of the strategy and something that we're committed to continuing to drive out.

Your next question comes from the line of Jed Kelly with Oppenheimer & Co.

Great. Just circling back on B2B, getting a lot more investor questions just on competition. Can you just talk about where we are in the competitive landscape? And just on a follow-up on B2B, it seems like that overhead expense increased a decent amount in the B2B segment. Was there anything there to call out?

Sure. I'll talk about, sort of, competition. Like as I said, it's a big target addressable market. If you think about the travel business, it's over $3 trillion. If you exclude, sort of, hotel airline direct and the 3 big OTAs, there's still a lot of space there. So for us, we just look at whether it's in offline retail, other online travel agents, loyalty programs, corporate travel agencies, where are all of the places that people are looking for when they look to travel beyond our core consumer brands and how do we make sure that we're showing up well?

I think competition forces you to be better, whether it's be better with having more service offerings, having better service levels and the like. So our focus is just making sure that we've got a great value proposition. And in fact, Derek can talk about it, but I assume some of the expense you're seeing is related to the build-out of our additional lines of business because that business today is very lodging focused. We do sell other lines of business. But over time, we want to become that one-stop travel shop.

Yes, Jed. And first, in terms of the margin point, Ariane is exactly correct. There's investments going into the B2B segment to drive that one-stop shop and build out our lines of business. And one aspect of that is that we had the digestion of Tiqets and that acquisition in Q2, and so that would have weighed a little bit on the cost that you're seeing. The other is a little bit of the geography of the FX hedging and where that shows up in the P&L. And so you're seeing a little bit of that show up on that line item and impacting the margin, as you pointed out. So hopefully, that context helps.

Your next question comes from the line of Ken Gawrelski with Wells Fargo.

Two, if I may, please. First, could you maybe talk about your approach to the marketing landscape. There's been some changes on the search side and SEO has been called out from -- by many companies in the, kind of, consumer landscape. Could you just talk about what you're seeing there first maybe?

And then, second, if I may, as you think about your second half outlook, maybe -- and I apologize if I may have missed this, but could you talk about your outlook for ADRs and maybe the environment we might be in as we think about the difference between bookings and nights growth?

Sure. I'll take the first one, and then Derek can take the second one. So when I think about organic traffic, and I'm going to bucket together SEO and AEO. For us, organic search traffic is stable to slightly up. Now as I mentioned in my prepared remarks, AEO is one of our fastest-growing channels. And SEO has remained a bit soft, but it's stabilized over the last few quarters. And I think it's due to the great work that our team has done.

A number of quarters ago, we organized a small team to look at organic across the board, AEO and SEO, and they've increased testing velocity, both, sort of, technical and content. They've been doing -- as I said, they've been doing more tests. They've been using AI across the board in order to improve our performance in that channel. Now that being said, as I said earlier, it's a fast-changing space. We're seeing algorithms and search page changes more prevalent and happening faster than they have in the past, which is why we're staying vigilant. We're monitoring. We're reacting to them. Today, we think we're getting at least our fair share, but organic is an important thing to us. So we're making sure that we're staying on top of it.

And in terms of the second half guidance on bookings and so on, we are assuming that the healthy demand trends that we have seen through Q2 and to begin Q3 here persist. And that's led by a particularly strong U.S. and domestic market. We do, of course, see an environment where the conflict in the Middle East is having some impact. The, sort of, direct impacts in that region, our business there is relatively small. And so the impact is lighter. However, there are secondary impacts impacting jet fuel prices, which have an impact on airline prices and ticket prices.

So there are some secondary impacts, but the strength overall and the resiliency in the travel market and consumers continuing to prioritize travel has led to a relatively resilient environment. And so we -- that informs our guide for Q3 and the updates we made to our full year guidance. As it pertains to bookings and room nights specifically, we do have much tougher comps in the second half of the year. And so we've incorporated that into the guide for Q3 and the update that we've made for the full year. So we do expect the growth rates to decelerate as we see those comps, although probably more so on the bookings side, a little less so on the room night side, but we will face much tougher comps on both of those numbers.

Your next question comes from the line of Lloyd Walmsley with Mizuho.

Derek, great to be interacting with you again in a new forum. I wanted to just get your sense of anything that surprised you the most? Or where do you see the most opportunity as you dive into a new business was the first one.

And then, just second one, as you all look at the AEO channel, it sounds like it's more meaningful for you all and growing faster than what some of your peers are seeing. Is there anything you can, sort of, elaborate? Do you think it's a bigger consumer activity in the U.S. or you guys are just, sort of, approaching it in a unique way? And is it -- do you think it's likely to be meaningful anytime soon? Anything more you could help us understand would be great.

Why don't I start with that one, and then I'll -- Derek can take your first question. Look, AEO, it's still a small channel. As I said, it's one of our fastest-growing channels. I believe we were early in organizing ourselves around it and understanding not only what visibility were we getting in, sort of, in prompts and answer and AI search, but also how do we make sure we're getting the right visibility. And it's a combination of work we're doing in our brands, the brand value proposition, obviously, a lot of technical work.

What I find exciting about it is it's changing really quickly. It's figuring out how do we make sure our brands show up either completely organically? Are there opportunities with these connectors or micro apps, for example, in Claude and ChatGPT. It's fascinating to see there are some cases in which we can control a bit more what the interface is where our brand shows up and others where we can't.

So I think it's, sort of, -- it's too early to declare anyone is getting a lot more versus less. I can just tell you that we have a team focused on it and that it's not just the technology of it. It's also all the work we're doing on our brand value propositions on making sure that we have great full and complete content and making sure that travelers understand that when they come to Expedia or Hotels.com or Vrbo, they're going to get a complete shop, they're going to get a loyalty program. They're going to be able to have payments in all different currencies. Just it's really that full value proposition that we need to make sure comes through.

And Lloyd, look, it's great to be engaged with you and your team again as well. Before joining Expedia, I'd say that I was really excited about what I saw and the opportunity in the travel market. It's -- the scale of the industry is immense and so the total opportunity set is huge. But for this business specifically, I was excited about the leading consumer brands in some of the most important markets in the world, and the opportunity for us to continue to grow beyond that.

And then, the B2B business as a leading B2B platform in the world as well, it gives the business a lot to work with. And then, I spent a lot of time looking at how well the team has executed over the last couple of years and the results that they've been able to drive to build momentum in the business is really impressive. That was exciting coming in.

I think that what's more exciting is that after a couple of months in the building and working with the team, most of what I hoped would be true on the way in the door has proven to be true. I'm particularly pleased with the quality of the team here and the consistent focus on operational execution. And I think probably the last thing I'd mention is just that it's exciting how much of the -- of what lies ahead of us in terms of opportunity is something we can capture through our own execution and scaling this business efficiently. And so I'm excited to dig in with the team and capitalize on that.

Your next question comes from the line of Deepak Mathivanan with Cantor Fitzgerald.

This is Cameron on for Deepak. Just one quickly on B2C. It seems like there's some nice margin expansion there this quarter. Can you just give some more color on the drivers of margin expansion here? What does the runway look like into '27?

So as you rightly say, we had nice margin expansion. We grew our bookings 8% while leveraging marketing spend, which was only up 1%. And that came from our fastest U.S. growth in 15 quarters and a healthy environment. I would say it came from really pulling on all of the levers of the marketplace, improvements in the product, whether that's recommendations, ranking, improvements all along the funnel, for example, optimizing the checkout in Vrbo. It came from growth in our supply footprint. As I said, the May sale was a record-breaking sale for us, making sure that travelers know that when they come, they're going to be able to find what they're looking for, driving attach in supply. The performance of our top-tier loyalty members, so Silver and above did really well, both in bookings and then also in retention.

And then in marketing, as you saw, yes, we've had good marketing leverage. And it's not just that measurement that allows us to better understand incrementality and returns. The team is also doing some really fantastic work around using technology to be more effective. They're developing these agentic systems to create personalized ads at scale, both using our technology and using third-party technology. And I look at it, and of course, I see all of the areas that we can do better, but I also see so much good work that the team is doing, and I'm just really pleased to see that margin expansion.

Your next question comes from the line of Mark Mahaney with Evercore ISI.

Okay. Two questions, please. One on advertising revenue. Just an update on the traction you're seeing there. And I think over time, you've been trying to thoughtfully roll out advertising revenue to more surfaces like Vrbo, so just an update on that. And secondly, I think you touched on it briefly, but the impact of World Cup in Q2 and Q3, was it material at all to Expedia?

Mark, on the advertising business, growth was stable relative to Q1 and Q2. As we look at the future growth opportunities for the business, we see a lot of opportunity to sustain healthy growth there. Some of the drivers you pointed out, more geographical reach, extending our existing ad solutions into our B2B and Vrbo business lines and then also monetizing on more areas of our sites. On Vrbo specifically, it's very early there, but we are excited about the opportunity to build on that over time, but it's early.

And we're -- we've got a new leader there also, and this is a business that I'm personally unfamiliar with. So I'm excited to dig in with them and help build this out over time. To your question on the World Cup, as Ariane mentioned in prepared remarks, we did see bookings related to that come in late. And the impact of that on the quarter was relatively modest overall. We saw it show up more in ADRs than we did in room nights and the impact to the quarter overall from a bookings perspective was modest.

Your next question comes from the line of Kevin Kopelman with TD Cowen.

Could you just give us some more color on how you've seen U.S. and Mexico trips progress as we've gotten further away from the security incident that you called out last quarter?

Yes. I would say we've seen a normalization. I think that's -- yes, we've seen a normalization.

Okay. Great. And also, could you just touch on B2B sales and marketing? It looks like that ticked down year-over-year first time since you started disclosing that. What are the key drivers there? And how are you thinking about the second half?

Sure. On B2B margins, first, I just -- we're really pleased with what we're seeing in the growth on that business. In the very immediate term, the big drivers on B2B margins include partner mix and the pace of our own investments in the long-term growth of that business. So on partner mix, we've continued to see strong partner promotional activity. We saw that in Q1. It persisted throughout Q2. And so that's a big driver is that some of our larger partners are active in that space.

In addition, we are prioritizing the growth of that business long term, given how significant the opportunity is. And so we're investing in building out and/or acquiring in the case of Tiqets, new lines of business to support our one-stop travel shop, enhancing our product capabilities to better support our existing partners and also in our partnership and sales to grow our partner base.

We have over 70,000 partners today, but looking to grow that and through lines of business to deepen our partnerships and business over time. And that's shaping the drivers of the business in the near term, both from a mix and margin perspective. Hopefully, that gives some context. I would just reiterate, we can invest and continue to make progress on margins. And if you think about our strategic pillar around efficiency and margin expansion, we're committed to that and are driving that across the business.

Your next question comes from the line of Naved Khan with B. Riley Securities.

Two questions from me. One, Ariane, you mentioned you're seeing good attach rates in Expedia. Maybe just talk about what are the products that are seeing the most attach rates where you're seeing the most success? And then the second question I had is just around the Uber partnership. Any early read or any color you can share in terms of how that's rolling out? And any -- what are you contemplating in your guidance in terms of contribution from this new partnership?

Sure. I'll take the second one first because it's going to be quick, which is we don't comment on individual partners. So I'm not going to comment and it's not going to be material to our guidance. On the first point, on attach, it really depends on does the trip start with a flight, in which case we're more likely to attach a lodging a hotel or a vacation rental or a car. Does it start with a hotel, in which case we might attach a car or insurance.

And actually, part of what's behind the record attach rates is the personalization we're able to drive by understanding what is the next best thing to recommend to a traveler. If they -- as I said, if they've taken a flight, they've already booked a flight and it's in a certain destination, we might know, hey, actually, the next best thing to propose is a hotel and it's one of these 3 properties or it can be based on the trip and information we have on the trip or it can be based on what we know about that traveler. And the team has really been honing in and optimizing those recommendations. In addition, they've done a great job really optimizing the UX and the design, figuring out where is it that we put the attach messaging, where is it in the app, where is it in the post-sale communications. So it's really a combination of all of the above.

Maybe just to, kind of, drill into that, what, kind of, runway do you see ahead in terms of continuing to drive the attach rate higher? Where are we in the innings?

Yes. So I would say there's still quite a bit of runway. We have good stats that tell us of people who book one trip element with us, how likely are they to have another trip element somewhere else. And without going into what exactly those numbers are, I can tell you I certainly see additional runway to have more multi-item trips. Even if I believe right now, we're best-in-class, but there's still upside ahead of us.

We have reached the end of the Q&A session. I will now turn the call back to Ariane Gorin for closing remarks.

Well, thank you all for joining our call. Thank you for your questions. As you saw, we delivered strong results ahead of our expectations as consumers continue to prioritize travel. As we look ahead, we remain confident in our strategy and our ability to execute and drive long-term value for travelers, partners and shareholders. And finally, a big thank you again to our team.

This concludes today's call. You may now disconnect your lines. Have a nice day.

Started. I'm Mark Mahaney, part of the Internet equity research team at Evercore ISI. I was telling Aryan. I gave a commencement address this weekend and I mentioned the AI and then I had to deal with hecklers -- and so I lost my voice shotting up, shouting over everybody the next 30 minutes. It was good to be here, and it's good to have you here, Ariane. This is, I think, your first public investor forum or conference

Second.

This is your first.

It was my first with you.

This is your first public investor conference. I'm glad you decided to do your first one with Evercore. So thank you.

Two years is on the job now.

That's right. That's right. Yes, we've had a -- we've been relatively bullish. And last year, you were one of our top picks -- and we don't -- we -- I've covered Expedia since -- actually since the IPO. And we've had a lot of management turnover at the company a lot and that hasn't been necessarily a great thing.

But we may -- they're made for investors or maybe something much more investable now. I think there is. So I want you to talk about that. So I'm going to -- we're going to go through a series of questions. And if anybody wants to jump in with questions in the end, please do.

So you've been there for 2 years now. You've talked about these 3 strategic pillars just to explain that to us. And you're pretty far into a turnaround. It's a relaunch and student set of turnarounds to relaunch. Let's talk about the relaunch of Expedia and what you've been able to do so far and what you want to do for the next 2 years?

SP619389981 Sure. Well, first of all, thank you for inviting me. As you said, I've been 2 years now in the role. And when I stepped in, I really said to the team, look, we need to simplify it. We need to focus and we need to execute with discipline we had come out of a platform transformation. And we were in a position where the consumer business wasn't growing the way we wanted it to. The B2B business was growing well, and it was a matter of how do you sustain that and how do you continue that growth.

And so we came to 3 pillars. The first is create more traveler value because if you're in a consumer business, the most important thing is what is the value you're creating for your customers. The second one wasing where we see the biggest opportunities for growth. And the third was expanding margins.

So let me talk about each one and sort of what we've done and what is still ahead. So on the topic of driving more traveler value, our consumer business has 3 big brands, Expedia, Hotels.com and [ Vrbo. ] And we started by sharpening the value propositions for each of them. So Expedia is the one-stop shop where you can bundle and save, get great deals. There's a strong loyalty program, and it's really the 1 place you go to go places. [ Vrbo ] is the trusted pure-play vacation rental marketplace and Hotels.com is the hotel pure play with a great loyalty program.

So it was strengthen those value propositions and then market them well, build products that support them and have great supply. On the product, when you look at the work we've done in Expedia, it's driving up the attach rates. It's personalizing the product more.

It goes from basic things like better uptime, site speed, checkout paths, kind of all of the e-commerce basics to things like driving the attach rate, driving more trust in Vrbo so trust is really important in the vacation rentals category. So making sure that with Verbocare, people trust that when they're in trip, they're going to get what they were expecting to.

And then, of course, supply, ultimately, people want great assortment in prices. We've done a lot of work in our loyalty program to have better member deals. But if you take Vrbo, for example, until about a year ago, we didn't have a ton of promotions.

And so last year, we ran -- we rolled out a [indiscernible] promotion suite. And in the first quarter, over 30% of our bookings were on partner-driven promotions. So there was a lot of work in driving traveler value. And what is ahead, and this is probably the #1 thing I'm most excited about is I really believe that using AI in our product is how we are going to be able to be true personalized and trusted travel agents for people.

I'm sure we'll get into that later. But that's on that first pillar around traveler value. It's a lot about what are we going to do in AI and the product to make people want to keep on coming back to us directly. And whether it's for inspiration all the way down to booking and servicing. The second pillar is around investing in the fastest growth drivers or where we have the biggest opportunities. has been -- I think we've had 18 quarters in a row of healthy double-digit growth, and we're continuing to invest to expand that.

So we're a leader in B2B. We've got great partner relationships -- and we've been expanding the offerings that we have. So not just hotel and vacation rental, but what are the other lines of business like hotels or activities that we can provide to our partners for them to build out their travel programs.

Also growth outside of North America because that's a place where our share isn't as high as it is in North America. And so with our consumer business, having real focus on specific markets to say how can we grow there.

Now our B2B business is bigger outside of North America, but we've really had a focused strategy for consumer -- and when I think about what's to come in that area of investing for growth, as I mentioned in B2B, we're growing these non-lodging lines of business.

You may have seen in the last 6 months, we've done an acquisition and activity, a small acquisition in car rental that we announced last week. And it's really about expanding the offering that we can provide to the partners we have and then adding the partners.

And then in international, again, that's a big opportunity for us because we underpunching our weight. And then the third pillar was about driving more productivity across the organization and expanding margins, which are 2 sort of sides of the 2 sides of the same coin. If you look in the last couple of years, in '24, I believe that we expanded margins by about 50 basis points last year by over 240.

This year, our guide is $100 million to $130 million. And that really reflects the work we're doing across the P&L from how do you drive more revenue? How do you get more efficient on your cost of sales, how do we drive leverage in marketing and in overheads. And our management team is very committed to looking down the P&L and finding ways to drive more productivity while we're investing in the attractive things that I talked about earlier.

Okay. That's you covered quite a lot. Let's dig into a few of those. I want to start with B2B because that's, I guess, the most consistently impressive growth that you've been able to string together.

And so just talk again about the sustainability of that growth. I guess it's going into the nonlodging lines of business and international expansion. But maybe a little bit more on how you sustain that for another 18 quarters.

So yes, I would say, one, the way to think about B2B is the travel industry is over $3 trillion -- and if you look at our consumer business, last year it was $85 billion. So there's a big gap there. And then half of that is supplier direct or a couple of other big OTA so there's still a huge amount of travel that happens in the world that our B2B business can go power.

And we think of it as how do you grow wallet share within our existing partners -- so it can be from adding new lines of business. It can be if our own partners are moving into new geographies or they're developing ideas to grow their business, how do we participate in that. It can be adding new customers.

So we may talk about -- we saw the deal with Uber recently. We signed a deal with Bank of Montreal and Canada. So we're constantly going and looking at new businesses we can sign. And then it's just in general, what is all of the value that we can add to these B2B partners in various ways.

And then I guess the core Expedia business, that seems to have required the least management attention lease turnaround. Is that right?

Maybe it's externally that it seems like that Look, I would say for all 3 of our big brands, the challenge and opportunity has been to take the work that was done in a lot of our replatforming, which was building these platform capabilities and then bring them to bear in a way that makes sense for each of the brands.

Now Expedia has such an amazing value proposition. There's 1 place you go to go places, bundle and save, package deals, loyalty program. So maybe it seems like it required the lease management attention because maybe how we talk about it, but it's got such a great existing customer business, a great value proposition.

But it's been amazing to see the work the team has done with better recommendations, with driving better attach, having travelers better understand the value proposition around packaging.

A lot of work has gone into servicing. I think for those of us in the industry, we all know that certain lines of business have more complexity in service requirements than others because Brand Expedia cuts across all of them.

We've done a lot of work in Expedia on servicing across our consumer businesses, we have over 30% of service at self-serve, but then when someone does need to call us, how do we make sure they're short wait times, we're able to resolve things quickly because that also is then a driver of people repeating more directly.

And then let's talk about Vrbo. That seems to have been -- and this is from externally, but it seems to be that's the 1 that you've most recently been able to kind of turn around, get back into growth. I think you talked about $1 billion run rate now. So what have been some of the drivers behind the recovery to modest growth in Vrbo? And how much better can you get that business

Yes. So one thing is when I talked in the last earnings call about $1 billion run rate it was vacation rentals on Brand Expedia. So we think about vacation rentals as a category. We can distribute it on Vrbo.

We can distribute vacation rentals on Expedia or Hotels.com or through our B2B business. And one of the important things we did last year is we were building out Expedia is really the one-stop shop where you could get everything was to better tune the way that we surface vacation rentals. So that's where we're very proud that we got to $1 billion annual run rate. When it comes to Vrbo, the brand, which is a pure-play vacation rental play, it has been a combination of things that have allowed it to get to growth that we're pleased with. One is the work I talked about earlier on supply.

So we -- having more promotions, whether it's early bird promotions, long-stay promotions, member deals, if you are a blue silver or gold member. So obviously, making sure we have competitive and great pricing.

There's been a lot of work around trust. So what our research shows is that 70% of people when they're looking at a vacation rental are concerned about is what I see actually going to be what I get. It's a bit different from when you're looking at a hotel where you may have more large brands.

So we've done work around trust. It's how to make sure that people can trust that what they're seeing and the listing is what they'll get. And then when they get to the property that their experience is going to be what they expected. We launched a guest favorite badge.

We increased the threshold for sort of our preferred, our premier hosts and our premier properties. We relaunched VrboCare. So Vrbocare is our proposition that basically says if something goes wrong in your stay or before this day, we'll take care of you. So all of these things together that drive trust in the traveler. You need to have the assortment, but you also need to have the trust.

And then there's all the work in the product of just speed, uptime, better content, easier checkout and all of the myriad things that any e-commerce company would do. And then the cherry on the cake, and this is 1 of my favorites is that we rolled out something called Weather promise. And weather promises Basically, it's an offering where if it rains over a certain number of days during your holiday, you're going to get your money back. And so as we're helping people not only make sure that they're going to get what expected when they're in trip but also given the ability to purchase something that will be an added protection.

It was clever. I didn't know about that. All right. I want to ask you a couple of questions about AI, but you mentioned already the Uber deal. So let's just touch on that briefly. The potential impact of the Uber deal and why you decided to do the deal with them?

Yes. So first, I'll start by saying what I had said earlier, which is the size of the overall travel market is massive. And our consumer business is $85 billion, where there's a whole lot of travel that happens outside our consumer business. And this is where our B2B business comes in. And the great thing is the more demand we bring through B2B, the more value we bring to our supply partners.

So in 1 connection, they get access to our demand through our consumer brands as well as through our B2B business. So when we sign a partner like Uber, obviously, it gives us some incremental volume, but it also really helps our value proposition to the supply partners.

So when Uber decided that they wanted to add hotels to their app, they like any company went out and talked to a number of players. And we won the deal. I believe we won because we have a strong value proposition on our supply, on our technology, on our servicing, I mean, it's really -- it's the full value proposition.

And years ago, we had -- we would have all these internal debates about, well, is B2B incremental or not. And I just keep on going back to the size of the overall market. .

Okay. All right. Well, let's touch on a topic that I know you haven't had much exposure to AI. The big -- 1 of the 2 biggest overhangs on the stock and I think it's a very thoughtful overhang on the stock. What happens to the OTAs, particularly to you and booking as Agentic Commerce rolls out, and hopefully, it'll be a lot more developed than it is today. But just talk about this as a channel for you. How do you think about this risk? How do you think investors should think about the AI risk or opportunity to Expedia?

Yes. So I think about AI for us really in 3 ways. One is what can we do with AI in our product to make it even more valuable for our travelers and partners. So I'll come back and talk about that. And I think there's a massive opportunity there, as I said, to be more personalized, trusted travel agents.

The second is how do we benefit from the changes in consumer behavior where they're starting searches in these new AI experiences, which is part of -- I think what's behind your question is a genic and these new services. So I'll come to that.

And then the third is how do we use AI internally in the company to be faster, to be more responsive and to drive efficiencies and productivity in our teams. Maybe I'll go to the second 1 first because that was the start of your question, then I'll go back to one, which is the 1 I'm the most excited about.

It is clear that people are starting more of their searches in AI search, whether it's in Gemini, in ChatBot, Claude, wherever that might be.

Now that traffic is still quite small. It's less than about 1.5%. It's growing fast, but it's still quite small. And we're doing a ton of work to make sure that our brands show up well there. And I think it's an incremental demand source for us. So we're doing work in AEO and organic -- we're doing work in paid or early with that GPT on their paid ads. And I think to the extent that the top of the funnel is fragmenting a bit more, whether it's with IGBT and Claude or TikTok moving into travel advertising more meaningfully, that is an opportunity for us.

And the fact that we've been doing work over the last year in our marketing and be able to shift our marketing spend across channels based on a really good understanding of incrementality is really good timing for us. And then when you think about Agentic, we have opened our apps for agents to be able to come in because I want to experiment on everything.

And again, it's a very small part of even that 1.5% that I was talking about. And it's early days, but from what we can see, what the agents are doing is they're coming in and doing a bunch of discovery, but not going to the transaction.

So again, I hesitate to draw too many conclusions from a small set of data. But I think what you're seeing is agents going in, probably checking prices, trying to get a bunch of information, but that people aren't yet comfortable allowing agents to actually make the transaction decision for them.

Because remember, travel tends to be higher ticket value, higher order value. There are a lot of different decisions to make at the time that you make the booking. If it's a hotel the room type? What is the rate plan? Is it refundable? Is it nonrefundable? There are so many different things that you don't necessarily want to delegate that to an agent. So all up, I would just say, it's early days. We're making sure that we're experimenting.

We're present where we need to be present or doing the technology work to allow agents to come into us, but I actually believe it's going to be the vertical agents, not the horizontal agents that over time, these are ones that people trust the most. That's kind of the second pillar. Do you want me to go into sort of the

Yes please.

Why I mean I'm talking for a long time, so I make sure that I'm not I mean.

You're doing great.

The part about using AI in our product again, is a massive opportunity. There's sort of invisible AI, which is the rankings and the sort order and the recommendation. So when you buy a flight what hotels are we proposing to you. There's a lot of AI that goes obviously behind that.

So that we're able to surface the things that based on what we know about you, you're most likely to transact on. There's type ahead. There's just a lot of things that are more invisible than there are the things that are more visible.

So the conversation agents -- we've just rolled out natural language search on Vrbo. And so if you go to the [indiscernible] I think it's at aroud 50% of traffic right now. You can toggle and search by saying, you know what, I want to go to Tahoe, the last week of July with 8 people. I want a hot tub.

We're automatically going to pre-fill the dates, the destination. And then when you get to the search results page, the content is going to be personalized based on your search as will the results and the amenities and the filters and the like.

What we're discovering through that is we get more than 60% more information about a traveler in that kind of search than we did before, if someone just put in the destination. And so when you get that additional information, you're able to personalize even more.

This is again why I keep on going back to we'll be able to be more helpful to travelers to help them get from search to find to book all of the -- in a faster way. And it's important that, yes, there will be agents that can go do some of the transactions.

But I think people often forget that people are often happiest when they're in the planning process. So the idea that you want to allow an agent to do everything end-to-end, to me is there will be some trips that people want to do that with but many trips, there's the joy of being able to plan to collaborate with other people to share.

And so we need to use the technology to take the friction away from it, but allow people to still have the joy of it, and to do it in a place where they can then connect it directly to the booking and the servicing. So that's -- that's really how I think about that first pillar.

And then the third is all internal productivity. And to the extent that we can move faster that we can ship faster, it will allow us to innovate more for our travelers and partners.

What we're trying to do is investors just figure out how we can -- what you say makes a lot of sense, I think, another word for AI is personalization. There's a real opportunity here. we can only tell us investors, I guess, we look at the top line, maybe see some acceleration or something and maybe see some margin expansion.

What KPIs do you look at internally to figure out whether it actually is improving your products, your personalization, your book-to-look ratio -- at the end of the day, that's -- I would think that there should be some -- and maybe it's still on the come. But what are the right KPIs for you internally, whether or not you disclose them?

So it depends which part of the business you're looking at. As I sort of said, there are some things that a traveler may not even know that it's AI behind it. So ranking and sort order or attach. So we look very closely at are the algorithms that are behind the recommendations improving.

I mean, it's a known way that you can look at the KPIs on that. when it comes to newer things like the property expert agent or AI compare or even natural language search, we're still in such early days, the way I talk to the team about it is how quickly are we learning what are we learning every day, every 2 days, every week.

What is the content we're discovering that people want that we don't have. I think you can too quickly go immediately to the -- what is the conversion impact or it may be that what we're finding is people are coming to us and using our agents where in the past, they would have gone to some other AI experience.

So it might look like conversion is going down because we're seeing people more often, but it's just we're getting to play in more of the steps of the discovery process. So that's why like any way you look at the data, you could make up your own story.

So I'm really focused on what is it that we're learning and how are we improving the product. And then we'll see down the road about conversion.

Do you think -- I mean, what's a reasonable time line for when this should all show up in our crude external financial metrics. Is this a '27, we're going to look back on 2017 and see that's -- we finally saw the real impact of personalization in AI?

I'm going to frustrate you because I'm not going to have an exact answer, but I think it's a gradual thing. I think like anything, and this is why I talked to the team about [indiscernible] basics and just it's like a day in, day out, improving things. And over time, if we're doing the right work and it's paying off, we should see conversion getting better. Now at the same time, if we're doing that, we should see more people coming to us, so that can impact the conversion numbers as well. But I think ultimately, it's how is the business growing? And are we keeping our direct business? And are we just growing overall the consumer business?

And 1 specific thing on that. We -- we've done 2 of these agentic travel reports, and we tried to track Expedia roaming, I think, and when we -- and George, did most of the work on this when we did this a year ago, we actually thought the best AI product for travel was Expedia roaming. And then it sort of seemed like you disappeared it a little bit, but it could be that you've just taken a different approach to it and just want to instead of having a separate named agent or whatever, just infused throughout the process. Did I get that right?

You did get that right. So what we did was -- and by the way, you're right, we were I believe we were the first to integrate a chat experience with Rome. It was 2 years ago. We put that out there. We tested a bunch, we learned. But 1 of the things we learned is it's pretty tough to have 1 conversation experience that's going to cover everything from inspiration to shopping, to booking to servicing all of that.

What we realized is having point solutions, what we're calling these micro agents that you trained to be really good at a specific thing and that could show up at that moment in the shopping funnel or in the journey is going to be more useful to travelers. So right now, we're building a bunch of these micro agents. We have property expert, AI compare. We're going to activity planner.

We've had a servicing agent for quite a while, and that's a really important 1 to be able to help travelers to be able to self-service. And then over time, we can build those all up into 1 agent. But again, our strategy is these micro agents that help at any point in the journey.

We have open AI presenting here later today. They've gone through a little bit of a change. It looked like maybe they were going to get into the booking or checkout process and then they backtrack from that.

I think there were some pretty underwhelming performance that they have from that early initiative doesn't mean they can't go back there. But what's your sense about? Is it clear to you that the open AI, the Gemini of the world want to work with you as lead generation partners, rather than compete with you as booking agents.

Yes. Look, booking and servicing is complicated. There is catalog, there is making sure that you have constantly updated and accurate rates and availability. If someone tries to book something and it's not the price they expected or the booking doesn't go through, is it it's a problem.

You have to be there to solve it for them. If something goes wrong, afterwards, you need to be able to get to 1 or fix something in product so that people can make changes to their reservations. So I would think it's a it's an easier problem to solve around advertising and lead generation and a great traveler experience and then leave kind of the tough work of the booking and servicing and the like to us.

Now I mean, I think, Mark, you need in the industry for a while, been in the industry for a while, we've had for many years, this discussion of where is the booking going to happen. But knowing the complexity of all of it, I'm not surprised that some of them have backed away from it.

I've thought about the OTAs having 2 core competencies, supply aggregation and management and then optimizing different marketing channels. On the supply optimization to actually can now every single hotel and residents whatever on the malficoast, but doesn't know their availability.

It doesn't have their availability, doesn't know their prices is not able to go negotiate member deals with them is not able to go do promotions.

I mean hotels sees and others as a really great lever to be able to fill their hotels to align with their revenue management strategy. And yes, technology can help us with that, but there's a lot of relationship that goes in the saying, okay, what are your need periods? How do we help you in your need periods? And that's an expertise that we have.

And then on the marketing optimization. So I think the thoughtful OTA concern or argument is they may not go and directly disintermediate OTAs, but there's -- those tools are becoming such so broadly used -- and then if they start -- over the last couple of years, you've had this increasing percentage of your traffic has been free. It's because of your loyalty programs, et cetera?

And what's the risk that, that reverses that -- so I could pitch this either way, either you're diversifying your marketing channels, you're pretty good at doing that. So more diversification, more better or I could say it's actually going to squeeze out and crowd out all of that free organic traffic. Help us resolve this.

So what I would say is on the -- what you're missing in all of that is how by improving our product experiences are we able for all the traffic to come into us to have it convert and then repeat directly.

So when we put these agents in place when we become more personalized, are more people going to start their journey with us because they're confident that we have a great loyalty program.

We have great rates and availability and a great assortment. And in fact, Expedia is going to be able to help me plan my trip in a more effective way than it could before. I also want to come back to your statement, which was OTAs have been good on supply and then marketing optimization I would add for us, the B2B pillar -- the fact that we've got over 70,000 partners that we have relationships with, that we have deep technology integrations with, we understand the business of that we are helping build travel programs is an asset that I don't think is sufficiently appreciated sort of the value of that asset.

Okay. And by the way, do we already know that you're able to get more people to come directly to your -- the 1 statement you just made about getting people to start there because your experience has become better.

Well, what I would say is we have said publicly, we have 2/3 of our bookings that start directly with us. And in fact, over time, I think that that's a great place to be because if you're less than -- if you're more than 2/3 direct, then you're probably missing out on attracting new people from outside of your ecosystem to then come in.

But to me, it's how do you grow both of them at the same time?

Okay. And then you mentioned these 3 strategic pillars at the beginning, and we sort of covered the first 2. And then this margin and all investors look at Expedia's margins and they can't help but compare them with bookings margins. And there's been this huge gap for a long period of time.

And historically, I think it's for a variety of reasons, but some of the booking has just been very good at marketing efficiency. And -- and anyway, but you started to climate -- you started to narrow that gap, but you started to climb it up a little bit. So just talk about sources of leverage going forward and -- do we -- do you somewhat close this gap, your operating margin gap versus Airbnb and booking?

Okay. And I will start because Rob just slip me a little note and I misspoke earlier when I talked about our full year margin guide, it's 100 to 125 bps. I don't know why I said 100 to 130 sites recorrect that. I'm not updating any kind of guidance here. Okay. Look, so since I stepped in, we we've expanded margins in '24, '25, '26 as we continue to grow the business. I think it was 50 bps in '24, 240 and '25, and then we've got our guide for this year, this expansion. And it is really across all the lines of the P&L.

Recently, we've had a lot of expansion coming from our consumer marketing. And that is a combination of using AI to have better creative having better measurement capabilities and understanding incrementality and being able to sort of shift across channels.

And again, as the product performs better, our marketing dollar should go further. Again, cost of sales as we're able to automate things more, whether it's in servicing or even optimizing some of our cloud costs, we should be able to drive more expansion there.

So overheads is another one. Since I've been enrolled, we've had a couple of overhead actions where we've reduced the size of our teams. And we're just constantly looking for opportunities there and it's balancing that with growth.

So creating the capacity to be able to invest in growth while assistant sort of, I would say, in a systematic way, improving the margin profile of the company.

Is getting leverage in consumer marketing a backhanded way of saying that prior Expedia management teams were poorly spending their marketing dollars?

Well, I don't like to talk about the past in that way because probably a few years from now, someone will be on this stage as the same question, and I'm hoping they won't say no, [indiscernible] Look, I think everyone does like the deck of cards that they're dealt, you do the best job where you can.

When you look at the 2021 to 2024 period in the consumer business, we were going through a lot of platform migrations. We had just come out of COVID. It was really difficult to understand where was demand coming from what was happening.

And we've now -- we're in a place where we have the foundations in place to be able to have a better understanding of returns. And it's true that I've been more demanding with the team on what do we expect to get in our channels.

Okay. help us interpret some of the changes you've had in the team. What's your approach? You've been with the company for 10 years now?

13.

13 years. And so you've watched a bunch of different management styles, you've come in, and I think you've had a different management style. Do you want to explain what that style is?

If could you explain from that is done. No, I'm happy to say. I would say I'm someone who -- people who know me would say, Ariane is he's an operator. He's very pragmatic. I mean, so like have big ambition for the team. I always tell them they got to think big, but also be executing on the basics. And so it's sort of this constant pivot between what is the big picture that's going to take us for the long term, but also the short term.

I also [Audio Gap] that we're building and the technology we're doing, I mean, it's exciting, but what is the traveler value and what's the partner value -- and I think because I grew up in the company in the B2B business and working on the supply side of the business, I'm really attuned to the like basically what's happening outside in the market and how do we differentiate ourselves from others.

I think the other thing people who know me would say, Ariane is she -- I have high expectations of myself and of the team. We need to have ambition. We need to be hungry. We need to think about what are the possibilities? Forget about what's happened in the past, what can we do in the future?

And if you look at what sort of where the management team is now. We've got, over the last couple of years a new head of technology, a new head of product, both of whom actually ran product and tech before had experiences in various companies. I like bringing in people who had experiences from outside of the travel sector.

And [indiscernible] I would say, you look at our management team, we're a hungry team, we're ambitious -- and I think we want to go out there and win and we're mission-driven in the sense that we get to be in a business that helps people connect in the real world, and that's a real purpose. Or also very competitive and want to be successful in the marketplace.

Okay. 5 minutes, 2 more questions. Any comments at all on the overall travel demand in the market now? I think the Hilton CEO talked about some sort of C-shaped economy I don't know what that is.

You didn't want to do [indiscernible] It was the I was still talking at our last earnings call about the K-shape con. I mean you certainly see more strength on the high end versus on the low end. And that continues to be the case.

In the U.S., there's a big summer ahead of us with the World Cup with U.S. 250, but we're certainly keeping a close eye on what's going on. You've got -- it's very public, the airlines that have taken some capacity out of the market, the pricing is going up.

So what we're focused on is how do we make sure that our marketplaces, our brands and our B2B business, has supply and offers at all price points.

I guess what I'll try to ask you is, I don't know what the [indiscernible] means is that things getting better or things getting worse? And would you comment 1 way or the other?

I would just -- I mean, I will stick by my [indiscernible] Okay. All right. And it's not my cake. -- mean it's typical for you.

And then last question, just as -- how about the competitive mode or the differentiation question. And I know it's funny that as people have talked about OTAs forever, it's like, well, what's the real competitive differentiation with a booking or Expedia, you could book that the Omni hotel room, you can book this 7, 18 different ways and yet, there have only been 2 OTAs for 20 years now or something like that.

Okay, AirBnB came in. But really, there's only been 2 OTAs. So I guess, it's an easy business to enter, but a very difficult business to scale. Something like that. But just talk about the competitive differentiation that Expedia has. Why is it that Expedia has just generally become bigger over time and why there haven't been a bunch of other Expedia?

Well, let me start at the company level and then I'll talk about the brand. So at the company level, I think the real differentiator for Expedia Group is the diversified demand portfolio we have, where you've got the 3 big consumer brands and you have a B2B business. that accesses demand across corporate travel, offline retail, loyalty programs, airlines, hotel business, OTAs in emerging markets.

So we're able to really get exposure to all of that demand. And then as I said earlier, that allows us to bring more value to our supply partners like hotels and airlines and the like. which in turn allows us to get better content and it feeds the flywheel.

So I think both for our supply partners and even for investors this idea that we are this diversified travel demand company is 1 thing. When it comes to the consumer business, Expedia, it's funny. We're the original super app and travel.

Like we are the one place you go to go places with car and air and hotel and vacation rentals and activities and really all of that. And it's always been about packaging and bundling and the loyalty program.

And I think the more scale you get, the more you can invest in great experiences and bringing more value to travelers. So we continue to do that. But now your question about why are other people doing it?

As I said, the travel industry is massive. And there are a lot of people who will find where is their moat going to be in travel. You've got the financial institutions or credit card companies that will have travel programs. You have airlines that we will power the hotel part of their loyalty program because people want to use their airline loyalty points to book hotel and it doesn't make sense for them to go directly.

So I think that's actually what's exciting is that there are a lot of different places where [indiscernible] can fit in and our B2B business can power them. So yes, we work to make sure that each of our 3 big consumer brands has a clear value proposition. People know why they should come back and be loyal. But the reality is people book in a lot of different ways in travel, and we want to be present for all of them.

That's great. All right. Ariane Gorin, CEO of Expedia. Thank you very much.

Thank you, Mark.

Please welcome to our Horizon stage Chief Executive Officer, Expedia Group, Ariane Gorin.

Good afternoon, everyone. What a trip down memory lane and a great way to kick off our celebration of 30 years of Expedia. Think about it. Think about it. Think about it. Where were you 30 years ago? I was 21. I was just out of college, and I was traveling around Italy with my best friend. We were eating lots of Gelato and Biscotti and figuring out what would come next in life. It's one of my fondest memories from my 20s, and I certainly didn't imagine back then that I'd be here 30 years later.

So much has changed from the earliest days of the Internet to mobile to where we are today. But what hasn't changed is people's desire to explore, to connect and to experience something new. At Expedia Group, our purpose is simple: to help travelers explore the world one journey at a time. That's what's inspired us for 30 years, and it's what will drive all of us into the future.

Over the next couple of days, you're going to hear about our products, about how we're bringing you more travelers to our consumer and our B2B businesses and yes, of course, about AI. You're also going to hear from leaders who have built our industry and who continue to shape what's next. You'll hear from Rich Barton, who invented Expedia as a scrappy start-up inside of Microsoft. He believed that technology could revolutionize travel and the exploration should be part of everyone's life, not a luxury for the few.

You'll hear from our Chairman and Senior Executive, Barry Diller. He saw that potential. He invested in it, and he scaled it to a global business. And you'll hear from Dara Khosrowshahi, who led Expedia through the mobile era and is now leading Uber through its expansion into autonomous vehicles, travel and AI. All of their work is what brings us to today and to Expedia Group's next chapter.

Now I want to acknowledge our industry is certainly facing some pressures, rising fuel costs. conflicts around the world, hantavirus. And the fact that we're here celebrating 30 years reminds us of the resilience of our industry.

With all of you here, we've built one of the most complete and trusted travel marketplaces. We connect millions of travelers to you, our partners. And with our connection points, you automatically tap into demand from our consumer brands, our B2B network and increasingly, from emerging AI and media experiences.

Travel is exciting, but it's also complex. It cuts across languages, currencies and so much more. Our role at Expedia Group is to take on that complexity, to make it simple, intuitive and reliable for travelers and for you so that you can focus on delivering unforgettable experiences.

Trust is at the center of the marketplace. Travelers rely on us for accuracy, for choice and for support when things go wrong. But today, trust is being tested, not by fewer choices, but by an overwhelming amount of information. We've all experienced the information can sound right without being right. Models can hallucinate and fraud is becoming so much more sophisticated. And that's what makes this moment so important.

We're not using AI for the sake of AI, it's about creating a world where every traveler has a smart, trusted guide in their pocket. And as we engage more and more with our travelers, it allows us to bring you, our partners even more, better insights better products, better demand, connecting all of you with the right traveler at the right time.

Every year, we spend billions of dollars in marketing to find new travelers to bring to you. We recently partnered with IShowSpeed, who's one of the world's most popular creators. Now if you don't know who is, trust me, most of your kids will. My kids and my nephews definitely knew who he was. He recently live streamed his record-breaking trip. He visited 5 countries in 1 day. And our campaign for it has already reached nearly 400 million people. It's such a powerful example of how travel inspiration is evolving and how Gen Z is discovering and increasingly booking where they want to go next.

Some of you may also have seen our recent partnership with Uber, connecting our marketplaces, powering hotels on Uber and bringing rides directly into our app. It's a simpler journey for travelers and it's more demand for all of you.

Now building on that, I'm excited to announce another partnership, one that makes the journey even smoother. Today, we're bringing CLEAR and CLEAR+ into the Expedia app for Expedia travelers and OneKey members, extending our seamless travel experience beyond booking and into the airport.

It gets better. And to celebrate, we're giving all of you in the room the gift of CLEAR Concierge Express, so you can all enjoy a smoother airport experience. These partnerships from Uber to clear and more ladder up to one idea, seamless travel from inspiration to arrival.

To me, the most special thing we do is to help people create memories. That trip to Italy I talked about from 30 years ago. I can still feel what it was like to hike the Cinque Terre under the pouring rain. It's really stayed with me. because the places we travel to, they aren't just destinations, the trails, the coastlines, the parks. They're where we make memories. Think about the places where you've created your most cherished memories.

As we look to the next 30 years, how do we make sure that people can keep enjoying those places? Well, today, we're launching the Expedia Trails Fund. We're funding on the groundwork, rebuilding trails and improving access to protected landscapes starting in the U.S., so people can keep creating memories for decades to come.

And it's not just about the land. It's about the communities who depend on it. It brings me such joy to get to share this with you because it's our commitment to the future. And beyond our own fund, we're also matching AllTrails Steward Fund, supporting additional community-led trail projects. For those of you who are avid hikers, I'm sure you already know AllTrails. But for the rest of you, it's an app you can use to discover and customize your roots. And for everyone here today, you're all going to receive an AllTrails premium membership, so you can get a create your own memories.

Renee Roaming, one of our amazing creators, has visited all 63 U.S. national parks. So if you want a little inspiration to plan your next outdoor adventure here you go.

The future of travel depends on protecting the places we explore. On my journey to visit every U.S. National Park, I had seeing firsthand the incredible diversity of our outdoor spaces from breathtaking cars lines to standing mountain peaks and all the incredible wildlife that call these park zones. It's abundantly clear that we have a duty of care to protect nature for future generations. That's why Expedia just launched the Expedia Trails Fund, starting with over $4 million in grants to help improve the trails we hike on and protect ecosystems in the parks we love so much.

On top of that, the AllTrails Steward Fund, a grassroots initiative supporting trail building and restoration projects. So hopefully, our future can continue to look as beautiful as this.

When I think about this moment, 30 years in at another inflection point. I feel such optimism about what we're creating together. Over the next 2 days, I hope you feel inspired. I hope you connect with one another because travel at its core is about shared experiences. We have the best jobs in the world because we get to help people create those experiences. So before I close, I have a special message for all of us from IShowSpeed.

What's up everybody? It's me here. First, I want to take Oregon for believe it is and for making this happen because this only exists because of her. And I don't take that lightly. I just did 5 countries and 16 hours live, Dominica, Guadeloupe, Saint Kitts & Nevis, St. Maarten. We plan for it, but I added one last minute. And that's actually what I want to talk about because travel isn't just constant for me. It's everything. Every place I go, I meet real people. I eat their food. I learned their history, I experience our culture firsthand. And I bring my fans along all four, and something shifts in the like, "Wait, I could actually go there for the people who's watching." So that's what gets me. Travel opens something up in people. It connects the world. It brings us together. So when it came to find a travel partner, I needed something. I know I needed something that could match my energy. And guess what? Expedia stood out. They didn't come with restrictions or scripts. They say, "We know who you are, this you. And I'm like, okay, we're on the same page." They wanted the real moments. They wanted the fit country. I added last minute.

They trust like that trust in everything for me because they kept the whole thing authentic. My fans can feel when something is real and when it isn't. And again, I'm always real. Expedia has spent 30 years making travel accessible for regular people. That lines up with everything I believe I'm not just trying to inspire my fans to want to travel. I want them to actually go. Let's go. Speed.

Well, as Steve said, let's get some business done, let's have some fun and let's make some memories. Thank you.

Please welcome President, B2B and Chief Commercial Officer, Expedia Group, Alfonso Paredes and Chief Executive Officer at Uber, Dara Khosrowshahi.

Welcome to the stage.

Thank you so much. Oh my God. How are you, Dara?

Now I'm doing pretty well. You're awesome.

And you are, Ariane?

I'm great.

Are you excited?

I'm full of energy.

I have to tell you, I'm kind of nervous. It's like I feel like I'm interviewing here for...

You think you're interviewing us. We're actually interviewing you.

You should be.

Okay. But be careful. I have some questions that might a little bit. So we'll make it easy. We're going to start soft and then we'll have some fun at, okay? We can go for it.

So the first question is for you, Dara, and its related to all this experience. I'm not saying old, I'm saying experience. You went from Internet, beginning of the Internet, mobile, now AI, this woman here. He has also the job that you had before. So what type of [indiscernible]. Thank God. Yes. What type of advice do you give?

Well, first of all, Ariane, I don't think needs any advice. She's a wildly better executive than I ever was when I was at Expedia. So -- but I think if there's one piece of advice that I give her, it's that change is constant, right? In our industry, we went through, obviously, the mobile revolution, et cetera. And, when you have a company with a history of Expedia with the success of Expedia, there's always a temptation to want to hold on to the present state in the past, right? And remember, in the early days, mobile bookings conversion was much worse, et cetera, like mobile early on for the first couple of years was actually a headwind for the company we went through meta search, et cetera. And now obviously, we're going through the unbelievable shift in AI.

And just the one piece of device that given, and by the way, it's also relevant to Uber because we're having to deal with these changes is not to be tempted to try to hold on to the past or the present. Like you have to run to these changes and experiment aggressively, even though there's a lot to defend because this is an extraordinary company, and I'm lucky enough to be on the board, don't give in to the temptation to play defense because the minute you play defense...

We'll have attacks.

Yes. Yes. You got to keep attack.

No, it was great. So it's exactly what we were talking about yesterday saying you got to be on offense all the time on offense, offense.

All the time. So I'm speaking about...

Wait a minute, can I say Dara has given me a lot of great advice over the years. And one of the best pieces of advice, it was when you were still CEO of Expedia, and I was career decision within the company to make. And you said, Ariane, if your head and your heart don't align on a decision, you're not ready to make it. And it is such a good piece of advice. And it's not just a career advice. It's anything in life, you need your head and heart to align. Otherwise, you're not ready.

Oh, is it heart?

Well, the reason why I give the advice like head is obviously logic, and in my career, whenever I've made choices that just I didn't feel good about in my heart, there was actually something that I was missing. There's a piece of logic that I was missing. So I think human instincts is quite powerful. And when those two align, I go, obviously, if the heart wants to do in the head says no, that's just gambling, which is something that's great here, but not great in business. So there you go, and heart.

And heart.

A question for you, Ariane. Tell us a little bit about that wonderful deal that Expedia signed with this great company call Uber. Walk us through that a little bit? I think I should ask the two of you to tell us about Uber. Alfonso, you are at the heart of it.

So as I just said a few minutes ago, we just signed a great deal with Uber. It's a 2-way partnership, we're powering Uber's hotels, and we're bringing Uber into the Expedia app. And one, for all of you who are in the hotel, who have hotels who are in this room, it means that we're bringing you demand through Uber that you wouldn't have had otherwise, which is awesome. I know everybody always wants more travelers. And as I said, it's a 2-way deal. So it's great for travelers if they're in the Expedia app or they're in Uber.

And those of us in the industry, we all know that people book in a lot of different ways. They might look with their corporate travel company. They might book with their retailer. They might book with their airline and use loyalty points for hotel. There are so many different ways people book. And so the ability to create better traveler experiences in at least 2 of them was a great deal for us.

I think for us, too, it is going to be interesting how we develop this. we were debating early on. Uber is synonymous with on-demand, push a button and get a ride, push a button, get your food delivered, et cetera. So for us, strategically, we had a question as to whether we could get into planning because hotels on or isn't just about last minute, although last minute is nice as well. And with our reserve product, we proved to ourselves that actually people can come to Uber and plan for their next trip. And at the same time, we really -- we are a huge presence in travel, right?

Usually, Uber is the first app that you open when you get off your flight. We've got over 100 million trips to and from airports. And then even just last year, we had 1.5 billion transactions happening outside of your home city, right? So we know what your home city is, but so many people are using Uber outside of the home city. So just there are a ton of travelers interacting with our app and to the extent that we can use that interaction in our partnership and to bring the folks here, some more business, incremental demand, that will be a win-win.

Should we do more?

I think so. Okay.

And we're ramping up. That's good. Okay. The next question is -- so let me just tell you if there is a few quotes from our Chairman from Barry that he says -- the one that I love more is when we say here when there is life, there is travel. But there is one that you repeat quite a lot is the one we lost next, which kind of is a good way to say like -- and I know you have this executive loneliness when you are at night, 2 a.m., thinking about something you have a deal that you have lost or something, and then at 9 a.m., you need to go back to the office and put a smile and make sure they are ready for the next one. So how do you handle that there?

So just the context for that quote was I was a banker for Barry. This is in the old and old and olden days that Barry had lost a hostile tender offer for Viacom. And we had like 118 lawyers and publicists planning, like the PR thing. Barry comes in. They won. We lost next. So it was then that I kind of thought to myself, I have to work for that man, right?

And I think how you respond to difficult times, like that's the true test of an executive. I love sports. And the best athletes like it's very easy to have a great day and just have an amazing round or you can't miss a shot. It's how do you perform during your worst days. That is a true test of a great athlete, great executive, et cetera.

And at Uber, we have had many, many terrible days. One time that was obviously familiar with the folks here was actually COVID, right? COVID was the toughest time for travel was the toughest of times for Uber. Mobility was 85% of our business, gone overnight. We went from losing $2 billion a year to losing $5 billion a year. It was a disaster.

And to your point of like how do I feel and then what did I communicate to the company, I've always believed that being completely transparent as an executive. Like one of the failings of executives, and I'm sure there are a lot in the crowd is the higher up you go in an organization, the less you actually know what the hell is going on. right? People talk to you in paragraphs is like every meeting has a PowerPoint, et cetera. They give you a sanitized version of the truth.

And I found that the only way to get around you're receiving the sanitized version of the truth is for you to be absolutely transparent to your team. Because if you as an executive or BS-ing your team, they're just going to BS you right back.

So while it was very tempting during COVID to go to the company and say, we're going to be fine, et cetera, actually, right after it happened, what I said was I don't exactly know what we're going to do, where we're going to go, but we're going to move very quickly as an executive team. We're going to make a decision that gave us 10 days. We're going to come back to you in 10 days. Right now, I don't know. And we made the decision and totally, totally by chance. And by luck, the Uber Eats business completely exploded and did incredibly well. Uber Eats is now as big as our Uber Mobility business, and I think during those very, very bad days in hindsight, the company performed well, but I would never ever, ever want to go through that again.

Well, hopefully, I mean, you see now, everything is thriving, your business is thriving.

I mean you too went through it.

I mean. I'm sure most people in this room went through it. I thought that was like one of the most emotional parts of the opening video we had was when it all went silent. And you can all remember what that felt like, like we were taking something that went in forward gear and putting it 5x faster in reverse and wondering, is this going to end?

I just want to build on what Dara was saying about being ultra transparent with your team. What I found is it's not just transparent. It's also being simple, like being clear on what you're saying, simple and explaining the why of the decisions you're making because sometimes will be looking for the, okay, I get the decision, but why? And so being clear on your why is that then people can understand if they have some information that will allow them to use the why to then make a different decision, they don't have to come back to you for it. So transparent, simple and the why.

He.

Does for you around one big, is this a bet that you are actually thinking is one of your big so I'm going to ask you the question. So Dara has a test and the test is -- you know what is the test, Dara, but you look at years from now is the company that you're managing better or worse. So what is the big bet that we will see in 9, 10 years. Dara was [indiscernible]. He moved out of Expedia after 9, so he didn't have to talk about it. I thought it was...

9 years at Uber.

So what I say is...

So what do you think? Do you did it?

Are you going to ask that he left the company.

No, no, no, kidding.

Yes. First of all, it's very emotional to mean that we're in our 30-year anniversary because it makes me think about how do I and the leadership team we have in place now, leave the company in a good spot for whatever team is going to be here in 30 years. But to your question of what...

I know you're never leaving so...

Well, maybe in 30 years.

30 years more?

In 10 years, I think the bet is really, it's all about AI. And it's what Dara you said at the beginning, which is you can't just try to protect the existing. And we're doing a lot of things in AI, whether it's about a year ago structuring, building a team that was all just about relationships with these big AI companies that we didn't really have relationships with before, so we want to stay close to them.

Tech teams that are just developing solutions that are integrating into them. We were very early in thinking about answer engine optimization and what integrations can we do. In the product, Someone asked me this morning about Roaming, which we launched 2 years ago, and why isn't that here any longer? Well, it's because we're testing new things. We're figuring out how is it that travelers want to react. It's not an end-to-end AI experience. it's sort of point experiences, and Shoho will talk about that later.

It's also in how we're adopting AI internally, how are our developers using it, how are our sales teams using it? It's a lot of experimentation and it's a lot of effort, probably even more effort than what we're actually yet seeing in the business results. I've shared that the traffic from these new AI experiences is less than 1.5% of our total travel. It's growing fast, but it's small, but it's important to, I would say, over investor, maybe you can't overinvest because we don't know how it's going to play out. What we know is we need to experiment. It will change the way travelers interact. It will change the way the company is run, and we need to be on the forefront of that.

Good. So now I'm going to change topic. I'm going to go to this word that we never use here, which is, we're going to go into that area. And in both industries, your industry there and travel, of course, there is this fear of AI and what is AI, what it's going to do with our jobs with our, with the work, with the drivers, with the riders, with everything else and also for the travel industry, the fulfillment of the rooms, et cetera, et cetera, and all of this. So the question is related to what do you think in your respective industry we are underestimating on the AI?

Underestimating.

An overhype as well.

And what?

On both. The opposite, so overhyping.

Overhyping. So I'll start with the overhyping which is for all of the promise of AI, I actually think that the consumer experience other than when you go to a ChatGPT or Claude, whatever your favorite foundation model company is, there isn't that much -- that's great. right? It's, how AI has fundamentally changed the consumer experience of booking travel or booking an Uber. We haven't had that magic yet.

So we, for example, have introduced voice booking on Uber. I want to go to work, take me back to the airport, et cetera. That will be cool. We'll see what the usage is. We've got some cool stuff, which is like you can take a picture of a dish that you love, and the AI will figure out the ingredients and put a shopping list together and deliver it to you, but like 8 people are using, that stuff, right? So it's just not big yet. And so for all of the power of AI, the our experience and the interaction with our services through AI, it's pretty thin now. And so I think from that standpoint, I want to see more. And it will come -- it will absolutely come but it's not there. And a lot of the AI foundation companies are all now investing in the enterprise because that's where the money is. And so to some extent, a lot of the early innovation that you thought was going to be a consumer, that's not the focus of these companies right now. So it will be up to companies like us to innovate on the consumer because that's our business, right?

So I just want to see more. I'm a little frustrated with how slowly things are going. Sorry to be the bearer of bad news. And then internally, as it goes through the enterprise, how we are working changing the nature of work, not just in terms of saving on costs, but actually doing things fundamentally better. It's the power of AI is extraordinary.

And I'll give you like one little example, which is for customer service. We obviously, as many of you have been testing out AI, AI-powered customer service. And if you think about the customer service agent for Uber, they are -- we have a bunch of policies. And when someone calls, they try to help the person based on these policies, right? And these policies we put in place for years and years and years.

A couple of things we then had AI agents follow the policies, right? A couple of things. We observed a couple of things. One is our policies are like terrible in terms of, they're just a complete mess, and humans can deal with that, which is, a, if there's an Uber Eats order that's late, what exactly is a policy. I can just ask you, you tell me and I'll deal with the policy. These AI agents didn't have that context. So when we had AI agents trying to follow our policies, the results were meh. So then we completely change our approach. One of our engineers is like less just like tell the AI agent. We have policies in place because we're trying to accomplish something. Their general rules to treat your customers better, et cetera.

We now have given these AI agents direction to treat Ariane well. And here are some guidelines to treating Ariane well, and I kind of use your judgment and the early results have been extraordinary, have been really, really cool. These agents just figure out contacts, et cetera, how good our customers Ariane, et cetera. And so the results have been really, really promising, and it required us to kind of throw away a bunch of stuff that we did in the olden days and completely rethink these processes. So I do think that the power of AI to change how enterprises work, how companies work is probably long-term underhyped, but it does require -- there's this temptation to like automate 10% of what you do, automate 15% of what you do. And I think what's going to work better is just to throw everything that you've done away and start from the ground up. So we'll see.

Well, and to the customer service point, we're working on obviously similar things, which is how do you make travelers experience better using agents. And what excites me a lot is working with many of you in this room because if you're a hotel partner or if you are an airline, you're trying to figure out the same thing. So you're doing that. We're doing that. And often, it's the same traveler. So as we're each working on our own, how do we then figure out together how to get to better traveler outcomes, which will also, I think, for us, help all of us because there'll be less manual people on the phone. But first, we've got to figure out our own stacks and then it's how does that work together to get to better outcomes.

I mean the other good news is Google is no longer going to be the gatekeeper, right?

I don't know who they are. Who? Okay. Ariane, I'm back a little bit to the same topic. There is all these rumors, okay? So AI is going to end up with the online travel agencies, et cetera, et cetera, which we all know that is not true. But what is one of the concrete decisions that you are taking to make sure that customers continue coming to our brands to Hotels.com, Expedia, Verint, et cetera, et cetera.

Well, I think there are a couple of things. One, I spoke about it earlier, is this concept of trust. We are not in the business of selling T-shirts for $10, where if someone gets the wrong T-shirt, they can send it back or they can just order another one. When something goes wrong in travel and in a trip, you never get that time back, which means there's a higher bar for people when they're booking and planning their travel to do it with a company that they trust. So we're spending a lot of effort in making sure that our content is up to date and making sure that our rates and availability and assortment is all in a really strong place, making sure that, like we talked about, our service is great, not only the sort of self-service you can do in the apps but also that if you call someone, they'll take care of it.

So probably in past explorers, we would have talked about great traveler experiences and a bit about trust. But I think in this moment, trust is what's even more important. Obviously, there's also the loyalty program. There's our ability to bundle and save when you start to have multiple trip elements and you can put them all together and get great deals when you put them together, that's something that I think it's going to be a long ways away before an LLM can do that.

And finally, I would say, I think what people underestimate is that people are happiest when they're planning their trips. In fact, sometimes they're happier planning their trips than the trip. But so the idea that you're going to just delegate it, by the way, there can be some business trips where I go to the same place every 2 weeks that I wanted just sort of done for me. But often, when you're planning a trip, you're going with someone else, you're collaborating with them. And so to me, it's how do you use the new technology to make that simpler and easier, but still empower the traveler themselves to get to plan.

Speaking about trust, Dara. So I was reading an article on the whole car drivers list and robotaxis going on around the world. And he was saying that in San Francisco already 20% of the taxis are robotaxis. I don't know if that's true.

[indiscernible]

But they're saying like in the next 12 months to 15 months, it could be 50% of the taxes. I don't know if that's true or not, but that's what they're saying. That's what they're aiming. And you have the drivers, the riders, the cities and then a lot of people that have never tried that before. So how do you build trust?

So it's actually going to take a much longer time there because right now, first of all, autonomous vehicles work, it's a spectacular product. These robot drivers are ultimately going to be safer than human drivers. They don't tax, they don't get distracted and they're continuously learning, right? They are all of them are driving multiple lifetimes of driving experience that human beings well. It's a great product.

The cars are unbelievably expensive. You need compute, you need sensors, et cetera. So these cars cost $200,000 plus. It's going to take probably 2 generations to get these autonomous vehicles down to prices where they will be a significant percentage of trips. So right now, they're like less than 0.5% of trips. In the U.S., they're probably going to double. So in 5 years, you may get to like maybe get to 10%. So it will take time, but it's worth the wait. Like it totally is worth the wait. The way that we look at it is that, just like I want every qualified high qualified, safe human driver on the platform. I want every qualified, safe robot driver on the platform. So we're working with Waymo and a number of other companies, Wave, WeRide, Avride, they are probably 10 or so companies that are working in the mobility autonomous space. you can get an autonomous vehicle in Atlanta and Austin in the U.S., for example, in Dubai and Abu Dhabi, for example. And there's this funny thing about technology, which is an experience that seems magical to begin with, gets wrote really quickly. I remember when, when I was at Expedia, I first used Uber and like push a button, it's like, it was magical, now it's like F&A, the ETA said 4 minutes in a 6 minutes. Like how could that happen, right?

We cancel it.

And it's the same with these AVs. Like you get an AV and at first, your wide eye like this is so cool, 2 minutes later, you're texting, right? So it is -- once you get in these things, you trust it because they're phenomenal drivers. I do think that there is a problem that we are going to have to face as it relates to greater kind of AI and autonomous generally is, to your point, it's a lack of trust, but it's -- we talk about how awesome AI is as companies, et cetera. I don't know if it's making the lives of regular people better. So I think that there's this disconnect with society in general as to, well, what's AI going to do for me, not the company, et cetera, like there was this, Eric Schmidt was giving this graduation speech mention AI cores of booths from the kids. And I do think there's a greater trust problem as it relates to AI society. And I don't know what the solution.

There was another commencement speaker who had the same thing happen in a week. So I think there's a real, between that, the distrust of that. The question is on data centers is a real societal question about that's going.

Okay. One last question for you, and then we go to the fun facts and questions. So Ariane, you step in this CEO role in a special moment in the demanding moment, what is the one leadership muscle that you have to build fast that you were not expecting?

I think it's the ability to go in, identify where there are problems and some things get, is getting blocked and to help the team unblock it. And it sounds funny because you would think, okay, you're stepping into a role that's got a big scale, isn't this about leading at scale? But what I realized is that you can have a great strategy and set the culture and do all of that, but there can be blockages in a lot of different places in the organization. And for me, it's a role model, get in, figure it out is something blocking and keeping us from moving fast because there's an organizational issue, there's a cultural issue like what is it? And then role modeling for others to say, I expect all of you to go in. Is there a blockage, fix it because the company needs to move fast. So it's the ability to sort of look at the high-level strategy and where we're going and also stay very grounded in how is the company operating and how do I make it better every day.

So now you can relax. This is the plan part starting now. Few questions, try to answer quick, especially you, Ariane. What's the best piece of advice you ever received about handling pressure? How do you handle pressure? One advice. Each of you.

Actually, it came from a previous explorer, Billy Jean King, pressure is a privilege. Don't see it as a negative. If you have pressure, it's a privilege.

I just drink.

They told me I couldn't say that type of thing, but you're in Vegas. I know. I know.

Wait a minute. Wait a minute. There's some sexism in there because for a woman at a certain age, drinking has other effects.

That's it. That's it. I don't want to continue talking about that.

Please don't quote me on that.

You said fun.

Let's be serious, please. So let's...

You should just cut it off.

No, this is not over, you cannot say Expedia. You cannot say Uber. First up, you open in the morning Dara.

Well, Uber. No?

No, you can't say Uber and don't say anything.

This is boring, e-mail. I instantly get on e-mail, see what's going on.

So podcast. I was in a podcast on the way into the office.

Best AI prompt for personal use, Ariane?

Best what?

AI prompt for personal use, Ariane?

Tell me about the travel news of the day.

Every day you ask them tell me about the travel industry? Every day?

Yes.

Well, they will tell you the same.

So for me, it's actually not an AI product. I've started vibe coding, and it's really cool. So I've built my own to app, and it's perfect for me, right? It's been really, really fun. It takes time, but it's been really cool.

Very nice. In this last question, you cannot say the words -- the answer cannot be France or Spain. So here is the question, Ariane, World Cup is coming. Who is going to win the next World Cup?

[Foreign Language]

You can't say France or Spain. Do you know there is a World Cup coming up next soccer, football?

I refuse answer that question.

But I can't -- my family will kill me if I say anything other than [indiscernible].

Okay. That's it. You don't answer. Dara? By the way, Dara...

Well, Iran is definitely not going to win the World Cup.

We can talk about that. Dara, just for everybody, he was very happy. He was listening to me a few minutes ago. And at the same time, he was watching Arsenal playing -- well, winning the -- everybody, I'm Arsenal. Everybody happy. So that's how much he care about the questions I was asking him. So you cannot say Spain.

I want England to win. I'm a big English Premier fan, and it's about time. They got the talent. I think this is their year.

You can ask the question to me.

Yes, what about you if you can't choose Spain.

Spain.

You can't choose Spain.

I can. I'm asking the question. So I can. Of course, I can. Okay. Well, that's all. Thank you so much, everybody. More fun coming up. Thank you so much.

Please welcome Chief Product Officer, Expedia Group, Shilpa Ranganathan.

Good afternoon. It's so great to be here today. How inspiring was it to hear from Ariane and Dara talking about how they are leading through the most pivotal moments in technology and travel?

Now earlier, Ariane shared where travel is headed. What I want to show you today is how we are building for that future, creating seamless and personalized journeys for travelers and turning that into real measurable growth for you. Because for more than 3 decades, we've learned from billions of traveler interactions across our marketplace, every single search, every booking, every itinerary change and every in-trip moment. All of this gives us something incredibly powerful, a really deep understanding of traveler intent, behavior and rapidly changing expectations.

Now the real question is how do we turn that into an advantage for you? First, we're going to help you win the right travelers, not just more demand, but demand that is valuable to your business. Second, we reduced friction for your teams with platform investments, simpler servicing, fraud prevention and tools that just work.

Third, we help you grow faster, with new intelligent products and capabilities to help you move quickly and capture more of that opportunity. All of this comes together in how we use insights and technology to help you grow your business on our trusted platform. Because in this next era of travel, winning will not just come from having the inventory. It will come from the intelligence that is used to connect the right traveler to the right experience at the right moment.

Now all bookings begin with the understanding of the traveler. And this starts with knowing what travelers value most at every step of the journey. Today's travelers expect every part of the trip to feel easy from discovery to booking to support. And this is why were we wing complete end-to-end experiences directly into our brands. Across our consumer brands and our B2B network, we reach travelers in more than 170 countries. And our sites and apps have more than 1 billion average monthly searches. So when traveler behavior changes, we see it early and we help you respond faster with the right pricing, right targeting, right content and the right offers to capture that demand.

Here's how we're going to bring that to life. Now we know every trip is as unique as the traveler behind it. So what I want to do today is share a couple of examples of how we create personalized experiences for 2 key audience segments, families and business travelers. And what does this mean for you?

So let's start with families. It's one of the most valuable audience segments in travel. On Expedia, families make up nearly 40% of leisure travel in the U.S., and they book about 40% more trips than nonfamily travelers. These folks plan early, they value convenience and they compare extensively. So let's look at some of the features we're investing in for them.

So I'm going to start with family highlights. It really helps show your property up in more relevant searches, properties that keep family-friendly amenities current in Partner Central, see over a 20% boost in bookings.

Now let's talk bundle and save. We spotlight smart package deals that make it really easy for families to book more of that trip. We can combine stays, cars and more into a single better value experience. And when you load package rates, we can show families clearer savings and help them drive higher-value multi-item trips. We're actively promoting these deals through our bundle and save advertising campaigns to increase their visibility and expand your reach and exposure.

Now we know family trips can be a big expense. So travelers want payment options that feel easy and familiar whether that's paying in their own currency, using payment methods that they already trust or distributing their cost with Buy, now Pay Later. We have support for over 40-plus currencies and 100-plus payment types. We remove all of the friction at checkout, some more trips get completed and partners like you benefit from bigger trips, more bookings and more simpler, transparent payouts.

Now families also book more complete trips. They value the convenience of doing all of this in 1 single place. Multi-item trips now represent over 25% of bookings on Expedia, and we are uniquely positioned to win that segment. Last quarter alone, we saw more than 3 million multi-item trips booked, and travelers who book multiple components deliver over 35% more value than single item bookers. And these folks have more than doubled the repeat rate. What this means is we're not just helping you win 1 booking. We're helping you win more of that trip.

Now let's look at business travelers. Many of us are business travelers, too. We want efficiency. We want flexibility. We want a consistent experience. Business travelers now represent more than 1/3 of Hotels.com's demand and converted roughly 3x the rate of leisure travelers. They book over 5 trips per year and are less price sensitive. Better yet, over 80% of their check-ins happen Sunday through Wednesday. These are the nights that are the hardest to fill. And this is premium and consistent demand. And that's why coming soon to Hotels.com, we're announcing a dedicated end-to-end business travel experience.

Here's how it's going to help you win. Business profiles will make it easier for travelers to set up work trip preferences upfront, so they can find the right stay in rates, helping your business-ready hotels get in front of the right guests and drive more bookings. Quick rebook turns a great stay into the default choice. It makes repeat bookings almost effortless. And then lastly, a personalized shopping experience that gives you access to what really matters for business travel, ease of getting to the office, reliable WiFi, free breakfast and a workspace. So if you want to show up well for this segment, the simplest step is really the most important, make sure your property details are accurate and kept up to date because when you do, you're not just getting 1 booking, you're building a repeat business with travelers who tend to come back again and again. And when you offer business rates, we can surface your property to help turn the short-term, short booking window travelers into loyal guests.

Now it doesn't stop with family or business traveler segments. We're applying the exact same playbook across many other high-value segments so we can match you with the right travelers who are the perfect fit, all of this through a single connection to our marketplace.

Now let's talk about one of the fastest ways to accelerate your growth on our platform, advertising. Now many of you here are already using our advertising solutions including on-site and off-platform display ads, visibility boosters like Accelerator, travel adds and flight sponsored listings. We're continuing to make these tools more powerful and easier to use. With our new audience targeting bid modifier inside travel ads, you can now put budget directly behind the audiences that matter the most to your business. This isn't just about more visibility, but it's really visibility with the right set of travelers, and we're seeing really strong results.

Travel ads deliver up to 9.8x incremental return on ad spend. This is one of your fastest levers that you can pull to reach more of your highest value travelers.

Now behind all of this is a powerful platform for both travelers and for your teams. We operate one of the most complete travel marketplaces in the world, spanning nearly 3.7 million properties. With a single connection, you can tap into our trusted infrastructure and diversified global demand across all of our brands, Expedia, Hotels.com, Vrbo and our B2B network.

Now I want to talk to you about 2 key pillars in our trusted platform, servicing and fraud protection. Now our platform is designed not just to drive demand, but also to make your day-to-day operations easier. Because we've heard you, when something goes wrong in travel, it creates real pressure on your teams. So we're investing in better servicing that catches issues earlier enables travelers to self-serve and reduces manual effort.

In just 1 month, we proactively flagged more than 40,000 issues before they became problems. And today, nearly half our traveler issues are resolved through self-service. And when you do need us, partner satisfaction is above 90%. What this means is fewer calls to your front desk, fewer escalations to your teams and more time to focus on your guests and your strategy.

And just this past March, we launched our first voice agentic experience for vacation rental partners, with lodging partners coming later this year. Now we're not trying to automate away the human side of travel. What we're really doing is using a hybrid model where technology handles the repeatable work so that your teams can focus on where they can add the most value.

And this exact same principle applies to fraud and payments as well. When they work well, we don't notice them, and that's exactly the point. Last year, we prevented over $2.6 billion in fraud attempts across our platform and more than $500 million in booking fraud attempts were blocked in a recent quarter, and 94% of those were auto prevented.

And when we act as merchant of record, we do the heavy lifting. We handle refunds, chargebacks and payment servicing. So your teams have reduced administrative costs and your brand reputation is protected. That's what we mean by trusted platform, more protection, less friction and fewer headaches for your teams.

Now you may have noticed something. We've spent the last several minutes talking about personalization, smarter matching, better servicing. And I haven't said the word, what's the word? Yes, AI, oh, that was time perfectly. Thank you, team. The reality is AI is already powering many of the experiences that I've shared so far. And for us, AI isn't really just a feature. It's how we help travelers make better decisions and how we help you run your businesses more efficiently.

Now what we've learned is simple, travelers don't want AI for the sake of AI. They wanted to meet them where they are with experiences that feel personal, relevant and trustworthy. And that's exactly how we're building it. We're taking a human-first mindset, focusing the real needs of both our partners and our travelers, because we see both sides of the marketplace. And Ariane and Dara both referred to this, none of this works without trust. And in the age of AI, trust comes down to 1 singular thing, and that is data quality.

We ground or AI in verify data from trusted sources, including the content and data you provide us, verified reviews, your real inventory and policies. This allows us to reduce the risk of hallucination and deliver accurate answers.

Now we've always said that content matters. And accurate content is the #1 detractor for travelers. And we actually see this. We see significant drop-offs in customer repeat when we don't get it right. And in an AI-powered world, this matters even more because content quality becomes match quality. And the partners who win will be the ones whose content clearly answers who their property is right for, what makes the property special and why? So please keep your content up to date. And once we open up AI tools for dynamic content, the action for your teams is to inundate us with it. This is what AI uses to match your inventory to the right guest. And when you invest in high-quality up-to-date content, our AI and your guests will both reward you for it.

Our AI platform also unlocks what's next. Now I think Ariane alluded to this, it's not a single chat bot. It's a connected system of specialized agents that will eventually work together as 1 unified agent that moves seamlessly across both the partner and the traveler journey.

Now let's look at what this means for you. For the hotel partners in the room, we know Partner Central is powerful, but it can feel complex. And so we're making it easier to use and way more intelligent. Today, we're announcing 3 partner agents. First, we're announcing the new AI assistant in Partner Central. It helps you identify performance issues, surface opportunities and take actions faster like fixing issues that impact your visibility or intelligently recommending promotions that capitalize on demand all within your defined parameters.

And later this year, we will introduce 2 more agents, content agent that cans traveler questions and reviews to identify missing or unclear information and lets you fix it from one place and an autonomous distribution agent that speeds up onboarding by prefilling listings from trusted sources. So when we onboard your newest properties, they can go live faster. So there's 3 agents, but they share goals, more time saved and faster action inside Partner Central to help you grow your business.

Now AI also helps with commercial recommendations. Last year, partners executed more than 1.4 million AI-powered recommendations, driving roughly 9% more transactions and about $6.5 billion in incremental revenue. And remember, we talked about those family package rates, hotels that followed our suggestions and loaded package rates saw 30% higher booking value, longer booking windows and longer stays. So we're using AI to help you make smarter commercial decisions every day, deciding which rates and offers to show and where to invest your next marketing dollar.

Now just like we have these agents for partners, we're also launching agents for our travelers. We're bringing AI into every stage of the trip to help with finding the right property, helping customers have the confidence that their choice is right and servicing to make sure it all goes as smoothly as possible.

So let's start with finding. This is all about AI filters, natural language search and activity planning. So let's start with AI filters. This is already live on Hotels.com. Travelers are nearly 50% more likely to book because we're able to help them connect with the right properties faster. And we're also introducing natural language tools to make search easier and more human. So on Vrbo, we're announcing a feature where travelers can now search for a pet-friendly lake house with a dock near Austin, to find a property with their exact preferences. In the coming months, we're also going to launch natural language search on Hotels.com and on Expedia.

And lastly, coming soon to Expedia, we're introducing our AI activity planner, where travelers can describe the trip they want and it instantly turns open-ended ideas into a personalized bookable inventory, itinerary. There's more opportunities for you to reach travelers with the right information when they're seeking the right property for their trip.

Let's now talk about how these agents are helping travelers book with more confidence.

Our Hotels.com confidence agents like our newly enhanced Property Expert and soon-to-launch AI Compare agents let travelers ask human language questions. Is the pool kid friendly? Is the WiFi good enough for video calls and get real cited answers pulled from your property details and reviews.

Travelers who used an early version of Property Expert came back almost 3x more often and converted at more than twice the rate of nonusers. What this means is fewer pre-stay questions to your teams and more guests arriving with the right expectations.

For servicing, we are launching an enhanced AI help center later this year. This will help travelers manage unexpected challenges before and during the trip. Now adding AI to our in-trip support tools drove a 30% increase in self-service use and an 18% lift in 90-day repeat rates. Across all these experiences, the pattern is the same, better information leads to better outcomes and stronger repeat demand back to you. The result is happier travelers, stronger engagement, better reviews and more repeat business.

So far, everything I've shown you is in the product or coming in the next couple of months. But I'd like you to imagine a future where a travel companion is with you throughout your trip, powered by trusted AI, maybe in your pocket, maybe on your phone, even in your glasses, providing always-on assistance. Let's bring this to life. Imagine a traveler, let's call him Aaron on his trip in Las Vegas.

[Presentation]

Aaron is on our team. I told him he'll be a celebrity after this. You should try to find him. So with Expedia by his side throughout the trip, Aaron arrives at your property prepared with all of his questions already answered. He's prompted to book experiences, gets timely reminders and continues engaging throughout his day. And what you may have noticed was that he interacts with your property and experiences throughout the trip, not just at the moment of booking. Whether it's in their pocket or through new interfaces, our goal is to be there for our customers in moments that matter. And by the way, this isn't a distant vision. It's already starting to come to life. And you can experience it today in our global travel marketplace across the hall. I would love for you to try it for yourself and help us shape what comes next.

Our North Star is simple, an always-on intelligent companion for travelers and a smarter revenue engine for you. AI has reenergized Expedia Group and unlocked entirely new ways for us to connect you with the right traveler at the right moment. But in this time of rapid change, our role is simple: to be your safe harbor, helping you navigate complexity, reduce friction and get more value from our marketplace.

Travelers trust us with their most meaningful memories, and you trust us with your business. We take this responsibility very seriously. So thank you for your partnership, for your trust and building -- for building the future of travel with us. Thank you.

Please welcome Founder Expedia, Co-Founder and Co-Executive Chairman, Zillow Group, Rich Barton; and Chairman Expedia Group, Barry Diller.

I think this chair is probably too comfortable. So I'm throwing that.

We will not be falling asleep, Barry.

No chance. So Rich, it was more than 30 years ago. So there you are, a little young snapper at Microsoft. Where did you come up with this thing?

Kind of like you were young when you were at ABC doing movie of the week. I was young at Microsoft and the Internet was sort of happening or beginning to happen. And I don't see as far into the future as you do, Barry, but it seemed obvious to me that the Internet was going to accelerate, reconfigure, disrupt many industries. And I was a frequent business traveler. And I remember calling the Microsoft travel desk and chatting with usually the woman on the other end of the phone. And I said, okay, I need to go to Chicago, then New York, then Atlanta, then back to Seattle. And I hear the clicking of the keys on the keyboard. And all I wanted to do personally was kind of jump through the phone. I knew she had a computer. I wanted to look at the computer and do it myself. And this notion of giving we, the people control.

Don't be against women.

I'm really -- I'm very pro women. Anyway, the idea that I had was give power to the people, and Expedia was born of basically that story inside of Microsoft. It ended at Microsoft interestingly with an IATA card. Do you guys -- do we still have IATA cards in the industry? There's a laugh.

What is it?

It's a little driver's license looking thing that travel agents and people in the industry used to carry back in the '90s, maybe they discounts.

What did it do for them?

Discounts. Fan discounts. There are still fam trips. We still have those in the industry. All right. All right. This is why people are in the industry. Steve Balmer, do you guys know Steve Balmer, the -- one of the early Microsoft guys. He's now the owner of the Clippers, didn't have any hair. I was trying to convince -- he was my boss. I was trying to convince him.

What has hair got to do with it?

Nothing. Nothing, Barry, nothing. But Steve, I said to Steve, Steve, you need to spin Expedia out and let me go on my own. We need -- we can be the largest seller of travel in the world. We can give power to the people. And you don't want to be a travel agent anyway. Do you I had pasted my his picture over my face on the IATA card, and I handed it to him. I said, do you want to be a travel agent? And he said, "No, no, no." That's only Steve can do. He's like, go, be free, spin out. However, he said, can I keep the IATA card because a little bit of your hair is peaking out over the top.

For years afterwards, every time I would see Bill Gates, he would like say, "You stole my company. How could you take Expedia away from Microsoft?"

Well, you did the deal. How did you do that deal? It was over my head.

I went to Steve Balmer and I said the same thing. I said, you don't want to be in this business. You got all these other things that scale, et cetera. This is little tiny thing. You don't want that. And I couldn't believe it because usually, if you do that, you go after something for somebody, they say, "well, thank you very much, go home, leave me alone." Instead, he said, "You're totally right. We made the deal in like honestly, 3 minutes.

Yes. And I found out later, it was funny.

We are...

And here we are. We're in the midst of the negotiation. This is very early in Expedia's life. So we're looking at Expedia now and all of you in this.

Expedia was losing money at that stage.

It was losing money. We were public, but losing a little bit of money. Yes, doing okay. But I remember calling Balmer in -- at the end stages of the deal, which we should talk about the deal and saying, "Steve, we don't want to do this. We want to stay independent. It's great." And it was late at night. I was in some hotel rooms somewhere, and Steve was like, you made your bed, Rich. It sounds like Balmer. But I do want to bring one thing up in the early formation story. We launched in 1996, 30 years ago, happy birthday Expedia, and thank you all of you for your partnership. Do you remember the period of time when that -- I know you do. This was -- so we're in the middle of negotiations. We've negotiated price. We have contract and 9/11.

We had -- no, we had a signed agreement.

We had a signed agreement.

And along comes 9/11 and of course, there is no travel. And we had a material adverse change clause kind of common. This was definitely a material change. And so we had the option to get out of the deal. And my colleague said, how can you go forward and pay -- I think it was about $1 billion, something like that for the...

It was the first tranche, yes?

Yes, whatever. And they said, there is no travel. You're buying a travel company, and there's no travel. Are you crazy? And we're all sitting around, and I don't know who said it, but someone in the room, it was not me, said, if there's life, there's travel. And I heard that and I said, yes, and we closed the deal.

That I had respect. So much respect.

Whatever.

No, I did. I thought there was a material adverse change clause, which is the famous active God clause when you're negotiating contracts. And I was like this doesn't constitute a material adverse change. But Barry did -- you stepped up and you basically said, we got bigger problems.

For sure. And it really is true. And one of the things that I think it's just -- first of all, by the way, it's so great to be here with all of you because your support over these 30 years has allowed us to build a really huge enterprise.

So on behalf of its founder and Dara, who helped us along at one period and certainly, Ariane, who helps us every day go forward, I really just want to say thank you. Sorry. All right. What are we going to do now?

I've got an idea. Okay. So you all know Barry in the context of the travel industry, but Barry really is Howard Stern may say he's the king of all media, but Barry really is the actual king of all media. By the time he even got around to talking to me at Expedia, he had multiple careers in every phase of the media industry from TV at ABC through building the fourth network for Rupert Murdoch at Fox to running Paramount.

However, not FOX Broadcasting.

Not FOX Broadcasting, running Paramount films, you were 32 years old or something.

Yes, I was.

I've known this because I read his fantastic book, who knew, I highly recommend that. It's also Laur. And then as I said, I think Barry has always been able to see quite a bit further down the road. You really are.

I'm sure you're going to ask me some futuristic question for which I will have no clue.

No, no. I'm going to say that you realized media the media industry, the film and television and cable, you did QVC and HSN in cable, you realized that the action was happening somewhere else. It felt to me like you had this.

What I had actually quickly was an epiphany, very -- a big time word, very few real applications -- but I saw this primitive convergence of televisions -- QVC of televisions and computers and phones coming and working together. But the thing that was like, wow to me was I saw screens, screens to me were for telling stories. That's what I've done all my life. Here, I saw a screen that was being used interactively. And I didn't really know what its application was going to be. This is early '90s. 3 years before the Internet. But I knew screens were not just going to be used to tell stories. And that is why I really switched kind of out of -- I've been in the movie business for 20 years. And I said, no, I'm going to the wilds of Pennsylvania to QVC to figure out what to do with these screens.

What did people -- what did your peers think of that?

They thought I was nuts. nuts. They all thought -- I mean, this kind of Hollywood person is now going to a home shopping network. What has happened to his brain, much less anything else. And I kind of -- I was happy at that. I've always liked the idea of people thinking I would fail or that what I was doing made no sense. A couple of reasons. First of all, it kind of allows you to work without distraction because nobody really wants to be around you because they think they aren't going to work out. And the other thing, of course, is if you're discounted, look at what you get to do if you pull it off.

So -- and that was a period where, again, luckily, because I did not see the Internet coming, I had a little bit of fluency in my fingertips about interactivity. So then the Internet comes along in '95, and I was like, I was ready to twerk.

Well, you twerk. And I mean, is that the logic that brought you to my door? Tell me what leap you made from the interactive epiphany and then the experience you had with HSN to Expedia.

It was -- it was to me so obvious, I thought what is the easiest, simplest, most obvious thing for the Internet to colonize? Travel, trillions and trillions and thousands and trillions of individual little things that could actually, with the technology available then could, as you say, be pulled out of the computer into a consumer's hands. And as soon as I thought that, really -- because I didn't know, it wasn't like Expedia came into my head. But really right after that, I'm browsing around something, and I see a little ad for this little embryonic Expedia. And I said, "Well, honey, there it is.

Yes. It's fascinating. I think we're lucky to be in this industry, and I'll still count myself as part of it because it's so fun and entertaining. I mean one of the insights that I had when I founded the company was that the individual traveler treats travel shopping, at least the non-business travel shopping, travel shopping as entertainment.

Well, so romantic.

It's romantic. It's sport. It's aspirational. One of the first ads we ran at Expedia was a print ad was somebody at a computer at night in their pajamas in the glow of the CRT of the screen. And I can't remember exactly what it was, but it was like Expedia never sleeps.

One of the first ads at QVC that I took out -- I took out a full page ad in -- the New York Times. And it simply said the following, "buy underwear in your underwear."

We had an underwear one, too. It's so funny.

Who came up with the Expedia and sound. I can't do it.

Dotcom.

Yes. Thank you. You did that well.

Expedia dotcom, we heard it. That was so good. It's too bad dotcom means nothing anymore. I the team, I honestly don't recall the creative process. It was great. The creative -- we didn't have a lot of budget. Balmer didn't give me much budget. So we had to be creative. But it was such a creative product to work with and so much fun. And we knew that the average traveler would spend 100x more time travel planning with Expedia than they did previously. and that has played out incredibly.

I mean, interestingly, Ariane or Shilpa was talking about the advertising business. I mean it makes a lot of sense that Expedia now has a big media advertising business because of how much time -- nonproductive time consumers spend dreaming about travel.

Of course.

Yes. Okay. So all right. So you saw the Internet disruption coming with Expedia. And we -- later, we weren't working together at Expedia then, but the mobile disruption came. The next -- kind of the next -- Internet was a big set of new things that were scary. Mobile came along, and that was new and scary. And of course, Expedia born at Microsoft was full of technology people and was able to create a big arc for its partners into which all its partners could go and know even though they were scared about this disruption, they could actually sail safely into the future. And I think that happened with mobile as well. And I do believe we're feeling that way. We, the room and probably we, individually, are feeling that way relative to AI, too. We couldn't...

The dread subject.

We couldn't get away from it, though. We don't have to go there, but...

No, no, we'll go.

Yes. And so...

See what we can make of it.

Okay. So the -- the new aliens have just -- they've just arrived. They're on the planet. They're at the kind of "take me to your leader" stage. And we're all asking ourselves questions like what is real. And will any business or person survive the invasion? I'm personally optimistic, and I assume you are, too, because I know you. But I am curious how you are feeling about this new technology magic, this new wizardry that has just showed up relative to Expedia and relative to your other businesses.

Well, I'm just -- the reason I said dread, it's obviously not that. It is the next revolution for sure, with truly unknown consequences. But I also think it is -- when something is kind of out of everybody's mouth at the same time and the hype around it and the -- all the people who are figuring out exactly what the terrible future might be or the great future might be, while all of us humans just have to go about our kind of daily tasks. And so I try at least to keep it into some at least narrow band of thinking, which is sure, it's going to help us in lots of ways. There's no question about that and probably a lot of unknown ways. But it is not a replacement for human activity. And I do not believe it will be.

Actually, one of our companies is called IAC, just changed its name to People Inc. And part of the reason I did it is partly because we own a group of magazines, one of them People. But I also wanted to, in a sense, kind of say people. Let us not forget that. Let us not think that all of the actions of every possible kind are going to be led by artificial intelligence. Artificial is a really good word. It is however smart it's going to get to be until we are the simulation, which may come. But short of that, I do not want to be led by -- I don't want to be led by anybody, certainly much less tech lords who are imposing their own almost hedging -- they're essentially wanting to take over everything. And while technology is certain -- look at what it's done for all of the things that we do in a daily life and all of our businesses, it is not -- it will replace jobs. Other jobs are going to get created, but it is not the human equation. And so I want -- I keep going back to that in kind of every iteration that I come across with regard to that word I'm never going to say it again.

I thought that might be where you would go, and I thought that might be behind -- I hadn't chatted with you about it, but I thought that might be behind the people rebrand. And even the people move, even the move into the magazines. You're a contrarian and you're usually always one step ahead, and I really took note. I also took note when IAC now people moved in to take a big piece of ownership in Las Vegas and understand.

Yes. Thank you for all being in one of MGM's properties, one of our really nice properties, the REA. I hope it's treating you all very well. And if it isn't, yes, I am open to complaints, although I don't.

It's fun walking around the hotels with berries. But investing in people and the convention of people and in entertainment and in sporting is amazing.

One of the things that was so obvious to me is that I thought there is no technology that's going to get between a person going to one of our properties. That is not possible. So while every day, I have to worry about disintermediation in our advertising businesses, certainly in Expedia, et cetera. At MGM Resorts, I don't have to think about really other than applications of AI to make the business run a little better. I don't have to give a second thought to any technology actually getting between me and my customer.

What a great -- and the same, by the way, for all of you who have hotels. I mean you're impervious to anything that comes from technology. Right now, as was mentioned in the last thing when people go on stage and talk about AI, they get booed, et cetera. Tech, which used to have a very optimistic and most people were big cheer leaders, certainly, really kind of when the iPhone came out and the emotional connections to the iPhone, very fond of it and thought well of technology. Silicon Valley was a good place. It had...

Full of heroes like me.

Exactly. But it had wonderful aspirations. Right now, you kind of ask people and they go, "Oh, no, I don't like that place." I think there are a lot of very odd folks coming out of that environment.

It's interesting, Barry. I told you yesterday, I'm Stanford University Trustee and have been for 4 or 5 years now. I'm an undergraduate engineer from Stanford, where I met my co-founder of Zillow, who you know and an early Expedia friend, Lloyd Frank.

Okay. At Stanford, for the first time in 15 years, we are seeing a decline in computer science engineering degrees. As a percentage of -- we are seeing a decline.

Wow that's extraordinary.

And I will tell you, I have been developing a thesis since I saw ChatGPT in November of '22. I have had a thesis that the humanities are coming back. Humanity is coming back. At Stanford, we call them the techies and the fuzzies, and they were always at odds with each other. And the techies have been winning for the last 15 years, and I actually believe we are entering a revenge of the fuzzies.

I mean what a great thing, though, to think that the humanities that out of, I would say, some tech overreach that actually people are caring about the human condition.

It's amazing to me. We have kind of forgotten to think philosophically and intellectually about what it means to be human until the aliens have arrived. And now we're actually -- we're thinking about it, and we're teaching it and the kids are interested in it. I'm like -- anyway, I'm very excited. Literature is coming back. Kids want to read books. Oh my God. It's so exciting to.

All good.

Okay. This is an interesting segue into an aspect of you that I really respect and it differentiates you from other business visionaries who've been very successful. And you don't call yourself a creative. You downplay your own personal creativity. But in almost response to that, I think you have developed a way of cultivating creativity around you.

I hope so.

And I think throughout your career, you were one of those business-oriented people who so loved and respected the creatives and understood how creatives are different from other people, okay? And how they need to be care and fed and watered and...

And protected.

And Protected...

Yes, for sure.

Because they get prayed upon by...

They're also a little crazy. And good crazy. I mean, sometimes bad crazy for sure, but generally good crazy. Good crazy needs nurturing. It needs an environment of protection. It needs an environment where you can make mistakes because if you can't -- if you're doing anything, most creative things are kind of, let's call it, editorial judgment, which is yes to this, no to that in the kind of process. And in doing so, there's no formula, no AI. He said quickly, but I'll make this bet.

No AI is going to better the ability of someone to recognize a good idea or a bad idea, but you're going to make mistakes. And so you have to have an environment where mistakes are encouraged, hopefully not the same dumb mistake after the other, but good individual mistakes are a joy.

I really -- I respect that. You always talk about how you just kind of plotted along and put one dumb foot in front of the other. And I don't think you're fishing for compliments when you say that. I think you believe that, but...

I do.

There's nothing dumb about the steps you've taken. And I guess on the creative side, I also observe and respect and try to emulate to the extent I can. you're aesthetic guy. Part of your creative cultivation has meant you actually understand what beauty is and what beautiful things are. And I observe in your -- even in your business life, the world that you created around you is a wonderfully beautiful place, and you built beautiful buildings. And I'll highlight one thing. You're a very philanthropic and community-oriented person as well, another thing I really...

Thank you. This is enough of this. Let's...

But I want to bring up one thing because people may not know this. and it's sort of travel oriented. But who out there has been in Manhattan and been to this wonderful little island on the Hudson River.

Yes. It was -- no, it was really an incredible journey. It took 10 years to build it. We had enormous adversity, all sorts of things and people said you can't do it. And then, of course, we're driving 287 piles into the Hudson River at depths, no one knew upfront, et cetera. But 10 years after we started, there it is. And what gives me and my family so much pleasure is seeing people leave the city on the bridges to get to it, and you see them expectant of something. And then when they come back, they're smiling and they're happy. How could you do anything better than that?

Well, the city...

No, no, no. I'm honestly. Thank you.

And that's just part of your philanthropy, but creating beauty for people and giving it to the community and punching through all the a******* that we're trying to stop you from doing that.

Yes, yes. it was -- and one of the things that's true, which I think is just generally true is you can't really remember pain. So I don't remember the painful part.

And now you have a beautiful thing.

And we have a good thing. And we're doing another -- we're starting a project in L.A. where we have -- our family got 100 acres on top of a mountain, and we are going to build some -- a kind of public art that I hope, dare I say it that will rival in iconography, the Hollywood sign in L.A. And that's our next project. And that is so much fun to try and create.

And can we bring actors and all of the careers back to L.A.

You see what we do.

I hope I certainly hope so. Okay. I'm being given the land the plane rich signal. And so I'll bring it back to Expedia to close. There was a picture of me and my firstborn child, Will, in Ariane's presentation. And what Ariane didn't say, we hadn't met at this point yet. This is November of 1999 when Expedia went public, spun out of Microsoft, 138 of us did that. It was crazy. I was 32 years old, totally crazy, but a lot of fun. My wife was pregnant. Sarah was pregnant during the whole roadshow and the whole wind-up period. And I had been on the roadshow with our CFO and others for 2.5 weeks, which doesn't happen anymore. I don't think. I think it's all on Zoom.

And I was exhausted and my wife was still 3 weeks away from her due date, but I decided to call the roadshow short a day or 2 because we were overbooked. The IPO was going to be so successful. We all knew that. Of course, dogfood.com could have gone public in 1999 in the Internet bubble, but don't let that get in the way of a good story. I came back a night early, and it was late night, I crawled the bed with my wife. And my wife said to me, she kind of felt something going on. And she said, if he's born tomorrow, do we really have to name him Expedia? Which I had promised to my team long ago, if he was born on the day of the IPO, I would call him Expedia. 4 hours later, she was in labor. And she was laboring in the hospital while Expedia was going public. We had brought a TV with CNBC going into the labor delivery room, and we watch -- we were following the action. I was not in New York with the team.

How is Expedia doing here at your trial?

Speedy. We call him Speedy now. He is doing fantastically. He's not 30 years old. That was the 30 -- was when we launched 1.0, but he's 27 years old. And he's I told you this. He just got engaged to be married.

Congratulations.

We're hoping for grandkids soon. Anyway, I want to close -- thank you very much, Barry. This has been a lot of fun. I want to close by turning back to you all and saying Expedia is this big arc, okay? We are -- we, I'm saying we -- it's not we anymore, but...

It is you.

We are nothing -- Expedia is nothing without its partners, and we've always had a really, really firm grasp on having great partnerships, and we know we do nothing without you all. And the technology -- the scary technology stuff that always seems to happen and is certainly happening right now, once again, at its root, Expedia is a technology company and understands this stuff. And I firmly believe that the AI revolution is an accelerant to what Expedia is doing, and it is an accelerant and a highlight like the humanities in general, it is a highlight for the travel industry in particular. And I think the travel industry globally has great prospects in the age of AI.

I think that's completely true. And I would -- of course, yes, thank you all for decades of being part of it and being supportive. But I'd also like to say the organization of Expedia, which has evolved over the period and people have come and people have gone. But the current -- and you could say, well, of course, he's going to say it, but I say it with such conviction, the current group led by Ariane, who is just a truly wonderful leader of a company and particularly -- yes, this is and particularly this kind of company, but her and her travel leadership team are just so first grade. So I want to thank them. I want to thank you. I'm glad Rich and I could be here.

Thanks for inviting me.

And I wish you a really nice couple of days. Thank you.

Good day, everyone, and welcome to the Expedia Group Q1 2026 Financial Results Teleconference. My name is Jen, and I will be the operator for today's call. [Operator Instructions]

For opening remarks, I will now turn the call over to VP, Investor Relations, Rob Bevegni. Please go ahead.

Good afternoon, and welcome to Expedia Group's First Quarter 2026 Earnings Call. I'm pleased to be joined on today's call by our CEO, Ariane Gorin; and our CFO, Scott Schenkel. .

As a reminder, our commentary today will include references to certain non-GAAP measures. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in our earnings release. Unless otherwise stated, all growth rates are on a year-over-year basis and any reference to expenses exclude stock-based compensation. We will also be making forward-looking statements during the call, which are predictions, projections and other statements about future events. These statements are based on current expectations and assumptions which are subject to risks and uncertainties that are difficult to predict. Actual results could materially differ due to factors discussed during this call and in our most recent Forms 10-Q, 10-K and other filings with the SEC. Except as required by law, we do not undertake any responsibility to update these forward-looking statements.

This call is being webcast on the Investor Relations section of our website at ir.expediagroup.com. A replay will be archived on our site A slide deck containing financial highlights has also been posted on our IR website. For today's call, Alan will begin with a review of our first quarter results. Then Scott will provide additional details on our first quarter financial performance and guidance. After our prepared remarks, we will turn the call over to our operator to begin the Q&A portion of the call. And with that, let me turn the call over to Ariane.

Thanks, Rob, and thank you all for joining us today. I'll begin my remarks with our first quarter performance, and then I'll talk about AI as we see it as a significant growth opportunity, and I know it's top of mind for many investors.

We had a strong first quarter underpaid by solid execution as well as progress on our strategic priorities and operational leverage that we've been building over many quarters. Our financial results exceeded both our top and bottom line expectations, demonstrating the resilience of our strategy even amid a mixed macro environment. We grew bookings 13%, revenue 15% and expanded EBITDA margin by nearly 6 points. Momentum from late 2025 carried through February, delivering our best first quarter start in 3 years. In March, we hit a more challenging macro environment, with the conflict in the Middle East and travel advisories in Mexico. When travelers needed us most, we took care of them, working with our partners in region to extend cancellation flexibility and augmenting our service teams. While the Middle East itself represents less than 2% of our total bookings, we saw elevated traveler cancellations across Europe and Asia. Cancellation rates stabilized in early April and booking activity reaccelerated throughout the month.

Total booked room nights in the first quarter were up 6%, including mid-single digits in the U.S., low single digits in EMEA and low double digits in the rest of the world. Our domestic U.S. room night growth remained stable, but it was partially offset by travel advisories in Mexico and less promotional activity by select B2B partners. B2B once again delivered healthy performance with bookings up 22%. We announced an exclusive partnership with Bank of Montreal AIR MILES, and just last week, became the exclusive hotel partner for Uber. Uber will also be in our Expedia app, making travelers' trips more seamless. Our Consumer Brands grew bookings by 10%, the fastest pace in 12 quarters. Active loyalty members were up mid-single digits, and we continue to see even faster growth in our higher tiers.

For the first time, vacation rentals on Expedia reached an annualized run rate of $1 billion demonstrating that our investment in a unified lodging shopping experience is scaling successfully. And we also continue to expand our supplier-funded promotions. 25% more hotels participated in our March sale this year, and more than 1/3 of Vrbo bookings last quarter came from supplier-funded promotions. Our strong performance was a direct result of the progress we've made on our 3 strategic priorities: delivering more value to travelers and investing where we see the greatest opportunities for growth and driving operating efficiencies and margin expansion. On our third priority, in particular, we achieved our highest first quarter margin in 15 years. We're pleased with our progress and remain committed to additional cost efficiencies and marketing productivity in our consumer business.

Now turning to AI. Simply put, AI reinforces our core advantages and amplifies our execution against our priorities. We're using it to enhance the experience for our partners and the travelers that come to us direct and to acquire new traffic and market more effectively. Let me ground this in some concrete examples, starting with how we're improving traveler experience through our products, supply and servicing. First, AI enables better personalization at scale in our products. We're using data from hundreds of millions of travelers interactions from shopping to reviews, servicing and more to continuously improve our ranking and recommendation models. AI-powered conversational experiences provide even richer data and coupled with more advanced models enable us to uncover deeper patterns.

In the first quarter, this translated into higher conversion at Vrbo and record attach rates on Expedia. Our 2 most widely adopted features are our servicing agent and AI-powered filters, and travelers who use AI filters return more often and convert at higher rates. Second, AI is a great tool to strengthen our supply advantage given the massive scale we operate at. We work with nearly 3.7 million properties, of which 800,000 are exclusive to us. AI enables us to onboard partners faster. And last quarter, we grew lodging property count by 10% with our fastest growth outside the U.S. It also allows us to improve our supply quality, enriching our proprietary content, which ultimately underpins travelers trust in our brands. And just as importantly, as AI deepens our understanding of travelers, we're bringing even greater value to our partners through more powerful insights, advertising and promotional tools.

Third, AI improves our post-booking experience. We handle more than 250 million service interactions a year with over half results through self-service. More than 30% of those are powered by AI, and that number keeps increasing. And when human support is required, AI shortens wait and handling time and enables faster resolution. We're automating conversation summaries in over 30 languages, enabling seamless handoffs with context across our global workforce and reducing new agent onboarding time by about 60%. As flights were canceled across the Middle East, AI helped us handle surge in volumes at speed, allowing our human agents to focus on more complex time-sensitive issues. This hybrid servicing platform combines intelligent automation, strong partnerships and human support to deepen travelers trust so they know we always have their back.

AI also strengthens our ability to acquire traffic and market more effectively. While roughly 2/3 of our bookings come through direct channels, AI platforms are an opportunity to grow through indirect channels. We moved early here, leveraging our technical strengths built up over many years. Answer engine optimization is now our fastest-growing channel. And in February, we went live with ChatGPT ads. Traffic and bookings from AI-driven channels remains small, but we're encouraged by the mix of new users conversion and average purchase land. This is a long-term opportunity to reach a large engaged audience, while diversifying our marketing investments. More broadly, AI is improving our creative and supercharging our testing abilities.

Overall, AI-enabled tools are driving hundreds of millions of dollars in realized marketing value through greater productivity and workflow automation. Stepping back, I want to be clear that as we're moving to take advantage of opportunities, we're also working deliberately to ensure our strategy is resilient no matter how traveler behaviors evolve. We know that trust, scale, supply quality and deep relationships will remain essential, and that's where we excel. In closing, we had a strong start to the year, delivering better-than-expected results against the mixed macro backdrop. Our team's solid execution drove double-digit bookings and revenue growth and meaningful margin expansion.

As we look ahead, we'll continue advancing our strategic priorities, thoughtfully deploying AI and driving value for all our stakeholders. Before turning it over to Scott, I want to take a moment to thank him for the significant contributions he's made during an important period for the company. Our strong financial foundation reflects the great work he and the team have done over the last 1.5 years. And looking ahead, I'm pleased to welcome Derek Anderson as our next CFO.

With that, I'll turn it over to Scott to walk you through the financials.

Thank you, Ariane. It's been a privilege to work with this team over the last 1.5 years, and I'm proud of the progress we've made to strengthen the business and drive improved financial performance. I am confident the company is well positioned to build on this foundation, continue to drive growth, further enhance operating efficiency and expand margins under Ariane's leadership.

With that, let's turn to the quarter. I'm pleased to share that our first quarter 2026 results exceeded the high end of our guidance range. Gross bookings were 35.5 billion, up 13%, driven by 6% room night growth and 4% ADR growth on an FX-neutral basis. Revenue increased 15% to $3.4 billion with foreign exchange contributing approximately 3 points to bookings and nearly 5 points to revenue, roughly 1 point higher than we had anticipated. Moving to our segment performance. Consumer gross bookings of 24.8 billion grew 10%, driven by sustained momentum in the U.S. and continued momentum in Vrbo. Revenue of $2.1 billion grew 8%. Bookings growth outpaced revenue in the quarter, primarily reflecting a higher mix of air. Consumer EBITDA margins were approximately 20%, up 9 points from last year, driven by marketing leverage and cost control. B2B gross bookings grew 22% to $10.7 billion, led by an acceleration in North America and double-digit growth across all core regions.

Rapid API was again the largest contributor to growth and B2B continued to benefit from elevated marketing activities from some of our largest partners, albeit at a more moderate level sequentially. B2B revenue grew 25% to $1.2 billion, and EBITDA margins were 22.7%, approximately flat year-over-year. As we have stated previously, we will continue to prioritize B2B investments to support future growth, which will weigh on near-term margins. Before moving further, let me provide some context on how demand progressed throughout the period. We entered the quarter with solid momentum with booking windows and lengths of stay modestly higher year-over-year. However, the macro environment became more volatile as we entered March, resulting in higher cancellations and more moderate booking trends late in the quarter.

In our consumer business, we faced headwinds from travel advisories in Mexico, while in B2B, the conflict in the Middle East meaningfully impacted outbound travel from multiple regions, driving elevated cancellations in Europe and Asia. Excluding these impacts, both bookings and room night growth would have been approximately 2 points higher for the quarter. During the quarter, we saw air capacity tighten and prices increase with some shifts across quarters, while U.S. domestic travel remained healthy. We also saw continued strength at the higher end of the market alongside resilience from more price-sensitive travelers. Moving to our cost structure. Cost of revenue was $373 million, up 5%, while leveraging approximately 1 point as a percentage of revenue. driven by continued efficiencies in payments and customer service.

Total direct sales and marketing expenses were $1.9 billion, up 6%. We saw significant leverage in our consumer business with direct sales and marketing down 7%. The leveraging approximately 75 basis points as a percentage of consumer gross bookings. This was partially offset by growth in B2B sales and marketing expense, which reflects partner commissions and is recognized at the time of stay. Overhead expenses were $627 million, up 4% from last year, while leveraging approximately 2 points on revenue. As a reminder, last year, we implemented a series of cost reductions which had a meaningful impact on the margin in the back half of the year, and those actions continue to favorably impact the first quarter.

Turning to profitability. We delivered first quarter adjusted EBITDA of $542 million with a margin of 15.8%, our highest Q1 in 15 years with nearly 6 points of adjusted EBITDA margin expansion. Approximately 1 point of the expansion was driven by favorable foreign exchange with the balance reflecting stronger-than-expected marketing leverage, revenue flow-through and cost efficiencies. Adjusted EPS of $1.96 grew approximately 4x, reflecting robust earnings growth and the accretive impact of our share repurchase activity. Moving to our cash position. We ended the quarter with $5.8 billion of unrestricted cash and short-term investments and we remain committed to maintaining debt levels consistent with our investment-grade rating. During the quarter, we retired $1.75 billion of short-term debt, including our convertible and senior notes. We secured a $2.5 billion revolving credit facility. And subsequent to quarter end, we issued $1 billion of long-term debt, further strengthening our liquidity profile and overall financial flexibility.

On a trailing 12-month basis, free cash flow was $4.1 billion, reflecting the strength of our operating model and continued disciplined execution. In the first quarter, we utilized $700 million to repurchase 3.3 million shares of our common stock at an average price of $212 per share. Since 2022, we have repurchased nearly 49 million shares, reducing our share count by 24% net of dilution. We remain committed to returning capital to shareholders. And today, we announced that our Board approved a new $5 billion share repurchase authorization. For '26 we intend to continue opportunistic share repurchases at a pace similar to recent years. Turning to our outlook. For the second quarter, we expect gross bookings growth of 7% to 9% and revenue growth of 9% to 11%.

At current exchange rates, this assumes foreign exchange tailwinds of approximately 0.5 point of bookings and 4 points to revenue. For EBITDA, we expect second quarter EBITDA margins to be up 50 to 100 basis points. Consistent with prior commentary, margin expansion this year will continue to be supported by cost discipline and a more efficient marketing base, with the pace of expansion moderating as we lap lower marketing spend and larger cost actions taken last year. We were also benefit in Q2 from cost actions taken in Q1. For Q2 and the full year, we acknowledge there could be potential upside. But given the volatility we have seen recently and the ongoing geopolitical and macroeconomic uncertainty, we believe it is prudent to maintain our current full year outlook and provide an update when we report Q2 earnings. As a result, we reiterate our expectations for gross bookings growth of 6% to 8% and revenue growth of 6% to 9%, including approximately 1 and 2 points of foreign exchange tailwind, respectively.

On EBITDA margins, we continue to expect full year expansion of 100 to 125 basis points. Given our first quarter performance and Q2 outlook, we would expect to come in at the high end of that range and we'll provide an update on our Q2 earnings call. In closing, we delivered a strong first quarter despite a challenging macro environment. B2B bookings grew more than 20% and our Consumer business achieved its highest bookings growth post COVID, and we expanded margins by 6 points. These results reflect continued progress in operating discipline and execution positioning us well to drive durable, profitable growth and sustain shareholder value.

With that, we will now open the call for questions.

[Operator Instructions] Our first question comes from the line of Brian Nowak with Morgan Stanley.

I have 2. The first one, I appreciate all the color on the macro trends throughout the quarter. Can you talk just a little bit about what you've seen in April and sort of the start in May from a macro perspective and what you've embedded in the guide on room nights. That's number one. Then the second one, kind of highlight a little more on the U.S. specifically throughout the first quarter? It looks like you may have gron slower than your -- a couple of your peers in the U.S.? Has there anything changed from a competitive perspective? And how do you think about sort of investing to drive faster growth in the U.S. throughout '26.

Yes, absolutely. Maybe a couple of things. I'll start and then hand it over to Ariane. We started with a strong January and February posting a strong healthy room night growth and bookings growth across both our consumer and B2B businesses in line with the prior quarter. In March, we experienced a slowdown with the rising cancellations in select quarters. First, with the announcement of travel advisories in Mexico, and second, with the conflict in the Middle East. The region's most impacted, as I indicated in my prepared remarks, APAC and EMEA outbound, which particularly impacted our B2B business. Domestic travel largely in our consumer business remained resilient during this time in our core regions. And additionally, I'd add, we saw some resilience for more price-sensitive travelers as well as continued strength at the higher end of the market. And while we saw a spike in March, cancellations have normalized in April and bookings have improved in the month of April. .

Yes. And on the U.S. I would say if you just look at the U.S. on domestic bookings, the U.S. domestic bookings actually accelerated and grew in the mid-teens. U.S. domestic nights were stable, and we grew faster than the market overall. Those numbers would have been stronger absent the pressure that we had on outbound demand, in particular, outbound to Mexico when they were the travel advisors to Mexico. We were particularly good about the performance of Vrbo and what Vrbo was able to grow in the quarter. At the same time, the B2B growth decelerated, and that was, as Scott said, due to moderation in promotional activity from some of the largest partners that we have following what they've done in the fourth quarter, which was more elevated promotional intensity. .

So overall, in the U.S., I would say the consumer sentiment -- consumer has been remarkably resilient. Certainly, it's our backyard. It's where we're investing. We feel good about where we are. We certainly look at room nights, we look at bookings from sort of low star all the way up to Highstar. And just like in all of our marketing, we're disciplined. We look at where we can have the best returns, and we make a balanced decision.

Our next question comes from the line of Eric Sheridan with Goldman Sachs.

And Scott, first, thanks for everything. I wish you the best going forward. Maybe building on Brian's question and just coming out from a different angle, How do you think about the health of your consumer facing brands as we get deeper into 2026? And talk to us a little bit about the amount of spend needed in support of brand and direct traffic initiatives rather than maybe performance marketing initiatives when you think about the mix of your marketing dollars in support of growth. .

Sure, Eric. I'll start on that one. First, I feel really good about where the brands are right now, in particular relative to where they were 2 years ago. When I stepped into this role, I sort of said we're going to go back to the basics on our brands. We're going to make sure that they have clear value propositions, position them well. We're then going to pull that through into our marketing, into our product into our supply, and we're going to be very disciplined to make sure that we're getting the returns that we want, where we're spending our money. Brand Expedia is in a great spot. It's growing well. It's very clearly the one-stop shop. It had a strong quarter with air ticket growth. I talked about what we're doing in vacation rentals and how that unified lodging path is doing well. that wasn't here a year ago. We're at record levels of attach and insurance. So I feel good about where Brand Expedia is.

Vrbo similarly, it had a great quarter we're positioning it as the trusted pure-play vacation rental brand. We filled some gaps that we had a couple of years ago. Last year, we started to have the promotions, which is now 1/3 of the bookings we've extended VrboCare. We've really done a lot of things to position that brand well as the trusted VR brand. And then on Hotels.com, we relaunched the brand last year. We have strong brand metrics from that, and we're still working on adjusting the loyalty program on Hotels.com, but again, we're pleased where we are.

With all of that, making sure we have the right positioning, the right product, the right supply, then it's a question of what is the marketing mix. We certainly have a mix of brand spend and then performance spend. On brand spend on Expedia, we just last week did a partnership with a big creator, big YouTuber Speed, which is really all about getting after the Gen Z audience. Similarly, in the other brands, we have plenty of upper funnel spent. And a lot of the efficiencies that we're seeing is coming out of performance and better understanding the incrementality of the returns in performance.

Certainly, on brand, we're getting benefits and leverage from using AI and creative and the like. But I would say we're keeping that balance and the better we are at understanding returns on performance spend, the more we also are balancing between upper and lower funnel.

Our next question comes from the line of Justin Post with Bank of America.

I'll dive into marketing. You're seeing continued really strong leverage there, better than estimates. How are you thinking about the efficient frontier and could you be driving room nights faster if you wanted? And then second, you're going to lap that step function improvement in the third quarter. Do you think you could still drive marketing improvements as you think about the back half? .

Yes, a couple of things. Let me start with first off, the marketing leverage piece. I think kind of following on from what Ariane just said, much like in Q3 and Q4 of '25, we continue to demonstrate strong marketing discipline and improved efficiency and returns across and between channels. And we've spent a fair amount of time reallocating between channels and countries and getting sharper. Our capabilities and improved targeting and measurement capabilities allow us to more dynamically reallocate spend across channels and markets, reducing investments in lower-performing areas while concentrating spend where returns were the strongest. AI has helped us do this. It's helped us do more tests, deliver more gains across both paid and unpaid channels.

And as you call out, as we look to the second half of the year, we expect marketing efficiency to moderate as we lap the elevated levels of leverage that we got the back half of '25. I indicated that on the last call as well.

The way I would think about it is -- there's some of the work that we've done that is going to be durable. The work that we've done to better understand returns, to understand incrementality, to move money from 1 place to another, that is durable. The -- raising the bar on the levels of returns we're expecting and taking out unprofitable spend, there were lower profitable spend that, as Scott said, is something we will lap over. As we go forward, what I'm looking to the team for is to make each dollar of marketing count by improving our product experience by improving how each marketing dollar then lands into the product converts. And that's where we're going to see benefits down line that what we're driving towards.

Yes. I would -- let me double-click on 1 of the questions that was embedded in there. Just growth on the table, we actually don't believe we left meaningful growth on the table, which is remarkable given our consumer brands are growing GBV at 10% and the margin expansion we delivered reflects the work we've done to improve those efficiencies across the business from marketing to cost of sales to overhead, and we tend to be very disciplined in how we allocate those funds. When you look at the top line, as I said, our consumer business growth grew about 10% this quarter. The strongest growth in nearly 8 years, while we've cut marketing spend in the consumer business 7%.

And even then, as we look at that, we haven't really cut -- I don't think we've left much growth on the table at all. And just shot to the team, they did a great job to better understand the returns, reallocate the spend and optimize the channel mix. So while we could have spent more, but the incremental return didn't warrant it.

Our next question comes from the line of Jed Kelly with Oppenheimer.

Great. Just circling back on the partnership with Uber. Can you sort of dive into sort of how sort of some of the economics potentially work? Like should we expect more of these larger partnerships with larger companies that could drive higher volume to your B2B segment? Can you just dive into that.

Yes. Thanks for the question, Jed. Look, we are excited to be the exclusive hotel partner for Uber, and it's a testament to the strength of our B2B business, the strength of the technology, the team, the supply. I'll just remind everyone our B2B business has been growing fantastically for many quarters in a row, and we have a lot of big name partners that we power. So we're thrilled to have Uber. There are lots of -- it's not our first big partner that we power. The way we think about this deal is, look, our supply partners or hotels, they're going to benefit from it because they will get incremental demand, all with the 1 pipe that they have or the 1 connection to us. It's a net positive deal for us. it's a deal that's first launching in the U.S. and then it's going to expand further.

And in fact, Uber is strong in some of the -- some regions where our brands aren't as strong, so that's going to give us access to that demand. And like with anything in our B2B business, I'm always pushing the team on acquiring new partners or partnering with new companies I mentioned Bank of Montreal, AIR MILES, we have Uber. It's really about how do we continue to build up our partner network which then creates a virtuous cycle because it's great for our supply partners. They get incremental demand. It's great for the B2B partners. And it also creates the flywheel, helps all of our content get even better.

Great. And just as a follow-up, just on the cost for the back half -- is there anything we should be thinking about AI investments around higher token costs, token usage? Anything around there that could inflate the cost?

So we'll get 2 next -- the second half in the next earnings call, but a couple of thoughts ahead of that. definitely, we're seeing the use of AI and the associated costs, broadly speaking, increasing. The team has done an excellent job managing their overall cost to include a number of reductions that we've made across multiple teams over the course of the last year. And that's left us room in our cost structure to be able to absorb that and deliver the margin expansion that we've talked about. That will moderate next as we cross into the second half of next year of this year. I expect token costs to go up we're going to be adding back skills that we need to optimize our AI plans. And I think that will put some upward pressure on costs. But I think the teams have done a good job continuing to take costs out. So it's kind of a mix of productivity to pay for additional investments in AI.

And I would just add because I'm spending a lot of time with the team on AI adoption internally is we are not constraining ourselves. That being said, we're certainly pressurizing our usage. So like with everything we're doing, we're being disciplined. And I think you've all seen that since I became CEO a couple of years ago, it has been a top priority to run the company efficiently. So it is invest in the areas we see growth and drive efficiency, which is why we can do both at the same time.

I'd also keep in mind that we're working not just on engineering costs. We're working on every cost bucket in the company, in particular, overheads and cost of sales. And we've done really nice work over the course of the last year-ish. and that dynamic will continue.

Our next question comes from the line of Ken Gawrelski with Wells Fargo.

Could we dig a little bit into the B2B segment. You talked about some of the dynamics in the quarter that seem more kind of macro related. But could you also talked about some of your partners pulling back on their promotional activity. Could you just elaborate a little bit more? And within that, were there any meaningful changes in customers or partners either in 1Q or as you look into the second quarter? And then maybe just expand on that as you saw the business recover in April on the core bookings side, are you seeing similar on the B2B side and any differences you might be seeing from the B2C versus the B2B side in April and anticipated in 2Q?

B2B had another solid quarter. Obviously, grew 22%. And just as a reminder, about 2/3 of the bookings in B2B are outside of the U.S. So it was more impacted than our consumer business. with the conflict in the Middle East. Saw more cancellations, especially in Europe and Asia in March. And then it's recovered since in the same way that Scott talked about cancellations that is dissipating in the month of April. The performance in the first quarter was like all of the quarters we've had recently, it's winning wallet share. It's better using the supply. I talked about the fact that we added 10% more properties and B2B consumes that. and then the marketing campaigns with some partners. So they're still investing in marketing campaigns. It's just that there was a more elevated level of investments in the fourth quarter. And look, this is an industry that's always been competitive. I mentioned a couple of partners that we've added. I always tell the team, they're going to be deals we'll lose. There are deals we're going to win, but you want to be on the net positive side of that.

Yes. I mean just a couple of things from a line of business team point. API was again the largest contributor to growth, and B2B continued to benefit from the elevated promotional activity, as Ariane highlighted, from some of our largest partners, but it's at a decelerating rate of growth. And so the contribution to growth for B2B from that is less this quarter, and we expect it to be a bit less next quarter. I think the other dynamic is [indiscernible] also delivered healthy growth each in at least kind of the mid-teens growth levels. So we feel good about the breadth of kind of the lines of business within B2B that continue to perform in a clear eyed about what we can expect as we go forward.

Just to pick up a couple of your point on the quarter or the kind of April to kind of throw March and April into the bucket of between the 2 highly volatile and highly dynamic. And that kind of informed how we thought about the rest of the quarter. What you see is a lot of different metrics moving very differently, suddenly some of it you can kind of see coming given the dynamics with Mexico or the Middle East, but some just consumer behavior changes. And so that informed our guide as we think about Q2 and why we didn't necessarily want to get into a full year guide at this point.

And maybe just adding 1 last thing about B2B, which is a more macro point, which is we've talked in previous quarters about our ambition in building out more lines of business in B2B to become a one-stop shop. And we continue to work on that to make progress. And we're doing that in the context at the company level of expanding our margins. So we're finding opportunities to find cost savings in some places and then reinvesting it in be it in B2B and in a few other areas as well.

Our next question comes from the line of Kevin Kopelman with TD Cowen.

Great. I wanted to follow up on the Uber deal, which seems like it could be pretty meaningful for B2B. Could you talk about how you think about incrementality? How you got comfortable especially in the U.S. with the incrementality of that deal? And how you balance the focus on B2B growth versus enabling a potential competitor?

Sure. I always think that each of our brands, and I'm going to put B2B as a brand. Our 3 big consumer brands and B2B have to stand on their own with really strong value propositions. Expedia needs to stand on its own as a one-stop shop where you can bundle and say, you package things together, you've got a great loyalty program. Vrbo needs to stand on its own. I'm not going to go through each of them, but they each need to stand on their own. B2B as a value proposition, which is we're going to power all of these other companies. And again, my view is that, that creates a beautiful flywheel that helps all of the assets across the company that powers all of our brands. So when we look -- when we looked at the deal, we said, look, it makes economic sense for B2B and for the P&L and it expands the size of our marketplace.

At the same time, of course, we've got leaders of each of the 3 big consumer brands, and they're working through how do they measure that of the 2/3 of bookings that come directly to them, they're continuing to make those customers more loyal. Obviously, I talked about we've got the silver members and above that are growing quickly. How do we keep on adding value in our consumer business to our loyal members so they come back, we retain them more, they retain more and that's the work of the consumer brands.

Our next question comes from the line of Deepak Mathivanan with Cantor Fitzgerald.

Ariane 1 for you, and then Scott, 1 for you. Ariane, I realize that the traffic from AI channels is still very small. I think you noted new users and conversion are all very good. But can you expand on the efforts to capture this traffic and potentially make them into repeat customers? I know it's early days, but curious on how you are approaching from a product strategy here. And then, Scott, can you expand on the drivers of B2C bookings growth, perhaps share additional color on the trends by brand that's enabling a pretty strong growth in 1Q? And how should we think about kind of the sustainability of this in the second half?

Yes. So with each of these AI channels, whether it's Gemini, whether it's ChatGPT, Claude, it's about making sure that our brands show up well there and then making sure that where we can, we then get traffic we can land into our own brands. Now some of that is answer engine optimization, and I talked about the work we're doing there. It's the fastest-growing channel for us. Still very small, but it's the fastest-growing channel. And then there are integrations that we can do. We did an early integration with ChatGPT. We're now integrated and live with Claude. And again, these are still early days, but what we're learning from them is what is the user behavior, how do we most seamlessly land them into our apps which, by the way, it's similar to what we've always had in performance channels where it's not only about getting the eyeballs on your ads or on to your brand, but also perfecting how you land them into your product, so that it's a seamless experience. So that you can get them to convert and then come back direct.

So again, it's early days. The teams are experimenting a lot. I expect we're going to continue to experiment over the quarters to come. It's a fast evolving space. But it's 1 that we think is a great opportunity for us to bring new travelers into our brands and then make them direct returning customers.

Yes. A few thoughts on B2C. Our consumer business delivered strong growth this quarter with all of the brands contributing actually. As I called out earlier, excluding the COVID period, the last time our consumer business grew bookings 10% was Q2 of 2018. And again, it was across all the major brands. Brand Expedia continued to deliver steady performance and was the primary contributor of the Q1 growth. We feel really good about positioning that business is in Vrbo continued to show strong momentum with improvements in traffic, quality and conversion as well as the overall shopping experience. And of note, our recent capabilities that we launched around supplier funded promotions, as I think Ariane called out in her prepared remarks represent over 1/3 of bookings at this point for the quarter.

Steping into margins. Consumer margin expansion reflects the marketing leverage and the disciplined cost management of all the line items, but in particular, marketing driven by the benefits that we saw from targeting that I mentioned earlier, measurement and channel optimization. And as we think about going forward, we're on a nice arc of growth from a year ago that wasn't great to where we are today. We feel wonderful about and we see that continuing. Think the dynamic that we're going to adapt to manage is the margin dynamics as we start to lap second half in particular due to the cuts in marketing that we made last year that will start lapping. That's probably the biggest change and what things will look like next -- in the second half.

And the main thing we need to do is to continue to find more ways to deliver value to travelers. If we create great product experiences. If we become truly personalized travel agents for people, they will come back to us. We will repeat more and the consumer brands will grow. Each of the 3 brands is in a different spot, but I can tell you that everyone in this organization from a product attack to marketing to supply servicing, we are all focused on creating great traveler experiences so that people come back to us in the long term.

Our next question comes from the line of Alex Brignall with Rothschild & Co Redburn.

You talked a lot about AI in your opening remarks. And the direction of travel in the last weeks and months seems to be away from commerce and AI and towards and even away from some sort of [indiscernible] to sort of CPC being predominantly certainly where open AI is headed. Could you talk a little bit about that? We've heard the big hotels try to talk up their own native apps. But it feels like we're going towards a very similar plays. I think Hilton alluded to this, a similar case to where Google has landed after a long time experimentation. So could you talk about how you feel about that as the direction and how that would affect your business?

Well, I would say I'm not totally surprised on OpenAI's decision to scale back but we always experiment, we're going to continue experimenting because things are moving so fast. What we know and what other hotel chains and other OTAs know is travel is complex. from bookings to payments to servicing. It takes expertise built up over time. And I think the decision and what we're seeing on the pullback in checkout reinforces our view that AI can be a powerful discovery layer but the actual booking and servicing is best handled by really a trusted scale provider.

And to the extent that the market evolves in that way, and it becomes more of a paid advertising, that's a space we know well. We're an expert in that over the year for many years. And I think that, that's a net positive for us. Again, no matter how it evolves, we're going to make sure we're there and we're playing, but I'm not totally surprised by the way it is evolving.

And just as a follow-up in a slightly different I think in your remarks, you said that your growth continued in line with Q4 in the early sort of January and February and then lots of decelerated materially because of both Mexico in the market has picked up in the Middle East. And then reaccelerated in April? Or was that just a referral to cancellations? Anything you can give on this February, March, April.

Both bookings expanded in April as did and cancellations reduced -- but I'd call out that there's like a number of things that are complicating that in terms of the volatility around other metrics. So we feel good about April. We're off to a good start for the quarter. but our outlook expects that we will take some -- that there'll be further volatility as we go through the rest of the quarter.

Okay. And sorry, just to be clear, my statement about January and February looking like Q4, is that what you were suggesting?

That's correct. That's correct. So we called out both Mexico -- both Mexico and MEA cost us about 2 points for the total quarter. So just I'm sure math, we're somewhere around 5% of an impact in March.

Our next question comes from the line of Naved Khan with B. Riley Securities.

Two questions for me. Maybe just coming back to the Uber partnership on. So the use case of Uber is usually -- people are doing a travel or at the time of travel, right? So how should I think about the -- or Uber being used to book a hotel when hotel bookings typically are booked sometimes months in advance. Just give us your thoughts on that. And then I think you also called out a $1 billion run rate for vacation in Expedia. Is that the revenue or booking just wanted to clarify that I think should be revenue. Correct me if I am wrong.

Yes. The second 1 is bookings. -- and it's the VR just on Expedia. Obviously, it excludes turbo. On the Uber partnership, I think you probably want to ask Dara and his team thinking about booking a hotel on Uber. But what I would just say is, look, there are a lot of use cases for obviously people using the Uber app and whether it's last-minute bookings or something else, it's probably more of a question for them. When you look at the B2B partners that we power, we power the hotel programs for a lot of airlines. .

And in fact, what we find is that people are using their airline loyalty points in order to book a hotel. We power hotel for corporate travel companies, and sometimes that's at the time the flight, sometimes it's stand-alone. So what's, I think, incredible about the B2B partner network is we've got this diversity of partners and each of them is figuring out how does hotel or lodging fit into their use case. And if there was 1 thing I'm confident in is that partners typically are very motivated to grow and so they figure out where is the right place in the customer journey to surface hotels or lodging.

Our final question comes from the line of Conor Cunningham with Melius Research.

Maybe a clarification first. Just -- I'm sorry to get back to the March and April trends that you're talking about. But is it fair to assume that second quarter does have some sort of lingering impact on the bookings figure as a result of the tensions that are in the Middle East. I just I understand the March dynamic, but April seems like it would be impacted as well. So I just wanted to make sure that I understand that correctly. And maybe just skipping over to -- like airfares have obviously been on the rise pretty rapidly as a result of like covering fuel and whatnot. Can you just talk about any impact that you've seen on bundling at all? Maybe any comments around demand elasticity just for travel overall. I think that would be helpful.

Sure. So April rebounded a bit from March. January, February strong for the EBITDA. 2 points of impact for the quarter in March was about 5 points for the month. April rebounded, not fully but pretty good, and we expect in our guide that to have some additional dynamics from MEA and uncertainty in gas prices and things like that in our numbers.

And in terms of the impact on bundling, right, so far, we haven't seen any dramatic shift in customer behavior. But you're exactly right that in a moment in which airfares are going up, the ability to be able to bundle to get deals on hotels, whether you bundle at the time that you buy the flight or later is something that we do think is very attractive for travelers and it's 1 of the value propositions of Brand Expedia.

This concludes the Q&A session. I will now turn the call back to CEO, Ariane Gorin for closing remarks.

Just want to thank you all for joining the call and for your questions. We delivered a strong first quarter ahead of our expectations, and I'm looking forward to updating you all next quarter on our full year guide with Derek. I want to, as always, thank our teams for their hard work and our partners and travelers for their continued trust in us. Thanks.

That concludes today's call. You may now disconnect your lines. Have a nice day.

Good morning, everyone. Welcome to Day 2 of the Morgan Stanley 2026 TMT Conference. We're thrilled today to have Scott Schenkel with us, the CFO of Expedia. Good to see you, Scott.

Good to see you.

We've had a very illustrious career at a lot of different companies. You've been at Expedia, eBay, GE. We've known each other a while, so it's good to catch up.

Good to be here.

Before we get started, let me handle the important disclosures, including the personal holdings disclosures and Morgan Stanley disclosures appear on the Morgan Stanley public website at www.morganstanley.com/researchdisclosures. They are also available at the registration desk. Some of the statements made today by Expedia Group may be considered forward-looking, and these statements involve a number of risks and uncertainties that could cause actual results to differ materially. Any forward-looking statements made today by the company are based on assumptions as of today. And Expedia Group undertakes no obligation to update them. Please refer to Expedia Group's Form 10-K for a discussion of the risk factors that may impact actual results.

There's a lot going on with Expedia, with the macro travel dynamics with questions about agentic. So I think this is a good time to sort of cover a lot of different types of topics. Let me just sort of level set a little bit. You've been in this role now for about a year. You've had a lot of different investor discussions over the course of that year. Maybe as a baseline, talk to us about one or two of the aspects of the business that have surprised you most? And what do you think is most misunderstood about Expedia when you've been having all these investor discussions?

Yes. So I arrived at December of '24, I guess. I'd say I came with the intent that we would connect kind of refine the strategy, connect the strategy to the operational side and then the financial plan, develop a 3-year plan with a 3-year financial architecture and operating metrics that associated with that plan.

And I was surprised at just how quickly the team was able to do it. Like you kind of go and go, this might be a multiyear journey. I think the business on the surprise side did a great job of just kind of adapting to that kind of mentality. And at the same time, we were doing things like Aon terms bringing at the basics. So the ability to kind of come in and say, okay, what do we need to improve now that we've put in a lot of work into the underlying platform of the company, what can we improve?

So site speed, uptime, conversion rates, multiple of other metrics. And so like -- some teams don't necessarily react to scorecarding and being held accountable and things like that. And I think Ariane did a wonderful job of doing that. And I think that's really changed the game. Think on the other side, things like a 3-year cost plan and saying, okay, we're going to get to a better marginal return rate or incremental return rate on our marketing spend for the B2C business.

The team did an amazing job of kind of pivoting from how they were running things to a different set of metrics, more critical assessment of what return levels are expected fast-paced daily innovation on where we're daily refocusing of where we're going to spend the money with then micro like measurements and ability to kind of determine how things are going. And I'm sure there'll be other questions about that. But that's sort of how I kind of walked in and I was very pleasantly surprised with how quickly you can -- that the team was able to make a change. And I think we changed -- radically changed the direction of the company over the course of the last 6 to 9 months.

In terms of surprise, I think the thing that's -- and maybe links to the agentic discussion or AI discussion that we'll have no doubt. The kind of underlying how an OTA works and how products get online in the kind of selective memory of what you remember. Like if you remember, this same conversation, Rob, you are probably in the room asking the question at the time. But Google is going to do this, too. And now it's one of the AI engines is going to do it. That's great. But the underlying complexity of the -- of the OTA and the value that you bring is maybe I certainly walked in and didn't fully understand it. There are a lot of analogs with the marketplace like eBay, but the dynamic of first supply. The ability to leverage supply between B2B and the B2C businesses. And so we put up a 10% number that we talked about Q4 earnings, 10% expansion in the number of properties that we're listing on our sites.

The ability to do that and the need to do that because not necessarily as every hotel going to reach out, especially when you get down to individual or small group chains, that need is out there for the industry. It just doesn't happen automatically. And we can believe it will, but it's been -- you've been able to list if you're one of those properties on Google for 10 years. More than that probably.

Second, how you then display those properties on your site, the kind of ability, the rich ability to take information about these customers and deploy that on to your apps and your site with roughly 2/3 of our traffic coming direct, that opportunity still exists, and we can leverage AI to do that.

Third, loyalty spend and pricing, the use of, call it, our overall take rate to drive better conversion with loyalty and better conversion with pricing actions, both paid for by our partners or by us. So that kind of capability. And then you go to things like service, mid-trip have a problem, happens all the time, sadly. Probably many of us flying in here had that -- have dynamics about that. The ability to call, get someone on the phone or increasingly the ability to use AI to find out what can be fixed in the product -- or in your trip, which can't necessarily be taken all of the time and fixed by an agent or by a virtual agent. So the ability to reach and have the trust of doing that across our properties. So the dynamic, I'm just surprised at the depth of that and then a little bit at the kind of reaction to an agent is going to solve everything. I think it will -- it will help some things, but also help us in a big way, and we'll talk more about that in...

Yes. Maybe I have a lot of questions about the core, but since you gave a great answer on agentic, maybe just let's tackle the agentic questions right now since it's sort of top of mind. There is this discussion about what can Expedia in the OTAs do to drive more direct traffic or improve the user experience on their own application with generative AI. Maybe can you give some examples of -- how do you think about continuing to grow that direct traffic mix, grow that direct traffic overall as you have more of these potential horizontal agents out there?

I mean, I start with the opportunity. The opportunity is immense. When you look at diversifying from where your traffic comes from is a key component of this, right? So I don't start like it's going to be a risk. You have to -- it's a new channel. So you've got to be always be wary. But you need to explore, you need to experiment with it. But we look at it as it's an opportunity to bring in more customers or existing customers differently into our rich environment. That's first. So there's a good side of this, which is diversification of where you're getting your customers from. And no doubt, we'll double-click on that. But let me stick on your question

Second, the kind of opportunity to leverage AI to make your product better. And whether that's the ability to have a chat bot or have a have written, here's what I'm looking for, that's richer and more -- and we have a little experiment with hotels today. But more and more of that capability built into the product is -- will be a huge opportunity for us. Third, how do you develop that product and then service it better. So we've got over 50% self-service rates, how do we continue to do that and take the productivity. So there's -- and then how do you onboard suppliers and make those suppliers easier to onboard and be able to bring the value that I just talked about to them more clearly.

And then so -- and then there's the whole dynamic of leveraging internally around pricing and algorithmic determination of pricing that you're going to show as well as personalization and loyalty. So there's an enormous kind of value chain, if you will, of opportunities that we can, I think, enable with AI that are super exciting, and we're ahead on some, and we're pacing right on track with where we want on others.

I think that, that 10% comment you made about growing supply is really important. Because I think there is this perception or this risk that the chains could go direct easier in an agentic world. So maybe just talk to us about your efforts to continue to grow that supply? And how do we think about the investments and when we can sort of see more of the nonchain supply come out over the course of '26?

Yes. So we were up 10% on properties in Q4. And as we look towards 2026 and beyond, how do you bring on more chains? How do you bring on more independents? How do you bring on more VR? There's a lot of opportunities to expand our supply and in doing so, also enable those suppliers to show and help us show value, so pricing dynamics, bring in loyalty dynamics, bring in like better marketing and advertising for them products. So there's a lot of things that we can do as we bring these suppliers on to kind of bring the richness of an OTA like Expedia into the fold for them and serve them better.

And so it's not just about getting a listing out there or just getting their property online. It's about managing their supply. It is -- are we as a person out to upgrade to a higher room and we can show them a higher room rate or a bigger room or a suite? Is it that they're looking for a family dynamic? Some of that's just not going to be available on a day-to-day feed with an agent per se. Especially when you connect it to the rest of the value chain that Expedia brings.

I think that room level detail is a very important point that is missed. You have room level detail of is the room -- what's the review of the room? What are the amenities? Does it overlook the dumpster or Lake Como? And you have that data and agents are not. In a lot of cases, they're going to get wrong and people aren't going to like that.

Exactly. And then if something does go wrong when you get to the site, we can -- you can call us and we'll help fix it because of our relationship with the suppliers. So I think there's a richness to the back end of an ecosystem around like Expedia manages. I think we bring an enormous amount of capabilities to that. And I think as we bring more people on, it just serves more people better. And then we just have to make sure that the front end of our product continues to evolve and get better based on some of the AI tools that are available.

I know you've partnered with some of these early horizontal agents like you have in the past with other emerging channels, anything you can share with us about sort of conceptualizing how large the volume is, the growth is? Any difference in cancellation rates, conversions? What are you sort of seeing with these early partnerships with horizontal agents?

Yes. I mean it's -- let me preface it by saying it's super early days. It's sort of like we're getting into inning 1 and there's an out, right? There's a lot of things that need to go to be able to say how great is conversion. Conversion goes up and down on any given day when we look at it. And as we monitor it daily, conversion rates are up or down, Cancellations are generally been lower.

I suspect that's self-fulfilling prophecy and that will normalize over time. So early days, it's really hard to extrapolate. For those of you that are extrapolating for 10 years, like good luck, it's super hard. It's an enormous challenge to extrapolate from less than round numbers of 1% of traffic and the dynamic is a lot of change in moving parts day-to-day. And the LLMs are also changing what they're doing, like you saw last week with advertising. Going to the top or going to the product. People are like trying to extrapolate what the CPM is or is the CPA or whatever it's going to be. There's a lot to do on that.

And I -- again, I think we come at it from a perspective of like each of these as an opportunity and keep an eye that it could be a threat, but how do you work with the LLMs and those providers to be the best possible chance to capture customers, travelers coming in the door, and add to our 65% directory, bring those into the fold and capture them with all of our tools that we just talked about.

The other question I get asked sometimes on the agentic piece is the risk around air. Like the higher risk around air just sort of given like the consolidation of the industry? Or how do you think about sort of maintaining that spot on the air funnel?

I think, again, like Google has a product and it's really hard. I think the dynamic is we have to continue to be a great partner to airlines. We have to be able to supplement their pricing schemes and their seat schemes and their route schemes and their time schemes to be able to deal with all of that and bring the value of our loyalty programs where people kind of double dip and there's other things we can do. But I think that dynamic is super interesting, again, an opportunity. Depends how you look at it.

All right. So 15 minutes on agentic. Let's talk about the core. There's a lot of goodness going on in the core. I want to start with the B2B business. This is a business that I'm pretty bad at modeling. I get it wrong in most quarters. So maybe can you help me -- help us sort of understand how you think about the drivers of the B2B business, the types of partners, the geographies, what has sort of driven the strong B2B growth you've seen over the past, call it, 12 months?

Well, look, I think you should start with the supply dynamic is just a big component to this. Second is the product component. So I won't dwell on that because we've kind of talked about it. But the second is the product component. We've got multiple, since called round numbers, four big products that serve different types of customer which make it difficult to model, particularly from the outside, right?

So you've got individual agencies all the way up to financial part -- financial and banking partners or airline partners, all of which spend at different levels at different times and so in some quarters, you see a little bit of a spike when one of the larger partners or a series of larger partners spend into the market and leverage our product.

And on the other hand, it's like when you get down to TAP or template, it tends to be smaller, large numbers of smaller groups, so they tend to move in math, a little bit easier to predict if you're internal. But what two or three of those, I think across all four products in Q4, we were growing nicely over 20%. We've been double digit for 19 quarters now. So the mix right now is working well, a combination of sourcing or product, then there's the mix of partners that we continue to evolve sign up, get on board. And you always win or lose some in there, but the dynamic is continue to bring more and better partners in, and it's just a great flywheel right now.

And at the same time, the lines of business that we're adding to that product, so we just bought tickets. So we're going to pump more activities through those -- that channel first and then bring it to B2C and more once it's structured. We're going to -- we've added lines of business. So last year, we expanded to cars, then we're going to expand into -- we've already expanded into airlines. We'll continue to expand that. So expanding what's possible and then improving the attach rates is another growth vector. So product, marketing, sourcing, there's a number of things in the flywheel right now that are working really well, and we feel great about the company.

Have you shared sort of...

And the mix is higher international as well. So it gives us a little bit more presence internationally than we have on our B2C side.

I know we call it B2B. But is there any way we can think about how much of that business is actually more consumers booking, whether we're redeeming points or it's actually it's a consumer-based demand...

Well, ultimately for sure, right? I mean -- but ultimately, but our customer is the partner. So then their marketing to their supplier base or to their customer base, their consumer base. So definitely, ultimately get back to that. But I think that dynamic is because we're serving the consumer -- or sorry, the suppliers, our partners, it's super important to just understand that we don't really get too involved in that, right?

We're providing a great product, a plug-in API, capability to have access to our hotels, the other products or lines of business that we're offering, and it gives us the capability to then take advantage of a different way that people go to market.

On the B2C, the official brands, I want to sort of ask you about, first, the Expedia.com and Hotels.com and then we can get to Vrbo after. Again, like the growth has really improved nicely. I'd be just curious to hear about some of the strategies that have really driven the faster both in the core two brands and how to think about the keys to sort of maintaining or maybe further accelerating growth from here?

Yes, I think it's important if you just take those through the three consumer brands, largely speaking, and talk about what's happened over the last few years, we were working on the platform. And Expedia is working on making those platforms better and more agile, easier to program, fast, can buy ourselves some room to be able to do things with speed. And I think over the last couple of years, as that's come to fruition, what you've seen is a much more dynamic. Hopefully, you've seen a much dynamic B2C business.

And so that's on things like -- and I ticked them off earlier, but just to kind of revisit, that's around things like site speed. Like we had -- imagine we hadn't worked for a couple of years on site speed. We're trying to get it onto a platform that was agile and be able to do that. So site speed pays off in my experience in the Internet. I think it's done nicely.

Conversion. How do we bring people into better landing pages from a diverse set of products and experiences, whether that's SEO or direct search or whether that's into our own direct channels. So there's a series of things that we've done in B2C that I think that our terms brilliant at the basics that are really good. Second, probably most materially around marketing.

We essentially said, "Hey, look, we're going to raise the bar on the marketing spend that we're working on, that we've been working with and say we expect this level of return and the incremental level has to be at this level. And we're going to measure it this way. And we're going to kind of adapt day-to-day and week-to-week and redeploy where we see the best opportunities for growth versus running it out for a quarter.

So we've done a series of things based on the use of the platform that gives us the ability to spend better and then we've held the bar higher. I kind of mentioned that in the opening response. The team that's been working on this has done an amazing job. Just like the technology team has done on site speed and uptime and conversion rates. The marketing team has done a great job of kind of adapting to a higher set of bars. And quite frankly, while cutting costs have added to the net traffic growth and the net GBV growth of the company. So quite great results. I could go on, but that's sort of at the macro.

And then what about -- what about Vrbo? I think I'd be curious to hear about just the evolution of the strategy both on supply acquisition by geography, as well as just the customer acquisition strategy.

Yes. So Vrbo is a big chunk of our supply and the supply expansion that we've talked about, I think that has been great because we have the supply team working. And it's been a combination of expanding from where we're strong into where we could do better, largely speaking cities. So smaller properties versus larger properties at the beach or golf courses, but what city properties and expanding that in our core market of the U.S. and then international on selective on select countries and locations to expand our property count and business that's there. So those -- that dynamic is really important.

For the channels for the marketing stuff, same thing. It's not just Expedia, or it's not just hotels, it's also Vrbo. It gets the opportunity to kind of participate in that efficiency and the effectiveness. And so I think the team has done a really nice job of working on both of those, but it's also the product. You've seen the product get better and implement things faster. So we knew we were behind on letting property owners market or offer lower prices at certain times, and we launched that last year, and that's gone gangbusters. And so the ability to kind of pivot the product, get sharper on what we're doing, be better at marketing and with more plans to come on that. And then the supply side has been terrific.

I always ask you, yourself, and your two alternative accommodation peers in this space. How much does take rate come up when you're sort of in the supply acquisition mode, trying to get more into Europe or get more into the cities. Like how much is sort of take rate a potential lever to pull to bring on more supply for you, guys?

Look, it's always a dynamic. I mean, for any marketplace, right? It's how do you bring in great supply at great prices. So it's always a dynamic. And I think we're competitive. And I think where we need to spend our time is right now is the ability to build a product that's even better for our -- not only the buyers who are bringing a rich set of supply to the property owners and then for the property owners give them the opportunity to easily manage their property. And I think that's a huge component of this as well.

As a couple of questions about the cost structure, the leverage that you've been delivering and guiding to has been pretty impressive of late. Maybe just let me start a big picture of where have you found the earliest sources of OpEx efficiency or cost reduction as of today? And then as you look into '26, where does that go?

Yes. So kind of a few points on this. First off, I think we've been doing a great job on cost of sales. So if you look at that combination of getting sharper around how we use cloud services, how we negotiate with vendors and how we deploy our data and utilize our data.

I think Ramana and the team have done an excellent job at controlling cloud costs that show up in leverage and cost of sales, mostly cost of sales. Very similar around customer service. The team has done an excellent job of leveraging AI tools as well as other tools to improve self-service percentage rates while keeping call times shorter and answer times faster. And I think that's done an excellent job at driving cost of service levels down as well. That would be one point I'd make.

Second, over the course of the last -- and the second point I'd say is marketing materially. Marketing and the whole dynamic around how do you hold the team and the traffic and the conversion in the business that you're driving to a higher bar of returns? And how do you maximize those returns across channel, across sites, across geographies? I think the team has done an excellent job there. And that showed up in the bottom line.

And then third, I'd call out, so over the course of the last year, call it, really since April of last year, we've been doing a series of workforce rationalizations to reduce costs. Some of that has been in product. Some of that's been in technology. Some of that we just -- we did last year, a bunch of it we did at the end of January.

Second, functional costs. We've announced a series of functional cost reductions last year in April and then this year as well in early February. And I think as we do them, we continue to kind of be critical about our cost structure and force fewer people doing fewer things better, faster with more impact is how we think about it. And look, along the way, we're using AI tools, and we'll continue to do that, and I think we'll see further productivity in the future. But right now, I'd highlight that the engineering team -- the key areas of engineering and customer service are doing an excellent job of leveraging those tools, and it's early days.

What is your philosophy on sort of letting those efficiencies flow through as opposed to reinvesting? There's a counterargument to say, well, maybe you should be pressing more on GPU-enabled machine learning to make the product better and that could pressure some margins. How do you think about that balance?

Yes, absolutely. The way we think of it is we'll drive more cost out and leave ourselves room to reinvest both in things like that and on the AI side as well as within the quarter if we see an opportunity to drive more growth, that's at a reasonable return. And so we always strive for more out, be able to redeploy and then continue -- coming -- I talked about the 3-year cost structure, and part of that was a visioning session about where we needed to invest for the future. And in our announcements for product and technology, what you'd see is we talked about we'll be cutting. -- we've done some cutting there, and we'll be reinvesting some of that back into machine learning and AI capabilities

On the B2C marketing point, you talked a lot about some of the changes you're making, the improvements you've been making about how quickly you're analyzing data and adjusting and things like that. Just sort of again, like philosophically, do you see B2C marketing, we evaluated externally as a percentage of gross bookings, is that a potential further source of leverage? Or are you more sort of in investment mode to reinvest those efficiencies in marketing spend?

I think for '26, the way we're talking about it is we're going to continue to get some -- we'll cut the cost. We'll test the efficient frontier. We'll reinvest where we see capabilities to grow and then we'll take to the bottom line or reinvest in other areas as we see the opportunity. How long you can do that? At some point, I'd like to just get to an agreement around what type of spend levels at what ROI and just let it run. And you've seen other companies do that. And I think that's a good way to operate and then just the ability to kind of tap the brakes or accelerate as you see fit or you see the need or you see the opportunity in the market.

You bring a fresh set of eyes to this business in the last, call it, 12 months, you have a new head of IR, like a lot of people in the room know. When you look at your individual sites, so Expedia.com, Hotels.com and compare them to booking, are there any structural reasons why some of those properties or both those properties couldn't get to the booking margin levels eventually sort of think about all these efficiencies?

Yes, I don't. I mean that's the perspective I come from. Let's benchmark our peers, and it's not just them, it's others. And it's other companies at this scale and you say, why can't you and continue to push around why can't we get to this? Or can we do better? And so I think the whole mindset of Ariane and I going to these types of discussions is how can we get to those type of comparison markers and why can we continue to expand margins? Or can we continue? So it's a mindset.

And I think we've got the mindset. It's going well, and we committed to 1 to 1.25 points for the year. For the quarter, for Q1, we'll do 3 to 4. Now some of that's year-on-year comparisons that I laid out in earnings, so I don't get too excited. But I think the dynamic is how do you chip away. I think it'd be very dangerous to flash marketing and brand spend without testing your way through it and being judicious about leaning in and spending where you can, but cutting where you can also do that and take to the bottom line. So I think it's a balance. And so how do you do that in a way that's rational that delivers great returns for our shareholders. And on the other side, does right by our shareholders in terms of driving the right -- the growth that we can.

There's a lot of focus in this market around Gen AI ROIC and what are companies doing to improve their overall cash flow generation from this. If you sit -- if you think about 1 year ago, where you thought you'd be on some of these Gen AI applications versus where you are now, do you have examples of investments that have actually gone better, led to more efficiencies, actually scaled faster than you think on the Gen AI side, where you say, wow, this is actually leading to even bigger savings than we thought 1 year ago.

Yes, it's a little early, but what I would say is we're super optimistic about some of the product innovation we're going to be able to do and we're testing today and then we'll continue to roll out over the course of '26. So I think we're all very excited about those opportunities. I've been surprised at how quickly we can get productivity and customer service. I think the teams did a very nice job there and making the customer experience better and making the -- so as part of that NPS scores go up. I've just been super impressed by what the team can do there.

I think the use of AI in personalization as part of the product, but also as part of marketing is a huge dynamic that I think we've done well on, and I've seen some speed there that's better. And then the opportunity is huge. And then functionally, look, I think it's super early days for a lot of functions, but I think functionally, there's an enormous amount of capability to be better, be more efficient and more effective, leveraging some of these tools, and there's a lot to sort out.

Yes. Maybe let's close on capital allocation and sort of just remind everybody of the company's philosophy about returning capital when it comes to both buybacks and reducing share count on top of dividend.

Yes. So post a few years after the COVID we reimplemented a dividend. We upped that dividend 20% this year. So $0.48 a share for the next -- for the year. And we've been in the market for the last 3 to 4 years buying back shares pretty dramatically. So I think for the last 3 years, we've reduced share count by 22% net of dilution. So quite good performance in terms of how it's driven not only for those of you that want dividends, I think that's -- we have a nice offering. And then on the other side, our EPS expansion has been really strong when you do that calculation. And there'll be -- what we've said for '26 is expect more of the same. So a 20% increase in the dividend and share buybacks opportunistically, but at roughly at the same rates as prior years.

Got it. All right. Scott, thanks for taking the time. Thank you. Thanks to see how the year goes, and we will be chatting in the year.

Great. Thank you.

Hello, everyone. Thank you for joining us, and welcome to the Expedia Group Q4 2025 Financial Results Webcast. [Operator Instructions]

For opening remarks, I will now hand the call over to Rob Bevegni, VP of Investor Relations. Please go ahead.

Good afternoon, and welcome to Expedia Group's Fourth Quarter 2025 Earnings Call. I'm pleased to be joined on today's call by our CEO, Ariane Gorin; and our CFO, Scott Schenkel. As a reminder, our commentary today will include references to certain non-GAAP measures. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in our earnings release. Unless otherwise stated, our growth rates are on a year-over-year basis and any references to expenses exclude stock-based compensation.

We will also be making forward-looking statements during the call, which are predictions, projections and other statements about future events. These statements are based on current expectations and assumptions, which are subject to risks and uncertainties that are difficult to predict. Actual results could materially differ due to factors discussed during this call and in our most recent Forms 10-K, 10-Q and other filings with the SEC. Except as required by law, we do not undertake any responsibilities to update these forward-looking statements.

This call is being webcast on the Investor Relations section of our website. at ir.expediagroup.com. A replay will be archived on our site. A slide deck containing financial highlights has also been posted on our IR website. For today's call, Ariane will begin with a review of our fourth quarter results and an update on our progress against our strategic priorities. Then Scott will provide additional details on our fourth quarter financial performance and guidance. After our prepared remarks, we will turn the call over to our operator to begin the Q&A portion of the call.

And with that, let me turn the call over to Ariane.

Thank you, Rob, and thank you all for joining us today. We accelerated both bookings and revenue growth and expanded margins by over 2 points. We returned Vrbo and Hotels.com to growth while sustaining the performance of Brand Expedia, B2B and advertising. Looking ahead, we're well positioned to build on our momentum as we execute our strategy and capitalize on the opportunities created by AI.

In the fourth quarter, we exceeded our expectations growing bookings and revenue by 11% and expanding our margins by 4 points. Booked room nights were up 9%, including high single digits in the U.S. and low double digits in EMEA and the rest of the world. Consumer spending remained healthy with longer booking windows and length of stay relative to 2024.

Our B2B and advertising businesses had stellar quarters. We grew B2B bookings by 24% and advertising revenue by 19%. Our Consumer Brands bookings were up 5% overall and double digits outside the U.S. We grew loyalty members by mid-single digits, with faster member growth in our Silver tiers and above. And for the second consecutive quarter, all 3 core brands delivered year-over-year bookings growth reflecting sharper brand positioning, product improvements and ever better execution.

Turning to our 3 strategic priorities. I'll begin with our first, delivering more value to travelers. On product, our sites and apps are 30% faster than they were a year ago. We've upgraded our checkout path and added new payment options, giving travelers more flexibility and making booking even easier. We're using AI to deliver more personalized experiences across all our offering.

On Brand Expedia, for example, our refined recommendation models drove our best fourth quarter attach rates ever. This is a strong signal as travelers who buy multiple products spend more and return more often. We also know how important it is to give travelers confidence throughout their journey, including when plans change. Our ability to meet this need is an important competitive advantage.

Last quarter, we expanded Vrbo Care, strengthening Vrbo's differentiation and giving travelers peace of mind when booking their trips. Across our brands, we enhanced our help center and servicing capabilities. So travelers can effortlessly modify their bookings or get support if things go wrong. This resulted in record traveler self-service levels. And for more complex issues that require a live agent, our advanced agent tools are contributing to materially reduced wait times even during peak call period. All of that translates into more satisfied travelers.

On supply, we continue to broaden our inventory to give travelers more choice and better value. In the fourth quarter, we grew our lodging property count by more than 10% compared to 2024. We're sourcing more promotional rates and partner-funded promotions were over 30% of bookings in Q4, up more than 10 points from the third quarter. Nearly 70% more properties participated in our Black Friday sale than ever before. These trends demonstrate the strength of our flywheel as deeper partner participation increases traveler value and drives incremental demand back to our partners.

Turning to our second priority. Investing where we see the greatest opportunities for growth. B2B had another fantastic quarter with double-digit growth across all regions. We gained share with existing partners and benefited from increased marketing activity from some of our largest partners. We added new partners and had more active travel agents than any prior fourth quarter. We continue to invest in new lines of business, extending capabilities from our consumer business into B2B.

Last quarter, we launched [indiscernible] assurance product. And in December, we announced our intent to acquire [ tickets ] to will broaden the activities we offer to our partners and their travelers. B2B is a great business, and we'll continue to invest to drive future growth.

On advertising, we reaccelerated revenue growth and finished the year with a record number of active partners. We continue to expand placements of new ad formats. And after launching video ads in our search results in early 2025, last quarter, we introduced video ads on Expedia's homepage. We're a high-return channel for our partners. And as we inject AI into both our ads and our ad targeting tools, our ads are becoming more relevant and performed.

Finally, as gen AI changes how travelers do trip discovery, it opens up new growth opportunities for us. We're working with all the major platforms to capture traveler domain, ensuring our brands show up prominently in gen AI searches and function effectively with agentic browsers. We're experimenting aggressively and while volume is still small, every additional integration gives us data and learnings about how to better surface our brands and how consumer behaviors are evolving.

These learnings, coupled with insights from our own brands are, in turn, informing the development of AI experiences in our own products. And that's important because while third-party AI experiences or new way to attract travelers and turn them into loyal members, our biggest long-term opportunity remains direct engagement.

Today, 2/3 of our bookings come from travelers who begin their planning journey directly with our brands. And those direct bookings are growing faster than comes from indirect channels. We're confident that our work to make our products even more personalized and intuitive along with our work on supply, customer service and loyalty will deepen our competitive advantage.

Moving to the third pillar of our strategy. Driving operating efficiencies and margin expansion. We expanded margins by nearly 4 points in the quarter, thanks to our continued operational discipline and volume leverage. I'm particularly pleased with the work we've done to get marketing leverage in our consumer brands. We've improved our targeting and measurement capabilities, reduced our least efficient spend, and reallocated dollars to where we see the highest incremental return. We all continue to optimize our organizational structure for speed and effectiveness, ensuring we have the right skills and velocity to execute on our strategy.

At the same time, we're deploying AI internally to give our teams superpowers and make our offerings to travelers and partners even more competitive. This is already delivering tangible benefits. Our product and tech teams are using AI to design and build products, improving quality, while shortening cycle time. Our supply teams are leveraging AI to speed up inventory onboarding teams. And our service team is using AI to resolve traveler issues faster and more effectively.

As we grow our business and increase our use of AI, we're keeping a close eye on costs. And we've been able to optimize our cloud spend through technology improvements and a more disciplined cloud operating model. In closing, I want to thank our teams for their hard work and our partners for their continued trust in us.

We enter 2026, our 30th year as a company, well positioned to extend our momentum. Looking ahead, we're confident in our strategy and our ability to execute to drive long-term value for all stakeholders.

With that, I'll turn it over to Scott.

Thank you, Ariane, and good afternoon, everyone. I'm pleased to share our fourth quarter 2025 performance, which exceeded the high end of our guidance range with bookings and revenue up 11% and EBITDA margin expansion of nearly 4 points. As Ariane mentioned, our outperformance was driven by sustained market strength through year-end and disciplined execution across the company. We grew share in the U.S. for both hotel and Vrbo and held lodging share globally. We also saw continued strength from B2B, which was a meaningful driver to our overall performance in the quarter.

Our booked room nights were up 9%, driven by continued strength in the U.S. and sequential acceleration in EMEA where B2C once again saw its fastest growth in nearly 3 years. Growth in Rest of World slowed as geopolitical issues in Asia weighed on growth in multiple quarters. Gross bookings and revenue grew 11% to $27 billion and $3.5 billion, respectively. The impact from foreign exchange was roughly in line with expectations, adding slightly over 1 point to bookings growth and about 2 points to revenue.

Moving to our segment performance. B2C gross bookings of $18.3 billion grew 5% driven by sustained momentum both domestically and internationally. B2C revenue of $2.2 billion grew 4%. Consistent with last quarter, bookings growth exceeded revenue growth primarily due to book to state timing as the majority of our revenues were recorded at the time of stay.

B2C EBITDA margins were 31.5%, up approximately 6 points from last year, driven by significant marketing leverage. Margins were further supported by disciplined overhead management as well as continued growth in our high-margin advertising revenues. B2B gross bookings grew 24% to $8.7 billion, with continued double-digit growth across all regions. Rapid [ ATI ] was again the largest contributor to growth and benefited from increased marketing activities with some of our largest partners.

B2B revenue grew 24% to $1.3 billion, while EBITDA -- B2B EBITDA margins were 24%, down approximately 1 point. As we have stated previously, we will continue to prioritize investments to support future growth, which may modestly weigh on near-term margins.

Moving to our cost structure, where we again leverage meaningfully across all our categories. Cost of revenue was $342 million, up 3% but leveraging 1 point as a percentage of revenue driven by continued efficiencies in payments and customer service. Total direct sales and marketing expenses were $1.7 billion, up 10%. We saw a significant leverage in our B2C business with direct sales and marketing down 5%, leveraging 0.5 point as a percentage of B2C gross bookings. This was offset by growth in B2B expense, which reflects partner commissions and is recognized at the time of stay. Overhead expenses were $640 million, roughly flat versus last year, while leveraging over 2 points on revenue.

As a reminder, last year, we implemented a series of cost reductions, which had a meaningful impact on the margin in the back half of the year, and expect those actions to favorably impact the first half of '26. Additionally, we've already taken action in January with our product and technology organizations to simplify and become more efficient, while we'll be using much of the savings to strategically in key areas like AI and machine learning, these type of actions will favor margins as well.

Turning to profitability. We delivered fourth quarter adjusted EBITDA of $848 million with a margin of 24%. The nearly 4 points of adjusted EBITDA margin expansion was driven by revenue growth, expense leverage and cost out, particularly within B2C direct sales and marketing. Adjusted EPS of $3.78 grew 58% and outpacing EBITDA growth due to share repurchases and a lower tax rate.

Moving to our cash position. We ended the quarter with $5.7 billion of unrestricted cash and short-term investments and we remain committed to maintaining debt levels consistent with our investment-grade rating. Free cash flow for the year was $3.1 billion and reflects the strength of our operating model and disciplined execution of our strategic priorities.

In Q4, we utilized $255 million to repurchase 1.1 million shares of our common stock. And since 2022, we have repurchased over 45 million shares, reducing our share count by 22% net of dilution. We remain committed to returning capital to shareholders. We intend to continue opportunistic share repurchases at a pace similar to recent years, and today are raising our quarterly dividend by 20% to $0.48 a share.

Turning to our outlook. Our guidance reflects strong bookings momentum as we enter Q1, while remaining appropriately cautious given ongoing macro uncertainty. For the first quarter, we expect gross bookings growth to be between 10% to 12% with revenue of 11% to 13%. At current exchange rates, this assumes foreign exchange tailwinds of approximately 3 points to bookings and 4 points to revenue and implies stability in growth at the upper end of the range.

For EBITDA, we expect EBITDA margins to be up 3 to 4 points. As a reminder, the first quarter is our lowest EBITDA quarter. So the benefits of our prior cost actions will have an outsized impact in Q1 relative to other quarters. For the full year, we expect gross bookings growth to be between 6% and 8% and revenue of 6% to 9%, including 1 and 2 points of FX tailwind, respectively. Similar to our Q1 guidance, the upper end of our range implies stability and growth on an FX-neutral basis by the lower end of the range reflects a more cautious view given the dynamic macro environment.

We experienced variability in bookings during 2025, and our '26 outlook assumes a more seasonal cadence similar to what we saw in 2024. Regarding EBITDA margins. As we noted last quarter, we expect a more moderate pace of expansion in 2025 as we lapped the benefits from our 2025 head count reductions and marketing optimization. With this in mind, we do expect full year margins to expand by 100 to 125 basis points as we maintain cost discipline while selectively reinvesting in growth initiatives.

In closing, I'm proud of the progress the team delivered in 2025, driving faster site performance, a leaner cost structure and more efficient marketing, all of which strengthened our confidence in the outlook shared today. With clear momentum across our strategic priorities, we are well positioned for long-term profitable growth and remain confident in our ability to execute and create shareholder value in 2026 and beyond.

With that, we will now open the call for questions.

[Operator Instructions] Your first question comes from Mark Mahaney with Evercore ISI.

I wanted to ask two questions, please. One, Ariane, can you just talk about the product or the features that you would want to try to roll out or are rolling out in order to really enhance the travel planning process on Expedia, it's always known as a booking site. But what can you do to kind of capture more people up the funnel and just kind of keep them there.

And then secondly, Scott, a lot of leverage being shown in B2C marketing, just talk about how much more leverage there is there going forward? Or are there other sources of leverage that are just as big as what you've been able to get out of that so far?

Mark, I would start my answer saying it isn't just what we're doing in the product. It starts with marketing, and we're doing a lot of work to make sure we know travelers. We're targeting them. We're personalizing our marketing to them. so that when they're doing discovery, whether it's in social channels or anywhere else. And when they're seeing our brands, they see messages that resonate with them. And then when they land on our brands, we're giving them relevant context so that they then convert.

So again, it starts with the marketing, knowing our travelers having messages that resonate with them, so we are top of mind. Then in the product, obviously, we do a very good job when people land in converting them. But there are things that we can do, whether it's agents of -- that can help look at if you have a certain budget, then how do we give you ideas. If you want to search by destination if you want to work search by themes, I think there's a lot of exciting things that can come both in the existing flows but also in natural language flows.

Right now, we've got an agent sort of the AI agent in Hotels.com. What works the best is actually the point solutions like AI filters or property Q&A. And what the team is working on, and we'll have more to share later this year is how we can use natural language and sort of AI to allow people to go from the trip planning all the way into the booking. But again, I just reemphasize it's not just when they land with us. It's also how are our brands known and what's the work we're doing in marketing.

Mark, to your question on the marketing, maybe a few thoughts and then some context. We've leveraged about 50 basis points as a percentage of GBV in B2C. And we've done that through strong marketing discipline by improving efficiency by holding the teams accountable and having a strong point of view about return levels, incrementality, detailed analytical insights and then reallocation. And I think we've done some really nice work to cut costs sharply accurately.

And then I think redeploy where we see upside between channels and the improved targeting and measurement capabilities, I think, have allowed us to be more dynamic in terms of how we manage our direct B2C sales and marketing. And I think the reduced spend on the lower-performing channels and reallocating has really helped kind of cut costs, take some leverage and then also reinvest for growth in other channels. So it feels very good. And as we look forward to the rest towards '26, I think you can expect more of the same.

And just to add to that, I would say at the highest level we're taking a more disciplined and data-driven approach to our marketing, and it's even more grounded in customer insights. Scott and I challenged the team to improve the returns, and they've done a great job. We've significantly stepped up the measurement capabilities we have, our testing velocity and our understanding of incrementality, and that sits behind a lot of what Scott described.

Also, the work that we've done to sharpen our brand value propositions with stronger creative makes our spend more effective. So last year was a big year for relaunching Hotels.com with the [ Bell Boy ], and we were able to move awareness and consideration numbers. For Brand Expedia, just last week with the Super Bowl, we launched the new campaign, which is the One Place You Go to Go Places. It was actually the most watched ad on YouTube with over 200 million viewers. So that as the creative is good, that also helps our efficiency.

And finally, the product and tech improvements that I talked about in my prepared remarks, the fact that our sites are faster, that they're converting better, that also makes our marketing dollars go further because when we bring traffic into our brands, they're converting better.

Your next question comes from Eric Sheridan with Goldman Sachs.

Part of the answer to Mark's question, how would you characterize the current competitive positioning of your consumer-facing brands? And how much of them have been realigned for where you want them to be in the marketplace today? Or to the degree some level of work still needs to be done to sort of have them operating on a more normalized level from a growth standpoint as we go deeper into 2026?

Yes. I feel very good about where we are in the positioning of each of the 3 brands. And that's been a lot of work over the last 12 to 18 months. So positioning Expedia as the one-stop shop where you go to find everything, positioning Hotels.com as a hotel pure play with a great loyalty value proposition. And Save Your Way, which we launched at the end of last year was a key part of that.

For Vrbo, positioning it as the trusted pure-play vacation rental marketplace. Last year, when we finally launched our promotion suite. That allowed us to basically expand our supply in November when we expanded Vrbo Care, it gave travelers more trust. So I would say sort of the positioning, I feel good about. We've done a lot of work that are just the basics of the marketplace around supply, around faster speed. All of those things are great.

And now there's really just a lot of growth potential. There's growth as our marketing becomes more effective. There's international growth. As I shared in my prepared remarks, room nights were growing faster outside of the U.S. than in the U.S. So there's always work to be done. But I feel like, especially relative to a year ago, we're in a good place on this brand in a healthy place to be able to grow.

Your next question is from Jed Kelly with Oppenheimer & Co.

Great. And good job. I guess, Ariane, I mean, since you've been here or taken over, you've really done a nice job making the business a pretty consistent done, EBITDA compounder and you consider to generate consistent margin growth. And I don't want to get you to -- take you too far out, but can you just give us a vision on where you potentially see that like the margin trajectory of this business could go over the medium term?

Well, Thank you, Jed. Look, what I will tell you is there is more to come. And obviously, you can see in our full year guide that we see more margin expansion. And it's not only us executing more effectively. It's our marketing, executing more effectively. It's us being able to deliver more from the teams that we have. And of course, the beauty of this business is as we grow, as we get more scale, I think the margins will come.

So I would just say my confidence in the growth comes in the fact that we've got a lot of potential on B2C, like I just talked about. B2B, there's always more opportunity to get more partners. We're making investments in new lines of business. which, again, gives us -- it positions us even better to be the one-stop shop for our partners. There's more supply.

We grew the number of lodging properties in the fourth quarter by 10%. And there's still a lot to go. There are some geographies where we don't have the coverage that we would like. We can get more promotions. Obviously, last year, we added Southwest, we added Ryanair. So that gives me a lot of confidence in growth. And then the ads business we -- I see a lot of potential, especially in using AI to make those ads even more effective. So again, I see growth on the horizon. I'm excited about the opportunities and AI just gives me even more confidence.

I think just a couple of quick points. I think, Jed, the dynamic that we're looking at is a really strong quarter for outlook for Q1 as well. So an extra 3 to 4 points on margin rate expansion for Q1. But for the rest of the year, as I pointed out in my prepared remarks, to be somewhat muted in the context of versus a 3% to 4% number, just as -- we've taken a number of actions, I don't want to come back to that, but a number of actions last year not only on headcount, but also on marketing costs, on cloud costs and those have kind of had a compounding effect over the course of the year are hitting Q1 strongly.

But I think the way Ariane operates is she challenges everyone on the team to get more for less. And so there's a constant drumbeat in the business of how do we think about operating smarter? How do we do it with less money? And how do we do it in a way that then favors growth as we think about reinvesting some of those funds as well as dropping some of that through to the bottom line. And so as we look out over the course of '26 for certain, and I don't anticipate that culture to change as well.

Yes. Just to add, I talk a lot about being brilliant at the basics and also about making every dollar count. And it's important that we all look whether it's in our cloud spend, whether it's our marketing spend, whether it's just where we're allocating our time, are we doing it where we can have the highest returns and make the most impact.

Your next question comes from Conor Cunningham with Melius Research.

Just helpful comment on the 10% supply growth that you gave for the fourth quarter. Curious on how that's actually trended into 1Q. I mean, obviously, there's a lot of debate around the hotels going more direct with large language models and so on. And then maybe if you could just parse out branded hotel growth versus ones that aren't. I think that would be a helpful point.

Sorry, can you repeat -- I missed the first part of the question. You said 10% hotel growth and I missed the end of it. Can you repeat, please?

Just -- yes, sorry. So just on -- you talked about 10% supply growth. I'm curious on how that's progressed into 2026. Obviously, there's this debate around hotels going more direct with of large lease models and so on. So just curious on that versus -- and if you could parse it out a little bit between branded hotels versus ones that would be helpful.

Okay. Thank you. we continue to add more properties. We've added airlines last year. There is even if we have a very good assortment, especially as we're growing internationally, there will be opportunity to do more. And in fact, some of the work we did on AI has sped up the time it takes to onboard properties. It's 70% faster than it was before. So I expect we will continue adding supply. We'll continue adding rate plans.

And as for the talk about large language models and what that can do, what we're seeing is our business continues to grow. We're doing work, obviously, with the large language models and with this, whether it's ChatGPT or Google and the like to make sure our brands are showing up well there. We're doing work in answer engine optimization, and native integrations work with agentic browsers. And all of the work that we do there benefits our suppliers because we're doing the complicated work to help them drive demand to them through our business.

Obviously, in the same way that they could always get business directly through Google and the like that will continue to be the case. But as long as we do the job of making sure that our brands have very strong value propositions that travelers know them. They trust the value they're going to get coming to us. the same thing in our B2B business that we're adding value to the B2B partners and the pie will expand.

Your next question is from Kevin Copeland with TD Cowen.

This is Jacob in for Kevin. I have two questions. Is Expedia seeing any changes on traffic from Google as they continue to roll out more advanced AI features within travel? And then on B2B direct sales and marketing costs above 27% year-over-year. Can you talk about key drivers and how you see that playing out this year?

Sure, I'll take the first one and then hand it to Scott. We're not seeing material changes right now. We are experimenting aggressively. We're working closely with Google and others as they are adapting their interfaces. We're making sure that our brands show up well, as I said, for many ways, whether it's answer engine optimization, native integrations and genetic browsers. I actually think that AI search opens up even more possibilities to reach more travelers. And as there's more context to those searches, there's an opportunity for us to better target and then as we bring those travelers into our ecosystem to better convert.

So I think it's an exciting time right now. Again, it's a fast-moving time. We're clear-eyed about where we all are. But our strategy is to be in early to partner deeply to get learnings from these early integrations. And to find opportunities because 1 thing we've always been good at is figuring out how to surface our brands and third-party experiences and then convert travelers that come to us, and we will continue doing that.

Then for B2B marketing, it really is more aligned with the revenue number, so 24% versus anything else because the dynamic is we book that with the time of stay and it's more commission model than it is a rev-share model than it is a marketing spend. So it's pretty straightforward.

Your next question comes from Ken Gawrelski with Wells Fargo.

I want to stick on the B2B side. Could you talk about any kind of concentration or any specific drivers that has driven -- that continues to drive the robust growth you see there? And as you look throughout '26, any factors we should be thinking about on the top line? And then maybe to stay on B2B, you touched upon the margins and perhaps some temporary investment pressure on margins. Could you talk a little bit about the kind of the key factors driving that potential pressure earlier this year? And then maybe the longer-term outlook, is -- should we think about these -- the '25 B2B margins as kind of the right place to think about the long-term outlook for the B2B business on the margin side.

Yes. Ken, I know you work from the bottom up there. First off, on margins. And we talked about this last quarter as well. As we're redeploying a portion of the savings that we're delivering in other parts of the company, we're investing in B2B initiatives that will weigh in the short term on our near term, we'll be weighing on those -- on our margins there. But we'll continue to do those investments because that's 1 of the vectors that we see a strong growth opportunity for the company. And I'll let Ariane jump in on that in a second.

That's factored into our Q1 and our 2026 guide. And so without getting into guiding by business unit or talking about specific numbers, we've had, what, 18 quarters now of strong double-digit growth in B2B. So I think it's relative -- been relatively consistent and strong double-digit growth. And as we invest in the new products and new lines of business, we feel like we can make that continue going forward.

Ken, I'd just add. We took actions to win wallet share with existing partners. The B2B business benefited the supply from the supply work that I was referring to earlier. The fact that we had more partners participating in Black Friday, we had an increase in the number of properties, all of that flows through and to B2B plus some of our large partners made particular investments in marketing in the fourth quarter, which we then benefited from. Our travel agency platform, which we call TAP, performed very well. We expanded the loyalty program. We grew the number of agents that were active in the fourth quarter.

On our template, which a number of partners use, we've improved the configurability I mentioned we launched our first assurance offering. So it's really -- the team is innovating across the products and technology. We're adding supply, we're deepening our partner relationships. And that's been a formula that's worked for us.

Now as I always tell the team, it's a competitive industry. We're going to win some deals. We're going to lose some deals. The important thing is that we keep on adding partners, we keep on innovating I think the work that we're doing in the new lines of business is going to be very exciting for the years to come, and we really believe in this business.

Your next question is from Deepak Mathivanan with Cantor Fitzgerald.

So Ariane, can you talk a little bit more about the product development efforts on the AI experience side? Are you approaching it -- generally using the current LLM architecture and your cloud partners or do you think you need to fundamentally build new AI capabilities specific to travel, maybe with Expedia data in a unique way.

And then if I can ask one for Scott, how should we think about the tech and infrastructure investments that's required to build and support some of the AI experiences -- is the platform currently already well positioned to trade on AI capabilities? Or do you anticipate potentially making some investments on this front?

Sure. So in the product, I think of AI in a couple of ways. One is just in the existing flows, how do we use AI to make a better traveler experience. So that is personalization. It's better recommendations, it's better ranking models. It's more personalized content. So if someone has -- always goes to properties that have spas, how do I make sure that, that is what the -- that we're highlighting on properties. So that's 1 real area of, I think, potential product improvement and in performance.

The other is everything related to natural language engagement with the product, which I talked about earlier, how do you introduce natural language, how do you make it both sort of typing and also spoken. And I would say it's earlier days on that, but that's also sort of a vector that we're going down. I'll just give you an example, though, of why I believe both things need to live side-by-side if you think about something like servicing, you can go into our app and you can go through the native flow and make changes, cancel, change your room type in a few clicks. You can also do that in the servicing agent. And we want to make sure that we give people the choice of which of those makes most sense to them.

In terms of the question about sort of the architecture and the technology, I would start by saying it is grounded in our data. So a lot of the work we've done in the last couple of years has been about making sure that we have clean data. We've got customer data, destination data and the like. And our tech teams are looking at the architecture. They're learning, they're obviously staying on the front foot on how things are evolving. And in fact, some of the partnerships that we're doing, whether it's around agentic browsers and the like, really does keep us on the forefront. And that's true both for our consumer business and for our B2B business.

Do you want to talk briefly about the platform and kind of you see that and then I'll pick up on the numbers.

So I mean, look, the platform -- I mean, anybody who tells you their platform is done is not truthful. At the same time, I don't foresee some kind of big platform transformation like we had in the company a few years ago at all. I think it's about understanding where the technology is evolving, understanding where are the pieces that we need to shift where the new architectures we need to look at. But I would say it's not on one end of the spectrum or the very other end of the spectrum.

I think that's well said. I think the dynamic is it's not a majority of our spend, but it's a continual spend to make sure that our platform is contemporary and continues to evolve. I think the other thing I'd point to how we're thinking about it, and I think in the spirit of your question, as we think about reshaping the product and technology teams, what we're trying to do is look at how do we operate smarter, how do we operate in a way that's more efficient and effective to simplify the organization and our decision-making and speed and at the same time, bring new talent in around AI and machine learning that can develop -- help develop our products in ways that Ariane just talked about. So while there will be some net benefits to that, I think, in the margin rate, overall, I think that's a cut costs to invest and grow strategically.

And I said in my prepared remarks that even though we're using AI more and we're growing the business, we've optimized our cloud spend and some of our technology spend. And going back to the whole theme of discipline and making every dollar matter, you can just count on the fact that the way we are looking at the technology work, it's how do we make sure we have the platform that we need and we're doing it with sort of the cost also in our mind.

Your next question is from Naved Khan with B. Riley Securities.

Ariane, I have one question on alternative lodging. So you've had alternative lodging on Brand Expedia for some time. And I'm curious if you can provide any color on what the uptake is what the mix looks like for alternative lodging versus hotels today versus maybe a couple of years ago or just last year. Is that growing? Or are you still trying to get more adoption there?

And then for Scott, maybe can you just maybe talk a little bit about CapEx for 2026? And how should we be thinking about that?

Sure. It's definitely growing. It's -- to me, it's not where -- it's not its maximum potential, and that's why I believe that there's a real opportunity there. But we made great progress in 2025 on selling vacation rentals on Brand Expedia we changed the UX. So if you go on to lodging, you now see sort of there's all lodging and then hotels and vacation rental. We brought on inventory. We made sure the servicing experience was great. So there was a lot of work that we did to drive more vacation rentals on Brand Expedia to support our one-stop shop value proposition and there is still upside there.

Yes. On CapEx, it will be roughly in line with '25. I wouldn't -- I don't anticipate a material change 1 way or the other.

Your next question is from Lee Horowitz with Deutsche Bank.

I guess, one, as you think about your 2026 outlook, can you comment at all, it assumes your B2C business accelerates relative to 5% you've delivered this year? And how you're thinking about the challenges you may face in terms of delivering acceleration while simultaneously bringing down the investment of your ad spend. And then maybe just on AI topic of the day, topic of the week. I guess, how are you thinking about the potential urgency to invest more aggressively into royalty in your B2C business as some of the general purpose chatbot take on and more on the customer relationship in the travel funds.

I'll take the first -- I'll take the last part of the question, and then Scott can take the first. Look, we always feel a sense of urgency to make sure that we're delivering more value and more trust to our travelers. And travel is a high stakes purchase or can be. It's complex. It's high stakes. It's not like a T-shirt where if you choose the wrong one, you can send it back is if there's something that happens in your trip, you never get your time back. And that's why we're investing a lot in making sure that not only we have a great selection and price and assortment and the ability to add trip elements after you bought one, but also building trust.

We've got proprietary verified reviews, and we know that 70% of travelers check reviews before they make a booking. So the fact that when they make their booking with us and they do their shopping, they're going to have that trusted information, is really important for the fact that if something goes wrong in the trip, they're going to be able to either deal with it in our app or call us is important.

I'll just add that during the winter storms and government shutdown, we were able to answer our calls on average between 1 to 3 minutes, which is the best in the industry, we believe. And travelers want to know that we've got their back. So of course, continuing to enhance the loyalty program is 1 piece of our offer, but there's a lot of different parts that we believe make travelers want to continue a deep relationship with us.

Yes. Maybe to try and be helpful. I'm not going to get into by BU guide for '26, but maybe just some thoughts around guidance overall. First off, for Q1. We exited Q4 with strong clear momentum I think we're all encouraged by our strong start to the year. And we expect our first quarter bookings growth of 10% to 12%. That, of course, includes 3 points from an FX tailwind, but we expect to be able to deliver that. I wouldn't expect a material difference in growth rates amongst the BUs, but obviously, it does [indiscernible] up and down a bit even in '25.

For '26 at the high end, our full year guide of 8% reflects stable healthy growth on a constant currency basis at the high end again. As we -- we'll update each quarter as we go along. But again, I wouldn't expect a material shift in an overall growth rate between business units, if you look at the last couple of years' average. Last year's average, I should say.

Our last question will be from Trevor Young with Barclays.

Great. You spoke to supply growth earlier in your comments. Was that largely a B2B dynamic outside of the U.S.? Or are you seeing some of that in B2C domestically? We've got a few major hotel supply partners speaking to pushing more inventory to the OTAs in 3Q and 4Q and being sharper on pricing and so forth. And so we were just wondering if that was a tailwind for your U.S. room night growth contributing to that coming in at high single digits again?

And then my second question is on the [ tickets ] acquisition, it appears to be more positioned on the B2B side. Is there an opportunity to leverage that on the B2C side as well to push into experiences more broadly across your customer base?

Sure. So on the first question, the supply, it works on both parts of the business, B2C and B2B. So when I talked about 10% growth in number of properties, and then also the promotions that flows through to both, and that's just the way the platform works, and that's the way our business model works. And it's a value that we deliver to our supply partners is they have 1 connection, and they can get access to all of the demand.

In terms of [ tickets ], yes, I did talk about it as part of our B2B business because it's going to be run by the person who's leading B2B. And we think it's a great value proposition to be able to extend what we're offering in B2B, but obviously, it is going to -- their expertise is going to have an impact in B2C. So while we're -- we'll keep our B2C product, when you bring in some expertise like that, it can only help us do even better.

The Q&A is now over. I will now turn the call back to CEO, Ariane Gorin for closing remarks.

So I just want to thank you all for joining our call today. We closed 2025 strong. And as we enter '26, we remain focused on executing our strategy to deliver value for all of our stakeholders. So thank you all.

This concludes today's call. Thank you for attending. You may now disconnect.

Good day, everyone, and welcome to the Expedia Group Q3 2025 Financial Results Teleconference. My name is Alex, and I'll be the operator for today's call. [Operator Instructions].

For opening remarks, I will now turn the call over to VP, Investor Relations, Rob Desni. Please go ahead.

Good afternoon, and welcome to Expedia Group's Third Quarter 2025 Earnings Call. I'm pleased to be joined on today's call by our CEO, Ariane Gorin; and our CFO, Scott Schenkel.

As a reminder, our commentary today will include references to certain non-GAAP measures. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in our earnings release. Unless otherwise stated, all growth rates are on a year-over-year basis and any reference to expenses exclude stock-based compensation.

We will also be making forward-looking statements during the call, which are predictions, projections and other statements about future events. These statements are based on current expectations and assumptions, which are subject to risks and uncertainties that are difficult to predict.

Actual results can materially differ due to factors discussed during this call and in our most recent Forms 10-Q, 10-K and other filings with the SEC. Except as required by law, we do not undertake any responsibility to update these forward-looking statements.

This call is being webcast on the Investor Relations section of our website at ir.expediagroup.com. Replay will be archived on our site for 30 days. A slide deck containing financial highlights has also been posted on our IR website.

For today's call, Ariane will begin with a review of our third quarter results and an update on our progress against our strategic priorities. Then Scott will provide additional details on our third quarter financial performance and guidance. After our prepared remarks, we will turn the call over to the operator to begin the Q&A portion of the call.

And with that, let me turn the call over to Ariane.

Thank you, Rob, and thank you all for joining us today. Our third quarter results exceeded both our top and bottom line expectations, reflecting an improved demand environment, disciplined execution, and progress on our strategic priorities. We grew bookings 12% and revenue 9%, while expanding our EBITDA margin meaningfully. We're building solid momentum across the company. with clear proof points that our strategy is working.

The market was healthy in the quarter with an acceleration in the U.S. and continued strength in the rest of the world. We saw longer lengths of stay and longer booking windows, both signs of a stronger consumer.

Based on our results to date and ongoing trends, we're raising our full year guidance, which Scott will cover shortly. In the third quarter, we grew booked room nights 11% and expanded our hotel share globally.

In the U.S., room nights were up high single digits, our fastest growth in over 3 years. Nets were up low double digits in EMEA and high teens in the rest of the world, including over 20% in Asia.

We drove continued momentum in B2B and in advertising. B2B bookings increased 26%, marking our 17th consecutive quarter of double-digit growth, while advertising revenue was up 16%. Our Consumer Brands grew bookings 7% and with double-digit growth outside the U.S. and particular strength in Europe.

Expedia remained our largest and fastest-growing brand, while Hotels.com and Vrbo both improved sequentially and posting year-over-year growth in room nights and bookings. Our strong performance was supported by progress in advancing each of our 3 strategic priorities, all of which continue to be accelerated by AI.

I'll begin with our first priority, delivering more value to travelers. Our brands are personalized travel companions better with travelers at every step of their journey. From trip planning to bookings adding and changing and beyond. A year ago, we set out to sharpen the value propositions of our 3 big brands. We've better aligned product, supply, marketing and loyalty for each brand and it's paying off.

On product, we released new features to drive better traveler experiences. For Vrbo, we made it easier for travelers to find a property that's just right for them. With new recommendation experiences and improved property comparison tools. On Expedia, we launched new design flows in the lodging search and post booking paths. Coupled with enhanced recommendation models, these have led to double-digit growth in vacation rentals and record attach rates.

Since the beginning of the year, we've integrated AI into our products at key moments that matter. From AI filters to property Q&A, guest review summaries and our service agent. And these features are driving engagement and getting even more effective with time. On supply, we provide travelers a broad assortment of inventory to choose from at competitive prices, and we're constantly improving both.

Last quarter, we sourced more great deals for our travelers than ever before. We tripled the number of properties funding deals in our summer sales. And on Vrbo, over 20% of our bookings were on partner-funded promotional rates, a new capability we launched in the spring. Both of these illustrate the power of our flywheel. Supply partners participate more deeply in our marketplace, we deliver more value to travelers. And in turn, we drive incremental demand back to these same partners.

Loyalty is another powerful way we deliver value to travelers. With OneKey, travelers get both immediate discounts and earn OneKeyCash for future trips. Active members were up mid-single digits and across the board, 1Q is driving more repeat and more direct bookings, growing fastest with silver members and above.

We recently launched 2 important loyalty capabilities on Vrbo and Hotels.com. For Vrbo, we introduced member deals, giving our members access to better rates. And on Hotels.com, we introduced Savior Way, a high-value program that gives travelers flexibility to choose how and when they see.

Turning to our second priority, investing where we see the greatest opportunities for growth. B2B had another fantastic quarter. We grew share with existing partners and added new partners. We released new tools to help our partners more easily identify promotional rates and also launched a new AI-powered trip manner.

Specifically in our travel agency business, we've grown the number of agencies we worked with expanded our agent loyalty program and added features like new payment options, all of which have contributed to over $3 billion of bookings year-to-date. Looking ahead, we see further opportunity across our B2B business, and we'll continue investing to drive growth.

On advertising, we delivered a strong quarter with a record number of active partners and we continue to be one of the highest returning channels for our advertisers. We're using AI to make our ads more relevant while also injecting it into partner tools like our new ad portal that has improved targeting and measurement capabilities.

Finally, on growth opportunities. AI driven search is transforming the way travelers discover and plan their trips. We're moving fast and deliberately to ensure our brands show up wherever travelers are. We're making good progress on answer engine optimization even as traffic today remains small. And we're forging tight partnerships with leading tech companies like Google, OpenAI and complexity.

We were a launch partner with ChatGPT's apps, and we'll continue to experiment with new Genie experiences. Beyond the volume that comes from them, these early integrations are keeping us at the leading edge of evolving technology and customer behavior. Learnings we're bringing directly back into our broader business.

No matter where a traveler starts their discovery journey, we're confident that they'll ultimately choose to book with the brand they trust and know will be with them along their whole journey, including when something doesn't go as planned. This remains a key differentiator for our business.

Moving to the third pillar of our strategy, driving operating efficiencies and margin expansion. We expanded margins by over 2 points in the quarter thanks to our continued operational discipline and volume leverage. I'm particularly pleased that we delivered our fourth consecutive quarter of improved marketing productivity in our consumer business.

AI provides an opportunity for step function improvement in our team's efficiency and effectiveness over time. We're already seeing the benefits in our product, technology and customer service teams. From enhancing developer productivity, to improving resolution speed on servicing to highlight just a couple of examples. We've created expert squads that we're embedding across our teams to accelerate adoption, and we see a lot of potential add.

In closing, we delivered a strong third quarter. The demand environment improved and we advanced our priorities. While we saw continued momentum in October, we're keeping a close eye on economic indicators and remaining focused and agile amidst a dynamic macro environment. As we enter the final quarter of the year, we have real confidence in our ability to execute and create value for all of our stakeholders. I want to thank our team for their hard work, thank our partners for their trust in us.

And with that, I'll turn it over to Scott.

Thank you, Ariane, and good afternoon, everyone. I'm pleased to share our third quarter performance, which beat the high end of our guidance range with bookings up 12%, revenue up 9% and EBITDA margin expansion of over 2 points. Our outperformance was driven by solid execution across our company and a stronger-than-expected U.S. market. Versus our expectations, we sustained strong demand throughout the quarter and higher lodging and air prices.

As Ariane mentioned, the acceleration in our B2B business was a significant tailwind that helped drive our performance. Our booked room nights were up 11% and driven by our strongest U.S. night growth in over 3 years and sequentially, acceleration across all our main regions and core brands.

Also worth noting B2C hotel room night growth in Europe was also the highest we have seen since the first quarter of 2023. Overall, as we look at travel, demand for premium travel has performed well, accelerating from Q2 and then was bolstered by resilient demand at the lower end as well.

Gross bookings were $30.7 billion, up 12%, including a 1 point benefit from foreign exchange. Revenue of $4.4 billion grew 9% and had a 2.5 point benefit from foreign exchange, roughly 1 point more than expected. Bookings growth exceeded revenue growth primarily due to book-to-stay timing as the majority of our revenues are recorded at the time of stay, not when the booking takes place.

Advertising revenue grew 16%, posting another double-digit quarter. We see significant opportunities for continued growth, including increasing penetration outside of North America, B2B and monetizing on more areas of our sites.

Moving to our segment performance. B2C gross bookings of $21.3 billion accelerated 6 points to 7% year-over-year, driven by performance both domestically and internationally. B2C revenue of $2.9 billion grew 4%, driven by improved market demand, advertising and insurance. B2C EBITDA margins were 41% and up approximately 4 points from last year. This was driven by significant marketing leverage achieved through ongoing optimization and marketing spend. Margins were further supported by our continued discipline in managing cost of sales and overhead as well as growth in our high-margin advertising and insurance revenues.

Gross bookings were $9.4 billion or 26% with broad-based growth across all regions. Rapid API was our fastest-growing product and the largest contributor to growth.

As a reminder, Rapid Connects Expedia Group's powerful lodging supply and content with larger travel partners such as travel management companies and other OTAs. Art travel business which is our solution for offline travel agents also grew 25%.

B2B revenue grew 18%, posting yet another strong quarter, which is below bookings growth primarily due to book to state timing. B2B EBITDA margins were 29%, flat year-over-year as we prioritize investments to support the continued growth of B2B.

Turning to group profitability. We delivered third quarter adjusted EBITDA of $1.4 billion, a margin of 33%. The 2 points of adjusted EBITDA margin expansion was driven by revenue and expense leverage particularly within direct sales and marketing in our B2C segment. Adjusted EPS of $7.57 grew 23% faster than EBITDA due to share repurchases.

Moving to our cost structure. We leveraged meaningfully across all our categories. Cost of revenue was $373 million, down 3%, leveraging a point as a percentage of revenue, driven by efficiencies in payments and customer service. Total direct sales and marketing expenses were $2 billion, up 7%, driven by B2B.

As a reminder, commissions paid to our partners are included in the direct sales and marketing expenses for B2B and recorded at the time of SPA. We saw significant leverage in our B2C business with direct sales and marketing down 4% and leveraging over 0.5 point as a percentage of gross bookings. Overhead expenses were $620 million, up 3%, while leveraging almost 1 point on revenue. Benefiting from the actions we took to reduce our cost structure earlier in the year.

Now turning to our cash position. We ended the quarter with $6.2 billion of unrestricted cash and short-term investments and we remain committed to maintaining debt levels consistent with our investment-grade rating.

Free cash flow on a trailing 12-month basis was $3 billion and reflects the strength of our operating model and disciplined execution of our strategic priorities. At quarter end, we had $1.8 billion remaining in our share repurchase program after utilizing $451 million in the quarter to repurchase 2.3 million shares of our common stock. This brings our total shares repurchased in the last 3 years to $44 million, which reduces our share count by 22% net of dilution.

Turning to our outlook. We are raising Q4 and full year guidance. For Q4, we expect gross bookings and revenue growth of 6% to 8%. Gross booking includes an estimated 1 point benefit and revenue includes a 1.5 point benefit from foreign exchange to current rates.

Adjusted EBITDA margins are expected to expand by approximately 2 points with a minimal impact from currency at current rates. As Ariane indicated, we saw continued momentum in October but we are monitoring economic indicators within a dynamic macro environment.

As a reminder, the moderation in our Q4 growth is driven by lapping the 6-point bookings and 7-point revenue acceleration experienced in Q4 of last year. For the full year, we expect gross bookings to be up approximately 7% and revenue up approximately 6% to 7% and EBITDA margins to be up approximately 2 points versus last year.

We will provide our full year guidance for '26 on our Q4 earnings call. We have built strong momentum on margin expansion with the year-to-date adjusted EBITDA margins up close to 2 points, enabling us to drive the highest margin expansion we've had in 3 years.

Looking ahead to 2026, we expect further margin expansion, albeit at a more moderated pace than what we drove in 2025 as we continue our cost-out efforts and invest behind our growth initiatives. Regarding capital allocation for the balance of 2025, we expect to continue repurchasing shares roughly in line with levels over the last couple of years. In conclusion, we are pleased with our third quarter results and our outlook for the fourth quarter. We are encouraged by the momentum we're building across our strategic priorities, which will position the company to drive long-term profitable growth.

Now let me open the call for questions.

[Operator Instructions]. Our first question for today comes from Eric Sheridan of Goldman Sachs.

Maybe I'll ask a 2-parter on B2B. So you've had a very strong year in B2B. How should we be thinking about the building blocks for medium-term growth of the amount of supply and partnerships you already have it B2B as driving organic growth and how are you thinking about continuing to grow the array inside the B2B business against potentially a competitive environment in the category as well, looking out over a multiyear view.

So look, clearly, we had an exceptional quarter in B2B. And as I said in my prepared remarks, we've been consistently growing faster than the market, 17th consecutive quarter of double-digit growth. The performance is driven by a combination of great supply, strong technology and a base of long-term partners who rely on us and who trust us as they're building their business.

In terms of building blocks of future growth, I would think of it as a mix of signing new partners and growing existing partners, both the existing partners as they grow their business and as we expand and enhance our product offerings. Lodging continues to be the core of our business, B2B business today, and we're increasingly excited about the potential with other lines of business, car rentals, advertising, insurance and the like.

And I'd just end by saying, look, this is a pretty diversified business. We've got 65% of it that's outside of the U.S., so it's quite geographically diverse. In terms of the types of partners we work with, we work with offline travel agents, online travel agents, corporate partners, airlines, bank and credit card companies. And so put it in the context of an over $3 trillion travel industry, we think that there's a lot of growth potential ahead, and we'll continue to invest in it.

Our next question comes from Mark Mahaney of Evercore ISI.

I'm going to try to sneak in 3 questions. Scott, you talked about being able to continue to expand margins going forward. Just talk about what the sources are of a big picture in the next couple of years, what are the biggest sources of margin expansion.

And then, Ariane, 2 questions just related to Agentic Commerce. So 1 is, is the quality of the signals that you're getting, the leads you're getting from places like ChatGPT, the perplexity Gemini, -- are they the kind of equivalent to all those performance leads the company got in the past?

And then could you just talk about in e-commerce, there's this expectation that we could really see an inflection up in online purchasing because you're going to much more personalize the service potentially. I think that will happen. I wouldn't -- travel the opportunities even greater given how much more personalization iteration there is in the travel purchase process. But do you agree with that? Or have you already seen signs that genetic tools and greater personalization can inflect up overall travel demand and fulfillment?

Yes. Let me take the first one. The way I think about the margin rate expansion that we've done and that we would expect in the -- can expect into the future, it's really on the legs of a number of different initiatives. The first -- the most clearly continuable for the foreseeable future is sales and marketing for B2C. I think the team has done an excellent job of optimizing our scale performance channels, improving metric capabilities, redeploying between channels, focusing on incremental returns and ROIs. I think they've done an excellent job, and I can foresee that happening for a while.

Cost of sales, we continue to get sharper whether that's using AI or whether that's tighter management of expense controls and better cloud cost dynamics that we're working on. Those are 2 very large ones. Overhead is also key as we continue to focus on our overhead cost population and what we're going to do to kind of continue to ratchet that down while getting revenue expansion to get the leverage.

And then there's a mix dynamic between ads, Insurtech and things like that, that help out as well. So I think we've got multiple legs of the stool to drive cost out of this business, again, leverage and drive margins up.

Yes. And the second question about the quality of the lead from the Gen AI search. First, it's still early days. And so the volume of traffic is still relatively small, even if it's growing quickly. And the quality seems good. There's going to be a question of how do we make sure that as those leads come through, we understand well enough the context of the travelers so that we can give them a personalized experience, which will then lead to more conversion. But it's early days. And what's exciting is that we're in it and we're learning and we're in the integration. So we feel good about that. In terms of your question about is AI going to help with personalization and getting inflection.

We're already seeing that the use of AI in our products is helping us get more personalization and is driving growth. I talked about changes we made in the flows of the Expedia product for post booking on attach. It's those flows plus stronger recommendations to AI that are driving record attach levels. ranking models are also going to get more personalized.

So I absolutely think that in our own products, we have an opportunity to better personalize and to give travelers better experiences, which is going to lead to more trips. I also wouldn't discount the importance of using AI and personalization and marketing, how can our marketing get more effective using AI. And finally, even for our partners, we're injecting AI into our partner experiences, whether it's supply partners or advertisers. And that's helping improve their content and their targeting, which ultimately gets them a better experience in our marketplace. So I'm very optimistic.

Mark, I think a couple of other things internally. So we think about deployment of AI internally, and I use the customer service example. Our virtual agents resolve over 50% of traveler queries. And when human support is needed, it delivers concise summaries to the agent, reducing our service cost per transaction, and we see this potential as we look forward as well. So we think it continue to expand. So I think we see it both externally and internally across our business.

Our next question comes from Anthony Post of Bank of America.

Just want to go back to the replatforming you went through. It was a couple of year process. It was pretty disruptive. Now that you're over that -- how is that helping you potentially compete better? And then second part of the question on the Vrbo and Hotels.com brands, which are presumably on that platform, how are they doing this quarter? And can you see a further uptick next year on kind of recovering those brands?

So as you said, we went through quite a replatforming sort of from 2021 through early 2024. And we are leveraging some of the capabilities that we built to get more scale across our brands. So if you think about data, we now are able to -- we're on 1 common data platform.

When you think of our lodging path, as we have a common lodging path, for example, across Hotels.com and Expedia, as we're getting the learnings of what drives conversion, we quickly have that across both of their brands. If you think about the loyalty program that we rolled out across all 3 brands, it was because of the platforming work that we're able to have 1 customer identity and allow travelers to earn and redeem across all of the brands.

So those are real advantages for us. Now I talked about 1.5 years ago when I stepped into the role, the challenges that we had, which was how do we take all of the platform work we've done and then tune it to each of the 3 brands and their own value proposition. And that's the work we've been doing in the last 12 to 18 months. And that's what's driving the strong performance that we had from Hotels.com and Vrbo in the last quarter.

So if you take, for example, the loyalty program, it's running off of the same platform, but now we introduced a feature like Savior Way for Hotels.com or in Vrbo, it didn't have access to member rates and now it's got access to member rates. So I would say if you look at the performance of Hotels.com and Vrbo, both of which were strong in this quarter, some of that came from platform work that we've done, but then a lot came from the work that we've been repositioning those brands and executing against that.

Yes. I would add to that just real quickly. I think the dynamic across platforms within B2C were very strong. It wasn't just performance of 1 of the brands. It was across all 3 of the brands. I think another data point that kind of the platforming dynamics and other initiatives that we have going on that Orion talked about is proof points that it's working.

Our next question comes from Lee Horowitz of Deutsche Bank.

So maybe 1 on marketing and 1 on B2C. So you guys have seemed to turn the corner on direct marketing leverage on I guess given that corner has been turned, do you expect to be able to sustain that into next year, presumably you do, given the margin commentary. And I guess if you do -- I guess how are you thinking about being able to control that outcome in a world where you have 2 competitors that seem to be talking of their investments in U.S. hotel?

And then second, just on B2C broadly, obviously, you hit a high watermark here, understanding the comps in the 4Q are a little bit tricky. Is there anything sort of in the number this quarter that would make us believe that what you're able to achieve this quarter is not sustainable on a go forward, particularly as brands like Vrbo and HCOM continue to make progress.

Yes, let me take the first one. I think a couple of dynamics, and I won't rehash the point that I made that the teams have been working on internally. But I think it's all about being agile because the other dynamic around whether the returns and the reallocations and productivity that we're getting within the marketing channels is how is your -- how are your sights and your experience is performing -- and if those get better, your ROI should start to get better and you can lean in.

And so we're ready to kind of lean in and we're ready to continue to get productivity like I've talked about, depending on the competitive situation as well. But I think if you -- if we get conversion up further, if we get better traffic metrics, if we get more customers coming in, we certainly could have the opportunity to lean in and drive more volume. At the same time, we can also work on the cost-out dynamic that we've been talking about. And certainly, if things change competitively, we would do the same.

And then let me pick up on each of the 3 brands and what gives us confidence we talked a bit about the replatforming. And I would say there was a number of years as tech migrations on Vrbo. And this year, we've been releasing new product features that are bringing the value of being a vacation rental or pure play to life. So just a few examples.

On supply, how we're improving our assortment and prices and quality. Last year, we talked about adding the multiunit inventory. And this year, we rolled out the promotion suite, as I shared in my prepared remarks, 20% of our bookings last quarter or on a promotion suite that we only rolled out in the spring this year.

In terms of the product, we're leveraging AI to personalize property content to summarize guest reviews, all to make it easier for travelers to find their perfect match. After last month, we introduced the, loved by guest badge, to highlight the top 10% of our properties. And we're doubling down on trust and liability. So just last week, we expanded Vrbo Care to reassure guests that we've got their back, if a problem arises. So I think those are going to be foundational to the performance of Vrbo going forward.

If I take Hotels.com, it grew at its fastest pace in over 2 years. And that's really a function of the work we've done this year and relaunching the brand, adding product functionality and launching Save Your Way. And it's really solidifying its value proposition as a hotel-only pure play.

And then finally, on Brand Expedia, which is our biggest and fastest-growing brand, I talked about work we did or work we have done to drive up attach. We're at record levels of attach in the product. and there's still more opportunity ahead. As we added more airlines this year with Southwest and Ryanair, that's improving the value proposition.

As we created a new lodging path or separating hotels and homes that's allowing us to grow vacation rentals. And we know that while we grew low double digits outside of the U.S., there's still a lot of opportunity for us to grow outside of the U.S. So we're just really looking at where are the opportunities that we see in the business to grow, how do we execute on them, while at the same time, being very mindful of where we're spending our marketing dollars.

Our next question comes from Ken Gawrelski of Wells Fargo.

Sorry about that technical difficulty there. Sorry about that. Can you talk about as you think about the alternative accommodation market going into -- over the next 12 to 18 months? Could you talk about the evolving kind of competitive dynamics maybe as some would characterize it as a bit more mature. Could you -- and do you think that the integration with hotels inside kind of a search window with an alternative accommodations will become the norm? And could you just talk about where you are in that process?

So Vrbo, as I said, is a vacation rental pure play, and we're excited about the features that we've built and we're launching that are strengthening its value proposition as the trusted vacation rental pure play. Then as you say, in Brand Expedia, we're now integrating vacation rentals into the lodging flow. And we're being measured in doing it because we want to make sure that there's a great traveler experience. And that they're going to find the lodging option that works for them, and we're seeing good results.

And I will add that we're now starting also to distribute vacation rentals through our B2B partners. So certainly, when I talk to vacation rental owners, they're excited about the fact that now in addition to bringing the volume and demand from Vrbo, we're now opening it up on Expedia and our B2B partners.

Our next question comes from Jed Kelly of Oppenheimer.

Great. Just circling back to B2B. Can you kind of give us an update on how you're looking in competition there and what you're seeing in terms of contracts and the renewal cycle?

Okay. And I'll say I've put in our B2B business for over a decade. And feel like every year, we're saying there's so much competition from all these different places. And the truth is, in any business, there's always a lot of competition and our team needs to go out there and put our best foot forward, make sure that we're delivering a lot of value to our partners, we're staying close to them. And look, there will be some deals that you win and some deals that you don't. But over the long term, I'm very confident in our value proposition, and we continue to innovate in order to respond to the demands that our partners have.

Our next question comes from Connor Cunningham of Melius Research.

One of your competitors spend a lot of time talking about direct to just solidify their position long term. And Presumably, you're seeing an uptick in direct bookings as well, given the fact that like things are accelerating and marketing efficiencies are getting better. But I was just hoping that you could level set on where things are in terms of your B2C business? And then what's a reasonable medium-term target as you continue to flex that efficiency on the marketing side?

Our direct business is about 2/3 of our bookings in our consumer business. come direct. Now obviously, some of that is from our loyalty program on the travelers coming back direct. And we're always looking for where can we bring in travelers outside of an ecosystem, what channels, where do we need to be present because you really do want a balanced set of where you're getting your travelers from. But today, 2/3 is correct.

Yes. I think what we've seen in the recent quarters is conversion in our direct channels have started to tick up. And while it's not necessarily where we want it to be and we see room to continue to improve, the dynamic of seeing it go in the right direction is positive. I think both for whether it's our site or whether it's our apps, there's a lot of benefit that the team has been driving and we feel good about that.

I think overall, you kind of mentioned traffic. And I would just say, we did see good traffic in Q3. It was nicely ahead of Q1 and Q2. And I think that the teams did a very nice job within the traffic channels balancing the spend levels and shifting to higher growth, higher returning channels, which is why you saw some of the expansion in the margins, particularly in B2C.

Our next question comes from Kevin Kopelman of TD Securities.

This is Jaden for Kevin. Could you talk more about the acceleration you saw in U.S. room nights, any drivers to call out?

Sure. Well, I mean, so room nights were 11%. The strongest in 3 years or over 3 years with some nice acceleration across remain regions and in all of our brands as well. So that was high single digits in the U.S., low double digits outside of the U.S. Of note, 20% -- north of 20% in APAC, as Ariane called out and B2C strength in Europe as well. So very nice expansion in line or better than market in many areas. And we feel good about where we stand with room nights . Do you want to add?

Yes, I would just say in the U.S., it was both across the consumer business and the B2B business. So it's really -- it was across the board.

Our next question comes from Deepak Mathivanan of Cantor Fitzgerald.

Great. So first, Ariane, on partnership with OpenAI and potentially other AI assistance, how are you sort of approaching it strategically to ensure that you get the best opportunity for branding and driving rupee traffic back to Expedia assets, while also maybe supporting a seamless booking experience for consumers particularly these systems start to become more and more a genetic over time. How are you balancing the trade-offs?

And then second question maybe for Scott. The preliminary commentary on 2026 margin is very helpful. Can you talk a little bit about the primary investment areas for next year so we can kind of get a sense of the scope of these investments?

Thank you so much. So we're thinking about these partnerships as great ways to attract people to our brands. As I said, there are really 2 things that we need to do. One is all the work on answer engine optimization and making sure that not only are our brands showing up when people are having conversations, but also that the content that's showing up accurately reflects the strong value propositions of our brands. So that's one thing that we're spending a lot of time doing.

And then the second is these direct integrations that then drive traffic back to us. And as anything we do, it's critical that the travelers have a good and seamless experience when they get handed off over to us.

So Look, as I said, we were one of the launch partners with ChatGPT. The team's worked really closely together and getting that integration together. And that's the approach we will take as opportunities like this arise.

I would just end by saying, it's a fast-moving space. I think this is an area where it's really important to be on your front foot, getting learnings, experimenting because a few months down the road, it may look different than it does right now.

Yes, back to your question on '26. I mean we'll go deeper on Q1 and '26guidance in February, but a couple of things for '26 to maybe underpin what you're looking for. In '26, in the longer term, you should expect us to continue to focus on our core 3 strategic priorities that Ariane's talked about in the script for the last year. We're going to invest in our growth opportunities across our businesses and continue to focus on operational efficiencies, including our focus on marketing leverage, cost of sales and overheads. So that will kind of frame out.

If you think about where we're going to invest and where we're going to get productivity, but we'll go deeper next quarter.

Our next question comes from Naved Khan of B. Riley Securities.

Great. Two questions from me. One on Vrbo. Ariane, how do you feel about the growth in verbal in the U.S. relative to where the market is growing? Are you growing faster or in line with the market? And then the second question, I have is just on the outlook for the fourth quarter. So there is some amount of uncertainty around government shutdown and the impact potentially on price and whatnot what are you baking in, in terms of your guidance? And how should we be thinking about that risk?

Yes. So just on Vrbo in the U.S., Vrbo all up, we grew bookings and room nights in the quarter, and we believe we maintained or perhaps even grew our market share in the U.S.

So Q4 guide, let me talk a little bit about that and then touch on the government shutdown and the flight cancellation dynamic. So first off, just to level set again, the GBV and revenue growth target for Q4 is 6% to 8% with 2 points of margin expansion, and we feel good about that. We feel confident we can hit that.

The October remains strong. So similar to Q3, we got out of the gate strongly and we feel good, but we are very clear, and I think everyone is clear that the lapping gets tougher in November and December. In fact, we saw a 6% to 7% increase in November and December last year. So we expect that there's going to be some dynamics where our growth will start to slow. When we're thinking about the next few weeks, and we're all -- let me step back for saying.

As part of guidance, we always try and make sure that we are prepared for a dynamic environment and events like these. And so we try to some extent, make sure that we've seen the latest, we're factoring those in. We're moving forward in a way that's clear and that it would include in how we deploy marketing funds or how we make investments or cut costs. The market remains dynamic. And in the U.S., just to be clear, we haven't seen a change in trend yet. But we're watching very carefully, and this weekend will be a critical one as we head into that. So we're watching the government shutdown very closely. And as we -- as I mentioned in my prepared remarks, our outlook already reflects the stable trends we saw in October, factors in the 6 points of lapping from the prior year acceleration in November and December. And we're always thoughtful about our guide and how we factor in room for unknowns like this type of thing.

So within our construct for Q4, we feel good that we can absorb Air in particular because if you think about air their Q3 revenue for Q3 put in context was $101 million or around $300 million year-to-date. And it remains our major -- remains a major priority for us to continue to expand our presence both on a stand-alone basis as well as bundling.

But with already 1/3 of our revenue booked from Air in Q4, even a significant reduction in a $100 million run rate for Q4, we should be able to absorb all or most of that in our outlook. So we factor these types of things in when we think about guidance, particularly in dynamic environments like this.

Yes. No. The other thing I'd just add at the end there is, look, as Ariane mentioned, the key differentiator for our business is being there for the traveler along their whole journey. So as customers go through the next couple of weeks or hopefully shorter, we're there when something goes -- it doesn't go as planned. So we'd like -- while we like everyone, hope for a fast and safe resolution on the situation, no matter what, we'll be here for our travelers.

Our final question for today comes from Tom Champion of Piper Sandler.

Just curious if you could provide us an update on kind of the international into U.S. travel dynamic and maybe particularly from Canada and if that's normalizing and kind of your outlook into next year.

In terms of corridors, look, the -- it was healthy across the board. Inbound travel to the U.S. was nearly back to levels of last year, not quite a bit menace levels of last year. Europe to the U.S. growth year-over-year has recovered from the second quarter. APAC to the U.S. has accelerated from the second quarter. Canada volume into the U.S. remains pressured, though it did improve as the quarter progressed.

Thank you. At this time, I will now turn it over to CEO, Ariane Gorin for any further remarks.

Yes. Thank you all for joining today's call and also for all the questions. We delivered strong results this quarter ahead of our expectations. As we enter the final quarter of the year, we have strong confidence in our ability to execute and to create value for all of our stakeholders as the global one-stop travel marketplace for every traveler, every partner and every advertiser. Thank you all.

Thank you all for joining today's call. You may now disconnect your lines.