SME, a little lower than I expected and I think I mentioned some of the reasons for that on the call. I referenced the American Express data, because Amex is really the best data point we have for SME growth rates. Amex has $400 billion of payment volumes from U.S. SME businesses and relationships with nearly 4 million small businesses in the U.S. So it’s a really robust data point to look at the external market. And if you look at Amex’s results for Q1 – U.S. SME payment volume was up 1%. If you look at the same store sales for Q1, they were actually down 3% and that’s a spend number, so that includes price inflation. So transactions would have been lower than that. And I think what Amex is seeing on the payment side of what we’re seeing as well is that there is more impact from sustained higher inflation, sustained higher prices, and I do think that is leading to tighter spend controls with SME businesses.
In terms of the second part of your question about how do we expect that to evolve? I think that will be macro driven. I think as confidence improves, as macroeconomic conditions improve, access the inflation outlook becomes a little clearer. We do expect that to change and we certainly still see SME, medium- to long-term being the growth engine for the company. Sorry, there was a second part of your question on APAC. I think that it’s really not a recovery issue that you mentioned in your question. Just structurally, I think APAC is a region that will continue to grow faster. Now we’re seeing really strong growth out of our key markets in Asia and India in particular. And I think we certainly see that as a longer term trend and not really driven by any recovery factors at this stage.
Operator: Thank you. Thank you, Lee as well. [Operator Instructions] Our next question is from Duane Pfennigwerth from Evercore. Duane, your queue is open now. Please go ahead.
Duane Pfennigwerth: Hey, thank you. Can you just remind us how you define SME? What is the cutoff to be classified as SME and certainly appreciate it’s highly fragmented, but any particular industries you’re keeping an eye on, just wondering about kind of drivers there? And really do appreciate that the vast majority of this is unmanaged, and it’s a very large opportunity for you, but we are interested in kind of this incremental SME commentary?
Paul Abbott: Yes, sure. For our kind of SME definition, we actually have – the way we’re structured, we have a division that is dedicated to SME customers. And so, we essentially report looking at the customers that are in that part of our business. But broadly speaking, it’s customers that are spending a kind of, let’s say, $30 million on the less in travel. But the vast majority of those are much smaller. But there are some exceptions to that as we try to be needs driven rather than purely volume driven. But directionally, that’s a good guide. And it represents about $14 billion of our TTV. So that’s the definition question. In terms of industries, I think SME is so broad based that it’s really difficult to pick out a specific industry.
I think when you look at the SME performance, actually, is a mirror kind of what we see in global multinational, the results are stronger in the larger companies within SME, and they are kind of a little softer as you go down into the smaller companies. So I would say that’s the general trend that we’re seeing. The smaller of the business, perhaps the tighter controls that were all spending. And I think that does connect back to the comments I made earlier about lending costs and higher inflation and price inflation. And we have to keep in mind that if you look at domestic airline prices in the U.S., for example, our average ticket price for the first quarter was up, I mean 8% year-over-year, but it’s up 24% versus 20.2%. So there has been some pretty significant price inflation that I do think is contributing to some of those spending controls that you see in the SME segment.
Duane Pfennigwerth: That’s great. And then just a follow-up there. I think you said that your U.S. air transaction volume was up 14%. I don’t know if you have it handy, but how does that compare to hotel transaction growth for the same geography? And sorry to put you on the spot, but again, it’s just something we’re interested in. Do you have any insight into how trip length or trip duration may be changing as the close-in corporate starts to perk back up.
Paul Abbott: Yes. I think on the air, we were 10% up on a workday-adjusted basis globally. Air was 11% up globally. And the U.S. was the strongest region from an air perspective, actually at 14% growth. So very strong overall sales growth on air. I think it’s worth noticing that about 2/3 of that growth was price and yield related. So you’ve got about eight points of pricing and yield growth and about six points of transaction growth. So hopefully, that sort of additional color helps a little bit on the air side. U.S. hotel transactions, I think I know hotel sales were up 10%. So I think that’s probably in the U.S. So that’s probably the comparable number to the 14% because both of those include, if you like, pricing and yield impact.
So U.S. air up 14%, U.S. hotel sales up 10%, but you’ve seen a little less price inflation on hotel. If you look at U.S. average daily rates for hotel year-over-year, they’re up 4%, where, as I mentioned before, air is up 8% on domestic. And if you go back to 2022, as I mentioned before, domestic air is up 24% but hotels up 14%.
Duane Pfennigwerth: Thank you, Paul, for that detail. Appreciate it.
Paul Abbott: You’re welcome.
Operator: Thank you. Our next question is from Toni Kaplan from Morgan Stanley. Toni, your line is open now. You may continue.
Toni Kaplan: Thank you. I wanted to ask another follow-up on SME. I know you mentioned the slowdown is really driven by macro factors. Just wondering what are some of maybe the sales initiatives or strategies that you could deploy to maybe mitigate some of the macro factors, I’m sure that this has happened a number of times in the past. And so just wanting to understand if there’s anything that can help mitigate some of the macro slowdown.
Paul Abbott: Yes. Good question, Toni. Absolutely. I mean certainly, there are a number of levers that we can pull in an environment where organic is slower. The first is you make sure that your retention remains really, really strong. And unfortunately, that’s certainly been the case. Then we have been making investments in our SME sales organization, both in the sales and the marketing channels and increasing those investments in our sales and marketing channels, obviously, is an important lever for us to pull. And then there is what we call share of wallet from existing customers, making sure that we’re doubling down on growing those existing relationships and taking advantage of the expansion opportunities that we have with the existing base.
