Ewout Steenbergen; Chief Financial Officer, Executive Vice President; Booking Holdings Inc
Welcome to Booking Holdings' fourth quarter 2024 conference call. Booking Holdings 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 forecasted in any such forward-looking statements.
Expressions of future goals or expectations and similar expressions reflecting something other than historical facts are intended to identify forward-looking statements. For a list of factors that could cause Booking Holdings actual results to differ materially from those described in the forward-looking statements, please refer to the Safe Harbor statements in Booking Holdings' earnings press release, as well as Booking Holdings' most recent filings with the Securities and Exchange Commission.
Unless required by law, Booking Holdings undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events, or otherwise. A copy of Booking Holdings' earnings press release is available in the For Investors section of Booking Holdings' website, www.bookingholdings.com.
And now I'd like to introduce Booking Holdings speakers for this afternoon, Glenn Fogel and Ewout Steenbergen. Go ahead, gentlemen.
Thank you. Welcome to Booking Holdings' fourth-quarter conference call. I'm joined this afternoon by our CFO, Ewout Steenbergen.
I am pleased to report we had a strong finish to 2024, closing out another successful year. I'm even more pleased to report the progress we are making on our long-term strategic plan. In a few days, I will mark my 25th year at this company, a quarter of a century, and I am more excited than ever about our potential.
It's an incredible time to be in the travel industry, with the transformative force of AI, particularly Generative AI, redefining how people will experience the world. Adapting to and leveraging new technologies has been in our DNA from the start, and Generative AI is pushing the pace of technology innovation faster than ever.
In this dynamic environment, I am confident that we are well positioned to deploy this technology to further benefit our travelers and partners given our legacy of innovation, resources, proprietary data, the global nature of our business, and years of experience with AI.
I'll speak more about the AI opportunity shortly, but first I'll briefly cover our financial highlights from the last quarter and the full year.
Our fourth quarter room nights exceeded the high end of our prior expectations and grew 13% year over year. The improvement in room night growth was seen across all our major regions, each of which grew by double digits in the quarter. The stronger than expected room night growth helped drive fourth quarter gross bookings growth of 17% and revenue growth of 14%, both above the high end of our prior guidance ranges.
Adjusted EBITDA of $1.8 billion was 26% higher than the fourth quarter of 2023 and 12% above the high end of our prior guidance range driven by revenue outperformance and lower than expected adjusted fixed OpEx. Finally, adjusted earnings per share in the quarter grew 30% year over year.
Looking back at the full year of 2024, I am proud of our achievements, including advancing our Connected Trip Vision, further innovating our AI capabilities, expanding our merchant offerings, growing alternative accommodations, and enhancing and expanding our genius loyalty program.
Our achievements in these areas allowed us to deliver even more value to our travelers and supplier partners while also helping to drive our strong financial results for the year.
For the full year, gross bookings of $166 billion increased 10% versus 2023, and revenue of $24 billion grew 11% year by year. We achieved these strong top line results while growing our bottom line even faster with adjusted EBITDA of over $8 billion increasing 17% year over year.
Finally, adjusted earnings per share was up 23% year over year, helped by the 7% reduction in our full year average share count versus last year.
I would note that on a constant currency basis, our full-year gross bookings revenue adjusted EBITDA and adjusted EPS all grew about 1 percentage point faster than the reported growth rates I just mentioned.
Our long-term ambition in a normalized travel environment continues to be: to grow our annual constant currency gross bookings by at least 8%; to grow our constant currency revenue by at least 8%; and to grow our constant currency adjusted earnings per share by at least 15%.
I'm proud to say that we exceeded these growth targets in 2024.
At the start of 2025, we continue to see healthy demand for leisure travel globally. Assuming another year of normalized growth for the travel industry, we are targeting full year constant currency growth rates that would again deliver on our long-term growth ambition for gross bookings, revenue, and adjusted EPS.
Given the importance of travel to consumers and the aspirations of people to experience the world, we remain confident in the long-term outlook for the travel industry and believe that we are well positioned to deliver attractive growth across our key metrics in the coming years.
Ewout will provide further details on our fourth quarter results, our expectations for 2025, and our approach to capital returns in his remarks.
At Booking Holdings, we have always been driven by innovation from the early days of the internet and online travel, to being one of the first deployers of large scale A/B testing, to the advent of the smartphone and consumer adoption of mobile apps, to using sophisticated machine learning models early in our business, we have consistently evolved to meet the needs of travelers and partners.
We believe that compelling, AI-powered offerings, like a travel vertical-specific agent, will play a central role indelivering an even more seamless and personalized Connected Trip experience to travelers. We see the development and use of AI agents, and those agents working with other AI agents, as a potential way to more quickly bring together the different elements of travel into a truly connected offering on our platforms.
We are highly focused on the many opportunities with AI and will continue the sophisticated work already happening across our company to integrate Generative AI into our offerings, which includes Booking.com's AI Trip Planner and Priceline's AI-powered travel assistant called Penny. In addition, we are pleased to see the work being done at OpenTable with its use of Salesforce's Agentforce platform, while Agoda and Kayak are making their own Generative AI advances.
As we continue to incorporate this technology, we are confident that it will enhance our ability to attract and satisfy our travelers as well as our partners, who have long relied on our technology advancements to help attract customers and grow their businesses. In addition, we believe Generative AI has the potential to drive improvements in operational efficiency, which would contribute to a further deceleration of our fixed expense growth in 2025.
Whether customer service, partner service, developer productivity, or other areas where we are finding more efficient ways of working, we are already seeing some early benefits, and we plan to continue to build on this. We are also excited to be working with leading Generative AI organizations on their agentic developments. These collaborations reflect our commitment to staying at the forefront of this rapidly developing field and are consistent with our longstanding approach to work with different sources of new customer traffic.
And with our track record in this area, I am confident in our ability to create value for all participants in this new, evolving, economic landscape. We expect that agentic models will change the way some bookers discover and use our platforms. And we believe that working with these models will be another, attractive way for us to deliver unique value to our travelers and partners through competitive pricing, loyalty benefits and rewards, offering of other travel products, high quality customer service, and an easy and trusted payment process.
Given the complexity, expense, and importance of travel to customers, it is critical to deliver value and to continue to be a trusted platform in order to have customers choose to make bookings with us. I'm encouraged to see that we continue to build trust with travelers as evidenced by our growing mix of direct bookings, which was in the mid-sixties percentage of our B2C room nights in 2024.
We will continue to learn about how consumers want to interact with all forms of GenAI, but I like how we are positioned. I am excited about the changes and benefits that this technology is bringing to us now and we expect will do even more so in the future.
Connected Trip Now focusing a bit more on our Connected Trip vision, we are making steady progress toward simplifying the planning, booking, and travel experience, making it more personalized, seamless, and enjoyable, while delivering better value to our travelers and supplier partners.
We saw Connected Trip transaction growth accelerate to over 45% year over year in the fourth quarter, and these connected transactions represented a high single digit percentage of Booking.com's total transactions. Flights are an important component in many of the connected trips that our travelers book.
For the full year, our travelers booked almost 50 million airline tickets across our platforms, which increased 38% year over year and had a gross bookings value of $13.1 billion. We continued to see this vertical bringing new customers to our platforms while delivering a more complete offering to our existing customers, making travel planning and booking easier for them and creating opportunities for us to provide more value to them.
And we believe that GenAI, coupled with our data and machine learning capabilities, will enable us to improve our supplier partners' businesses, particularly the small- and medium-sized businesses who do not have easy access to these sophisticated technologies.
Another foundational component of the Connected Trip vision is our expanding merchant offering at Booking.com. Merchant capabilities offer more flexibility for our travelers and partners, while also unlocking the ability to merchandise across verticals. The mix of merchant gross bookings reached 59% of total gross bookings at Booking.com in 2024, an increase of about nine percentage points year over year, which is higher than our expectations at the start of 2024.
We are pleased to see that processing transactions through Booking.com's merchant offering generated incremental contribution margin dollars in 2024, though this was still a small percentage of our total adjusted EBITDA. We believe that we are still very early in our fintech journey and expect over the upcoming years to reduce the costs of transactions for our travelers and supplier partners while also contributing to our bottom line.
We believe our Genius loyalty program at Booking.com also helps to connect more elements of travel as we extend this program beyond accommodations into other travel verticals. We believe the value this program delivers will promote customer loyalty, frequency, and direct booking behavior.
We are encouraged to see more of our travelers moving into our higher Genius tiers of Levels 2 and 3, which represent over 30% of our active travelers, and these travelers booked a mid-fifties percentage of Booking.com's room nights in 2024. These Genius Level 2 and 3 travelers have a meaningfully higher direct booking rate and a higher booking frequency than the rest of our travelers.
We continued to drive more Genius benefits to our travelers in 2024, and we have seen steady growth in the share of Connected Trip transactions that receive Genius benefits. We believe that all of the Connected Trip elements provide value to our customers, leading them to choose to book more frequently, and directly, with us. We are encouraged to see that the direct booking channel continues to grow faster than room nights acquired through paid marketing channels.
Providing great supply choices for our travelers is another way we deliver a comprehensive planning and booking experience, and one area where we are actively expanding our supply is alternative accommodations.
For alternative accommodations at Booking.com, we continue to see year-over-year growth with listings at the end of Q4 reaching 7.9 million, up about 8% from last year. More listings means more accommodation choices for our travelers, which we believe contributed to strong alternative accommodations room night growth of 19% in the fourth quarter, which was an acceleration from 14% growth in the third quarter.
We were pleased to see alternative accommodation room night growth accelerate in the quarter across all of our regions. We remain committed to being a trusted and valuable partner to all of the accommodation properties on our platforms by delivering incremental travel demand and developing products and features designed to support the success of these businesses, the majority of which are small independents.
Now I want to briefly discuss our transformation program and Ewout will provide further details in his commentary. In November 2024, we announced our intention to implement certain organizational changes, including modernizing processes and systems, initiating an expected workforce reduction, optimizing procurement, and seeking real estate savings.
We are in the process of reviewing some of these potential workforce reductions with works councils, employee representatives, and other organizations. While workforce reductions in some areas along with investing in other areas involve very difficult decisions, we believe that these steps are critical to improve organizational agility and drive greater operating efficiencies.
Reallocating resources across our strategic initiatives in a disciplined manner is a key requirement to maintain global competitiveness. Ultimately, we believe this will help drive stronger and more durable topline and earnings growth over the long term.
In conclusion, as I look back over 2024, I am proud of all of the hard work and excellent execution by our teams as they continued to advance our strategic initiatives while delivering strong financial results. These are exciting times for our industry, and I am confident in our company's position and ability to leverage Generative AI technology to deliver an even better offering for our travelers and partners.
I will now turn the call over to our CFO, Ewout Steenbergen.
Ewout Steenbergen
Thank you, Glenn, and good afternoon. I will now review our results for the fourth quarter and the full year of 2024 and provide our thoughts for the first quarter and full year of 2025. All growth rates are on a year-over-year basis. Information regarding reconciliation of non-GAAP results to GAAP results can be found in our earnings release. 4 We will be posting a summary earnings presentation as well as our prepared remarks to the Booking Holdings investor relations website after the conclusion of the earnings call.
Now let's move to our fourth quarter and full year results. Our room nights in the fourth quarter grew 13%, which exceeded the high end of our guidance by five percentage points. The higher-than-expected room night growth was driven by stronger than expected performance across all our regions, with the largest impact coming from Europe.
Looking at our room night growth by region in the fourth quarter, Europe was up low double digits, Asia was up mid-teens, Rest of World was up about 20%, and the US was up about 10%. We are encouraged by the progress we are making in enhancing the experience for our travelers and partners as we continue to advance our strategic initiatives and build towards our Connected Trip vision.
This includes strengthening our offering through alternative accommodations growth, increasing the direct and mobile app mix of our bookings, expanding our Genius loyalty program, and growing our other travel verticals.
For our alternative accommodations at Booking.com, our fourth quarter room night growth accelerated to 19% and continued to outpace the overall business. The global mix of alternative accommodation room nights at Booking.com was 33%, which was up one percentage point from the fourth quarter of 2023. We continue to strengthen our direct relationships with our travelers and increase loyalty on our platforms.
For the full year, the mix of our total room nights coming to us through the direct channel was in the mid 50% range and increased year-over-year. When we exclude our B2B business, our full year B2C direct mix was in the mid 60% range, which is an improvement from the low 60% range in 2023. The mobile app mix of our total fourth quarter room nights was in the mid-50% range, which was up from the low 50% range in 2023. We continue to see that the significant majority of bookings received from our mobile apps come through the direct channel.
For our Genius loyalty program, the mix of Booking.com room nights booked by travelers in the higher Genius tiers of Levels 2 and 3 was in the mid-50% range in 2024 and this mix increased year-over-year. In our other travel verticals, about 14 million airline tickets were booked across our platforms in the fourth quarter. Airline ticket growth in the fourth quarter was 52%, driven by the continued growth of our flight offerings at Booking.com and Agoda, and accelerated from 39% growth in the third quarter.
Fourth quarter gross bookings increased 17% year-over-year and increased about 18% on a constant currency basis, which was approximately five percentage points higher than the 13% room night growth due to a few percentage points from higher flight bookings growth and an increase in constant currency accommodation ADRs of about 2%. The year-over-year ADR increase was impacted by a higher mix of room nights from Asia.
Excluding regional mix, constant currency ADRs were up about 3% versus the fourth quarter of 2023. The increase in gross bookings exceeded the high end of our guidance by eight percentage points due to stronger than expected room night growth, as well as stronger than expected constant currency accommodation ADRs and flight ticket growth, partially offset by about one percentage point of impact from changes in FX.
Fourth quarter revenue of $5.5 billion grew 14% year-over-year, which exceeded the high end of our guidance by five percentage points. Constant currency revenue growth was about 15%. Revenue as a percentage of gross bookings of 14.7% was lower than expected due to impacts from timing and a higher mix of flight bookings.
The timing impact was driven by the acceleration in bookings in the fourth quarter, as well as a booking window that was more expanded in the quarter than expected. Revenue as a percentage of gross bookings was also lower than the fourth quarter of 2023 due to impacts from timing and an increased mix of flight bookings, partially offset by increased revenues associated with payments. We expect the impact from timing in the fourth quarter will benefit our revenue in 2025.
Marketing expense, which is a highly variable expense line, increased 10% year-over-year. Marketing expense as a percentage of gross bookings was 4.2%, about 30 basis points better than the fourth quarter of 2023 due to lower brand marketing expense and higher direct mix, partially offset by higher spend in social media channels at attractive incremental ROIs.
Fourth quarter sales and other expenses as a percentage of gross bookings was 2.0%, in line with last year despite the higher merchant mix, as higher payment expenses were offset by efficiencies in customer service. Adjusted fixed operating expenses were up 9% year-over-year, which was better than expected due primarily to lower IT and G&A expenses.
Throughout this year we have been very focused on carefully managing the growth of our fixed expenses. Adjusted EBITDA of $1.8 billion grew 26% year-over-year and was 12% above the high end of our guidance range largely driven by the higher revenue and also by the better-than-expected adjusted fixed operating expenses. Adjusted EBITDA margin of 33.8% in the fourth quarter was up versus last year by about 320 basis points due primarily to leverage from adjusted fixed operating expenses and marketing expenses.
Adjusted EPS of $41.55 per share was up 30% and benefited from a 5% lower average share count than the fourth quarter of 2023. On a GAAP basis, net income was $1.1 billion in the fourth quarter and was impacted by a mark-to-market adjustment to the conversion option premium of our convertible note due May 2025. This was mostly offset by FX remeasurement gains on our Euro bonds. Both items were excluded from our adjusted results.
When looking at the full year, we are pleased to report that our 2024 room nights grew 9% year-over-year. On a regional basis, we saw full year room night growth from Europe up high single digits, Asia was up mid-teens, Rest of World was up high single digits, and the US was up mid single digits. European bookers represented about half of the room nights booked in 2024, Asian bookers were about a quarter, and US bookers were a low double digits percentage.
The growth in room nights helped drive increases in gross bookings, revenue, and adjusted EPS that were above our long-term annual growth ambition. Our full-year gross bookings and revenue increased 10% and 11%, respectively, and both growth rates were about one percentage point higher on a constant currency basis.
Revenue as a percentage of gross bookings was 14.3% in 2024, which was up slightly versus 14.2% in 2023 due to a positive impact from increased revenues associated with payments, mostly offset by an increased mix of flights. Our underlying accommodation take rates continue to be stable year-over-year.
Marketing as a percentage of gross bookings in 2024 was 4.4%, down slightly from 4.5% in 2023, driven by higher direct mix, lower brand marketing expenses, and higher performance marketing ROIs, partially offset by higher spend in social media which became a more significant channel for us in 2024.
Our full year adjusted fixed operating expenses were up 8% versus 2023, which was better than our expectation for low to mid-teens growth at the start of 2024 and was a source of leverage due to many management actions taken throughout the year.
Our full year adjusted EBITDA was more than $8 billion, which was up 17% year-over-year and up about 18% on a constant currency basis. We are proud to have generated $1.2 billion more adjusted EBITDA than in 2023, delivering profitable growth and expanding margins while investing in strategic initiatives.
Adjusted EBITDA margin was 35%, which was 170 basis points higher than our adjusted EBITDA margin in 2023 and ahead of our expectations at the start of the year. Our adjusted EBITDA margins, along with every other profit metric that we report, includes the impact of stock-based compensation expense, as this is a very real cost of doing business.
Our full year adjusted EPS was over $187 per share, which was up 23% year-over-year and up about 24% on a constant currency basis. Our full year average share count was 7% lower than 2023 due to the impact of our share repurchase program.
Now on to our cash and liquidity position. Our fourth quarter ending cash and investments balance of $16.7 billion was up versus our third quarter ending balance of $16.3 billion due to about $1.9 billion of debt raised in November and about $650 million in free cash flow generated in the quarter, partially offset by about $1.4 billion of capital return including share repurchases and dividends.
Free cash flow in the fourth quarter was pressured by about $825 million from changes in working capital, driven primarily by the seasonal reduction in our deferred merchant bookings balance. For the full year, we repurchased about $6 billion of stock and paid out $1.2 billion in quarterly cash dividends. Since restarting our repurchase program in early 2022, we have repurchased almost $23 billion of stock, or 21% of our shares outstanding at the start of 2022. We ended 2024 with about $7.7 billion remaining under our existing share repurchase authorization.
As we look ahead, we remain focused on strategically investing in our business and returning capital to shareholders while maintaining our strong investment grade credit ratings. We are pleased to announce today that our Board of Directors approved a new $20 billion share repurchase authorization, along with a 10% increase to our quarterly cash dividend per share.
These actions reflect our confidence in our earnings power, strong free cash flow generation, and our ability to consistently return capital to shareholders through both share repurchases and dividends.
Moving to our thoughts for the first quarter. We expect the comparison to the extra day in February 2024 to be about a one percentage point headwind to our first quarter growth rates. Also, we expect the calendar shift of Easter from March in 2024 to April in 2025 to be a small tailwind to room nights and gross bookings growth and a larger headwind to revenue and profitability growth in the first quarter.
We expect first quarter room night growth to be between 5% and 7%, which includes a slight benefit from the calendar shift of Easter into April. We expect first quarter gross bookings to increase between 5% and 7%, which includes about four percentage points of impact from changes in FX, offset by about two percentage points of positive impact from higher flight ticket growth, about 1% higher constant currency accommodation ADRs, and a slight benefit from the calendar shift of Easter.
We expect first quarter revenue growth to be between 2% and 4%, which includes a headwind of about three percentage points from changes in FX and about three percentage points from the calendar shift of Easter into April. We expect first quarter adjusted EBITDA to be between about $800 million and $850 million, down 5% year-over-year at the high end, which includes about 14 percentage points of year-over-year impact from the Easter shift and about two percentage points of impact from changes in FX.
Note that historically the first quarter is our seasonally lowest EBITDA quarter for the year. Normalizing for the impacts of Easter timing, changes in FX, and the leap year, our expectation for first quarter gross bookings, revenue, and adjusted EBITDA is for low double-digit growth at the high end of each of those ranges.
Turning to the full year 2025. We are targeting full-year constant currency growth rates that would reach our long-term growth ambition of at least 8% growth for gross bookings and revenue, and 15% growth for adjusted earnings per share. We believe we are well positioned to achieve these levels of growth given the investments we have made to build a stronger foundation for our business and a better product offering for our travelers and partners.
At recent FX rates, we expect changes in FX will impact our reported growth rates by about three percentage points for gross bookings and revenue, and by about three and a half percentage points for adjusted EBITDA and adjusted EPS. As a result, we expect full year reported gross bookings and revenue to increase mid single digits, and on a constant currency basis to both increase high single digits. We expect to drive leverage in our marketing expenses.
Additionally, we expect revenue to grow faster than adjusted fixed operating expenses, in line with our prior commitment for 2025, which we communicated at the start of last year. As a result, we expect adjusted EBITDA to grow a couple of percentage points faster than revenue, and on a constant currency basis to increase low double digits.
We expect to continue to expand our adjusted EBITDA margins in 2025 and deliver margin growth of slightly below 100 basis points. We expect our full year adjusted EPS to grow low double digits, and on a constant currency basis to grow mid-teens.
Finally, we remain focused on managing our capital expenditures, and we expect that CapEx will be about 2% of revenue, similar to 2024.
Turning to our new Transformation Program, which we announced in November. Our intention is to implement certain organizational changes to reduce complexity and increase agility, which we estimate will ultimately produce annual run rate cost reductions of approximately $400 million to $450 million versus our 2024 expense base, and we expect the majority of these savings to be realized after 2025.
By the end of 2024, we have already actioned over $35 million in run rate savings. We estimate the aggregate transformation costs that we will incur over the coming two to three years to be similar to the expected annual run rate savings. In order to provide transparency, we will report these costs separately in a transformation costs expense line, and we expect that certain of these costs will be excluded from our adjusted results.
Embedded in our full year 2025 guidance is about $150 million in cost savings related to the Transformation Program, the majority of which we expect to be in variable costs. Beyond the Transformation Program, we expect to drive additional efficiencies in our ongoing operations.
With the capacity created by these savings and efficiencies, we are reinvesting about $170 million above our baseline investments in 2025 to support our strategic priorities for long-term value creation while still expanding our adjusted EBITDA margins for the year.
These investments will be in areas such as progressing our GenAI capabilities, advancing our Connected Trip vision, and expanding our FinTech offering. We see the potential for these investments to contribute incremental revenue growth in future years and deliver attractive returns.
In conclusion, we're pleased with our fourth quarter results and our outlook for the first quarter and the full year of 2025. We're excited about our long term vision for the Connected Trip. And enhancing our offering for technological advancements such as Generative AI.
Thank you to all of my colleagues across the company for their amazing work and dedication to drive new product offerings, tech innovation, speed and agility, and deliver value to our shareholders, travelers, and partners.
With that, we will now take your questions. Operator, will you please open the lines?
Operator
(Operator Instructions) Lee Horowitz, Deutsche Bank.
Lee Horowitz
Great, thanks for the question. Maybe, starting with Glenn on Generative AI. Thanks for the details on all the products you guys have rolling out there. But I guess how do you contextualize the risks associated with perhaps greater competition from agentic platforms. We have massive buckets of investment aimed at building functional AI agents that could circumvent listings on booking go-direct to hotels. Any more thoughts that would be helpful, and then one follow-up if I could.
Glenn Fogel
Sure. Hi, Lee. Thanks for the question. I'm not surprised by it. I've been here now, as I mentioned in my prepared remarks, I've been here almost 25 years, and it's been a rare time that somebody hasn't brought to me the thought that we were going to be disintermediated that someone else is going to take away our business. And at first it was the hotels. We're going to build our websites, and we will go direct there.
It was Google, it was going to get rid of us, and et cetera, et cetera, et cetera. So it does not surprise me that new technology comes out and people are asking the appropriate question, how is that going to impact your business? And are you still going to be able to achieve what you've been able to achieve for a quarter of a century?
And I would say one of the great things about this company is our ability to evolve, adapt, use all of our resources, our technological knowledge, the tremendous ability of our people, our capital. In terms of a agentic AI, one of the important things is data.
It's something that I think about a lot, as do many people in the management team, how can we change so we make sure that we are the winner of these new technologies. One of the things we mentioned about was coming up with a travel vertical specific agent having a model that domain specific. There are a lot of different things we're working on.
I'm not going to spell out all of the playbook and how we will make sure that we maintain this lead in the industry, but I recognize the question, and I say that we will be able to do it not only by ourselves, but we also, as I mentioned, and I -- we've talked about this in the past, that we're working with all of the major players in the valley and elsewhere, that we are working together to do things that would be better as togetherness instead of trying to do separately.
And I believe that the past is a good example of being able to adapt and continue to go forward and create something that is even better than it was in the past. I'm incredibly excited about this new world of AI, Generative AI, agentic AI models. All of these things are incredible opportunities for someone like us that has the ability to actually turn it into something that is better than it was before. So, I hear you, Lee. I hear that question. It's not new, but I believe we will be a winner in this.
Ewout Steenbergen
Let me build on the answer that Glenn gave with one other perspective. As we all know, these developers of large language models are spending an incredible amount of capital expenditures, and they have choices. One choice could be, are they trying to figure out the complexity of travel themselves or what is probably more likely is partnering with us as they are already doing today because we are able to give them very clear monetization opportunities, which of course is going to be very important in order to prove that there will be very sound returns on these very large CapEx numbers. So really the economic argument on top of all the arguments that Glenn has mentioned is very important from our perspective as well.
Lee Horowitz
Makes sense, thanks. And maybe just to follow up on alternative accommodations. I guess, it's fairly clear you guys are a share gainer at this point. I wonder if you could maybe unpack a bit more on a regional basis. Where you see the biggest contributions to your sort of consistent teams growth rate and the alternative accommodations business in '24? What regions do you perhaps expect to invest most behind the '25? And what do you think is resonating so strongly with the consumer to -- that allows you guys to really outpace the competitors at this point?
Ewout Steenbergen
Yeah, Lee, I think a brief answer on that question. The first part is we see higher growth in alternative accommodations in all the regions in the world compared to the traditional accommodations. And the second part of your question is why are we growing so fast?
I think that has to do with the total proposition that we offer, really great supply, expansion of the proposition in terms of accommodations that we can offer to travelers, and most importantly that we have traditional accommodations and alternative accommodations together on the platform, and travelers can compare and ultimately pick the best option in their particular situation.
And what we're hearing back is that it's absolutely something that travelers like that we have that all combined on our platform. So those are a couple of the reasons why we are growing faster, really the quality of our platform and our products.
Glenn Fogel
That's a good opportunity to do a shout out to the team who has done such wonderful work for so long now. I mean, the 14 out of the last 15 quarters to be a leader in the space, and it's not because we're small. I mean, our [home's] the area in terms of a room night number and you compare it to the leader, we're more than two-thirds, potentially a lot more than two-thirds, you don't really know because the number one puts their experiences and their room nights together.
So, but it's at least two-thirds. So it's not like we're tiny. So it's really just wonderful, the incredible ability of us to come from. What was something that a lot of people didn't think we'd be able to do and achieve something that is now a competitive product.
Lee Horowitz
Helpful, thank you both.
Operator
Mark Mahaney, Evercore ISI.
Mark Mahaney
Okay, let's see. I'd like to ask about airlines and then operator. On the airlines, that growth you had, you talked about a little bit on the call, but that's the, I think the fastest growth you've had in, I don't know, a year and a half or something like that. So maybe just talk about the growth going forwards, like how much higher you think the attach rate could be or how many more markets is do you still have the airline offering to roll out in?
Like just give us a sense of what inning we are in terms of the growth of airline as a product in the booking portfolio. And then could you talk a little bit about the operator experience you have, anything you disclose on the economics? How did that partnership come together and what do you expect to get out of that going forwards? Thank you very much.
Glenn Fogel
Sure. Hi, Mark. It's Glenn. Yeah, very excited about those flight numbers. 52% growth, and it was an acceleration from the previous quarter of 39%. I look back, it was even acceleration from the quarter before, so I think, it's really nice to see that trend. I do not think anybody should be projecting in a linear way that's just going to continue to increase and accelerate, accelerate, accelerate, that obviously is not going to happen.
But I do believe that we will continue to maintain a strong growth in our flight business and it's not just by adding more markets. I don't think there's a lot to be done in that area. It's going to do a lot. What it is is providing a better service to the traveler. So the traveler wants to use us versus all the other ways they can do a flight, and that includes bringing together part of our Connected Trip, giving all the other types of value that we can provide.
And it's not just giving them a hotel, it's not just giving them perhaps a discount in terms of a ground transportation from the airport or insurance or -- actually, it's creating something that really is different. Something that provides a value that the traveler has always wanted, and that is that travel agent in your pocket. And that travel agent in your pocket lives in the phone.
And the idea is that this Connected Trip, which many people when they start their travel planning starts with a flight. So we want to get them in. But once they're in, give them a lot more value. And then of course they're telling other people that this is something new and actually a much better way to do it. That's the idea, and that's how we maintain a strong growth rate in all of our verticals, not just flights, and that's what we're going to do.
Now in terms of operator, that is very early. I don't think we're going to disclose any economics, and I'll be perfectly honest with you, as you may not be surprised, I don't think there'd be much to talk about in that area right now. This is an area though that has just started and just learning how it works. What is the purpose of it? It's working with a very respected partner who knows a lot about AI.
We know a lot about the travel industry. How can we do things together that be mutually beneficial to both of us, and we'll learn. Look, you go way back again. I'm going back in the past. I look at our sites from 1999 and 2000. My God, it was horrible. It's amazing anybody bought anything back then. And now this thing too, it's not the easiest. I've used it. It's a little clunky and stuff, but it will get better, and we'll improve and build upon it. Gotta start somewhere and we've already started.
Mark Mahaney
All right, thanks, Glenn.
Operator
Brian Nowak, Morgan Stanley.
Brian Nowak
Great, thanks for taking my questions. I have one for on agentic for you. Just want to ask you a question. So when you think about partnering with some of these other players like operator or maybe Gemini or any of the emerging potential next generation travel players, you give them access to your differentiated supply.
How do you sort of think about managing the long-term risk that a larger percentage of people and travelers could start using those products the next 3, 5, 10 years as opposed to going direct to you and it potentially has a negative impact on your overall mix between paid and direct traffic?
Glenn Fogel
Well, that is obviously something that people think about when you're putting together an agreement of any type with anyone in terms of what you're going to maintain proprietary to yourself, what you're going to be able to share with someone else to use, how the economic powers between the parties is going to work. Lots of things to still work out, that is something that's going to be a negotiation with a lot of the different parties involved in this, and we'll see how it plays out.
I will say the obvious that we are aware of the issues that you bring up. I do believe there are going to be different ways to come together so that different parties in this new world of agentic AI in that ecosystem, there'll be ways for lots of players to do well, and I'm just pleased to be in the business we are with all the data we have, with the resources we have, the people we have, the worldwide network of consumers who trust us, which is also a very big deal.
People when they're putting together travel, for a lot of people, it's a lot of money to them, and they don't do it often enough that they're just willing to just throw it at anybody. They want to do it with somebody they trust.
So we have the advantage of having a brand that is trusted. All those things together help us in terms of discussions with other players who have other expertise to bring, and I am positive that we are in a very, very good position for this going forward. Ewout, you may have some more.
Ewout Steenbergen
Yeah, and Brian, one other perspective to think of is the following. So with multiple agents that are going to be developed, and we will see many, many agents by many developers over time, horizontal agents, vertical agents, very tasks specific agents.
For us that actually, from an economic perspective, will create an advantage because think about the cost of acquisition. If there are many parties and many providers working together with them will give us some advantage in terms of cost of acquisition that will come down from where we are today.
So actually, with all the partnerships that were building, all the relationships plus our own travel specific vertical agents that we are developing over time, we believe that actually this could help us very much from an overall economics perspective for the company.
Operator
Kevin Kopelman, TD Cowen.
Kevin Kopelman
Great. Thanks a lot. Could you give us your updated thoughts on your interest or lack of interest in larger M&A deals given recent activity in the space? Thanks.
Glenn Fogel
Well, as we don't discuss about M&A except when we have a transaction to discuss then we'll just keep it the way I said every single of the 33 conference calls. This is the same one, same answers. We don't comment on M&A.
Kevin Kopelman
Okay, fair enough. Can I ask about, ad cost? You mentioned that you're expecting leverage this year. Could you give us more color there on the trends you're seeing? Is it safe to assume that direct traffic you expect to continue to go up, and if you could touch on what you're doing with your brand spend, you mentioned it was down and also merchandizing. Thanks.
Ewout Steenbergen
Absolutely, Kevin. So we expect marketing leverage to continue for the full year 2025, driven by the same trends that you have seen in the more recent past. More direct traffic is clearly a benefit overall at higher performance marketing ROIs that we are able to achieve based on all the optimization algorithms that we are running and where the company has built so much expertise over time.
And then I would very much like to call out also how excited we are about the development of social media channels. This is a big area of investment for us. We have invested a lot of our technology in this space and expertise working together with some of the large social media channels, particularly Meta, where we have built a very close relationship.
I don't want to say too much about that from a competitive perspective, but this is very much bespoke model where both teams of both companies have built a very effective way how we can monetize their leads and our leads because this is really based on both remarketing and prospecting that comes from both sides as well as very personalized creative content in terms of feeds.
So incremental ROIs that you can measure with respect to social media channels is something that is new. But we have been able to find out, figure out how to do that. So therefore, we are very confident that this is not ultimately a traveler that would have booked anyhow with us, but it's really an incremental traveler that comes to us and therefore we're spending much more at attractive incremental ROI.
So the combination of all of that means that we are very positive and enthusiastic about the outlook with respect to continued marketing leverage for the company.
Kevin Kopelman
Great, thank you so much.
Operator
Stephen Ju, UBS.
Stephen Ju
Hey, great. Thank you. So, Glenn, I wanted to dig in a little bit more on your thoughts on AI. I think I heard in your prepared remarks about products that can help drive more revenue, and on the other side, other products that can help in cost avoidance. So as we talked to other companies, it seems like the cost avoidance part seems easier to deliver and things that might help revenue may take some more effort. So where do you see yourself position in terms of, when we can start seeing, I guess, noticeable impact to either the top or bottom line. Thanks.
Glenn Fogel
That's a very good question and I'm going to talk a little bit. I'll let Ewout what he wants to disclose in terms of what we're already seeing in terms of some of the benefits. But let's start with the cost avoidance part. Last call we talked a little bit about what we were seeing in benefits in customer service. Clearly an area where there's a great opportunity for anybody who has a large customer service operation to achieve significant savings.
Even something as simple as a CS agent that has to do a summarization at the end of the call, well, right away you have something that can do it automatically, thereby making the amount of time the agent is spending not talking to a customer but summarizing those away. Simple example, but there's so many about that. And then think not just in terms of the cost there, but this is an important one is there are a few things that are as frustrating as having to wait on hold to get in touch with a customer service agent.
The wonderful thing as we develop AI capabilities and customer services, we won't be waiting for somebody to answer the phone. The agent will be answering the phone. In fact, one of the things that we mentioned in the call, it's not a big thing for our income statement, but I like saying it, it's an open table in the interactions they're doing with sales agent, Salesforce in their agentware and coming up with some things that are very helpful in that area. So that's just one area.
Of course, you have the coding efficiencies that everybody talks about. You get hopefully some significant benefits down the road as our developers are able to do a lot more work in the same amount of time, and they're all different areas. So I'm not sure what Ewout's going to want to talk in terms of numbers for that. I'll let him say how much he wants to disclose or not.
On the revenue side, yeah, it is going to be a little slower in showing up in terms of increases. But it's great to see what we're already doing. And again, it's the benefit of having the knowledge, the expertise, and the resources to do this. I mean, one of the things when you're not involved in the industry, you're not as knowledgeable about the complexity of travel. It's not just simply you press a button, and you get a boogie.
I mean, even things as simple as the regulatory world that you have to deal with to make sure if you're using AI, it's not like the travel rules you have to worry about. You've got to worry about the legal things with AI, for example, in Europe, there's the EU AI Act. So you've got to make sure anything you're building is going to fit that. And then there's obviously it's the context, awareness, and data knowledge of travel.
The great thing is having the incredible amount of data we have, really understanding what works, what doesn't work, and being able to put that into a database that can then be used by a Gnerative AI model, that's an advantage. I can go on and on. I won't use it all the time, but I just -- yeah, it's going to be a little slower perhaps than the cost savings, but that revenue opportunity is huge and Ewout, I don't know what you want to disclose.
Ewout Steenbergen
Stephen, I would like actually more to point at actual numbers and to speak about some percentage of savings that sometimes is being mentioned, but then of course the question is where does it actually show up in the results.
So let me first point you to our sales and other expenses for the fourth quarter. What you see here is that those were flat as a percentage of growth bookings, around 2% of growth bookings compared to the fourth quarter of 2023. Underneath, what is happening there is with the growth of our merchant bookings, we have higher payment related expenses, but that is offset by efficiencies in our customer service.
So the fact that we have basically flat as an all expenses, as a percentage of growth bookings, despite the growing merchant business is a clear point in our results that we're already seeing the advantage of Generative AI in terms of actual efficiencies.
The other example that I can give is that in terms of the Transformation Program savings in year 2025 of $150 million, a meaningful part of that is already coming from efficiencies that we will be able to achieve with Generative AI in multiple parts of the company. So it is already clearly showing up in our numbers in the fourth quarter as well as the savings target that we have for 2025.
Operator
Justin Postm Bank of America.
Justin Post
Great, thanks for taking my question. Glenn, I'd like to comment a little bit more on the merchant mix shift. Obviously, way faster growth for merchant bookings. Can you talk a little bit about how that might translate to higher margins or better loyalty, or better repeat rates, and just how that's kind of transforming your business over time? And then I'd love to ask about room nights, obviously some desal in Q1, but you seem very confident on the year. So what were some of those nights borrowed in Q4, and then maybe talk about summer booking pacings if you can. Thank you.
Glenn Fogel
Sure, Justin, I'll take the first and then I'll let Ewout take the second. Now on the first one, when we first started the merchant program, Booking.com, there was a lot of question of why are we getting out of an agency model that seems so simple, so clean, and why are you're doing that. And one of the key things right from the get-go was to achieve the connected provision. We -- you need to have that foundational platform in payments, very, very important.
We have that now, obviously, the numbers you just mentioned, they continue to increase in terms of the share of the total amount of our bookings. That's very important in terms of being able to give benefits to our customers. It's also very important for giving them the way they want to pay. Some of them want to pay in one way, some want to pay in another way. A lot of people who aren't international don't understand that a lot of people don't use Visa. They don't use MasterCard. They have their own way to pay.
And the traveler on the other side -- the supplier on the other side doesn't really want to take the payment the way the traveler wants to give it. So for example, the easy example is out of China, somebody's using Alipay. The small hotel in France doesn't take Alipay. Fortunately we, as that person in the middle, with that merchant pay, we can do that.
So it makes it a win-win for everybody, and it can be less expensive given the FX charges, the interchange charges, et cetera. There's money to be made for all of us. It's cheaper for the traveler. It is cheaper for the supplier, and we can make money in the middle. That's one example.
But then you come up with new products, new things that we talked about. Ewout, as mentioned, the pay in your own currency type thing. There are lots of different things. Here's the thing. So we said we did $166 billion of total transaction value in 2024. Now not all of that was done on payments, so with agency, but it's continued to grow up as our total volume continues to increase.
The question is, what percentage of that, how many basis points, what should we be able to get out of that as profit? And I'll let everybody else make their own guesses and estimates on that. But there's a lot of way to make some very good returns at the same time providing better services to both sides of the marketplace. And Ewout, you can go ahead his room nights question.
Ewout Steenbergen
Justin, let me first zoom out a little bit for our guidance with respect to the first quarter, and then I will give you a more specific answer with respect to room night. So first, let me point out for the first quarter normalized, and it means normalized for the impacts of Easter, FX, and leap year, we are having guidance that shows low double-digit growth with respect to growth bookings, revenue, and EBITDA, low double-digit growth. So specifically on room nights, there's a few elements, why it's 5% to 7%.
Looking first back to the fourth quarter of 2024, the comps were a little bit easier in the fourth quarter, particularly due to the effect of the October 7 attacks in 2023. So that drove a little bit of the higher growth and also the expansion of the booking window. And then we have for the first quarter of this year, a little bit of a headwind from the impact of the leap year compared to a year ago.
So those are a couple of specific elements. Why we are guided to 5% to 7%, but as I said, normalized, we think it's going to be a really good quarter. And again, for the full-year guidance, what you see is on a constant currency basis, we're hitting our long-term algorithm for the company.
So coming out of a, I think, fantastic quarter for the company with a lot of momentum, we're very encouraged about the outlook for the year, and we see a lot of underlying healthy trends for the company.
Operator
I'll hand back today's call -- (multiple speakers)
Glenn Fogel
Thank you. So I just want to say I thank our partners, our customers, our dedicated employees, and our stockholders. We're truly grateful for everyone's support as we work towards realizing our company's long-term vision. Thank you very much, and good night.
Operator
This concludes today's call. Thank you for joining. You may now disconnect your lines.
