Booking Holdings Inc. (NASDAQ:BKNG) NASDAQ 47th Investor Conference Call December 7, 2022 5:00 AM ET
Company Participants
David Goulden – Executive Vice President and Chief Financial Officer
Conference Call Participants
Brian Nowak – Morgan Stanley
Brian Nowak
Okay. Good morning, everyone. We hope everyone had a first – a productive first day of the NASDAQ Conference here, and I hope the second day is equally as productive. My name is Brian Nowak, I’m the Head of U.S. Internet coverage here at Morgan Stanley. We are thrilled to have David Goulden here, the CFO of Booking Holdings, to sort of talk through everything that’s going on at Booking Holdings, the macro space, the state of travel. We were just talking about China reopening, walking in. So there’s a lot to cover. I have some disclosures I have to read to get the party started.
Please note that all important disclosures, including personal holdings disclosures and Morgan Stanley disclosures appear on the Morgan Stanley public website at www.morganstanley.com/researchdisclosures. Some of the statements made today by Booking Holdings may be considered forward-looking. These statements involve a number of risks and uncertainties that could cause actual results to different materially. Any forward-looking statements made today by the Company are based on assumptions as of today, and Booking undertakes no obligation to update them. Please refer to Booking Holdings Form 10-K or 10-Q for discussion of the risk factors that may impact actual results.
Question-and-Answer Session
Q – Brian Nowak
So let’s talk about travel.
David Goulden
Sure.
Brian Nowak
I want to sort of start with macro a little bit. I thought it was really interesting on the third quarter call. You talked about sort of sustained demand, in some cases, even accelerating demand, pretty good demand trends even to start the fourth quarter. So maybe just sort of talk about those demand trends. What are you sort of seeing at a high level? And if you want to sort of get into the regional breakdown, I think it’s really interesting to sort of hear about the state of travel through your eyes.
David Goulden
Sure. Thanks, Brian. So yes, we saw strong demand through October. Room night growth was up 12% versus 2019, which is higher than it was in September and higher than it was in the third quarter. The third quarter average was 3% – sorry, it was 8%. So we feel that is good because it shows that customers have a strong desire to travel. A lot of questions about the macro and different markets.
In October, U.S. was up 35% versus 2019, very strong growth. A lot of questions around Europe. Europe was up high-single digits versus 2019. And obviously, the consumer in Europe in October is in a different position than the consumer was in, let’s call it, in January and February in Europe and yet, we’re seeing strong and increasing demand from those customers. So we see that people are prioritizing travel, even though the macro has certainly tightened a little bit since then, they are prioritizing travel.
And the other thing that we’re seeing across all our markets is that customers are not trained down in terms of the start of a combination that they’re going to, and they’re not reducing their length of stay, which is the usual two kind of early indicators that we look for. When things are going to slow down, those tend to be the canary in the coal mine type indicators for us. And we’re not seeing that in Europe, and we’re not seeing that in our business globally. So just to complete the picture.
The other bit of good news for us in the September, October time is that’s when Asia came back to growth for the first time. So Asia was about 20% of our business pre-COVID. That has been down a lot during COVID, despite the fact that China outbound, which has been the most important part of China business for us is not yet back at all. We got back to a recovery in September. And by the time we got to October, we were also high single-digit recovered in Asia compared to 2019 as well. So if you look at it, that’s a really good picture.
The final piece of kind of what we talked about on the call for disclosure is to give people a view as to what we’re seeing into the future is we also said that we see a nice build of our book of orders for Q1. We said that looking into Q1, Booking.com in euros, we were 25% higher in bookings than we were at the same time in 2019 looking into 2020, even though we got a shorter booking window, which would actually brought that number down.
Brian Nowak
Right. And those – I think it’s an important definition as for everyone. When you talk about the regions, Europe versus 2019, U.S. versus 2019, that’s people in Europe booking?
David Goulden
Yes. Our disclosure on a regional basis is always on a booker basis. Exactly.
Brian Nowak
Yes. So European demand is still pretty strong is sort of the punchline?
David Goulden
Yes.
Brian Nowak
Okay. And then talk about ADRs a little bit. I mean, it’s been quite a ride for ADRs as you just sort of think about pre-COVID, through COVID troughs and now ADRs have shot up pretty quickly across the entire travel space. You talked about how you’re not seeing any of the star trade downs or any of the issues around shorter stays. Some other OTAs have talked about some trade downs on price. Have you seen any trade downs in price? And how are you sort of thinking about ADRs into 2023 and strategies you can use around discounting just to make sure you’re hitting the right point on elasticity?
David Goulden
Yes. So ADRs have been very interesting, and it would have been difficult to sit – beginning of COVID and predict what’s going to happen to ADRs. Because historically, when there’s a slowdown in demand, ADRs go down, and they stay down until you get back to occupancy levels that you were before. And industry-wide, we’re not back to 2019 occupancy levels. ADRs for the longest period of time, and the ADR increase happened early in the recovery cycle and has accelerated, particularly into this year. So we had a 26% constant currency ADR increase year-on-year, excluding mix impacts in our business in Q3.
Now we talk a lot to hoteliers and to property partners, and what they’re telling us is they are passing on their cost increases. Their energy bills, particularly in places like Europe are going through the roof. They downsized their labor force in COVID. They can’t get the same people back at the same rate. In some cases, they can’t get the same people back at all, and they’re paying a lot more for their staff. So what they’re telling us is this is basically inflation impacting their business, and they’re passing those inflationary costs on. That’s what we hear. And that’s what we believe is the primary driver of the ADR increases right now.
And again, we’re talking about three years. We’re talking about 2022 compared to 2019, right? So you’ve got a few years of compounding cost increases built into that. So it looks like a very big number, but if you kind of – if you grow into that over the last three years, it wouldn’t seem quite so crazy. So we really believe that the primary driver for what’s going to happen to ADRs right now is going to be kind of what happens to the macro environment around pricing and inflation.
And I don’t think people are talking about deflation. Obviously, if there was deflation, there could be some reduction in ADR associated with that. But people are really talking about what level of inflation we’re looking at. And therefore, based upon what we are hearing and seeing is it really is tied to that compounding inflation over a few years of impact, and of course, the different dynamics of the labor market.
Brian Nowak
Got it. Okay. Let me sort of take a step back across the CASM of the years. If we go back to pre-pandemic, 2017, 2018 you were growing bookings at a double-digit clip. But then in 2019, the business did start to slow to high single-digit growth. Then we go through COVID, and online penetration and travel is probably higher than it was before COVID. How do you think about sort of one or two of the keys to maintaining double-digit bookings growth into 2023 and 2024 and not going back into single digits as you were?
David Goulden
Yes. So we have said, and continue to say that coming out of the COVID, we expect to grow faster than we did going into COVID. Faster on the topline, faster on the bottom line, and of course, the two have a level of connectivity. And why is that? Well, going into COVID, we absolutely were slowing. And a lot of that was to do with our business model. Booking.com, our biggest brand, we were almost entirely an accommodations focused business and entirely dependent upon the agency model where we did not touch customer money, right? We did basically made a booking, passed it on to the property partner and the booker, and the property partner manage the payment flow.
Very scalable model, being very successful for us. But wasn’t quite as differentiated by the time we got to 2019 as it was in 2014. So that really explains the majority as to why things were slowing down. So what have we been doing about it? Well, we’ve been building out a lot of new capabilities and a lot of new tools. So we’ve been building out a payments platform. Payments platform is now 40% of our gross bookings value of Booking.com.
The payments platform reduces friction in the traveler, booker experience, but also increasingly gives us the ability to merchandise. So to your point, we can now participate in – we were a merchandiser who couldn’t merchandise, or retailer couldn’t merchandise. We relied upon entirely upon what we got from our property partners to give us great rate because it’s still primarily what we do, but we couldn’t participate in those more targeted pricing promotional activities, and now we can.
We have started out building new capabilities on the journey towards the connected trip. So flights is now an important business for us at Booking.com, growing from a small base, but growing rapidly, now up in over 40 different countries. Six million tickets booked across the company in the second quarter, over 20% of all the customers are getting in Booking.com in our flights business or brand users we’ve never seen them before.
So you start adding these things up. So we’ve obviously got the strength of the business that we had before, we’ve got new capabilities, we’ve got payments, we’ve got merchandising, we’ve increased our alternative accommodation inventory. All the things that we’ve done give us many more levers to grow the business. And that’s why we believe that with the additional capabilities, the additional tools in the toolkit we didn’t have before in 2019 that we have increasingly will build upon more in the future, they give us many more levers to grow the business.
Brian Nowak
Got it. Yes. It’s a great segue to the next question I want to sort of get into, flight payments. Even the way to think about the margin profile of the company, and I think payments – so first is sort of maybe give us an update on how we should think about payment profit contribution this year? And what about in 2023? What sort of happens with payments and profit contribution next year?
David Goulden
Yes. So payments profit contribution, operating margin contribution is basically breakeven right now. And I talked about why because it’s just a good accelerant for the business. Think of it as it have a nice lubricant oil that helps the rest of the business go faster. One simple example I gave is, whilst we didn’t use the due payments, perhaps our single biggest source of customer service complaints was for payments. Customers call and say, the property charged me the wrong time, the wrong amount. And of course, we’re in the middle of that. By definition, we made the booking. So we’re going to have to go off and solve that problem. We don’t have to when it’s ourselves, right? We solve the problem ourselves.
So there’s a good reason why we’re running at a breakeven. We will start to make some contribution from payments next year in 2023. That will be the first year. If you remember, up until this year, we’ve said that we’ve actually been investing in payments that we’ve been building up. So we’ll go from investment pre this year, breakeven this year, and start making some contribution margin from payments next year from the base payments platform itself.
And then we’ll also, you’ll see us starting to introduce some payment-related travel services. So things like paying your own currency. We’re working with partners, but we can offer that to our customers. Our FX-related services, paying your own currency, things like that, where we can actually provide value to our customers over and above just the ability to process the payment itself. So those will start to rollout next year, a little bit more than you see them now, and they will also start adding to contributions. So looking forward, we see some contribution margin from the base payments platform and from some of the things we can build on top of it.
Brian Nowak
Okay. I think that, that multi-year way to think about payments is helpful for investors. Maybe let’s try to do the same thing on flights. I know flight has a lower take rate. You’ve been investing in building up flight supply and flight integration. How should we think about the flight contribution or headwind to profitability? And how long can it be before flight gets to be a profitable business?
David Goulden
Yes. So obviously, we’re investing in building flights right now, as you said. I think the way to think about flights is to kind of think out into the medium term. So we’ve got flights up and running at scale, and it’s tens of billions of TTV and then you kind of look at the P&L underneath that. The P&L underneath a flight’s OTA is very different from the P&L underneath the accommodation of OTAs and certainly not a 39-point EBITDA business, right?
And I’ve been telling people just in a way to think about the framework and how it works is think of flights as maybe a mid-single-digit EBITDA business once we stopped investing it, and we rolled it out. But I also think of flights and payments as incremental to the core accommodation offering and complementary, but purely from a financial point of view, think of them as incremental. So they’re producing EBITDA dollars we wouldn’t have before. So with flights and payments, EBITDA and gross margin, EBITDA dollars and EPS dollars grow faster than they did before. But obviously, there’s a margin compression impact because you’re adding these two lower margin businesses to the existing kind of core higher margin business. But as I said, the incremental and they’re supportive because I explained how payments make the accommodation business more competitive.
Well, flights also makes the whole business more competitive because we can solve a bigger piece of the customer problem. They go to the connected ship, but also it brings a source of customers. So I think people get a little bit sometimes wrapped around the axle saying, well, yes, you may have lower margin rate? Well, yes, mathematically, we’ll have a lower margin rate, but we’ll have more EPS dollars that are growing faster than they were before, and we’ll have a stronger and more competitive business.
Brian Nowak
I think it’s a very important point. We always use in the past, we’ve talked about how flights are sort of the milk to get in the grocery store and the travel journey, and then I booked a hotel later. Have you already started, or sort of do some of that upselling where if I book a flight through Booking.com you’re already sending e-mails and having an impact or people are booking hotels and you’re getting a larger direct mix from that? Or is that sort of still on the come in 2023 and beyond?
David Goulden
We are starting to see some of that. I’ll break flights into two segments. So obviously, right now, the majority of flights we’re booking to existing customers because that’s who we’re marketing to it. We haven’t really done much marketing of flights to new customers yet. We are participating in some of the kind of flight metasearch platforms a little bit. But dominance of what we’re doing right now is to our existing customers. So in that cohort, it’s great because we’re seeing those customers, probably because they came to us first when they booked a property then booking flights. But some of those are coming in booking flights and booking hotels. But obviously, there, there’s a pretty good attach rate because they were used to buying a hotel from us. So if they’re buying a flight from us, there’s a high likelihood they’re also buying a hotel or some form of accommodation, alternative accommodation, et cetera.
The good news is in that new cohort I mentioned, the over 20% who are brand new to us, we’re getting, I’d say, an encouraging conversion rate of them who are also buying a combination for us. And then in both classes, we know that the more the customers buy from us, the more likely they are to come to us back directly. It’s kind of back to the connected trip. The connected trip means we’re solving much more of a travelers problem. We’re going from circa 2019 being a book-and-go transaction engine to something that’s actually providing a real complete solution for our customers’ leisure travel problem. We know that the more things that they buy from us, we have good data on this, the more likely they are to come back to us directly again in the future.
Brian Nowak
And that sort of changes the way you can manage the merchandising and the performance marketing mix in the overall business. So as we – in 2022, we’ve been doing some incremental merchandising, performance marketing has been coming as the regions are opening. How should we think about merchandising and performance marketing as a percentage of bookings into 2023?
David Goulden
Yes. So it’s quite interesting. If you look at them as a combined number, now in 2022, it’s about 6% of our total bookings we’re spending on those two marketing engines. And that was about 5.5% back in 2019. So we really have stepped on the gas, so to speak, but we told people to start the year that we would. And then you kind of again look at our room night growth in October at 12% versus industry occupancy rates probably down high-single digits and you see there’s a big spread between those two, and we’re absolutely gaining market share. So you can see the benefit we’re getting from that incremental marketing and merchandising.
We believe right now, we don’t need to do – we don’t need to further deleverage those into 2023. We’re spending at a level at which we gain share. And exactly how much we spend will be a function of how much growth is remaining in the industry because we’ve been spending into growth this year, and growth recovery and still recovery in the industry. And then, of course, what happens to the macro environment and what the total demand cycle is. The more demand there is out there, the more likely we are to keep that engine burning higher.
Then of course, beyond 2023, in the medium term, we will plan to lever on those line items. Again, because as our direct mix increases, we have to spend less of the business on paid marketing. A great example of that would be just go back and look at 2019 where things were in a more steady-state environment, we weren’t talking COVID and all the rest of it. We basically kept our ROIs about the same in 2019 as we were in 2018. Because of the direct mix increase in 2019, you saw we got about 20 basis points improvement on leverage on our marketing spend compared to gross bookings about 120 basis points compared to revenue. So you see what happens when direct mix increases and how that flywheel helps the investment in that area move down with mix.
Brian Nowak
Okay. I want to talk about the individual regions a little more in U.S. versus Europe versus Asia. But maybe just to sort of follow on that last question. Are there any differences by region where you find performance marketing is more effective, merchandising is more effective, Genius is more effective? Like are there any differences in acquisition channels where you made more or less progressed by region?
David Goulden
They’re all are very important. And you mentioned Genius, we haven’t spoken about it. I mean, Genius is something that we’ve really expanded a lot in the last few years as well. Something else in my list of tools that I could, or should have mentioned earlier in terms of what’s different. And now we have three tiers of Genius customers. And the nice thing about Genius is now if you’re a logged on user and you haven’t booked with us before, you get the Genius Level 1 benefits, which are often a 10% discount on the property, which is not to be sneezed at. And then Genius Level 2 and Genius Level 3 customers are gaining more benefits.
That also comes back to the kind of segmentation and the potential inside of the business to really make sure we really work with our most loyal customers. We talk about averages a lot in these businesses. The average direct share is X. The average app user is Y. But you go to the more loyal customers, and they have a much higher percentage of direct share, much higher percentage of app users, et cetera. So that’s another tool in our equation.
So you’re right, when we kind of looking at these marketing tools, you’ve got marketing, you got merchandising, of course with the marketing. You’ve got brand, you’ve got paid marketing, and then you’ve got things like Genius and they all – so those marketing mixes all exist in all of the regions. And I’d say it’s kind of more of a tweak between the differences. I wouldn’t say they’re fundamentally a lot different.
Europe is, of course, the market we’ve been in the longest, where we have the highest recognition. So you can play that into account. In the U.S., we still recognize, whilst we’re gaining lots of share, we have some brand awareness try and build, so we hire our brand there right now than – higher mix of brand spend in the U.S. and more concentration on brand in the U.S. than we had done historically.
You saw us last year, I think for the first time in the history of Booking.com, run a truly integrated brand campaign that started off with the Super Bowl and ran throughout the entire year with very consistent creative messaging, that was a big investment for us. And one that we’re actually getting from the awareness data, some decent results from and it shows up in our financial results. So I’d say it’s more tweaking the mix based upon our position in the region.
The Asian marketplace is much more generally geared to some of the merchandising type activities, merchandising and pricing and incentives and cash back and [indiscernible] all those things are very prevalent in the Asian marketplace. And of course, the benefit there is we have two brands. We have Booking.com. We have Agoda, and Agoda is very good at those things. It has been for a period of time and competes well with the regional players like Traveloka, et cetera. So we have the ability to play with – to use both brands and kind of use their respective tools to kind of play in the marketplace.
Brian Nowak
And you mentioned prior to pandemic, 20% of the business was Asia. Have you ever broken out how much of that was China outbound, or like domestic people in China booking?
David Goulden
We basically said – you are right, the 20% pre-COVID was Asia. We said that no single market was more than mid-single digits of that. China would have been one of those bigger markets. Now within China for us, though, pre-COVID very little exposure to the domestic travel. Most of our focus was on outbound where, again, we use our two brands, Agoda and Booking, and both have good reputation with the China outbound traveler.
We also use partnerships – partnership with [Mesh1], where we provide most of their outbound inventory for the outbound travelers. And we still have a partnership with Trip.com, Ctrip, where they use some of our outbound inventory as well. So through partnership and through our direct brands, that’s how we kind of tapped into that China outbound marketplace, and we’re all looking forward to it rebounding when it does it. So we’re saying it’s been – it will be three years plus for those travelers. And of course, they were very active travelers pre, and I’m sure they will be very active travelers post.
Brian Nowak
So many topics I’d love to ask you about it. Actually, the point on the loyalty and the power users, it bring – it makes me think of business travel and sort of all of us being back, and sort of business travel continuing to come back at different levels. In the past, you’ve spoken about what percentage of the overall business you think is associated with business based on people checking the box. Is that another potential tailwind to your total company-wide business as you go into 2023? Or where are you on business travel?
David Goulden
Yes. We participate in what we call the unmanaged business travel segment. We don’t do any corporate managed travel. And that’s different industry, and one we don’t have aspirations to move into. We’re basically a leisure platform. We’re very proud and pleased with that. But to your point, we do have people self-disclose if they’re using it for business. And of course, it’s a pretty good tool if you’re a small and medium-sized business, get all your travels to book in one platform, you’ve got a consistent records, we can help you with invoicing, et cetera, et cetera.
That has not recovered as well yet as leisure travel. I’d say, based upon what I read about corporate and managed travel, it’s done, it’s recovered a lot better than us, but it’s somewhere between those two. So that is definitely an opportunity for us. I think we still put most of our focus on that leisure segment, so we kind of look into the future at things like additional flexibility in the workplace from a work environment. Most companies are not bringing their employees back five days a week. They’re bringing them back in some kind of hybrid model. That creates the ability to have more extended weekend travel. That’s right in our sweet spot. Also, a lot of companies are giving their employees the ability to work for a different state or a different country for a certain number of years. Booking.com, we let our employees work from another country for up to 20 days a year.
Well, what happens then? They will probably extend their summer vacation or the winter vacation work from somewhere else approach. Again, that’s in our sweet spot. So those are the things that we’re very excited about coming out of COVID we think is different because definitely, the workplace has changed, and that will create more opportunity for people to travel. So we’re excited about that.
Brian Nowak
Got it. The other part that does seem to have hit an inflection point is your U.S. and your North America business. I remember 10 years ago, writing a note called a Party in the U.S.A., referencing the great Miley Cyrus, all about the U.S. opportunity, but it didn’t really ever hit a stride I feel like until a few years ago. So maybe talk to us about what has driven the inflection in the U.S. business? And what are sort of the keys to continuing to take share in that travel market?
David Goulden
Yes. So a lot of things came together at the same time for us. We’ve been investing in the U.S. for a few years before COVID. And COVID were the horrible thing to happen, but it did kind of reset travel back to zero just about. And then when you’re rebuilding from zero, you have a chance to kind of assess where you are and what you’re doing. And we – and the things that we have been investing in really kind of came together as travel rebounded in the U.S. marketplace.
So we’ve been investing for quite some time in our relationship with the big chains, the chains are very important to chain-centric market in the U.S. And as the COVID market recovered, we were able to kind of really work those relationships. So we have a more – a better understood symbiotic partnership with those chains. We were able to back that up with spending in brand and marketing that helps everybody because we are creating demand on our platform as we kind of refine and fine-tune those tools a little bit prior to COVID. We got much more granular in terms of how and where we are marketing, treating states to states and not the U.S. is a big state and things like that.
We also have payments coming out live in the U.S., which is important for alternative sector because that’s a key capability we didn’t have before. We started launching flights. So a lot of the things I talked about generally really kind of all start to come about in the U.S. at the same time. Of course, we have our two brands. We’ve got Priceline, and we’ve got Booking again. Some of the examples that I gave you for Asia, and both brands have participated well and done well in our U.S. growth. And we’ve done much more work to proactively position those complementary and kind of stop bumping into [indiscernible] where we can and try and position them as two brands in the same family.
So it all kind of work together. We’ve been adding to our alternative inventory in the U.S. It’s still underway compared to where we were, but more than we used to have. So a lot of good things happening. And as we talked about, from a growth rate point of view, 35% in October compared to an industry that hasn’t fully recovered in the U.S. from an occupancy rate point of view, obviously, shows we’re doing very well, and we’re pleased about it. And there’s more to do.
That’s the good news is we’re doing well. We’ve got much more to do. I’d point to the alternative space, and the U.S. as an area where we’re still underway compared to our global average, but we’re doing a lot of work to enhance our product, to bring out new capabilities. We brought out liability insurance for partners. We’ve brought out damage deposit mechanism for partners. We’ve enhanced our payment offering to handle the professional sector, all at their request to make sure we can have more complete and more capable, and we’ve been adding properties. And we plan to continue to do that.
And then at some point in time, we can then work on the last piece a bit because in the U.S., both of our platforms are really viewed as more hotel booking sites whereas I think in Europe, people don’t think of us as a hotel booking site. They think of us as a place to book accommodations, and then we need to kind of turn that piece of the engine on in the U.S. as well.
Brian Nowak
How do you think, that point on alternative accommodations in the U.S., how do you think about the competition for supply and sort of getting more of those individual hosts to list on Booking.com as well as the competitor?
David Goulden
So we think there’s a really good phenomenon, and I think it’s happening in the U.S., perhaps more and elsewhere from a supply point of view. There is definitely a professionalization of supply going on in the U.S., and in some ways and particularly in that single property owner home. So you have a nice second home, it’s in a nice vacation area. But you don’t live there. You live somewhere else.
Do you want to be your own booking agent? Do you want to manage check in and check out? Do you want to manage payment? Do you want to manage maintenance and cleaning? Probably not. What about the property manager happens to be in the same town, same village, does that for 20 other properties, all high-end homes like yours and takes care of it as if it was their house? Well, that’s what a lot of people are doing.
So by signing up those property managers, we really get – we get access to faster inventory, but also to inventory that people really want to monetize. So somebody wants to just rent the house for a week, a year and live in the rest of the year, that’s probably not the right customer for our platform. Maybe somebody else can take care of that for them. But we like the people who want to get a bit more yield.
But if you turn to a property manager, you probably also don’t want to rent your place for week or year either. You want to rent it for a bit more and get some income from it. So there’s a nice convergence there that is giving us access to that high-quality, single-property owned inventory, but also kind of fits our platform because those property managers are looking for yield and volume as well and they know how to work with a demand platform like ours.
Brian Nowak
Yes. I wanted to end with Europe because we think it’s your biggest business. We think Europe makes up about 55% of your overall business. It’s certainly one of your oldest ones when we think about booking and active hotels and bookings BV bringing them together. It’s big and it’s doing well. I would just be curious to hear about some examples of still existing low-hanging fruit and improvements you think you can make in Europe just to sort of continue to drive outsized growth versus the overall travel industry in the next few years?
David Goulden
Sure. I go back, first of all, to quantify the kind of impact of yours. Yes, it’s our biggest business. It’s over half of our business. But go back to 2019, just from a penetration point of view, we look at all the rooms on our platform, we look at the theoretical sell-through capability. And in 2019, we sold about 7% of all the rooms available on our platform globally. In Europe, that was high, but it’s still only 11%. So there’s a lot of headroom.
Now within that, even though we have much more awareness and much more capability in Europe, that’s really where the connected trip is aimed because let’s just assume that we do have a strong customer base that use us, again, for that book and go transaction machine, right? We said that on average, pre-COVID, our average customer, we get about 25% of the travel budget. Now obviously higher and lower. But if we’re only getting 25% of the travel budget, it means we’re getting roughly half the spend on accommodation then none of the spend broadly on anything else. Then even for existing customer base, that’s where the connected trip increases the share of wallet we can get from those customers.
There’s also a lot of things that we don’t do as well as in Europe, things like beach ski vacations and things where we can tune – fine-tune our capability. And also families versus couples, again, things we don’t do quite as well. So there’s a lot of tactical things, a lot of share potential. And that’s really where the connected trip is going to make, I think, the biggest difference in the shortest period of time.
Brian Nowak
Got it. All right. Well, David, we’re against the clock.
David Goulden
We’re over time.
Brian Nowak
Thank you so much. Thank you, David.
David Goulden
Thanks, everybody.
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