Julie Whalen: And from a capital allocation perspective, our approach hasn’t changed. We did sort of lay out the targeted leverage ratio this time just to sort of give disclosure to what we internally are striving for. And we will make progress towards that this year and going forward. And we can make progress towards that with EBITDA growth and potentially some small pay down of debt. And it won’t take much given how much we’ve already reduced our debt level. So all that to say, with strong EBITDA and strong free cash flow, we have a lot of cash available to be able to deploy to buybacks, as we have done with our largest one to date – one of our largest ones to date that we’ve done about $600 million this year. So there’s still ample room and availability to be able to buy back. And as long as our stock is trading at the levels it is relative to what we know the long term performance of this company is going to do, we will continue to do that opportunistically.
Operator: Our next question comes from Eric Sheridan with Goldman Sachs.
Eric Sheridan: So much of the focus for the investors tends to be on the North American market. And you made some interesting comments about some of the international markets on this call so far. Can you give us an update on your view on where you sit competitively and how you think about the investment cycle to drive growth away from North America, maybe through the lens of some of the B2B and B2C initiatives and some of the refocused brand initiatives, so we have a better understanding of that.
Peter Kern: Let me work backwards. I think B2B is a great business, a great tool for us to reach pockets of demand, as I said, that we don’t otherwise reach or reach well. That might be geographical, like China, for example, where we expect a good rebound there and we have a nice book of business with partners in China. Or it might be a loyalty program in the market we’re already in, but that has a captive audience that’s burning points in a bank credit card program or something. So that business definitely gives us ways to participate in travel economies that we are not otherwise sort of going head to head in the B2C side. But as we talked about the B2C side, we’ve had presence in many markets around the world, some of which we are just as leaned into as we’ve ever been, and some of which we – as we talked about in prior periods, we pulled out of because the economics just weren’t worth it.
We were losing money and not gaining retainable share, I would say, without having to continue to spend and lose money. We believe what we had to do. And what we’ve been doing is building a better model, a better product, a better go-to-market marketing strategy that helps us acquire the right kinds of customers who value what we have, which is the best product, the best loyalty program, the best service in the category. And that may or may not be every customer in the world, but we believe we can target those customers in lots of geographies. There are big pockets of them that we don’t touch right now that are opportunities and there are also pockets of them that we used to touch less efficiently that we think we can go back to with strength.
So, I think you’ll see us – it’s not going to be a huge story in the numbers this year. Although we have seen a great comeback in EMEA, in Asia, in Latin America where we do participate. But that’s a bigger story over time as we get our One Key launch done, as we get our product complete, and as we can start to move our strategy more holistically into new markets and target the right customers for us.
Operator: Our next question comes from Lloyd Walmsley with UBS.
Chris Kuntarich: This is Chris on for Lloyd. Maybe the first question on – just as we think about the 2023 double digit growth guides on both the top and bottom line, just philosophically, how do you think about potentially letting upside flow through on either the top line or bottom line for this year? Second, it sounds like things are turning around in the air product. Just can you talk a bit about how you think about air as a separate funnel potentially for driving room night growth from here?
Julie Whalen: As far as the guidance, I didn’t hear all of what you said, but I think basically the question is, is what gives you the confidence to be able to hit the top line and the bottom line guidance, which does include margin expansion. It’s several things. Peter alluded to many of them. But, obviously, it starts with the travel industry, the strength of travel is really strong. Everyone’s reporting great numbers. And so, clearly, the consumer is prioritizing their spend on travel. We’re seeing it in our own business with the success we’re seeing with the brand Expedia business with a 30% growth in gross bookings and then hotels.com getting on that platform. And at post migration, now driving 20% increase in gross bookings.
We have a B2B business that’s growing 55%, which is a halo for the rest of the business. We have Q2 where at the moment where we’ve got to address this tougher year-over-year compare and we’re going through the Vrbo migration. But when we come out the other side, Vrbo will be on the same platform that is delivering that same sort of double digit growth. And so, we’re excited to see that. And then on top of everything else we’re doing with the growing loyalty member base, the growing app user base, and all of the goodness that that will drive in the back half along with all of our tech and product initiatives, that’s what gives us the confidence that we’re going to be able to hit this guidance on the full year.
Peter Kern: I’ll just take the second part on air. We’ve been innovating a lot on air. Now, it’s important to remember, since if you go back pre COVID, we sold Egencia, our corporate business to Amex GBT, and we got out of the air business with our partner Chase. So there’s some weird comps if you go back in history. But if you look at the air product, I think we’ve made huge progress on it as a product. You’ll find we have price tracking and predictions now in most of the world. That’s been a great engagement product. It’s helped with conversion. It’s helped with attach sales of hotels and other things. We’ve increased our speed, we’ve got smart shopping, which is a new capability of comparison shopping, looking at the best seats in the different economy, basic, economy, et cetera, and comparing more easily.
We use AI to suggest the best option for each customer. So all of these things are in the works. We’ve improved our search speed considerably recently. So there’s a bunch of work going in to make that product the preeminent product in the space again. And I think we definitely look at it as an opportunity. It’s a unique capability, something we’ve always been strong in, something we can drive traffic through. We have a lot of opportunity to improve our attach rates and our packaging, if you will/. We have terrific package rates for many of our partners. And we’ve just started deploying as part of the run up to One Key, flight member discounts, which we’ve never had before, which is a great opportunity for airlines to use their pricing to help get the best customers out of our marketplace.
So I think there’s a lot of things that have been in the works and coming. And again, this is just one of the areas where I say the technology has been evolving through this period. And it’s all getting to a place where it can be much more effective. And we haven’t spent much time on it. But obviously, once everything’s on the same stack, we start to have a unique capability to start moving more products across brands. So things we’ve talked about before, like better selling our Vrbo content on our OTA brands and through those points of sales becomes a reality. Selling Vrbo content through our B2B partners. There’s some vacation rental content in our OTA brands that isn’t on our Vrbo stack. So we will have that consolidated. So there’s lots of opportunities that come from this migration that are all – air is one of them and we’ve done a lot there.
But there are many.
Operator: Our next question comes from John Colantuoni with Jefferies.
