Good day, and welcome to the Expedia Group Incorporated Fourth Quarter 2019 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Michael Senno, Vice President of Investor Relations. Please go ahead.

Good afternoon, and welcome to Expedia Group's financial results conference call for the fourth quarter and full year ended December 31, 2019. I'm pleased to be joined on the call today by our Chairman, Barry Diller; our Vice Chairman, Peter Kern; and acting CFO, Eric Hart. The following discussion, including responses to your questions reflect management's views as of today, February 13, 2020 only. We do not undertake any obligation to update or revise this information. As always, some of the statements made on today's call are forward-looking, typically preceded by words such as we expect, we believe, we anticipate, we are optimistic or confident that or similar statements. Please refer to today's earnings release and the Company's filings with the SEC for information about factors which could cause our actual results to differ materially from these forward-looking statements. You'll find reconciliations of non-GAAP measures to the most comparable GAAP measures discussed today in our earnings release, which is posted on the Company's Investor Relations website at ir.expediagroup.com. And I encourage you to periodically visit our IR website for other important content, including today's earnings release. Unless otherwise stated, all references to cost of revenue, selling and marketing expense, general and administrative expense and technology and content expense exclude stock-based compensation and depreciation expense. And all comparisons on this call will be against our results for the comparable period of 2018. A reconciliation of adjusted EBITDA guidance to the closest corresponding GAAP measure is not provided because we are unable to predict the ultimate outcome of certain significant items without unreasonable effort. These items include, but are not limited to, foreign exchange, returns on investment spending, and acquisition-related or restructuring expenses. As such, the items that are excluded from our non-GAAP guidance are uncertain, depend on various factors, and could have a material impact on GAAP results for the guidance period. And with that, let me turn the call over to Barry.

Thank you, Michael. I haven't been on one of these analyst calls, and I don't know, endless amount of times. So, I'm probably a bit raggie. But, I won't ask your indulgence. I'll just kind of plunge in. Since December 4, which is when we made the management change, Peter Kern and I, not a day’s gone by that we have not been engaged in Expedia business. And during this period of time, I mean, having been Chairman of Expedia for I don't know, I think almost 20 years or so, I thought I knew a lot about the Company. But, there's nothing like being on the ground, and we've been on the ground. And I've gotten to know the leaders of the businesses. And I'm definitely impressed. I believe in the future of Expedia as do my colleagues emphatically. We bought in the last couple of months $634 million of our stock, which is more than we've ever bought in an entire year. And we're not going to end that process now. But, what we've really done is we've taken as immediate steps as we can to refocus the Company on the day to day operations of -- and the execution for what the Company is engaged in every day. Last year, we spent probably nine months of the year on this massive reorganization. We're contemplating changing 350 I think of 500 jobs. It was vastly complicated process that froze us. Management at the same time didn't really have a clear path how to grow the Company. It's just kind of a top-down commandment to deliver x earnings. And that misled a lot of people into actions that kind of made sense for a quarter of a day and rest of the day, results of kind of this top-down pressure without understanding how to actually execute and simplify the business and give a clarity. We’d somewhat become a kind of consultant-led and wildly complex business. I said and I think sporadic and bloated. And I'll give you one anecdote that kind of rang in my ears that I'd heard, I don't know, I guess a month or half or two months ago, kind of out there in Seattle, that at Amazon -- whole concept of working life balance that at Amazon, it was all work and no life; and then Expedia was all life and no work. Now, that's an enormous exaggeration. We've got wonderful people in the business. This is not damning or employees. But for several years, we really lost clarity and discipline. So, we're changing a great deal. We're stopping this too large complexity. We're simplifying our strategy. We're stopping doing dumb things and starting to do what we think are good things. So, from doing that dumb to doing this smart, here are a few examples. From wasteful activities that weren't core to our business to actually driving sustained growth, from every brand working in silos around the world to one strategy on marketing, and geographies across all of our brands, from our reliance on Google and metasearch, to aggressively moving to grow our own direct business and have loyal relationships with our customers. So, separate teams and data that's dispersed all over the place to one platform, driving the entire Company. From an air business we basically took for granted, it's just another line of business to actually prioritizing it, energizing it as a true competitive differentiator, and from chasing all these grand goals, to focusing on day to day execution and making that customer experience great. So, we're in. We're energized, we're enthusiastic, and from now on, I hope I think, you'll see the effect of that and the excellent people of Expedia and what we can all accomplish together. So, with Mr. Karan, my colleague, my partner, in this process, is going to say a few things.

Thanks, Barry, and good afternoon, everybody. Let me start by reiterating what Barry said. I think we've learned a ton in the last two months. We've seen some great people and great things and we've seen a fair bit of wasted energy and calories going at things that may not have promised, may not get us to the promised land, and certainly we have not learned and been agile enough and willing to say no to things, and willing to acknowledge failure when it happens. I think we are getting about the business of that and being highly disciplined. And I think that is working its way through the organization. And it's just frankly a terrific feeling. And again, to a few specifics, I want to start by just covering guidance a little more closely. There's sort of three components to how we built our way that is broad guidance approach. One is the core business, the base business if you will with the new disciplines we put in, with some attention to wasted marketing spend and a few other areas. We believe the core itself will accelerate as against 2019. It will be somewhat backend loaded but it will accelerate. On top of that, as we said in the press release, we are going after $300 million to $500 million of incremental savings and that is across the waterfront. We are looking at every part of the business, whether it be tech licenses and procurement to geography, et cetera. And we think there's a lot of money there. The timing of which, however is uncertain as it lays out through the course of this year. But, we do believe by the end of the year, we will be at that run rate level. On the other hand, of course, there is the coronavirus, a terrible thing for humanity and also a not very good thing for our business. And that is highly tough to predict. We have a pretty good line of sight on its impact on the first quarter. But, in terms of its duration, and the depth of its impact, it is hard to predict. So, taking all that uncertainty, running a number of scenarios on the virus based on historic patterns, we have generally taken all that together and said notwithstanding all those uncertainties, we believe and are confident we will get into the double digits. Of course, the virus becomes something completely unexpected, who knows, but we feel confident about that. Moving on to the operations and digging slightly deeper on a few of the things Barry was talking about. This idea of bringing our brands together and out of silos and collaborating in a whole new way is super important to the future success of our business. I would add to that that the best example and the cleanest example today is probably geographical rationalization. We have many brands all over the world, they are -- different ones are strong in different markets. We have historically taken a brand by brand approach. And now, we are taking a market by market approach. And we will push the best brands in every market and we may take some brands out of certain markets. And we will do whatever is smart, both on an operational basis and on a marketing basis to advance the greater good. On the marketing side, as an extension of that more generally, we are looking to rationalize some of our spend, we are looking at common measurement, common tools. These silos didn't always look at marketing the same way, they didn't always attack performance marketing with the same metrics. We are unifying those things so that we have better ways of measurement, and therefore better ways to collaborate and cooperate for the greatest return. On Vrbo, which I know everybody has followed closely, the trends remained fairly muted through the fourth quarter. The replatforming last year and the rebranding were definitely a distraction, slightly different than the distractions Barry more broadly talked about. But now, the team is keenly refocused on fundamentals driving core operations, and they too are beneficiary of our geographic rationalization as they have looked at where they had really inefficient spend to drive reach and geographies that did not make sense, and candidly now that we have the capacity to drive their supply through our other brands, we don't need to have Vrbo in every market in the same way because alternative accommodations can be provided to the customer base through our other brands. Expedia Partner Solutions continues to be a very strong story for us. We believe in the momentum there. We believe in the opportunity to fill in gaps in demand, whether they're geographical or just customer based. And we believe that EPS can add to that momentum by capitalizing on all the things we are now going to be able to do with our core technology platform. So, a lot of exciting stuff going on there. It will give EPS greater configurability and improved customer experience for their end business partners. We recently also brought Egencia together with EPS under a business we're calling Expedia Business Services. It's simply an effort on our part to further simplify, get advantages between businesses. These businesses are not the same. They don't have the same end users, but they have a number of common practices from which they can learn and help one another, including sales and customer management and a variety of other business to business techniques. Our platform is perhaps the biggest story in part with the blame this reorganization to get us to this place. But it is in many ways our biggest opportunity to share technology across our businesses and bringing together groups. Barry mentioned that data and AI group, I'm really excited about what's possible here. It's early days, but for the first time, we are bringing together all the data in the Company into one place where our best data scientists and AI and machine learning engineers can use that data to learn faster and build solutions across the Company that will help us improve the customer experience and obviously our monetization. The teams in our marketplace have also come together and are working to better match supply with demand, which we believe again enhances the customer experience and enhances monetization. We've also brought together a group that will monitor cloud and work on the cloud spend. I know this has been an interesting area for everybody as we have migrated to the cloud. It's been a bumpy and expensive road. We are getting to the end of that road. But importantly, we are getting to a point where we need to and have to optimize our cloud spend. And we now have a centralized group that will look across the Company and work to optimize that and get the most out of it and ultimately get the leverage we've all been working for there. But overall, the common themes here, as we said, are really about simplification, precision, really bringing an efficient operating line to everything we do. We will be aggressive about that and we plan to get a lot out of that as we push through the year. And we of course will keep you apprised as we get through that. I’d just like to point out before I pass it on to Eric that the year will be noisy, not only because of the virus but because the first half of the year. We are getting the benefit or detriment of a slow back half of 2019. We are also spending into our strength areas where we believe we can drive growth in the back half of the year, rationalizing out some of our less efficient spend areas. So, there will be noise between revenue and EBITDA. But as I’ve said and Barry said, we believe strongly we will be in double digit EBITDA territory this year. We're excited about the future. And I think we'll have terrific momentum going into 2021 if we can pull all this off. And with that, I will pass it on to Eric.

Thanks, Peter. Before diving into our results, I want to lay out three main areas we're focused on in 2020.One, driving margin expansion and unit economics; two positioning the Company to move faster and invest back into key areas to accelerate top-line growth; and three, delivering attractive shareholder returns. Turning to the fourth quarter results. While gross looking and revenue trends moderated, disciplined marketing spend and overhead cost containment resulted in a 1% increase in adjusted EBITDA. And for the full year, we came in slightly ahead of our revised guidance range. The slowdown in gross bookings largely related to our air business as we started to comp the enterprise deals at Expedia Partner Solutions, which drives significant air volume for us. Lodging revenue grew 9% in Q4 on 11% stayed room night growth and a 2% decrease in revenue per room night, largely related to growth in our loyalty program. Domestic room night growth remained strong accelerating to 10% as we continue to gain share in the U.S. on the back of strong trends and direct channels. Cost of revenue was up 19% for the quarter. The majority of the growth related to the increase in cloud costs, inorganic impact of Bodybuilding.com and processing fees related to the ramp-up in Vrbo’s transition to the Expedia payment platform. By leveraging Expedia’s payment platform, we expect Vrbo to see improved conversion in unit economics as it benefits in several areas including fraud detection, order completion rates and flexibility on payment options. Also, as a reminder, Bodybuilding.com is essentially neutral to adjusted EBITDA. Free cash flow grew 46% for full year 2019. Normalized for Vrbo’s payments transition, free cash flow grew approximately in line with adjusted EBITDA to nearly $1.1 billion. Based on Vrbo’s current payment structure, the funds are held at a third-party and are restricted. On a normalized basis, we expect solid free cash flow growth. And going forward, with declining capital intensity and favorable working capital dynamics, we're well-positioned to drive healthy free cash flow growth going forward. On the balance sheet, in September, we placed $1.25 billion and 3.25% 10-year notes. We will use the portion of that to regain $750 million notes that mature in August 2020. Our prudent approach to managing the balance sheet is unchanged and we are committed to operating within our investment grade credit rating. In terms of capital allocation, given our conviction and Expedia's growth prospects, we repurchased 5.8 million shares for $634 million from early December through this month. We believe our stock remains undervalued and plan to use our free cash flow and cash position to continue to actively repurchasing shares. Now turning to 2020. As Peter mentioned, we will continue to drive efficiency on direct marketing spend. That will lead to some tradeoffs and modestly slower unit growth for most of the year. But, we believe focusing on higher quality unit growth and on driving our direct business will lead to a stronger, more sustainable top and bottom line growth over time. On cost of sales, we expect growth to remain elevated the next few quarters due to same factors we saw in Q4. Our cost of sales outlook also incorporates higher digital service taxes as we currently expect legislation to take effect in additional countries this year. This remains a dynamic issue and we are closely monitoring developments. In terms of the quarterly phasing, it will take time to work through the carryover effects from the trends of the past two quarters. So, we do expect the majority of our profit growth to come in the second half of 2020. Now, looking at Q1 specifically, we expect adjusted EBITDA to be down substantially. Vrbo losses will be significantly higher due to the usual seasonal trends as we invest to drive growth that will come later in the year. Cloud costs continue to ramp and will have some carryover effect from the operational headwinds that we experienced late in 2019. Each of these is magnified in the first quarter as a reminder, given our seasonally low adjusted EBITDA base. In addition, the coronavirus outbreak is adding further pressure on the top and bottom line in Q1. Based on the current trends, we expect approximately $30 million to $40 million impact to adjusted EBITDA in Q1, and we expect some impact beyond Q1 and 2020 as well. But, the exact amount will depend on how long it takes for travel trends to normalize. Looking below the line, we started to recognize depreciation related to our new headquarters in Q4 and forecast approximately $30 million of incremental depreciation related to the building for the full year in 2020, which will account for the majority of our depreciation growth this year. In closing, we are excited, we are executing on a clear formula that we believe can create significant value, positioning the Company for consistent healthy revenue growth with leverage down the P&L to drive even faster profit growth. And with strong cash conversion, we expect to generate substantial free cash flow to fund capital returns through shareholder repurchases and our dividend. We believe executing that formula will create significant shareholder value over time. Operator, we're ready for our first question.

[Operator Instructions] We'll take our first question from Eric Sheridan of UBS.

Thanks so much for taking the question. Maybe one big picture and one modeling question if I can. Barry, Peter, I want to know, maybe we can get a little more granularity on your vision where online travel is going over the next couple of years. And then, peeling that back to how you're thinking about the exposure to those big trends and whether Expedia has the right assets or not, how should we think about aligning the assets within Expedia against your longer term vision for online travels going? And then, on the model, with the $300 million to $500 million of cost savings, is there a way to think through what that might mean on a division by division basis or where you see the biggest areas where you could gain leverage in your model year-on-year from cost cutting? Thanks so much.

Thanks. Well, online travel started 20 some odd years ago. That was the easiest area to colonize when the internet came along. There's no indication that it is going to do anything but continue to gain adoption. There's been a lot of adoption, it will continue to grow. There is nothing in its path. There are existential issues that have been raised. Of course, one is Google and the other I just heard the other day is an existential issue, which is that we're losing share to hotels. I'll start with hotels first. Because this was -- I think it was an analyst who's -- Terry, I think he’s been consistently wrong about. Actually if you paid attention to him, my other IAC, you would have given up, I don't know, enormous billions of dollars. But anyway, I won't do that. It’s pointless. The point is that he said that hotels were gaining strength, gaining share et cetera. So, here are the stats. For the business -- whole business, the OTA share of online hotel bookings has basically remained steady at about 38%, I don't know for many, many years. But the OTAs continue to gain share in the overall market as this shift continues to go online. For instance, from 2015 it’s gone from 17% to 19%. And at Expedia, our total room rights continue to grow, 11.2% in ‘19 versus 10.5%. So, I would say, yes, there are some direct channels that people like to use. But overwhelmingly, people use online agents to book hotels and are going to continue to do so. As far as Google is concerned, it's a much bigger topic, and I've been quite vocal about this that Google has certainly monopoly share all over the world. And it does what monopoly shares get you to do, which is extend its business in every direction they can. Now, so long as they don't use unfair practices, I got no problem with that. But, when they compete against their advertisers, and we are one of their largest advertiser, we and Booking.com are within their top five of advertisers, they're using their tactics to squeeze these entities that are delivering real service is among many things, anti-social. I mean, I think it's bad practice. I think, the government, which is getting engaged in this, whether it's at the state level or the federal level, which I absolutely believe in the next period, I don't think I ask anybody to come and save us from our mistakes. And by the way, we've made our own mistakes in our SEO practices, which we are fast correcting. I told the senior management of Google exactly what we feel about this and have implored upon them to basically stop actually taking away the profits from businesses that are probably one of their main contributors to their advertising revenue. And I don't know whether that'll have much effect, but I've been very straightforward about it. And I think that there will be -- look, when businesses get to this size, they absolutely have to have regulation, sensible regulation. I'm not talking about breakups. I'm not talking about any crazy stuff. But I do believe that will happen. But, we are making our own efforts. We're driving direct relationships with consumers. Our download apps, we have about 400 million of them and their growth, like [indiscernible] is actually up 40% this year. We're going to drive more downloads, we're going to do everything we can to diversify our traffic to more direct arenas. We also have an EPS, our business-to-business business, which does not depend upon Google, and that's growing terrifically. And we're going to push that too. So, sorry. I went on a bit. But, as I said, I haven't done this in a while. Peter, do you want to say anything?

Yes. I would just add to that a couple of things. One, around the question of cost savings by division, that's something we really can't identify yet and won't identify. There's a lot of shared costs and a lot of -- we're doing more to make the businesses collaborate. So, I think it's really not helpful, even for you, I think, long-term to think of it on a by division basis. I think we're looking across shared opportunities, shared inefficiencies, and where we can get out of things that don't make sense and eliminate friction. So, I think, it's something we're looking for anywhere it exists. And it's not a division by division question. I think, also just to add to Barry's point at the end about EPS, and you asked whether we have the right assets to compete. I think, actually, we have terrific assets to compete. We've got brands that are strong in certain places and not in others, we've got -- and vice versa. We've got to do a better job of differentiating our brands and the customer proposition that our brands provide. But, we have a lot of ways to serve a lot of different demand. And we're using EPS to fill in the gaps and serve geographies and certain demand pools that we can't get at directly. So, I think we have a very attractive way to go eat as much gross bookings as they are out there in the world. And that's what we're going to try to do as efficiently as we can.

We'll take our next question from Mark Mahaney of RBC.

Okay. Thank you. Barry, it's nice to have you back on the call. I think, the question I want to focus on is.

It’s not going to go on that long.

I think, I want to ask you about is, high level, the growth in the lodging business between alternative accommodations and Vrbo and the growth in core, kind of hotel industry. As you've kind of -- looking at it from a 30,000-foot level for a while and you're now getting back into the weeds. Where you think the growth is most interesting for the industry and for Expedia in particular and how confident are you that if -- it does seem from where we sit that the growth is superior in alternative accommodations. Is Vrbo where you need it to be? It seems like that you’ve gone through like a branding strategy part A, branding strategy part B, over the last two years. Is Vrbo where you need it to be in terms of operations, in terms of marketing, et cetera, in order to attack that alternative accommodations market? Thanks Berry.

No, Vrbo is not where it needs to be. But, it is a lot different than it was, I'd say a few months ago. It has a new leader. We have confidence in, and he's also on the ground. And look, what happened to Vrbo is it was -- I think all of you know, a collection of a bunch of disparate businesses brands all over the world, basically that were bought together and put under the name of -- dumb name called HomeAway and -- which meant nothing to no one. We did have one business called Vrbo that did mean something to people and so -- called the VRBO, which we’ve tried and I think are at the very beginning of branding Vrbo. And whether -- I don't know if we went too fast actually or too slow on this, but we did this absolute change day one, the day two, from everything to then one thing Vrbo. That caused us to lose a ton of SEO traffic. Given the trends in SEO anyway, that was hardly -- it was not well executed. So, we've been now cleaning all of that up. And I think it's -- I don't know, somebody here, one of my colleagues may comment on the progress of that to-date. But, look, Vrbo is in a great actually somewhat standalone category. It’s not kind of rooms that are in the attic that people rent you and stand next to you while you go to the bathroom. It is basically accommodations, family of homes, large apartments, things like that in resort areas and other places. It's got great product. We just need to market it better than we have. But, it's got -- I think it's go -- certainly, it's got large opportunity for us. And we've also just plugged it into Expedia recently. That took six months of somewhat disarray. But now all of Vrbo I think is available on Expedia. Is that true or…

Almost all.

And -- but that was a difficult thing. As far as the category, look, I'm very impressed with what Airbnb has done over time. I wouldn't call it a revolution, but it has opened up. Not only has it opened up inventory that didn't exist, but it's also brought people into traveling that couldn't afford it before or didn't want to mess with big stiff hotels and also people wanted a different experience, older people who were lonely and didn't want to go to some cold place. It's not a great job. But basically -- but by the way, you put its inventory as against the hotel inventory, they have kind of different audience. I'm not -- I don't -- I'm not a big believer that they are going to merge. So, I think there's a very healthy standard hotel business. And there's going to be this business, we're participants in it. So, that's as much as I got to say about that.

Okay. Thank you, Berry.

You're welcome, Mark.

Thank you. We'll take our next question from Justin Post, Bank of America Merrill Lynch.

Thank you. Berry, maybe you can give us an update on CEO outlook and how you're thinking about that role going forward. And then, secondly, I thought it was interesting in your prepared remarks talk about improved revenue growth. Is that just as you take out the fact this year, easier comps next year, or do you see some real drivers for improvement in revenue growth, as you look out to the second half of next year? Thank you.

Okay. We're not doing a CEO search. I don't know that we’ll ever do an actual search. I'm not a big believer in “searches”. I think, they usually turn off the usual and obvious suspects. And when you only know somebody from interviewing and recommendations, I figure failure rate is usually certainly above 50% in my experience, other people's for sure. Anyway, we're not doing that. I'll say this. First of all, Peter and I are completely engaged. We are operating the Company, we are responsible for the Company, and we are -- definitely, it is our responsibility. That is not to say that during the calendar year ‘20, a chief executive will emerge from this process. But right now, look, time will tell. But, what happened is amazingly, once we had to make this management change -- unfortunate management change, and I have said before, it was not to demean Mark Okerstrom or CFO, but it really was a real difference in what we actually thought. And that happens. So, there's no damning here. But from that moment, I got incredibly energized about this because I actually began, other than superficially, as a Chairman, I began to really understand the levers of this business and what the opportunities were and what the condition of the Company was that I bought relatively quickly we could turn. So, we’re at it. And it's not going to last beyond ‘20. But, that's where we are for now. As far as drivers for revenue growth, Mr. Kern.

Sure. So, Justin, I think, the way we look at the revenue drivers, it's not a comp issue. We want to drive healthy -- as much healthy revenue growth as we can find. In the near term, we are in a period where we are coming off of weaker back half of '19. So, that's a dulling effect. And we are being very clinical about, as I mentioned, geographies and marketing spend and trying to get rid of empty calories. It's not a bad thing to drive performance marketing and to drive throughput when you're good at getting repeat customers and you're good at turning them into being direct customers. But, when you're not as good as you could be, it's not the most efficient use of capital. So, we want to get better at all of those things. And so, in the near-term, I think you'll see some pressure on the top-line from those movements, which we think are very healthy. But, out of that we believe we will find much better ways to invest our capital geographically by brand. We think we will do a better job of repeat business and direct customer experience because we will be better at the customer experience side of the business. We have huge leverage that we can't even really calculate that will come out of the platform technology group, whether it be the data and AI side, the management and yield side, the cloud. There's just a number of places where we can just do a lot better. And so, we believe all of those things will drive conversion, will drive better customer experience, will drive stickier customer relationships, will allow us to invest more aggressively, and all of those things will accelerate revenue going forward.

We'll take our next question from Justin Patterson of Raymond James.

Great. Thank you very much. Barry, you called out the consumer experience in your initial remarks, that and loyalty. What are the key things you need to do to get right, improve the customer experience and build loyalty?

Look, one of the things I think we suffered from is -- to a degree, we lost attention of the product itself, what the consumers get, what do they see, how do they interact with it, what is the user experience, et cetera, et cetera? How do we not only ease their path to travel, but how do we really add value? And so, one of the things that has come out of this is now an absolute focus on what that experience is, that's where a lot of the organization and investment is going to come from. By the way, it’s investment in focus and time; it's not investment really in cost. But making -- look, OTAs have not had in my opinion, enough differentiation, and differentiation meaning that Expedia, which has the benefit to only one that's got the benefit, I mean God knows who poured money into it. It has the benefit of being able to get you hotels, air, cars, experiences, anything you need in travel is in one place at Expedia. It is not -- certainly, it has not been as efficient as Booking.com and hotels, particularly in Western Europe, and when the United States has been fine. But, that's not a solitary diet. And that's fine for some people. But, if you come to Expedia increasingly, you're going to have a product that is actually going to not only ease the process but can add value to the process. Because we're the only ones who can really package. We're the only ones who can officially put things together and magically offer people a lower price and probably a better experience. So, it's -- anyway, I think, I kind of said it. On loyalty, Peter will talk about it.

Okay. I'll talk about loyalty, but I was going to add that -- no, that's okay. I would say that the industry suffered or benefited from a high degree of commercialization around everything they did. It was an aggressive, how can we turn a customer into a consumer into a buying hotel room. And that goes for all OTAs. And I think ironically, to tie a few of these questions together, that Google's pressure and the pressure on performance marketing puts the pressure back on all of us to make it really about the consumer experience. You can't just cash your ticket every time and have the consumer feel like they're having a great experience and they have a reason to come back. So, it's on us to do. There is a lot of work streams going on against that. It covers a lot of activities, including what you serve up to the customer and how well you match content and supply with them, all the way through to how you take care of customer service calls and everything else. So, we are on that path and we are aggressively focused on that. And we may have Google and the rest to thank for driving us there. But, we should have been there and we will be there. As for loyalty, it's an important part of our consumer proposition from Hotels.com. Again, we are going to strive to better differentiate our brands. Berry took you through the end to end opportunity that brand Expedia offers, Hotels.com is another thing, Vrbo again another thing. So, we are going to differentiate those and drive to the biggest pools of demand, we can take them all, and hopefully they will work symbiotically and to the greater benefit.

Thank you. We'll take our next question from Brian Nowak of Morgan Stanley.

Berry, it's great to hear your energy. I guess, I wanted to sort of ask about your view over the next two to three years for the Company. So, understanding that the near term, focusing more on higher quality room night growth, rationalizing some ad spend, really focusing on direct, pressure near term room nights. But, talk to us about how you think about the keys to really driving sustained, faster room night growth in ’21, ’22 and beyond as you sort of get through the important steps you're going to take in 2020.Thanks.

It’s continued execution and focus and not resting, not being very patient. That is one of the things that we're going to have to imbue in this organization. And, again, look, I think the outlook is good. It's got some challenges. I'm less worried now, having gotten into it about these existential challenges than I was before I got into it. Those are what they are, but Expedia has -- and with its brands, with differentiation with -- by the way increased, hopefully more interesting forms of loyalty, rewards and things like that. Expedia is going to be able to which I think it's going to be able to do as against its competitors. I think, we're going to be able to build up loyalty. The whole concept of all of this was you paid a lot for your first experience with an OTA with what you did in advertising but you were hoping for the second. From now on, it's going to be the second, third and fourth for us because what we're -- because all we're -- really I would say driving us down to is this kind of pragmatic focus on -- basically the verities, which is what is the experience, we are -- we have chased the tail. The tail was pretty good to start off. I want to travel, started off with the boom because it was obvious, better experience, kind of raw. But we have simply chased it with -- look, working on conversion, working on all those things is good. But the reason that I think 2, 3, 5, 10 years from today, Expedia can continue to actually beat its competition is because of what we're focusing on now. That will give us -- we won't have to do -- we won’t have to look for other pools. There's enough there for us, if we just get back to pragmatic focus on streamlining our business, simplifying our business. As I said before, we were bloated organization. I mean, not because people were lazy or whatever. But over the years, just chasing the tail of growth and all that we're just adding people and people and complexity and all that stuff until, frankly, very few people figure out what the hell we were supposed to do during the day. So simplifying that has a great byproduct of cutting our costs. Our costs were too high and our costs are going to come down beyond this first level of $300 million to $500 million over the future, because we are going to simplify. Simplifying lets us pay attention. If we pay attention, given the opportunity, I worried about two or three years.

We'll take our next question from Deepak Mathivanan of Barclays.

Thanks for taking the questions. So, two quick ones from us. First, can you elaborate on the cost savings? You noted that the expected cost savings to reach $300 million, $500 million run rate. Should we assume this progression to be relatively linear? Just trying to understand how much is factored in the low-double-digit guide? And then, the second question about coronavirus. Is the impact currently largely contained to Asia Pacific or is there demand softness in other markets as well? Thank you.

I'm just going to spout off something here on the virus thing. And I think it's going much beyond that. I think, people are worried. I think, people are just saying -- I mean, they are all over the place. New York City people are in buses and subways with masks on. I think, there’s been one case reported in New York. So, I think, this is a damper. How far this goes? I mean, a week ago, it was supposed to kind of be lessening and yesterday, again, shot up in terms of infected cases and I guess deaths. I mean, do we have a pandemic? I don't know. I have to believe that now the activism of every country in the world on this is going to contain it quickly. Now, by the way, that's the statement with no facts and no knowledge, so you can all toss it. But we don't truly know the extent of it. And it is going beyond Asia and it will go beyond Asia.

Yes. And Deepak, this is Peter. I would just -- to your question of the timing and how to think about the expenses, I'm afraid we're not going to give you much satisfaction here. This is a work in progress across literally the entire Company, and all pockets of spend and all activities. And we are making progress on many, many fronts, but some will take time to germinate and some will be sooner. And, you'll know as soon as we know, but we can't give you much color except to say obviously as we take these things out and they stack up, they obviously get better as the quarters, they should. We should get more savings as the quarters go by. But how much and how volatile that number is, it's still pretty early to tell. So, we're committed to getting through it in an orderly fashion in a way that helps the business and doesn't break something new. And we believe we can get through the lion's share of that by the end of the year and be kind of at our full run rate. But again, it's across so many things that it would be impossible to give you a schedule of that.

I'll just add one more thing because I think it should be said, which is this process of simplifying our business and lowering our costs has an effect obviously on people. We have been in the process of going through this over the last at least months. I've never seen a process like this. I keep saying it to my colleagues that are involved, how impressed I am with the thoughtfulness, the deliberations that go on in every part. So, this is not just saying, okay, there's one little piece of the Company. Every one of our senior leaders has participated in this. And in a way I almost feel like we should publish the process we've gone through because I've never -- look, I have been around and I have been doing a lot of these processes. I've never seen one as thoughtfully and decently done as this. And the plan for communications is I mean, I'm sure we'll make mistakes here or there, but it's just impressive. Anyway.

Thank you. We'll take our next question from Lloyd Walmsley of Deutsche Bank.

Hi. Thanks. This is Chris on for Lloyd. How are you guys thinking about driving app downloads from here? It seems like you guys have done some good download growth. But, should we be thinking about a rebuild of the app or spending to drive app downloads or expanding a loyalty program? Just any color you can share beyond what you guys have shared so far? Thanks.

Yes. Thanks for the question, Lloyd. I think, the specifics are taking place on many fronts. This isn't a rebuild or anything else. In fact, as you probably know, as well as Barry and I, the Company has been moving to PWA to drive mobile abilities across our brands. That translation has taken time. There's been some bumps in the road. But now, our biggest brands are there and -- or nearly there. And I think that's a big opportunity for us to improve on that app experience. In fact, the app growth and app conversion has been showing signs of being better than the rest of the business. I attribute some of that to PWA and any the experimentation people can do. We obviously -- once we have it nailed, we've got to push into it, push into it with marketing and push into it with getting our consumers there more, getting into sign in more and all of those things. So, it's across a whole waterfront. I think, the biggest sea change is just our push to the Company that this has to be our focus and this has to be where we want to move people. We need to get them out of refishing for them in the performance channels and into having real relationships with us. So, it's a holistic kind of approach. But it's taking place on the marketing side, on the product side, on the innovation side and everything else. And so, I think, we're going to push across all those things.

We'll take our next question from Kevin Kopelman of Cowen and Company.

So, I have a question on SEO. Can you give us a better sense of what happened to SEO in the third quarter, because externally looking into revenue and ad trends, it's really hard to tell how big of an impact that was and what changed there? And on that, how big ballpark is Expedia's exposure to SEO? Thanks.

This is Peter. I'll take the end of that, Kevin, which is we don't really disclose how big SEO is and don't intend to. But, it's still a significant part of the business and a good part of the business. We've been belaboring this. But clearly as we move to direct relationships and direct traffic with our customers, that is the single best way we can offset any declines that come from SEO. In terms of what happened in the third quarter, I think it was a compounding of a number of tactical things that Google did and we did not respond well to. Again, Barry mentioned in the very beginning, we were caught up in a rather large undertaking in terms of reorganization, and that took people's eyes off the ball and our view. And we could have done better, we should have done better, we will do better. There were also some changes to auction -- some auction dynamics in meta that we did not respond particularly well to. So, there are number of things that were going on that we were not really on top of. SEO's one of them. But, I think as you think about it, we expect SEO to be a continued headwind. Google, until someone stops them, is not going to stop doing what they've been doing. We've seen signs, as early -- as recently as last week, of some changes that may have impact. And hopefully they will think better of it and create a fairer marketplace. But, we can only control what we can. We're working really hard to offset those headwinds in pure SEO activity, as well as do everything we can around the rest of the business to make up for whatever we give up in SEO.

The SEO is not going to kill us. And SEO is not the future of our business. The trends have been -- these trends began seven or eight years ago. We should have been more alert obviously to the continued consequence of this session. As I said, I don't think we're going to be saved by some by some bill, government bill. I absolutely believe there will be regulation. But, we are doing all the things that we intend to do to deemphasize it. It’s still a part, it's not a huge part, but it is a part of our business, but it isn’t the future.

Thank you. We'll take our next question from…

So, you can go ahead. What do you want to add?

I wanted to ask -- I appreciate that, Barry. I just wanted to ask a follow-up on coronavirus. Everyone's asking us about it. What are you seeing? Obviously you can't predict it. But what are you seeing quarter to date in the Asia Pacific business? And I appreciate the EBITDA guidance is very helpful but just in terms of how much…

Very good. Eric Hart is going to respond.

Yes. Hi. This is Eric Hart. So, if you think about how it has affected the business over time, it started in mainland China domestic, then inbound-outbound, then sort of going through APAC, and then, as we believe that it is impacting other areas of the business. We have broken down as best we can looking at the fundamental underlying drivers for it -- and of the business. And what we see is in APAC itself upwards of 50% plus and obviously higher that as you get closer to in APAC to China that that can get very much north of that. But, then, when you try to control for APAC, and you look at North America and EMEA, it does appear that there is weakening of the business as well in those areas of the business. So overall, concentration, APAC obviously is an issue for us. We do see that -- we believe that is having some impact in other areas of the world as well. And in the 30 to 40 is what we're able to estimate, based on the different scenarios

$30 million to $40 million.

$30 million to $40 million.

Yes. Listen, it truly is an unknown. I know everybody's asking about it. Look, you've got to believe it's going to be contained. If it's not contained, by the way, the entire world's going to shut down. So, all you can do is every day you read the news and react to it. I think, anybody as an investor, unless you think this is going to be the end of life as we know it, who cares? Believe me, I don't mean who cares a lot of people are going to get sick and whatever. But really, this is an exogenous list events, will end. And frankly, no one should count it. All we're trying to do is separate what we absolutely believe is the effect of the virus from our ongoing business, so we can prepare ourselves and make that ongoing business as strong as possible when this thing is over.

Thank you. We'll take our next question from Jed Kelly of Oppenheimer.

Great. Thanks for taking my question. Back to Vrbo. It's primarily domestic and it seems like you're rationalizing your marketing outside the U.S. So, does that have the most opportunity this year to inflict back to growth? And then, I have another question. As you think of driving more differentiation, more loyalty, do you ever think about getting more-closer to the inventory, and taking more inventory risk?

So, I think I'll start at the top there. I think Vrbo, yes, we're rationalizing some international spend. But, that is by no means all international spend and ambition. And as I mentioned, now that Vrbo inventory is available on brand Expedia and actually went live partially in Hotels.com for the first time a few days ago, we have many ways to get that inventory into other markets that may be way more efficient than trying to build a brand in a place where we have no brand recognition. So, there's lots of ways to look at that. I don't think we believe Vrbo is on a path to any greater inflection than any other of our businesses. All the businesses are working hard. And there's a lot of -- various drivers. So, I wouldn't think of it that way. But, we do believe Vrbo will grow EBITDA and get back to growing top-line, again as we lean into our stronger opportunities in the beginning of this year. And no, inventory risk, no, not right now. We got plenty of other things to do before we get to figuring out whether we're going to take inventory risk.

Operator, we'll take our last question.

Sir, we have no further questions in queue.

Thank you, all. Actually, I’ve said before, I really am enjoying this process, and I think so too is Mr. Kern. And I hope many of our executives are enjoying that too. But, nevertheless, we'll plow through it on. In any event, thank you for being with us. And we'll talk to you in a few months and update you with our progress. Good day.

This concludes today's call. Thank you for your participation. You may now disconnect.