Good day, and welcome to the Expedia Group Q1 2019 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Michael Senno, vice president of investor relations. Please go ahead, sir.

Good afternoon, and welcome to Expedia Group's financial results conference call for the first quarter ended March 31, 2019. I'm pleased to be joined on the call today by Mark Okerstrom, Expedia Group's CEO and president; and Alan Pickerill, our CFO. The following discussion, including responses to your questions, reflects management's views as of today, May 2, 2019 only. We do not undertake any obligation to update or revise this information. As always, some of the statements made on today's call are forward-looking, typically preceded by words such as we expect, we believe, we anticipate, we are optimistic or confident that, or similar statements. Please refer to today's earnings release and the Company's filings with the SEC for information about factors which could cause our actual results to differ materially from these forward-looking statements. You will find reconciliations of non-GAAP measures to the most comparable GAAP measures discussed today in our earnings release, which is posted on the Company's Investor Relations website at ir.expediagroup.com, and I encourage you to periodically visit our IR website for other important content, including today's earnings release. Unless otherwise stated, all references to cost of revenue, selling and marketing expense, general and administrative expense and technology and content expense excludes stock-based compensation and depreciation expense. And all comparisons on this call will be against our results for the comparable period of 2018. A reconciliation of adjusted EBITDA guidance to the closest corresponding GAAP measure is not provided because we are unable to predict the ultimate outcome of certain significant items without unreasonable efforts. These items include, but are not limited to, foreign exchange, returns on investment spending and acquisition-related and restructuring expenses. As such, the items that are excluded from our non-GAAP guidance are uncertain, depend on various factors and could have a material impact on GAAP results for the guidance period. In addition, please note that starting this quarter, we have renamed the HomeAway reporting segment to Vrbo. Finally, on April 15, Expedia Group entered into a definitive agreement to acquire Liberty Expedia Holdings in an all-stock transaction, which remains subject to approval by Liberty Expedia stockholders. With regard to the deal, we refer you to the Form S-4 filing made with the SEC yesterday. Note, we do not plan to take any questions related to this topic on today's call. Please refer to the information in the S-4 and the 8-K filings. And with that, let me turn the call over to Mark.

Thanks, Michael. We're pleased to come out of the gate strong in 2019 with robust profit growth and solid momentum. Now into the second year of our transformation, teams across Expedia Group are more aligned and collaborating more than ever as we execute against our key strategic themes, being customer-centric, being locally relevant on a global basis and speeding up the pace of innovation and execution. With these strategic themes serving as the foundation, Q1 saw a continuation of the operating momentum we built through 2018 in our core OTA segment. Q1 core OTA room night growth was healthy and, adjusted for the Easter impact, was a bit faster than we saw in Q4. We have a playbook in place and execution is continuously improving. Focused geographic expansion supported by rapid customer and partner-centric user innovation, locally relevant content, broad inventory assortment at excellent prices and disciplined data-driven marketing and investments add up to a formula that we believe can deliver sustained share gains and balanced growth for a long time to come. We remain pleased with our supply acquisition efforts, a key part of our playbook. Our elevated pace of new property acquisition continued in Q1 and we are on track to add a healthy number of new properties in 2019. We ended the first quarter with over 1.1 million properties on our core lodging platform, including approximately 460,000 integrated Vrbo listings as we continue to make progress unlocking the potential of our alternative accommodations inventory on our core OTA brands. As you have likely noticed, we refreshed the brand positioning of Vrbo. With high consumer awareness and brand loyalty, Vrbo is our strongest alternative accommodation brand and accounts for a majority of our U.S. business in the space. Vrbo will now be Expedia Group's primary global alternative accommodation…

Thank you, Mark. Our 42% growth in adjusted EBITDA puts us on a good path early in the year. Excluding close to 300 basis points of negative FX to each, gross bookings grew 11% and revenue increased 7%. As expected, trends at trivago and the Easter shift negatively impacted revenue in the quarter. We expect revenue growth to accelerate in Q2 and remain healthy as we move through the year. Stayed room nights grew 9% in Q1 while FX drove ADR declines, resulting in total lodging revenue growth of 7%. In our core OTA segment, in addition to the healthy room night trends Mark noted, we also delivered solid adjusted EBITDA growth, especially notable given our usual first-quarter seasonality. Our balanced approach to marketing, along with benefit from strong performance in our direct proprietary channels, is contributing to the solid top and bottom-line trends over the past year, and our core OTA business is on track for another strong year in 2019. Vrbo bookings increased 5%. As Mark mentioned, the platform consolidation and brand streamlining related to making Vrbo our primary global alternative accommodation brand contributed to continued SEO headwinds. That, along with tough comps in performance marketing channels, were the primary drivers of the deceleration from Q4. We expect the slower gross bookings growth trends to persist in the near term as we work through these changes and lap the elevated performance marketing comps. We have good visibility on what we need to do to optimize our SEO profile on our new platform and expect Vrbo's gross bookings trends to improve later this year. Revenue at Vrbo grew 14% in the quarter with transaction revenue up approximately 25% and subscription revenue down 10%. As expected, adjusted EBITDA came in at negative $40 million given a seasonally light top-line and…

[Operator instructions] Our first question comes from Justin Post with Bank of America Merrill Lynch.

I'll ask two. First, with Vrbo decelerating, how do you think you're doing in the category? Do you think the category has really decelerated and that's part of it? Or is it really company-specific issues? And then secondly, a lot of questions out there about your hotel take rates with some of the bigger hotel deals. It looks like they were stable at 9% room night growth and 9% revenue growth ex FX, but could you talk about that? And do you expect any impact on your take rates in the back half?

Listen, with respect to Vrbo, not V-R-B-O, Vrbo's deceleration, yes, listen, I think it's largely company-specific factors. If you take a look at the place where we are actually focusing our effort, which is the Vrbo brand in the U.S., that business was up nicely double digits and growing healthily. And really, what's causing the deceleration is a combination of the brand streamlining we've been doing, the re-platforming we've been doing, as well as just more difficult comps. So the underlying fundamentals of the business we think remain strong. 2019 is going to be one of these years though until we get the SEO trends moving in the right direction from pulling some of these replatforming moves and we can really start investing much more aggressively on the urban opportunity, on the international opportunity, that we might just see some moderated growth rates here for a number of quarters and until we move to the back part of the year. With respect to hotel take rates, listen, we have been very clear that with respect to, particularly our large global chains, that we were done resetting our compensation rates. That is, in fact, the case. And I would just say that the overall dialogue with our global chain partners has just become significantly more constructive over the course of the last couple of years. I think that we have all recognized that we all play a unique role in this ecosystem. It turns out this Internet thing is here to stay and the big global marketplaces and platforms, of which Expedia Group and travel is kind of one of the biggest ones, we're here to stay. And we have a lot of value to create, but also our partners who deliver incredible customer services and unique products, they have a lot of value to bring, too. And so the dialogue has shifted away from us versus you and how do we redivide this pie toward how do we actually expand the pie? How do we actually create new sources of value and both participate in that in a way that is accretive to both of us? We're super pleased with the way that that has gone with virtually all of our global chains. We're very pleased with the Marriott arrangement that we made. I think they are, too. And I'm hopeful that this is a sign of things to come across all of our global partnerships across all of our product categories.

Our next question comes from Mark Mahaney with RBC.

OK. Two questions. One, just the usual one about geographic regions. I know last quarter you called out some -- a little bit of concern over Europe, especially in the U.K. Just give us an update there, please? And then you also talked about revenue improvements in the back half of the year. You know that stuff always gets me going. You talked about -- is that more than just the comp issue related to the timing of Easter in Q2? Are there other reasons why revenue growth should accelerate or improve as we go through the back half of the year? Just lay those out.

Sure. I'll take first one and then Alan will take the second one. On Europe, we did call out on our Q4 call that we were seeing some weakness in outbound U.K. travel and inbound U.K. travel. That really was something that was a theme for the quarter. I think as April unfolded, it was really hard to tell with the Easter timing. Certainly, as the Brexit date has been extended out, there are, anecdotally, reports of better economic activity in the U.K. and we're hopeful that will translate into better trends, but it was a factor in the quarter. With respect to the rest of Europe, I would say, generally, it looks stable to us. There's always puts and takes from time to time, but it generally looks good. And I think we're going to get a good read here in May and June as we move into the high season, how things are generally looking out, but so far, so good.

Yes. And Mark, on the reasons to think about revenue trends in the back half of the year, there's a couple of things that are very applicable to Q1 and the first half, and those include the impact of foreign currency. That becomes less of a headwind as we move through the year. Obviously, Easter is only a first half phenomenon. trivago, as they said and as we believe to be the case, they'll be on more normalized footing in terms of their revenue in the back half of the year. And so we expect to see easing impact on our revenue and obviously even some growth. The other thing I'd say is just that the core OTA business is performing quite well. We're pleased with the trajectory there. We do continue to do a lot of work around adding inventory and making sure that we're locally relevant. And we think that's going to continue to have impact on the business and we're optimistic about that as well. So I mean, I think those are some of the factors.

Our next question comes from Eric Sheridan with UBS.

Maybe a couple, just following up on Justin's with Vrbo. When we think about the marketing investments you made starting in '17 through '18 and now, are you starting to see a yield or return on those investments? Or is the rebranding of the platform now and unifying it under one brand going to sort of hide or mask those improvements? And how should we think about those getting pushed out? And then secondarily, it sounds like your expectation now is that business will stay relatively moderate through this year and recovering until the very end. When you strip out some of the headwinds you're seeing in the business, what do you think the underlying market and your business are growing ex the headwinds you're facing so investors have a better sense of what we're trying to track back to in terms of a comp against the headwinds we see now?

Yes, sure. I think the marketing investments that we made in '17 and '18 were largely in two primary buckets. One was really ramping up our performance marketing efforts as we transition the business from being a listings business to being a real transactional business. That created a great opportunity for us to really build best-in-class capabilities there. We're very pleased with the results that we've seen, but as we went into the first quarter, we started to lap really the big push there. And so that was a moderating factor on growth, but it is still a source of growth. The other place was that we started to concentrate particularly our brand investments against the, at that time, the VRBO brand, now the Vrbo brand. And again, we saw really strong returns for those investments. And in fact, some of those investments were some of the rationale for us choosing Vrbo as the primary global brand. We were running one television campaign with essentially the same creative, one with Vrbo branding and one with HomeAway, and the Vrbo brand just performed multiples of the performance that we saw with the HomeAway version. And that, along with a bunch of consumer research globally, really drove us to pick that brand. And you can see the results that I mentioned earlier that we are seeing in the Vrbo brand, solid double-digit growth. And I think that's a testament to the marketing investments, but also just the whole consumer experience improvements that we've made in the Vrbo division generally. And really, the story here is that the things we've done to de-prioritize certain brands, to consolidate platforms both on the consumer side and also on the partner side, are masking some underlying strength and goodness in the core Vrbo brand. I think in terms of what is the steady state for this business, this is a highly popular category. It's definitely growing faster than the overall industry. I think that Vrbo, at real steady state and certainly if we look at the trends that we see, again, against the Vrbo brand here, should be able to grow gross bookings, I think, at multiples the Vrbo brand here, should be able to grow gross bookings, I think, at multiples of the rates that it is right now. It may take us a while a little bit -- it takes a little while to get clear of that as we move through the year, again, because of these other factors, but we think this is a growth category, not only on Vrbo, but also as we move more of the inventory on to our core OTA brands. We think this remains a very attractive category and a very attractive opportunity for us for a long time to come.

Our next question comes from Naved Khan with SunTrust.

Just a couple. I guess, on the Vrbo side, as you sort of consolidated the HomeAway and Vrbo just under Vrbo and lead with that, how do you address consumer retention and loyalty, those who might have been coming directly to HomeAway and now you're out, I guess, in a bigger fashion with Vrbo? And then secondarily, maybe on just the core OTA, how should we think about this gap between ADR versus revenue per night over the next one to two years?

Naved, on the customer retention question, our intention right now is not to shut down HomeAway, but rather just to focus a lot of our marketing and other innovative efforts on Vrbo. So the expectation is that the loyal customers of the HomeAway brand, of which there are many, will continue to enjoy that brand, but on margin, we'll take the bulk of the new customers against the Vrbo brand here in the U.S. and globally. And then, of course, as we get into this, we will probably look at ways where potentially we can incent customers, whether or not it's from HomeAway to Vrbo but certainly with respect to some of the other regional brands in international markets, really start to introduce them to the Vrbo brand in a way that is nonthreatening and gradually move them over.

Yes. Naved, on the revenue per room night versus ADRs, I think the factors there are, as we've discussed before, loyalty is one. And loyalty costs are recorded as a contra revenue. And as long as our loyalty channel is growing faster than the rest of the business, that will be a net difference between revenue per room night and ADRs ongoing. FX is a component too, but we don't read too much about that because it would come out in, over time, in the wash. There are other factors in there that ebb and flow, things around customer refunds if there's particularly inclement weather. Again, those are things that tend to ebb and flow over time. In terms of the core margins, I think the only things I'd mention is just that in terms of our global chain, contracted margins, we feel like we are where we need to be and we're providing value for the rates that are being charged. We are constructive, as Mark mentioned earlier, with our partners and try to look for ways that we can add value there, but we don't expect big changes in our contracted rates with our global chain partners. In there too, there could be some mix factors over time. If we're growing in particular countries where the economics are different than they are for the rest of the business, that could have an impact as well, but that, again, should be generally around the edges. We've talked about a gap in the 200 to 400 basis point range. It's been a little bit narrower than that these last couple of quarters, but there's nothing really changed significantly in our thinking about that gap and how to think about it.

Yes. The only other thing I would add to that is we do have a couple of programs that we're seeing great traction on that could aid in our overall monetization and also aid our partners. One is the Accelerator program where we're just getting significantly more sophisticated in providing our tools partners to essential -- our partners tools to essentially get higher placements in the sort order to drive more incremental volume where they want to get it, when they want to get it. And that is something that is getting increased traction. We're happy to see that. And of course, we do have our TravelAds product, which shows up in ad and media, which is also getting strong traction. And you can see that show up in our advertising and media revenue. But I think, as Alan said, I think we feel good about where we are in terms of our margin trajectory. There will be various puts and takes, but we think we're in a good spot.

Our next question comes from Brent Thill with Jefferies.

Alan, you mentioned a more disciplined approach in expenses. I'm just curious if you could give us a sense of kind of where you're seeing the greatest efficiency this year maybe where you didn't have that last year. And for Mark, just a follow-up on Mahaney's question on Europe. In the quarter, was Europe worse than what you had expected? Or did it decelerate from what you saw in the fourth quarter? I'm just curious, the trajectory that Europe is on from your perspective.

Yes, Brent. So on the first question, I think there's a couple of things to call out. One is that we are -- one of the things we're trying to do, and a lot of our overhead costs are people as I'm sure you're well aware, is just to be very strategic and purposeful about where we're hiring, why we're hiring and make sure that's focused on the most strategic and value-add areas of the business. At the same time, we are looking across Expedia Group and the teams, in fact, are looking across the Company for opportunities where we can better leverage the technology and assets and get some efficiencies there as well. And I think we're starting to see some of that benefit as well. This was kind of a something that we started really focusing on late last year and I think we're starting to see some benefit now. I was careful on the prepared remarks to say we don't expect the same level of growth that we saw in Q1 for the full year. We have some investments that we are making. We are doing some hiring. And so don't expect to see those same levels in the rest of the year, but we do expect to get leverage on fixed costs and overhead as we move forward.

And on Europe, I'd say Europe was broadly in line with our expectations, grew broadly in line with the overall rest of the business. We did see nice growth in the domestic markets of most of the major markets probably with the U.K. as an exemption. So that would be the one thing I would call out. But broadly, it was in line with our expectations and, like I said earlier, broadly stable from what we can tell.

Our next question comes from Kevin Kopelman with Cowen and Company.

So I wanted to ask another question about your supplier relationships and take rates on the air side. So can you talk about how you're approaching your dispute with United Airlines and what's going on there, and more generally with your air partners? And how do you expect those negotiations to impact your metrics and financials?

Sure. So I think, listen, on the air side of things, it's really a tale of two cities. On one side, we've got some very strategic partners that not unlike our global lodging partners, over the last couple of years have really started to work with us on a much more constructive basis, recognizing the value that we bring, the value that they bring and all of the different areas that we can work together to add more value. Honestly, that is probably where the majority of our U.S. carriers are, including the big ones, the competitors of United. And to give you a sense of the breadth of places where we are working together, if you look at the traditional distribution business, the ticketing business, that has evolved significantly over the course of the last five years. Not only are we significantly larger than we've ever been, we've got huge audiences in the hundreds of millions of visitors and customers that we can showcase brands to and showcase products to, but increasingly it's become a very cost-efficient channel as consumer credit card fraud has become an issue, as automation and customer service has become an issue. And if you look at our major carriers, in many cases, we are driving billions and billions and billions and billions of dollars of revenue for them at the same time as doing it with lower fraud cast -- in fact, on fraud protection, we're covering that for our partners. For customer service, we're covering that for our partners. And that can add up to tens, if not more than that, millions of dollars per carrier. We also have great partners like American Airlines where we're working on ways to actually help them reduce their customer service costs. And again, this is just…

Next question comes from Heath Terry with Goldman Sachs.

Mark, just kind of curious, I mean, we're obviously in a moment in time as it relates to the way that many of the companies in the OTA space are creating marketing efficiency goals and the ROIs that they're trying to target within their advertising. We talked about it before. You guys have clearly been a beneficiary of this. We saw this obviously in trivago's numbers yesterday and your results today. Curious if you have a view on how stable this environment that we're in is and to what extent having other competitors for keyword buys, retargeting buys, pulling back from the market has sort of benefited Expedia's profitability or growth and what your expectations for that are going forward. And just merchant side of things, well, I completely understand and have seen in your numbers that the take rate or commission piece of this has been relatively stable. We've seen in prior negotiations, structural changes, things around pricing parity and last room night availability. I'm just curious to the extent that you can share with us or give us some direction whether or not you're seeing the hotel partners or Expedia pushing for certain structural changes within the operating agreements that you have with your hotel partners.

Yes. I think, Heath, on the marketing efficiency side, I wouldn't say that we are at steady state right now. I think we're currently benefiting from what has largely been a step change in our approach and some of our competitor's approach to marketing. And I think we will, as we move through the back part of this year, get to more normalized levels where we've got the non-incremental spend out. We understand with much more accuracy what our returns are and we can start to lean back in, in a more disciplined way. So again, I think we're not quite there, but I think it's been a good benefit, I think, for all of us. Obviously, it has been a headwind on revenue because even inefficient marketing spend does generate some revenue. And we're looking forward to the back half of this year, not only for our core OTA business, but also for trivago to essentially start from this new base and start really pushing into efficient, balanced growth on a much more regular basis, on a go-forward basis. I think as it relates to our relationships with our big chain partners, there's nothing specifically that I would call out. I think, again, the general theme for us has been let's find new ways where we can tailor our arrangements to better match the value that ultimately these partners get from our channels. Let's find ways through programs like Accelerator, programs like TravelAds to give you more control around getting the volume when you need it. And I think beyond that, we are looking at other unique ways where we can work together beyond just powering packages and doing other unique things that leverage our platform capabilities. But it's not really one thing. It's really -- we're really trying to be very flexible and tailor our approach on a strategic partner by strategic partner basis.

Our next question comes from Deepak Mathivanan with Barclays.

So first for Alan. Alan, regarding your comment on revenue acceleration in the back half, can we read the commentary as applicable to the room nights as well? And then secondly, on Vrbo bookings growth, I realize the headwinds from comps and the SEO issues from brand consolidation, but is the benefit of online bookability penetration gains fully achieved at this time? And also, considering the scale of marketing investments, is it smaller compared to what you are doing at last year? Wondering about this kind of deceleration in the face of ongoing investments.

Yes, Deepak. On the room night, I mean, there are definitely some connections between my comments on revenue and room nights. There are things like Easter being a first half issue is comments to both. I think one thing we've talked about before is that from a room night growth perspective, trivago at meta generally and trivago specifically has been a reasonably meaningful headwind for us on room night growth as we've pulled back and as they've kind of reset the business. If that goes according to plan and they start to normalize in the back half of the year, get back to growth and just by virtue of the comps that we have there, that should start to ease and we should see some benefit from that in the back half of the year. We will have lapped the -- a lot of the marketing optimization that we did in 2018. And so I think that can have an impact as well. So definitely some connection between the revenue and the room night trends that we'll be seeing there. And as I said before, we're quite happy with the core business. It continues to just basically hum along. And so we think that will be as good or better as we move forward.

I mean, Deepak, on Vrbo, listen, the team, over the course of the last three years, has done just an exceptional job of getting a big book of offline business online. I think what you're seeing right now is getting to some of those harder yards associated with getting that offline and online starting to actually reach a flatter part of that penetration curve. I think that's absolutely happening. But again, the real story on gross bookings and online gross bookings deceleration has really been around these platform changes that we've made that has taken some of that business because it was offline and maybe we've lost it to other parts of the industry and, of course, platform and brand streamlining as well. So that's really been the story. And then in terms of marketing investments, I think we're still pleased with the return that we're seeing at the marketing -- with the marketing investments. I think the story there is, again, we're just lapping over something that went from 0 to 60 pretty quickly and now we're at cruising altitude.

Our next question comes from Anthony DiClemente with Evercore.

I had two. How much of the performance or the strength that you saw in the quarter outside the U.S. is being driven by improvements as a result of the property supply growth and acquisition that you've embarked upon in Europe and other areas and any corresponding marketing around? I'm just trying to get a sense for how much of the strength is sort of year two or that as opposed to better stability in the macro environment. And then my other question is just in terms of Vrbo and the investments there. I know that you're trying to compete in urban and international and growing supply in urban and international. And so -- but just wondering, is the goal to drive consumer engagement with those newer listings primarily on Vrbo? Or to what degree are you thinking about integration of those listings on Expedia.com as well?

The new inventory that we've added is performing very nicely. I think though it's really just part of the overall formula, which is adding new inventory, making sure that inventory is actually selling through, through good, solid disciplined performance and marketing and then having much more locally relevant user experiences, getting content right, getting translation right, making sure we've got local payments. So I think it's a combination of all of those things really starting, again, starting, we're still early stages here, starting to show some real promise in terms of better customer engagement and repeat rates and more efficient growth. And we're hopeful that we can just keep this going. As we mentioned last quarter, we really have ruled this effort into business as usual. We are targeting a broader set of markets here in 2019 in addition to continuing to improve in our initial wave one markets. With respect to Vrbo in terms of where we're investing and the goals in terms of driving consumer engagement with alternative accommodations, I think it's really going to be a combo of driving Vrbo and expanding it globally as a really best-in-class single product type focused player and then also bringing that inventory on to our core OTA brands. Our core OTA brands have incredible urban demand already. In general, they've got very strong and actually strengthening international demand footprints. So I think in the initial stages when we add new properties -- alternative accommodations properties, having integration on to the Core OTA brands is going to be a big boost, but we have no question that Vrbo with their unique user experiences, their focus on family and friends, the collaboration tools that they're building that are truly unique and best-in-class, we have no question that Vrbo does have the potential to be a real strong growth driver and generate real strong customer loyalty in its own right both here and the U.S. and then importantly, in international markets and really extend it back into the urban markets on its own.

Our next question comes from Lloyd Walmsley with Deutsche Bank.

Yes. This is Chris on for Lloyd. Maybe a few, if I can. We've seen some of your peers migrate away from the traveler fee model. Just curious how disruptive a change like that would be for Vrbo and if you think industry forces would really kind of move you in that direction. And then we've seen a little bit of news lately that some of the hotel brands are starting to compete in the vacation rental space. And was just curious if that inventory is something you guys would expect to get on the platform and how those take rates would look relative to a like your core lodging business. And then maybe one on your Add-On Advantage product. I think it's been about a year since you guys have rolled it out. And I was just curious if you could give us an update on what markets that product is currently in, some of your early learnings there and maybe how we should be thinking about the program rolling out to additional markets and the potential integration of other products like vacation rental into it.

Sure. On the traveler fee, Vrbo is in a fortunate position in that they've got the complete menu of monetization options between traveler fee plus subscription and traveler fee plus pay-per-booking, pure pay-per-booking model. And they're really looking at trying to find ways where they can match the monetization model with the inventory type, what the supplier is interested in doing, what consumers are willing to do. So I think any sort of migration to or from the traveler fee is something that essentially Vrbo is very well equipped to handle and is, in fact, driving a lot of these changes and testing itself across its own supply base. In terms of the hotel brands competing in the VR space, certainly we have seen that. The recent announcement by Marriott is not particular -- it's new for them, but we have had other players, including the core, be active in this space. I think it's super interesting. I think that the alternative combination space is one that is right for some degree of professionalization. If you look at the big hotel operating companies and chains, boy, they are really good at this stuff and really providing a great guest experience. So I think, generally, it could be a really good thing for the industry to add this type of professionalization to the space. And I think we're very hopeful that we can help our partners as they develop these new inventory types just like we have with all of their other ones, help them to get them to market and get them in front of the right consumers and at the right time. With respect to Add-On Advantage, it's alive here in the U.S. It has been for a while. We have rolled it out to a number of international markets. It has been pretty darn successful here in the U.S. It's been moderately successful in other parts of the world. But getting this right is a combination of two important things. One is getting the product right. And the product is super compelling. Buy a product and then ultimately you can add other things to it over time. It incents people to essentially get these bundled deals. And then, of course, once they've got everything in one place, it's super easy to change and cancel. We can handle everything at once. We update itineraries. I mean, the value proposition is there and the product is really getting significantly better over time. But the second piece, of course, is merchandising and marketing. And that's where the team continues to experiment with Add-On Advantage and does that resonate with consumers in other parts of the world as much as it does in the U.S. But like everything, I mean, we are just continually testing. We're continually striving for better. We like what we see go far -- so far. We know the product is super compelling and we're just evolving the way that we market it over time.

Our next question comes from Brian Nowak with Morgan Stanley.

I have two. You guys are a very data-driven company, sort of very analytical. I guess, could you sort of talk us through some of the main KPIs that you're watching in the markets where you've rolled out the new inventory and the new supply you've added over the last couple of years just so that investors would kind of get an understanding for the merits of your investments sort of paying off. What are you watching and what are you seeing in these markets? And then, Mark, can you talk to us about the way you think about loyalty, the importance in sort of investing in loyalty program to potentially build a stickier customer base?

Sure. So as you can imagine, being a data-driven company, we just look at a ton of KPIs in terms of success, but let me just give you some highlights. Really, at the core of what we're trying to do here is be locally relevant. And locally relevant is a piece of customer centricity. So how do you measure that? Well, we take a look at customer repeat rates and try to understand, are we creating more sticky products with what we're doing in terms of everything, from inventory acquisition to being more locally relevant? We're looking at does adding more inventory give us access to new customers as we add essentially new destinations with real competitiveness, new keywords, new metasearch placements. We're taking a look at room night growth. And importantly, we're taking a look at domestic room night growth and saying, hey, are we actually driving incremental room nights? Or are we just shifting share among our partners? We're taking a look at marketing efficiencies. And importantly, we're also taking a look at -- for the partners that we add, are we driving bookings to them? Are we becoming more relevant for them? So those are just some of the metrics that I would call out. I would say that, generally speaking, in all of these markets, the metrics are moving in the right direction. We're learning as we go. We don't get everything right, but it is a constant optimization effort. And as you can tell from us baking this into business as usual, this is absolutely the right way to go. In terms of loyalty and the importance of building that, building a stickier customer base, listen, I'll just say that we're strong believers in the fact that the best loyalty program is an incredible product and that we are dead focused on providing a customer-centric product, a locally relevant product. And that is the core focus. But we do believe that our loyalty programs, the Hotels.com program stay 10 nights, get one free is super additive to that story. In addition to having a great product that Hotels.com does have, it adds that extra thing that is a real value and a real differentiator for them. And I think for the Expedia, the Brand Expedia program, the Orbitz program, also similar stories. They're very focused on building a great product, but again, that caret of moving up the loyalty tiers and getting better status with maybe a bit better treatment, a bit better amenities when you show up at the properties are all just little things that make the product just a little bit different, a little bit more differentiated and ultimately we believe can turn into better customer share of wallet and better customer retention over time.

Our final question will come from Stephen Ju with Credit Suisse.

So I wanted to dig in a little bit more on the SEO headwinds you called out for HomeAway from the brand consolidation. Our recollection from back when HomeAway was an independent company was that this was an issue that they had to navigate slowly. So are the headwinds you're calling out, I guess, a more rapid pace of brand consolidation you have put in, so at some point you just have to comp these? Or are you consolidating the sites one at a time into mainly Vrbo?

Sure, Stephen. So I would say SEO headwinds for every player in the Internet have been a story for a long time. Google is absolutely taking free and moving it to paid and moving from paid to more qualified like they're during in hotel ads products. What we've done with Vrbo though, of course, has been on top of that. And Vrbo and essentially HomeAway and all of the brands that they've had internationally traditionally been actually quite dependent on SEO. And as we have consolidated platforms, it has changed essentially the linking structure of those brands and ultimately resulted in bigger headwinds for them. In some cases, there are places where we can recapture this. I think in Vrbo, for example, the teams have got great playbooks in place. And even as Vrbo has changed platform structures, we're marching up. We're seeing good metrics and there are signs that things are moving in the right direction. But with some of these brands, some of these regional brands, it will be something where, by and large, we're just going to have to comp it and lap it over time. And we'll move past this. Again, we're a long-term player. We're very much focused on building great brands and building great customer relationships and growing them internationally. We're backing Vrbo as the primary brand and we're optimistic that Vrbo has got a long runway ahead of us and it will move past some of these transitional issues like we're seeing with SEO.

And at this time, I would like to turn the conference back to Mr. Mark Okerstrom for closing remarks.

Great. Well, a big thanks to all of you for listening today. I especially want to thank all of the Expedia Group employees around the work -- around the world for your hard work this past quarter. I'm just incredibly impressed with the collaboration that's happening and the progress I'm seeing across the Company. I'm just so excited about what we can achieve together. I look forward to speaking to all of you next quarter. And with that, we'll turn it back to the operator.

Thank you. Ladies and gentleman this concludes today's presentation. You may now disconnect.