Welcome to the Priceline Group’s Second Quarter 2015 Conference Call. The Priceline Group would like to remind everyone that this call may contain forward-looking statements, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially from those expressed, implied or forecast in any such forward-looking statements. Expressions of future goals or expectations and similar expressions reflecting something other than historical fact are intended to identify forward-looking statements. For a list of factors that could cause the group’s actual results to differ materially from those described in the forward-looking statements, please refer to the Safe Harbor statements at the end of the group’s earnings press release, as well as the group’s most recent filings with the Securities and Exchange Commission. Unless required by law, The Priceline Group undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. A copy of the group’s earnings press release, together with an accompanying financial and statistical supplement, is available in the For Investors section of The Priceline Group’s website, www.pricelinegroup.com. And now, I’d like to introduce The Priceline Group’s speakers for this afternoon, Darren Huston and Daniel Finnegan. Go ahead, gentlemen.

Okay. Thank you very much and welcome to The Priceline Group second quarter conference call. Thank you for joining us before the markets open this morning in New York. I’m here in Amsterdam with Priceline Group CFO, Dan Finnegan The group reported consolidated gross bookings for the second quarter of approximately $15 billion, up about 26% on a constant currency basis or about 11% year-over-year in U.S. dollars. Our customers booked accommodation reservations for 113 million room nights in the quarter, up 26% year-over-year reflecting slight acceleration for the second consecutive quarter. Non-GAAP earnings per share were $12.45, down slightly versus prior-year, surpassing FactSet consensus estimates of $11.85 per share, and our guidance for the quarter. Our U.S. dollar denominated growth rates were again impacted substantially by the strong dollar. Our international business recorded 30% gross bookings growth on a constant-currency basis, up from 29% last quarter. Booking.com continues to benefit from further penetration of its existing partner relationships, as well as growth in its accommodation supply. Booking.com’s platform now has about 707,000 hotels and other accommodations in 220 countries and territories, up 35% over last year, including 313,000 instantly bookable vacation rental properties. Vacation rental properties grew 62% year-over-year and now represent 1.7 million rentable units within these properties. In the last 12 months, about 50 million room nights for vacation rental properties were booked on Booking.com and Villas.com, up 39% year-over-year. This quarter, we began experimenting with self-onboarding of individually owned vacation rental properties, subject of course to a set of quality checks on our side and the ability of the property to be instantly bookable. We already have an encouraging pipeline of vacation rental properties to activate via this channel. We’re hopeful this functionality will help us scale our property acquisition even further. BookingSuite, our partner-facing software…

Thanks, Darren. I’ll discuss some of the highlights and operating results and cash flows for the quarter and then provide guidance for the third quarter of 2015. We’ve talked the last couple of quarters about how significantly our U.S. dollar reported results are impacted by extreme currency volatility, because about 90% of our gross bookings and operating income are generated by our international brands. Our two most impactful currencies, the euro and the British pound were weaker by about 19% and 9% respectively for Q2 as compared to the prior year. Many other important currencies in which we transact were also significantly weaker versus the U.S. dollar in Q2 relative to last year. The strong U.S. dollar means our gross bookings, gross profit, operating expenses, adjusted EBITDA and non-GAAP net income mathematically translate into significantly fewer dollars than they would have at least year’s exchange rates for Q2, Q3 and the remainder of the year. Since our expenses are denominated in foreign currencies on a basis similar to our revenues, they also translate into fewer dollars. Therefore, our operating margins are not significantly impacted by currency fluctuations and we believe that the impact of currency on our bottom line is generally similar to the top-line impact. Although the stronger dollar has a significant negative impact on our growth expressed in dollars, the fundamental performance of our business is still evident in our unit growth rates, and our constant currency growth rates for gross bookings, international gross bookings, and gross profit. The Priceline Group performed well for all these key metrics in Q2. Accelerating unit growth paired with less margin pressure than forecasted resulted in over performance compared to consensus at both the top and bottom line. Room night growth was strong in Q2 across all our key regions. Room nights…

Thank you. [Operator Instructions] Our first question is from Eric Sheridan with UBS. You may begin.

Thanks for taking the questions. Darren, appreciated the color on mobile and how big it’s becoming inside the business. Wanted to know what you were learning as mobile became bigger in terms of where money is best spent on the marketing budget to earn sufficient ROIs in mobile? How that might develop longer term? And also, Booking.com was mentioned on Facebook’s earnings call as a new partner. You’ve talked about social media in the past and what that might mean as a marketing channel for Priceline. Want to know if we can get some updated thoughts there. Thanks.

Okay. Thanks, Eric. So I think it’s important on mobile to - obviously there’s web-based mobile and there’s app-based mobile. And web-based mobile still largely and traditionally it’s through Google and other search engines, and I have to give Google a lot of credit. That’s working better and better for us, where web-based mobile is a highly converting big base of transactions for us and it ends up - in the hotel space, transactions are relatively infrequent, so a pretty significant percentage happens on web-based, particularly customers we’ve never seen before. Our app-based customers tend to be our more loyal customers and the place that we build those is mostly from our own property sites. We do go out and buy app downloads, although app downloads don’t tend to be very economic because they often get downloaded and then not ultimately used, at least from that space. So this is basically the world of accommodation. It’s very different for KAYAK and OpenTable, primarily because both those businesses are a much higher frequency business. They’re very heavily skewed to app and the whole business of getting people to use the KAYAK app to check for flights or OpenTable to book restaurants is another dynamic, and both of those businesses focus heavier and can find economics and actually getting downloads and building lifetime value to customers that are app-based. In those app based downloads, there’s a little bit of that that comes from Google, but a lot has come from new places like Facebook and other partners. On Facebook specifically, we generate most of our demand from basically search or travel. And travel includes everything from TripAdvisor down to easyJet and airlines and trains and other things. So we’ve always dreamed of a time where we could access demand from any of these big horizontal audiences. Facebook’s obviously one, Twitter’s another. You can think of WeChat over any of these other things - or even the big portals, Yahoo!, MSN, as places. But we’ve always struggled. And I was quite skeptical, but I have to give Facebook a ton of credit. We’re finally getting some good business out of Facebook. Most of it is remarketing or re-messaging. And we’ve now talked with senior management at Facebook about how do we get intent out of their network. And that’s an area that both us and them are focused on. And to the degree to which we can crack the code on intent would make Facebook a real serious source of demand for us as a business. And obviously as a performance marketer, that would be a big deal for Facebook, as well. So I’m excited with the progress we’re making. They’re investing a lot of time and energy into it, which I appreciate. And hopefully by cracking another source of demand, it allows us to also diversify where we spend our money to find hotel customers.

Thanks a lot.

Thank you. Our next question is from Mike Olson with Piper Jaffray. You may begin.

Good morning. So you mentioned strong continued growth in vacation rentals and you’re clearly putting some effort into that space. How would you describe just in general your strategy there and how your partnership with HomeAway fits into that? And overall, what kind of reception are you seeing from travelers on them seeing vacation rental inventory? And has there been any reaction from your hotel partners?

Yeah. Thanks, Mike. Well, first of all, we started out as being a hotel-only site, but it’s been some years now that we’ve built out other forms of multi-room accommodation. And even in our old - in the old Booking.com model, you even said, online hotel reservations was our sub tag. But starting even four years or five years ago, we started adding B&B’s, and we even have tree houses and igloos and stationary boats and basically other things that you could book. So for us, we went from being the world’s largest online hotel player to now being the world’s largest player in online accommodations. So moving into vacation rentals was a very natural thing for us, it’s kind of going down the pyramid and ultimately getting into this self-catered product. And for us, we’re building it out in an instantly bookable verifiable way, which is very different than what say a HomeAway or an Airbnb is doing. We’ve also focused a lot on making sure the customer experience didn’t have all the friction. If you can think of booking a vacation home and having to put down a deposit and having multiple email exchanges and not really knowing you’ve got the property, not really having the trust. We’re doing it in much more of a kind of a pure ecommerce way, just trying to create it ultimately like booking a hotel. And through that strategy, we’ve had to obviously take a lot of friction out of the industry and change the way that players think about that. And it’s a lot of work, because for a vacation rental owner, you’ve got to maintain a digital calendar. You can’t overbook people. When you say the place is available at a certain price, it has to sell at that price.…

Great. Thanks very much.

Thank you. Our next question comes from Ken Sena with Evercore ISI. You may begin.

Hi. So the bookings in the unit seemed quite strong, but the revenue margin declined 6% or so over the prior - versus the prior year. Maybe you can just elaborate a bit more on that pressure, give us a sense maybe how much of it is related to mix as far as the vacation rental expansion versus maybe some of the competitive factors that you’re seeing. And also, you mentioned that Google is performing better. But any thoughts that you can provide us on kind of the current booking functionality and how you see that progressing? Thanks.

So, I’ll let, Dan. Why don’t you take the first one? I’ll...

Yeah, hey, Ken. So in terms of take rate, what you see in Q2 is an acceleration in the business so very strong gross bookings momentum with a portion of those stays in the revenue taking place in Q3. So if you look at our Q3 forecast, you’ll see kind of a reversal of that trend where now the take rate is going up, so the gross profit growing faster than the gross bookings. So that’s a timing issue. Our take rate - our fundamental take rate on our transactions is very stable.

Great. Thank you.

And then your question on Google, specifically on booking functionality. What - did you want to repeat that?

Yeah, you mention that Google is performing better and if you could maybe just specify. Is that just in terms of the traditional keyword buys or are you getting more traction in terms of working through like the product listing ads? And do you have any thoughts as they try to rollout booking functionality, if it’s something you’d be interested in or other?

Yeah, yeah, I mean, generally, our relationship with Google is very strong. They have some of their own challenges. I mean, it’s an amazing business, but it’s become less of a percent of our business over time, so we’ve been working with them across our entire business. Of course, always first focus on core search. What are the other things we can do to innovate to get more out of core search and we’ve seen some benefit particularly in mobile web, where we work together to try to get more out of mobile web, and that’s been, I think, very successful. We’re also working with the YouTube team and we’re also doing a lot of work in retargeting. So Google kind of sees us as one of their biggest advertisers in the world, so they are - and we’re very technically performance-driven people, so we work closely together to try to get more out of all the various Google engines. Very specifically, hotel price ads is Google’s price product. We don’t love it because we would rather buy blue links. We don’t need all the extra listings, but we do understand and we have worked a lot with the HPA team to make that a better product. I think, when it started out, there were a lot of savings and thing shown on HPA that just weren’t real savings. Generally, in meta, there’s a lot of challenges with showing customers things that are savings, when a large majority of the time they’re not. It’s exchange rates, people don’t put taxes on, et cetera. It’s a real - it’s not the prettiest space. So, we’ve worked hard with them to improve that product. And then recently, as you mentioned, they’ve launched an instant book product. It’s still very early on. We don’t love instant book products either because we have a really good process of taking cold customers and turning them into paying customers. So anyone who creates a path that ends up becoming a lower common denominator that’s not good for us, because we think we’ve one of the best booking paths. We have an agency model. We don’t even need the credit card in many cases to do bookings, so - but we’re working also with Google on that, not standing away from saying, hey, is there a way to make this work for our businesses as well as what you’re trying to achieve? So it’s always been a close open collaboration, but as I always say, we’re going to put our money where it’s strategic. We’re going to watch this really closely and we have lots of options on where to spend our money. We’d look to continue to create more options to find hotel demand in the future.

Great. Thank you.

Thank you. Our next question comes from Michael Millman with Millman Research. You may begin.

Thank you. The other night, Expedia indicated that the bulk of their profit comes from repeat customers. Can you talk about to what extent profits come from repeat customers?

Yeah, well, yes, we’ve to go across our brands, but we never reveal the exact percentages, but we have a very healthy repeat business. And I would say across all of our brands, every single brand the repeat business every year gets stronger and stronger. A lot of that is related to the new multi-screen environment. A lot of that is related to we did a lot more business with signed-in accounts. In the early days, when it was a single screen, you would do transactional business and every time you booked a hotel or a flight, you’d have to reenter all your information, but once you have an account, we can store your credit card securely, we can store your name and it leads to like one-click booking. And as we’ve gone to more of a multi-screen environment, that advantage for an account holder goes up dramatically. If you’ve ever tried to book an airline ticket on a mobile phone and not have an account, you’ll know what I’m talking about. It’s not a pleasant experience, but once you have an account we can fill out the forms and we can facilitate that, and then you can take your confirmation that maybe you booked on your tablet and you can show up at the rental counter with the confirmation on your phone. These are all positives that have driven to more increased repeat business and loyalty among our customers. Then our challenge becomes really, and has been, how do we bring more customers into the franchise? And that’s what we use paid marketing for. But generally speaking our direct business continues to increase, which is a reflection generally of repeat business.

And with our - with new customers, Michael, we’re running in paid channels at positive ROIs, so they’re profitable, too. I don’t know to what extent maybe other players take a lifetime value approach and perhaps are losing money on the new customers with the hope of making money over time. That’s not the case for us.

Would you say repeat customer profitability is well over 50% of your business profitability?

We wouldn’t comment on that.

Okay. Thank you.

Thanks.

Thank you. Our next question comes from Mark Mahaney with RBC Capital Markets. You may begin.

Thanks. I was going to ask two geographic questions. You called out Latin America a little bit more. Just some more color on how big that - how material that region is for you, maybe a little bit more explanation of the investment in Hotel Urbano? And then any comments on - you didn’t mention the China outbound market. Anything you want to point out as to how well that’s doing with the path to materiality there? Thank you.

Yeah, thanks, Mark. Well, let me give maybe just a little bit of top line geo-commentary. So, first of all, in the second quarter Europe isn’t very strong. The Eurozone in Southern Europe with a little bit of the ripple of the Grexit and the coming back of Greece, but generally Europe has been very solid this year. U.S. is strong for U.S. travelers and China inbound, but generally almost everyone else is going a little less to the U.S. because of the currency effect. And yeah. China outbound continues to be very strong for us, growing at very fast rates. Japan inbound, Taiwan inbound very strong. Korean inbound not so strong because of MERS, not something that gets talked about a lot in the United States, but was a real overhang for us. But then on the other hand we had positive comps. Southeast Asia was a much calmer place in Q2 than it was last Q2, if you remember the Malaysian Air crisis, the coup in Thailand, burning of factories in Vietnam, there were all sorts of things going on. But that’s been a positive from a comp basis. And so that’s some quarterly commentary geographically, but specifically strategically Latin America - we entered Latin America specifically with the Booking.com, ran a number of years ago starting in Argentina, moving to Brazil. I would say this is a year where we’ve really had a breakthrough in Latin America. We launched our TV ads in Brazil, but really despite the fact that Latin America is not in the greatest economic health right now and the two big engines, which are Argentina and most specifically Brazil have all kinds of issues, but this has been a year where we’ve really gotten great traction in the market, maybe past the tipping…

Thank you, Darren.

Yep. Thank you.

Thank you. Our next question comes from Heath Terry with Goldman Sachs. You may begin.

Great. Thanks. Darren, you have talked in the past about your willingness to go down the ROI funnel a little bit further on the advertising side, willingness to take dollars for $0.90 versus requiring $0.70, I think is the way you put it in the past. How much of that willingness is what’s driving the 25% or 26% FX neutral growth that you’re seeing here, clearly well above sort of where the overall market is growing?

Yeah, I should probably be - thanks, Heath. I should probably be clearer, and Dan mentioned this as well. We don’t lose money on the transaction level. So on our paid advertising we have a pretty high bar. We [indiscernible].

Yeah, no. I understand - I understand that. Yeah.

Yeah, so we don’t really - so we’ll - so I think what you’re saying is we might go down and spend $0.90 to get a dollar, and therefore make $0.10, right?

Right.

And that’s really our push on the paid advertising side. The thing that we go out a little bit on a limb in is our brand marketing. We now know that we can get a pretty good return on our brand marketing, but it may not happen immediately. But we’ve shown that over time in the markets we’ve been in for a while that we can get a better return on our advertising when you add the brand marketing to our performance marketing than the return we got on our performance marketing alone, and we’ve done a bunch to build just a whole bunch of data-driven tools to help us with our media mix, and that’s helped us be smarter and data-driven about where and how we spend our brand marketing dollars. So we’re building over whatever now has been a couple years some more and more confidence in our ability to appropriately spend our brand marketing dollars, which obviously is a big growth potential for the company. Booking.com is not a household name. If you go to America you’d mention OpenTable and Kayak and Priceline before you’d mention Booking. And the ability for us to build the brand and have great performance marketing is still growth potential that’s out ahead of us and we’ve been working hard to methodically attack that. I would say our growth is truly sustainable growth because the paid marketing that we’re spending is earning us profit, and all the direct business we’re coming is earning us of course even more profit. So I don’t feel like, as opposed to some geographies, we have positive unit economics on every single transaction. And we’ve looked to improve that and any incremental that we’re making in marketing generally comes with positive EBITDA. And we’re always trying to get as far as we can to generate positive EBITDA and cash flow for our customers, without worrying about the percentage of our P&L that gets taken up by marketing, and that’s been our general philosophy. Some people may say, well, if you’re that far, why don’t you go a little bit further? And that’s always the balance that we’re striking on what business do we bring in and do we really, truly understand the economics, but always trying to be positive on a transaction by transaction basis.

Got it. Thank you.

Hope that helped.

Yes, thank you.

Thank you. Our next question comes from Justin Post with Merrill Lynch. You may begin.

Thank you. Two questions related to marketing. I think you said ROIs are improving in 3Q. Is that a result of all the brand spending? Or are there some technology conversion changes that are helping you? And then secondly, a lot of commentary out there about instant book on TripAdvisor and Google. Any commentary on your exposure to those channels and what your thoughts are, especially with Google maybe taking direct bookings over the next year, how you think about that affecting Priceline? Thank you.

Yes, so thanks, Justin. Dan, why don’t you take the first one? I’ll take the second one.

Yes. Hi, Justin. So just to be clear, ROIs were still down year-over-year, but not to the same extent as they were in Q2. And then just due to the normal seasonality with more checkouts taking place in Q3, we get a benefit there from the economics as well relative to the acceleration that occurred in Q2. We’re not going to go into the drivers specifically for you, what’s happening in the ROIs, because of the sensitive competitive nature, but Darren talked about the benefits. The offline advertising is driving in online. It definitely helps reinforce our brand and make it better known, which helps click-through rates, it helps drive people searching for the brand, and then every day we’ve got hundreds of people that are running experiments to improve conversion on our website. So that’s just a constant battle that our people are very talented and do a great job with. But beyond that, I just don’t want to comment on those specific drivers.

Yes. And then on your question on instant book, yes, it’s a pretty tricky equation. Always the question is, is your advertiser trying to be an OTA, and at the most extreme, being an OTA is really hard work. Like three-quarters of our people are in customer service, they’re in the field, they’re working property by property on pricing and on availability and it’s a business you have to do at scale. And most of our media partners make a lot of money off of us. On TripAdvisor we spend more than $1 million a day. So we have to find a place to spend our money and we of course don’t want to spend it with somebody who’s planning on being an OTA. I don’t believe that’s really what TripAdvisor is trying to do, but we have to make sure that whatever business we participate in is good business and its business that we can ultimately pay for that will repeat on our platform. So that’s why there’s a lot of discussion in this area. There’s not like a big rainbow for anyone that’s in the media business on the other side because they get most of the economics of the transaction anyway. It’s not like suddenly there’s a whole bunch more money there. In fact, all there is, is just a lot more cost. If you have to think of - I can show you my inbox someday and some of the escalations I get of the dirty ocean in Cabo because the person wants a refund or the flying ants and the OTA business sounds very sexy, but in fact there’s a lot of manual work, and that’s why there’s only a few players who do this work and do it at scale. And by the way I’d throw Ctrip in there as well. That’s why they do it so well. They’ve got over 10,000 customer service agents who deal with this kind of stuff every day. So we’re being good partners. We’re leaning in. I frankly think that instant book path ultimately will prove to be cannibalistic. They may help a little bit on mobile, but that’s all to be seen. So we’re trying to be positive partners in the process and try to make sure that if that’s the way our advertising partners are going that we can design a path that is a good auction for us and where we can get good business off of it.

Thank you.

Yes.

Thank you. Our next question comes from Ron Josey with JMP Securities. You may begin.

Great. Thanks. I wanted to follow up on maybe some prior questions around marketing. And Darren, I think you said specifically now, I think a third of traffic is mobile, could see that getting to 50% over time. And as you sort of see the mix between online and offline working together, wanted to understand a little bit more how you think about how brand advertising sort of evolves over time and when you think you can start bringing that back as the brand awareness goes up? Thank you.

Yes, I think it’s an excellent question. When you ultimately do a transaction on mobile, there’s a question of what other screens did the customer engage with you on? How did they get to know the brand? And then there’s an issue, of course, of do you have the force through your brand - by having a stronger brand, do you get more loyal customers who then therefore go more app-based mobile versus web-based mobile. To me at the highest level I think of mobile as a huge positive for a company like ours. For many of our partners it’s tough enough to build a great website. To actually have a multi-screen experience that works with an account is a very difficult thing to do. So that’s why I think net is a positive. I don’t think it necessarily drives a lot of incremental business for us. It’s a little bit maybe more last-minute, but it’s really a shifting in the way that people engage with digital assets. I’m sure marketing mix will change relative to mobile. I talked previously that more and more business is coming direct. It’s a bit of a chicken and egg. Some of that may be because our mobile business tends to be more direct than our PC-based web business. But again, I think it’s all one customer and it’s all related to the fact that people are living multi-screen lifestyles versus single screen lifestyles, which I think is a net benefit to us, and ultimately I think also leads to more direct account driven traffic versus purely off of the web transactional traffic. I guess the last thing I would say, and you certainly see this in China, the impact of mobile and how like Ctrip [ph] buys their demand. We’ve learned so much from that relationship and always appreciate all the time I get with James and Jane, but it’s amazing how they just buy traffic differently. There are whole marketplaces for apps in China exist that don’t exist in the Western world, and how they built that up is quite fascinating and amazing and I think there’s a lot of lessons for us to learn as this environment changes. But yes, today again, as I said before, most of our app downloads are from our own properties, which means we would’ve had to find that guest some other way in the past. So the more and more of them that use apps in a sticky way, obviously that’s great business for us because it’s always coming direct by definition and is very profitable.

Great. Thank you.

Thank you. Our next question comes from Lloyd Walmsley with Deutsche Bank. You may begin.

Thanks. Last August you guys gave us some disclosure around the trailing 12-month vacation rental bookings. Wondering if you could update that number or maybe whether we should just use the 39% room night growth that you gave on that $4 billion base number. And then I guess as a follow-up, curious if you can just give us some color on how different you see demand for that space? So, for example, are a lot of people coming specifically to look for VR properties from marketing campaigns and keywords driven specifically to VR, or is a lot of that also people kind of looking also at hotels? I’m trying to get a sense for how different that growth trajectory can be without cannibalizing the core. So any color you could give there would be great.

Dan, why don’t you take the first? I’ll take the second.

So, Lloyd, the reason we gave you growth rate and room nights is because of the impact of currency on that metric as well. So it wasn’t useful really to give it to you in U.S. dollars. So I would recommend that you use those two data points we gave you in your model to try and understand the size of that business.

Okay.

Yes, and in terms of the vacation rentals incremental or not, our general belief is, first of all, it’s one customer. And either a customer is just a consumer or they’re a business person and a consumer. And they take a number of trips every year, and every trip has a different rationale. And if somebody is a hotel booker on three of their trips, they may be on a trip with their family and become a vacation rental booker. We want to be able to provide all of those instances and all of those scenarios through Booking.com, so they become comfortable with that, rather than in the past, they feel if I need a hotel, I go to booking, and if I need a vacation rental, I go to company X, Y or Z. The markets have traditionally been very different because the nature of the markets were very different. But more and more over time, and I think we’re partly shaping that, and I believe that’s ultimately going to be the outcome, the markets get a little bit mixed because a person says, hey, I’m going to Barcelona or I’m going to Rio de Janeiro and I need to find a place to stay. It’s a very common question asked, where am I going to stay. And relative to that scenario, we want to provide them an option. And by having more optionality in that, you can drive incrementality because the person may not find quite the right thing on a site that has a more narrow set of options. But on a broad set of options, maybe they have a certain price range and a certain thing they’re looking for we’ll be able to satisfy that. Or in a market like San Francisco or New York, if ADRs in hotels are really high, maybe a business person ends up in an apartment. Or if you’ve got a big event on like the World Cup or the Olympics where everything gets sold out, having all of this incremental supply offers more beds that people can sleep in. So I think about it if today the market is very different between the vacation rental buyer and a hotel buyer, over time that’ll only coalesce to become a more similar market, because all it is human beings looking for a place to stay. And I think that’s generally the case that we’re seeing on our site. Now certainly vacation rental stays are generally bigger groups, they’re generally longer length of stay, slightly higher ADR, relatively good take rate, there’s all these fundamentals that reflect the market of today. But I do believe that those things will continue to change. And I think just like B&Bs used to be a very different thing than hotels, I think over time accommodations will become more similar than less similar because it’s the same customer.

Thanks. That’s helpful color. Appreciate it.

Thanks.

Thank you. Our next question is from Douglas Anmuth with JPMorgan. You may begin.

Great. Thanks for taking the question. Dan, I was hoping you could just provide some more color on the commentary on the non-marketing OpEx in the back half. Is this purely just a function of lapping OpenTable and BookingSuite? Or is there anything else going on there? And then also can you comment on the take rate environment, what you’re seeing particularly in Europe now? Thanks.

Sure, Doug. So in terms of take rates, I mentioned before, our take rates are very stable. If you look at our margin picture in general, the different ways that our margins are impacted, take rate stable, also in terms of revenue we are not aggressively discounting out of our margins, so we’re stable there. In terms of take rate, just with what we believe to be one of the lowest cost distribution alternatives for our accommodation partners, we feel like that’s stable for the long run. And then in terms of advertising, we talked about offline advertising. Over the long run, we should see stable to margin leverage there as we end up spending in the markets we want to spend at the levels we want to spend. We could see pressure from time to time as we enter a new market or we increase our spending in the market, but over the long run we should have leverage there. The online advertising is a big variable. It’s very hard to predict. But the OpEx is much more under our control. And we’ve had a good track record there over many years, so we feel comfortable that over the long term we can have operating leverage in that line item. For Q3 and Q4, it is largely that we’re lapping the acquisition of OpenTable and the acquisitions we’ve made in the Booking Suite area, but as we’ve seen from time to time in the past, we have some lumpiness in the investments that we make in the core business. So in the early part of the year, we typically ramp up our customer service teams, our hotel teams to get ready for peak travel season, and then we see leverage in that line item. Over the long run I think we’ll continue to see leverage there.

Okay. Great. Thanks for the color.

You’re welcome.

Thank you. Our last question is from Kevin Kopelman with Cowen & Co. You may begin.

Hi. Thanks a lot. Could you just give us an update on the rate parity landscape in Europe given the changes to your agreements with hoteliers there? Thanks.

Yes, thanks, Kevin. So at the highest level I think for those who follow this, we worked with the competition authorities in France, Sweden and Italy, came to an agreement on what we call a narrow MFN, which basically allows us to keep parity with the hotel’s website and Expedia’s also agreed to that. We’ve had a number of countries come out formally, Austria, Denmark, [ph] saying they agree to us. Many others informally have dropped their cases against us. We’ve got one challenge in France a law that’s come out banning parity, which we weren’t consulted on or anything, but will come into effect. We of course will follow the law. But I think the basic bottom line to understand in this whole discussion, we will never charge our customers more. You can’t say it clearer and we will never charge our customers more. So we will adjust to whatever environment it is and we’ll make sure that we get the best pricing for our customer. And in some case we have so much innovation we could do to make sure our customers don’t get shown prices that are uncompetitive, and I don’t believe the new law in France is good for consumers, I don’t think it’s good for the French tourism, I don’t think it’s good for small properties in France, I actually think it’s quite negative, but it is what it is and we will adjust our model. And our business in France is really strong, both from a booker standpoint as well as bookings coming into France. So it doesn’t concern me too much other than just a lot of the time invested in this whole area. And I strongly believe - parity was an invention of the hotel industry itself. I strongly believe it’s a good way that all travel should be sold on a basis where customers don’t spend too much time searching and that they decide which channel from an agnostic standpoint that they want to buy through. But we’re more than ready to compete under any set of standards and hope that the narrow MFN will be accepted more broadly across Europe.

Thanks, Darren.

Thank you.

Okay. I guess that’s it. Thank you all for joining our conference call and look forward to speaking to you next quarter.