Good afternoon. My name is Anne. And I’ll be your conference operator today. At this time, I would like to welcome everyone to the Expedia Group First Quarter 2021 Conference Call. After the speakers’ presentation, there will be a question-and-answer session. Thank you. I would now like to turn the call over to Patrick Thompson, Senior Vice President and CFO. Thank you. Please go ahead.

Good afternoon. And welcome to Expedia Group’s financial results conference call for the first quarter ended March 31, 2021. I’m pleased to be joined on the call today by our CEO, Peter Kern, and our CFO, Eric Hart. The following discussion, including responses to your questions, reflects management’s views as of today, May 6, 2021 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 plan, 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. Unless otherwise stated, all references to cost of revenue, selling and marketing expense, general and administrative expense, and technology and content expense exclude stock-based compensation. And all comparisons on this call will be against our results for the comparable period of 2019. And with that, let me turn over the call to Peter.

Thank you, Pat. Good afternoon, everyone. I appreciate you joining our call. I'll start with some brief comments before we move to questions. I want to discuss the Egencia deal we announced recently. We find this proposed deal very exciting, and Eric will provide details shortly. This highlights three key objectives we are pursuing. First, we aim to identify the best opportunities for all our businesses. In this instance, we believe combining Egencia with Amex GBT will form an excellent corporate enterprise focused on corporate customers, offering a top-tier suite of services. We are thrilled about our ownership stake in this new venture. Secondly, we have entered into a long-term agreement for lodging supply and technology with the company. As you may recall, our B2B business, Expedia Partner Services, is central to our long-term strategy, and this deal significantly enhances our capabilities, allowing us to innovate on both the supply and technology fronts to better serve the travel ecosystem. Lastly, as we've frequently discussed this year, we are working to simplify our companies to concentrate on the most significant and promising opportunities. With Egencia potentially in a new home, we can focus more efficiently on our B2C and B2B operations and our core technology platform, which offers us a great opportunity to streamline and enhance agility within our core business. Regarding current trends, travel remains quite variable. Different regions are experiencing different levels of restrictions – some remain closed, while others, like the U.S., are much more open. There are also notable differences in travel segments, such as vacation rentals versus domestic and international travel. Business travel has been more impacted, while traditional lodging, especially in major cities, faces challenges. Our vacation rental and domestic U.S. businesses have performed well, but other areas are still struggling. According to various reports, summer looks promising, particularly in the U.S. and other regions where vaccination rates are high, with booking trends already surpassing 2019 levels for leisure destinations like beaches and mountains. This improvement applies to both vacation rentals and traditional hotel accommodations. On bookings, our previous call indicated a decline in gross bookings, net of cancellations, of about 40% in January, which has now decreased to approximately 20% in March and improved further in April. These trends are strong, particularly in the markets where we are performing best. However, while summer appears bright, we are cautious about the upcoming seasons due to uncertainties related to COVID-19 and its impact on travel behavior. For Vrbo and vacation rentals, we are continuing to invest in this segment. We have gained market share across our key regions, investing heavily in marketing and host acquisition. This remains a promising opportunity for us as we work on building brand recognition and encouraging more people to experience Vrbo. We are aware of market compression this summer. When people can't find what they want, they tend to look for nearby alternatives, and with rising vaccination numbers, many are choosing to stay in resorts and traditional lodging, with some even preferring that option. On the marketing front, we initially took a cautious approach, choosing to leave some potential revenue on the table rather than overextending. However, we've shifted our strategy in the first quarter, particularly in the latter half, to capitalize on the anticipated demand surge. This includes launching new brand marketing efforts like the Expedia campaign that kicked off at the Academy Awards, rebranding Orbitz with a focus on the LGBTQIA+ community, and preparing a summer ad campaign for Vrbo that we expect to be impactful. Building brand affinity is essential for us, as it encourages direct interactions and consumption, although it requires time and investment. We believe this will ultimately enhance our performance marketing results as our brands become more well-regarded. We're seeing progress through combining our performance marketing teams and have appointed a new leader from outside who brings valuable experience. As a measure of our advancement, 75% of our SEM expenditure now utilizes a new consolidated technical and data platform, up from just 15% at the end of last year. Our ongoing marketing strategy is evolving, and we're committed to testing and adjusting as needed. We previously indicated our decision to step back from Google meta products for vacation rentals, and we've also reduced exposure to other vacation rental meta players with positive outcomes, gaining more direct traffic efficiently. We'll continue to focus on this approach while preparing for the demand wave. On the technical front, we are making significant progress, with a particular focus on our AI and data products. We recently deployed a reinforcement learning algorithm that personalizes shopping experiences on our platform to improve customer satisfaction and conversion opportunities. This adaptive technology is being rolled out gradually, aiming to enhance customer interactions and reduce friction in their experiences. These technologies are akin to those utilized by leading e-commerce businesses, and they will improve our consumer experiences. To conclude, we are benefiting from strength in our top markets and remain hopeful for further openings. The recent announcement regarding New York City is promising for international travel recovery between EMEA and the U.S. this summer. While we are encouraged by our progress, we are also mindful of the challenges faced by our colleagues in India, where many are affected by illness. We are dedicated to supporting them in any way we can and hope for a renewed global response to help those in need. This is a volatile period, and future developments in various markets are unpredictable. Nonetheless, we are optimistic, witnessing considerable improvements around the globe, and feel confident about our work at the Company. We anticipate ongoing vaccination efforts and urge everyone to get vaccinated to facilitate the return of travel. Now, I will turn the call over to Eric. Thank you.

Thank you, Peter. I want to share more details about the binding offer we received from Amex GBT to acquire Egencia. I agree with Peter's earlier comments. We are very excited about this deal, and I’m hopeful about the success that the combined company will achieve. This includes two main components. First, we would have around 14% ownership in the combined business, which we currently value at approximately $750 million, assuming the deal closes. Second, we would establish a 10-year lodging supply agreement between Amex GBT and EPS, as Peter mentioned earlier. To give you context for this commercial deal, the supply agreement could have generated over $60 million in EBITDA at 2019 volume levels. We expect the proposed deal to close within 9 to 12 months. Next, I want to update you on our cost-saving initiatives. In 2020, we made significant strides in aligning our cost base, and those efforts continued in Q1. We still aim to be at the high end of our $700 million to $750 million target for fixed cost savings compared to our exit rate in 2019, and we’ve achieved approximately $700 million on a run-rate basis. We are confident that we will meet most of our cost savings targets by the end of 2021. As noted previously, we will see annual increases in our remaining cost structure from factors like annual compensation increases, and we plan to invest in areas of the business where we see promising opportunities. Regarding variable costs, we are on track to achieve over $200 million in annual savings based on 2019 volume levels. The three main drivers are improved economics through our payments platform, expanding our conversations platform to lower customer service costs, and reduced variable cloud costs. We still expect to realize most of these variable cost savings by the end of 2021, although the savings will become fully apparent only when we reach more normalized business levels. We have also focused on enhancing marketing efficiencies and made improvements in Q1. I want to emphasize that we are investing in the recovery, as Peter mentioned. In Q1, we increased our investments, particularly in the latter part of the quarter, and we plan to increase spending further in Q2 to capitalize on the travel recovery, especially in the U.S. We incur marketing expenses in the quarter they occur, but we don’t recognize the associated lodging revenue until the stay happens. Concerning our balance sheet, we currently hold an investment-grade rating. As the recovery progresses, we are dedicated to reducing debt to more traditional levels while also lowering our cost of capital. Our ultimate goal is to be well-positioned to restart our capital return program to shareholders, as we discussed earlier last year. Recently, we took advantage of favorable market conditions and raised $1 billion in 10-year unsecured notes at a 2.95% coupon and $1 billion in zero coupon 5-year convertible debt with a 72.5% conversion premium. We used the proceeds to redeem $1.7 billion in debt due in 2025, which had coupons of 7% and 6.25%. This will provide around $80 million in annual interest savings. From a liquidity perspective, we have $4.3 billion in unrestricted cash and short-term investments, about $1 billion more than we had at the end of Q4, mainly due to positive free cash flow. We also have approximately $2 billion in untapped revolver capacity. As for deferred merchant bookings, we have seen a steady improvement in each quarter since the peak of the pandemic, totaling $6 billion at the end of Q1. We have observed encouraging trends and are cautiously optimistic about the pace and nature of the recovery. We are also confident about our liquidity position, leading us to decide to pay down 50% of the preferred stock issued in 2020 later this month. It’s worth noting that we can pay off that balance at any time, and we will monitor this over the coming months. Shifting to the P&L, total revenue declined by 52% compared to the first quarter of 2019, which is a notable improvement from last quarter, where revenue was down around 62% year-on-year. This figure has been adjusted for the insurance contra revenue impact we previously discussed. Overhead expenses were approximately $500 million in Q1 and came in slightly better than expected due to timing benefits. We define overhead as encompassing G&A, tech and content, and indirect sales and marketing, excluding stock-based compensation. In Q1, we adjusted our approach to managing software licensing and maintenance costs, leading to a modest reclassification to previous results. We shifted from a decentralized method, where each team managed its own costs, to a more centralized approach across EG. This change in 2020 led to about $60 million in costs being reallocated to tech and content, mainly from sales costs, with the rest coming from sales and marketing and G&A. There was no overall change to total costs or EBITDA from this reclassification. Adjusted EBITDA for the quarter was negative $58 million, which was slightly better than we anticipated. On an absolute basis, adjusted EBITDA decreased by around $235 million compared to Q1 2019, while revenue dropped by about $1.4 billion during the same period. Free cash flow totaled $2 billion in Q1 on a reported basis. If we exclude the change in restricted cash, primarily influenced by Vrbo’s deferred merchant bookings, free cash flow was around $800 million. Looking ahead, we expect our overhead costs to increase by about $50 million from Q1 to Q2 of this year, mainly due to bonus payments and other factors we discussed previously. In conclusion, we remain very encouraged by recent trends in the business and have growing confidence in our liquidity position due to our recent decision to pay down the preferred stock. However, we remain cautiously optimistic about further advancements in travel recovery as the year progresses.

Our first question comes from the line of Mark Mahaney.

Thanks. I have two questions. First, Peter, could you clarify your comments about the 40% decline and the 20% decline in January, and the improvement in March and April? I believe you were referring to domestic bookings. If that’s the case, could you provide insights on the trends for global bookings? Perhaps I misunderstood that. Secondly, could you provide a high-level overview of what you've been doing to enhance the business? You've implemented several changes to improve the cost structure as you navigated through COVID. How would you describe your efforts to boost bookings growth and revenue growth before and after COVID? What strategies do you believe will best help the growth reaccelerate to where it was prior to COVID? Thank you.

Thank you, Mark. Sure. I’m happy to answer those. First of all, the answer to your first question is, those numbers are global. That is our entire business, collectively, not just the U.S. The U.S. is stronger for sure, helping that number up. But, those are global numbers. As for beyond the cost structure, I’d say, we’re doing tons of work, and I’ll start by, unfortunately, reiterating all the work we’re doing on the marketing side, the work we’re doing to simplify and combine our performance marketing team, tools, capabilities, data analytics, that’s a huge benefit for us as we go into the post-COVID period into the future. We believe we can do better and do more on the brand building side and to create that direct customer relationship. And then, that bleeds all the way down through, of course, the importance of doing the product right, getting the engagement right, improving the apps, improving the technology, using AI to improve the customer experience. So, all of those things are the classic sort of virtuous cycle of can you get them in the door, can you make them love you, is the experience great, does it help them find what they want? So, there’s a ton of work. All that work I talked about on the platform side is not about efficiencies, although it does create efficiencies. What it really creates is agility and the ability to serve the customer better and create a stronger tie to that customer and repeat and loyalty and lifetime value. So, it’s really an exercise in all the pieces, but we are getting sharper on all elements, whether it’s the brand proposition for every brand, whether it’s the geographic proposition for every geo and brand, and then what that customer experience is like all the way to the end, through service. And it’s all those pieces. So, we are investing across the board in terms of our energy and time. And I think those pieces will start to multiply on themselves as we get more and more of them sort of across the road as it were. So, lots of good work going on. Some things are a lot further along than others, but I think you’ll continue to see improvement across all those categories.

Your next question comes from the line of Justin Post from BofA.

I have a couple of questions. First, regarding Vrbo, there are high valuations in that sector. Can you provide insight into the percentage of bookings and the growth rates for bookings or revenue in the quarter? Secondly, there was an interesting disclosure about the Expedia marketing spend, which you mentioned is the largest in the past five years. Could you explain how this might impact EBITDA in the second quarter? Additionally, are you experiencing positive marketing returns that encourage this level of spending? Thank you.

Thanks, Justin. I'll address the second question first. We've dedicated considerable effort to establishing a new brand proposition along with various new capabilities to communicate to consumers. We're in the early phases of launching our Expedia Brand campaign, which is a significant initiative across multiple markets that we believe holds great potential. However, it's important to understand that brand marketing isn't purely scientific; it requires time before the benefits become apparent. We believe that by enhancing our performance efficiency and investing more upfront, we can achieve better long-term returns. Brand marketing isn't an instant process; it requires repetitive exposure and cementing the brand proposition in consumers' minds, leading to rewards in performance and direct bookings. We recognize the opportunity and intend to invest in it, though it will take time to realize those benefits. Regarding Vrbo, while we don’t disclose specific numbers, I can say that Vrbo is performing well, particularly in the U.S. In our strongest markets, we are gaining market share. Overall, vacation rentals, including Vrbo, are in a positive position, contributing to our overall performance. We view Vrbo as an integral part of our business, and as I mentioned previously, our long-term goal is to make vacation rentals accessible through all our brands in the most customer-friendly manner. That's our current status.

And two quick things to that. This is Eric. Also on distributing that inventory from a vacation rental standpoint, ultimately through EPS or Expedia Partner Service as well. We think that’s a meaningful opportunity for us as well. And then, on the marketing side, if you look at year-over-year going to 2018, 2019 and 2021, our marketing spend as a percent of revenue has come down quite a bit when you compare against those. And yet, we are spending heavily into brand, and we’re continuing to spend in performance channels as well. And we’re also seeing, given all the work that the teams have done, where we’re getting good share of voice, share of wallet, if you will, at ROAs that are higher than we’ve traditionally seen. So, still a lot to learn how that’s going to flow through the P&L over time, as Peter mentioned, but we feel pretty good about the investments that we’re making at this time.

Your next question comes from the line of Lloyd Walmsley from Deutsche Bank.

Thanks. If we start on the cost side, you’ve taken the business kind of down to the studs during the pandemic. How are you feeling about your positioning as the tempo increases in the market? Are you able to handle strong upticks in volume? Do you feel like things are running in a stable fashion kind of operationally, any areas that might need investment? And then, secondly, kind of as you lean into the new brand campaign, would you characterize your posture on the performance ad side as kind of leaning in or more kind of neutral there and focus on the brand side and hoping that that will have benefits in the performance channel that allow you to kind of get some efficiencies there? Anything you could share there would be helpful.

Thank you, Lloyd. First, I want to clarify that we did not completely overhaul everything. We made several strategic investments focusing on the long-term health of the Company, including enhancing our workforce, talent, marketing, and technology. I believe we have taken the right steps to shape the business in the way we envisioned, which we planned even before the onset of COVID. We feel confident about our progress so far. We certainly have areas where we aim to invest further and are committed to attracting and retaining top talent. We've made significant hires and have adjusted our equity and bonus structures to incentivize our team for growth. We will continue to invest in initiatives that drive our business forward, focusing on the capabilities of our people to develop excellent technology, tools, products, and services, as well as promoting our achievements in both B2B and consumer sectors. We do not feel we are in an unstable position; while we have many moving parts and are undergoing significant changes, we see great opportunities ahead. We may face some challenges along the way, but overall, we feel we are in a strong position. As opportunities for growth arise, we will continue to invest. Regarding brand campaigns, we are not just hoping for success or reallocating funds randomly. We believe we can improve our performance marketing strategy to be more effective and competitive, which will then enable us to allocate more resources to enhance our brand initiatives. Our goal is to ensure all aspects function cohesively, allowing us to connect everything effectively.

Your next question comes from the line of Naved Khan from Truist Securities.

Yes, thank you. I have a couple of questions. Peter, you mentioned ROAs. As you work to determine the optimal ROAs, how should we view the allocation of your advertising budget between performance and brand advertising moving forward? How does this compare to your past budget allocations? Additionally, you are making significant efforts towards customer loyalty, and I recall you recently mentioned adding about 25 million new loyalty members. How will this impact the profit and loss statement regarding the accrual of loyalty rewards?

Yes. I’ll address those in reverse. Regarding loyalty, we believe there’s a significant opportunity, especially within Brand Expedia, to enhance customer loyalty. Our findings will certainly benefit our other brands as well. We felt that our previous sign-up process was leaving many potential customers behind due to its complexity. The reality is, customers have a much better experience when they become loyalty members; they gain access to loyalty rates and various benefits, leading to higher consumption. Moreover, the returns from loyal customers exceed those from non-members. While we may need to record some accounting for these customers over time, their performance yields much greater returns. This strategy is all about simplifying the process for customers, allowing them to see the advantages sooner. We see only positive outcomes for both the company and our customers. In terms of return on advertising spend, we’re uncertain about where it will stabilize. We are applying a scientific approach to maximizing returns through our marketing efforts, continually testing different strategies across various brands and regions. From a performance marketing viewpoint, we will also be experimenting with ad spend by geographic area and brand. We expect to learn and adapt over time, and with a strong team on both the brand and performance marketing sides, once we consolidate these efforts and refine our technology, we anticipate being well-positioned to outperform our competitors, which has not been the case for a significant period.

This is Eric. And I would just add on the loyalty side, we are working through ultimately how to account for those going forward. We have robust teams. We actually have three different teams that look at and quantify it separately. We have an internal team, a third-party provider, and then our auditors go through it as well. And so, we’re going to be going through that math to effectively say, there’s going to be a lot more points perhaps with a respective lower probability of redemption, at least for those that don’t get actively engaged, which again, the point is getting them actively engaged in that journey. But, we’ll provide updates as we go through, but it is something that we’re working through.

Your next question comes from the line of Brian Nowak from Morgan Stanley. Your line is open.

Thanks for taking my questions. I have two. First one, Peter, sort of a high level one. When you came into your role, you outlined a number of strategic priorities, brand reorg, the cost reductions, improved product merchandising, et cetera. Just sort of help us understand which of your priorities you think you’ve made most progress on? And then, as you sort of look into ‘21, ‘22, where are there still sort of the most low-hanging fruit to continue to improve the execution of the Company, both top line and within OpEx? Then the second one, just a little bit on marketing. Talk to us about what you’re seeing on performance marketing ROIs and your mix of overall direct traffic as you sort of head into the spring and summer.

Thank you, Brian. From a strategic priority perspective, we've made significant progress in various areas. The most challenging aspect is really the platform, technology, and product organization. A lot of our efforts have focused on aligning the right parts of the Company under effective leadership to transition from our previous complex, siloed technology to a more streamlined, efficient, and agile system. This is where most of our energy is directed. Each phase of this journey varies in terms of completion, presenting numerous opportunities ahead. Every success we achieve, whether it’s consolidating multiple checkouts into one or merging various identity features, enhances speed and consumer experience and allows us to reallocate resources to higher-return projects. We are still in the process of optimizing these functions as if they were operating separately, but we aim to unify these efforts to achieve stronger returns on investment. Regarding marketing and cost management, cost savings will largely stem from the structural changes I mentioned. We continue to identify opportunities, and many initiatives Eric has highlighted have already yielded savings and have further potential. We are developing excellent new service tools that enhance customer efficiency, leveraging technology to support human efforts. There are many avenues where we can improve efficiency, and we view these opportunities as chances to reinvest back into the business rather than simply cutting for margin. We see substantial opportunities on the margin side as we recover from travel slowdowns. On the ROI for direct traffic and mix, I want to caution you. During COVID, numbers on direct traffic and mobile use looked promising because our most loyal customers comprised a larger share of our mix without heavy marketing. As the travel market normalizes, these dynamics may change. Nevertheless, we are committed to enhancing app usage, direct relationships, and minimizing reliance on auctions. The direct traffic mix is certainly trending in our favor, but I urge caution in projecting how it will stabilize when the market recovers globally.

Your next question comes from the line of Deepak Mathivanan from Wolfe Research.

Thank you for your questions. First, regarding Vrbo, could you discuss your initiatives on the supply side? You mentioned a shift towards traditional lodging. How are you managing supply during this period of increased demand? Secondly, I wanted to inquire about trends in booking windows. Are you observing any significant changes with the recovery taking shape? Are these trends primarily driven by summer bookings or more immediate reservations? Any insights you could share would be appreciated.

Thank you, Deepak. I'll address the Vrbo aspect. We've increased our marketing investment to attract Vrbo hosts and owners, and it has proven successful. We're working quickly given the high demand, particularly in busy areas where we can maximize new inventory. We launched a program called Fast Start, which allows us to quickly onboard highly rated hosts from other platforms without needing to rebuild their reputation on our site. We leverage their previous success to rank them favorably from the start, enabling them to kick off their business with us effectively. Overall, Vrbo hosts tend to earn more than Airbnb hosts, making it an attractive option for property owners to generate income. As our brand gains visibility and more people become familiar with our services, we're seeing positive indicators. Our statistics support a compelling sales narrative, and we're investing more to spread the word.

Yes. And I’ll just add to that, this is Eric as well. There’s also, listen, as there a compression or when there’s supply selling out, if you will, there are alternatives that we’re then providing. That’s part of the product experience on whether it’s a nearby alternative or a peer or whatever else. So, it’s something that we’re working from a product standpoint. In regards to your question on the booking trends, we continue to see elevated in the next 30 days, unconventional lodging, but it has come down from what we saw during the depths of the pandemic. We’re continuing to see, obviously, very strong demand for the summer. And even off a very small base, we’re seeing healthy demand for the holiday period as well. So, we’re starting to see it extend into away from the zero to 7 days or very near term into more healthy time periods as well and more distributed to what we have seen historically. And I would say, that’s a similar story on the Vrbo side as well. But typically, it has longer booking cycles, and we continue to see that as well.

Your next question comes from the line of Kevin Kopelman from Cowen.

Thank you very much. I wanted to follow up on the trends you mentioned for April. There was a significant improvement from January to March. Can you provide more details about how much April improved compared to March, since you mentioned it was an improvement? Additionally, could you elaborate on the U.S. market? Have you seen the overall U.S. market return to growth compared to 2019?

As for April, I would say we've seen some modest improvement compared to March. It's not a straightforward shift from the negative high-40s to the 20s and continuing on. So, don't get overly excited. However, it is a positive direction, and we hope and believe that this trend will persist. There's a lot of summer bookings happening during this spring period, which can be attributed to Americans getting vaccinated and feeling more comfortable making summer holiday plans. We expect this trend to continue for a while. But as I mentioned in my remarks, we really need cities to reopen, international travel to resume, and other sectors to come back. U.S. domestic travel alone won't bring us back to previous levels. That said, U.S. domestic travel is currently higher than it was in 2019, and we've observed that trend. We're not disclosing the overall growth of the U.S. market in relation to our performance; however, the U.S. market is indeed strong, driving a significant portion of our performance and supporting other markets that are still closed. We feel very positive about the U.S. situation and hope that, for many reasons, the rest of the world also comes back—not just for our business, but for their own livelihoods. That's where we need more improvements to take place.

Thanks, That’s really helpful. And then just on Amex, did you mention expected timing on the close here?

Expect 9 to 12 months. Yes.

Your next question comes from the line of Brian Fitzgerald from Wells Fargo.

Thanks, guys. A couple of clarifications on Egencia. I want to ask about the enterprise value for either Egencia or all of the combined entity on the deal. And then, clarification on the supply agreement. Does that apply just to Egencia slice of the biz, or will all of that organization be relying on EPS going forward? So, first one on Egencia. And then, the second one was just a follow-up to Naved’s question at Vrbo. If you’re seeing any indications of other long-term shifts in travel behavior, maybe have you seen repeat usage, hey, what we rented last summer, we’re doing again this summer or tailwinds with the inventory, making inroads in urban centers and resort areas where the competition has been tougher, like California? Thanks.

Great. This is Eric. I’ll address the first part of that question regarding Egencia. We mentioned that we own about 14% of the combined entity, which we estimate to be valued at $750 million. You can use that information to calculate the overall estimated enterprise and equity value for the business. Regarding the commercial agreement, it exceeds $60 million based on 2019 volume and pertains to the entire supply relationship we will have with the combined business. There are elements of that involving Egencia and distribution that we are integrating, and we aim to establish a much larger relationship with them as well. Therefore, this represents the complete estimate of that agreement.

Great. I'll address the last point, which is that we haven't observed significant changes. As I've mentioned before, I’m hesitant to draw too many conclusions from this COVID period. However, many new users are engaging with the Vrbo experience, and overall, the data indicates they are returning to it more often. Yet, we are still in a COVID environment, and as long as this usage pattern continues, it shows comfort. The question remains whether this is sustainable and if people will return to resorts and other options. I have publicly stated that I believe the overall trends from the past will persist. One of those trends has been a growing interest in vacation rentals, which I think we've sped up. More individuals have been introduced to the product, which is a positive long-term trend for this sector. I believe this will make vacation rentals a more viable option for people who may not have considered them before. Nonetheless, I don’t expect to see a significant long-term shift, but rather a reestablishment at a higher baseline for vacation rentals that can then grow from there.

Your next question comes from the line of Stephen Ju from Credit Suisse. Your line is open.

Okay, thank you so much. So Peter, I guess, more of a macro question here. So, as we look to maybe next year, I think there may be reasons to believe that the travel industry may be seeing elevated growth for the next few years, especially as the personal savings rate in our country seems to be at the highest it’s been in probably 50, 60 years. So, maybe the consumers are ready to go out there and maybe do some revenge travel. So, anything you’re seeing so far in the data to customer-by-customer level or otherwise that can either confirm or deny the notion and the activity that you’re seeing? Whether they seem more willing to splash out for more luxurious accommodations or staying longer, that sort of thing? And I think you brought up reducing friction, I think in your prepared remarks. Anything you can share in terms of where you may be now in terms of rolling out real-time bookings among your Vrbo property owners, and how much of the Vrbo inventory has been integrated into your OTA brands so far?

I’ll respond to the first question. Thank you for the question, Stephen. I'm excited about the idea of "revenge travel," whatever that entails. We are ready to accommodate any kind of travel people wish to pursue, whether it's revenge travel or not. Early in the pandemic, we observed longer stays, particularly in the vacation rental sector. While things have somewhat normalized, the average duration of stays is still longer. Additionally, we are seeing higher average daily rates, and consumers are spending more. This can be attributed to a mix of factors; both hotels and vacation rentals have successfully increased their prices, and consumers are willing to pay. Destinations like Miami highlight a significant pent-up demand for experiences that feel relatively normal. I can tell you that Miami is bustling right now, with full hotels, crowded streets, and busy restaurants. Booking levels are substantially higher than they were two years ago. Looking at the broader picture, it's clear that when people have the opportunity to travel comfortably and feel secure, there is a significant demand for that. Naturally, this demand will extend globally as more destinations emulate what Miami has to offer. Ultimately, this underscores the pent-up demand for places and experiences where people are eager to spend their money.

And this is Eric. I’ll address the second part of the question regarding Vrbo and distribution on the OTA brands. We don’t disclose the number of properties available on our other OTA brands, but I can say that we are actively adding more properties. The number increased in Q4 compared to Q3, and it has continued to rise in Q1 compared to Q4, so we are making progress. Additionally, we are also increasing the number of OTA brands through which we distribute that inventory. We are seeing good advancement in both areas. However, our primary focus is on improving the customer experience. This product is different; it has a unique use case and a distinct operational flow and customer experience, as Peter highlighted. We have made strides in this area, but there is more work to be done. We are committed to investing in enhancing that user experience, which should lead to acquiring more properties, increased bookings, and a better overall customer experience. Overall, we are making progress, but we have more to accomplish.

Your next question comes from the line of Jed Kelly from Oppenheimer.

I wanted to follow up on Vrbo. Given your discussions with property managers over the past five years, it seems that the integration of Vrbo with Expedia has been slower than expected. Can you provide an update on the progress of this integration? Additionally, with the rise of remote work, it appears that leisure travel could benefit from increased flexibility. As travel restrictions ease, are there any brand campaigns planned to capitalize on these work-from-anywhere trends, and how do you plan to take advantage of this opportunity?

We are committed to enhancing the customer experience and have made progress in our investments, with a recognition that there's still room for improvement. We are enthusiastic about the product and are increasing the number of properties we distribute through our OTA brands. As noted earlier, our distribution numbers have grown from Q3 to Q4, and Q1 is showing even higher figures. Additionally, we are expanding the number of OTA brands involved in this distribution. While progress has been slower than we hoped, we are dedicated to this initiative because we believe it presents a significant opportunity for us.

Yes. This is Peter. I want to echo that the management companies were correct. It has taken us too long, and we are working hard on it. We aim to change it for them, for us, and for the consumer. However, getting the right consumer experience, as Eric mentioned, is essential to making it successful for all of us, and that is our primary focus. Regarding the work-from-home trends, we have been addressing this from the start. Vrbo has been promoting staycations, nearby trips, and remote schooling, ensuring that people are aware of the Wi-Fi and other amenities. We have recognized these trends and have tried to respond to consumer interest. In the long run, like every company, especially in the tech sector, we are confronting work-from-home challenges and the future of flexible work. Clearly, the trends we have observed indicate that the world will be more adaptable, whether that means people can work from various locations, take extended weekends, and work from different places, etc. We will have to see how this evolves. We hope it will contribute positively to travel, but it is still too early to determine.

We will take our final question coming from the line of Mario Lu from Barclays.

So, just one on the revenue per room night. This quarter, you mentioned it was up 10% year-on-year, driven by the mix shift to alternative accommodations. Just curious what was the revenue per room night if we kind of looked at it on the same room basis? Is that trending higher based off of pent-up demand? And how sustainable do you think these trends are as we continue to approach 2019 levels? Thanks.

Yes. This is Eric. As you mentioned, what we have in the release is revenue per room night was up 10%. That is due to two primary factors, mix to Vrbo and then mix to the U.S. as well, where there’s typically higher ADRs. We don’t get into the detail of breaking out individual components. But, I would say, anecdotally, we’re certainly seeing ADRs improve. They continue to be down relative to, call it, 2019 levels, but sequentially improving. And Vrbo is obviously seeing some nice ADR improvements, just given the demand in that sector.

There’ll be no question at this time. I will now turn the call over to Peter Kern for closing remarks.

Thank you, operator. Thanks, everyone, for joining us. I hope we got your questions answered. We’re feeling really good about our improvement, and we hope the world continues to open up. Please get your vaccines or tell your friends, and please keep your thoughts with all our friends in India. And thank you for joining us. We’ll talk to you next quarter.

Thank you.

This concludes today’s conference call. Thank you all for participating. You may now disconnect.