David I. Goulden
Executive Vice President and Chief Financial Officer at Booking
All right. Perfect timing. Thank you. I was cut offline, back in again. So thank you, Glenn, and good afternoon. I'll review our results for the third quarter, provide some color on the trends we've seen so far in the fourth quarter. To avoid the comparisons to the pandemic impacted periods in 2020, all growth rates are relative to comparable periods in 2019, unless otherwise indicated. Information regarding reconciliation of non-GAAP results to GAAP results can be found in our earnings release.
Now on to our results for the third quarter. On our last earnings call, we discussed the improvements in trends that we saw throughout the second quarter driven by the U.S. and Europe, followed by a modest pull back in July. After our earnings call, we saw our overall trends improve in August and continue to get better in September, which resulted in Q3 reported room nights declining 18% versus Q3 2019, which was ahead of the 26% decline in Q2 and the 22% decline in July. September was the strongest month in the third quarter with room nights declining 14% about the same level as June.
The improvements in the Q3 room night decline versus Q2 was driven primarily by Europe, which benefited from strong cross-border travel within the region. In Q3, room nights in Europe were down mid-single-digits versus 2019 with room night trends improving in August versus July. September was similar to August. You will recall, the room night growth pulled back from June to July in Europe due to concerns over the Delta variant. Rest of world also improved from Q2 to Q3. In the U.S. -- Q2 to Q3. However, the U.S. still have strong growth in the quarter and remained our strongest performing major country in Q3.
Within the U.S., we saw a meaningful slowdown in August from the very strong growth we experienced in July, followed by a recovery to strong growth in September. The slowdown in the U.S. in August was due to concerns about the Delta variant. Asia room night declines in Q3 were about in line with Q2. Room nights in Asia were still down significantly from 2019 levels.
Mobile bookings, primarily through our apps, represent about two-thirds of our total room nights. Our apps continued to represent an increasing percentage of our mobile bookings. In Q3, as Glenn mentioned, we achieved an important milestone in use of our app of Booking.com surpassing 100 million monthly active users. We're also pleased to see the number of unique customers booking via our app in the quarter grow strongly compared with Q3 2019. Our direct channel, as a percentage of our room nights year-on-year and relative to Q3 2019 increased.
While international room night remained down versus 2019, we saw another sequential improvements in our international trends, with international mix of our room nights increasing to about 33% in Q3 from about 25% in Q2 from about 15% in Q1. Most of this improvement in international room nights came from bookings to travel within Europe. We continue to see double-digit growth in domestic room nights in Q3, but at a slightly lower level than in Q2. The pickup in international travel in the quarter was a driver of the improvements in overall room night trends from Q2 to Q3. However, international room nights were down almost 50% compared with Q3 2019 levels.
Our Q3 cancellation rate was slightly above Q3 2019 levels. However, cancellation rates improved in the quarter, and in September was slightly better than 2019 for the month. Percentage of our Q3 2021 bookings made with flexible cancellation policies remain significantly higher than in Q3 2019. The booking window of Booking.com remained shorter than it was in the third quarter of 2019 and contracted more than it did in Q2 as we saw a higher mix of near-term bookings during our peak summer season. All regions had a shorter booking window in Q3 than in Q3 2019.
For our alternative accommodations, the global mix of room nights in Q3 of about 30% was up slightly from Q3 2019. The increase in mix of alternative accommodations in the quarter was less than it was in Q2 as we saw a greater sequential improvement in demand for hotel room nights in Europe from Q2 to Q3. Our alternative accommodation room nights in Europe grew slightly in August and September versus 2019, and for the quarter, were about in line with Q3 2019. We believe we benefited from the strength of our portfolio in Europe where we could respond to solid demand for alternative accommodations and an improving demand for hotels.
Gross bookings declined 6% in Q3, which is less than the decline in room nights due to the increase in average day rates for accommodations of about 10% versus 2019 on a constant currency basis and also due to a couple of points of benefit and changes in FX rates and strong performance in our flight business. Our accommodation constant currency ADR benefited by just over 5 percentage points from an increased mix of business in North America, which is a high ADR region and a decrease of mix in Asia, which is a low ADR region. Excluding regional mix effects, constant currency ADRs were up just over 45, driven mainly by rate increases in Europe and North America across many destination types with notable strength in beach-oriented leisure destinations.
Airline tickets booked in the third quarter were up 131% versus 2019, driven by very strong growth of Priceline and by flight bookings at Booking.com. We're encouraged to see another quarter of triple-digit growth from our flights business, which is a key component of our multi-product Connected Trip strategy. Consolidated revenue for the third quarter was $4.7 billion, which was 7% below Q3 2019 and was more than double the amount of revenue in Q2 2021, a far greater sequential improvement than in 2019.
Our Q3 revenue as a percentage of gross bookings was about in line with Q3 2019, which was design in line with our expectations. We experienced even more revenue seasonality in Q3 2021 than normal due to the concentration of stays in Q3 from bookings made in the quarter and also from bookings -- when customers could book accommodations, but could not stay due restrictions and other COVID-related concerns.
The strong top-line performance we just -- the strong top-line performance resulted in adjusted EBITDA of $2.1 billion in the third quarter, which was 15% below Q3 2019. Marketing expense, which is a highly variable expense item, decreased 3% versus Q3 2019. Marketing expense declined by few points less than gross bookings due to slightly lower ROI in paid channels of invested into capturing demand during the peak travel season.
Sales and other expenses in Q3 were significantly higher than they were in Q2 on a dollar basis due to higher volume of merchant gross bookings, which increased as a percentage of our total gross bookings in the third quarter. On Booking.com, the amount of gross bookings processed through our payments platform in Q3 was over $6 billion, which was almost one-third of Booking.com's business, up from about a quarter in Q2.
Our more fixed expense categories in Q3 in aggregate came in 3% lower than Q2 as the $136 million of personnel expense in the second quarter related to our decision to repay the government aid was mostly offset by an increase from Q2 to Q3 in our bonus accruals and digital service tax expense, both of which are crude proportional to revenue.
Our non-GAAP EPS was $37.70, down 17% versus Q3 2019. Non-GAAP net income of $1.6 billion reflects a non-GAAP tax rate of 21%, which is higher than the 19% in Q3 2019 due to a higher proportion of non-tax deductible expenses in relation to lower pre-tax income versus 2019. On a GAAP basis, we have operating income of $2 billion in Q3. We recorded GAAP net income of $769 million in the quarter, which includes $1 billion pre-tax unrealized loss on our equity investments, primarily related to our investment in Meituan as well as income tax expense of $199 million.
Now on to our cash and liquidity position. Our Q3 ending cash investment balance of $15.4 billion was down versus our Q2 ending balance of $16.1 billion after $1.5 billion of free cash flow was more than offset by the repayments for $1 billion convertible notes matured in Q3 and the $1 billion unrealized loss on our equity investments.
The return of capital to shareholders have and will be an important component of our value creation strategy. Throughout the COVID pandemic, we said that we'll restart returning capital to shareholders when we saw that our three largest regions were no longer a meaningful risk of a major reversal due to COVID and it also becomes more predictable. Assuming the travel recovery continues, we plan to restart returning capital in early 2022 under our remaining authorization. Assuming continued recovery, we would expect to complete this authorization within three years from restarting.
Now on to our thoughts for the fourth quarter. October room nights declined 10% versus 2019, which is better than the 14% decline in September. The improvements in October was driven mainly by Asia, although the region remains down considerably versus 2019. The improvement in Asia was led by domestic travel within many countries and was driven by improving vaccination progress and governments easing restrictions on travel.
Room night growth in the U.S. improved a little from September to October and remained strong in October. Rest of world also improved a little in October and was back close to 2019 levels. Room night declines in Europe were about the same in October as they were in September, but weakened towards the end of the month. This resulted in overall room night declines being higher in the last week of October than the average for the month. The slowdown at the end of October in Europe was driven by a number of countries that have seen recent increases in COVID infections, including Germany, Russia and Italy.
Given the ongoing uncertainty around COVID, it's difficult to predict how room nights in November-December will compare with a 10% reduction we saw in October. Looking forward to November-December, the rising case counts across many important Western European countries and across much of Eastern Europe as well as the start of the winter season in the Northern Hemisphere, which in 2020 contributed to an increase in COVID cases, creates unpredictability. Also, pre-pandemic, the contribution of Asia to total room nights was highest in November and December, and Asia is still our least recovered region.
On a more positive note, since the U.S. announced in late September plan to ease travel restrictions in November for international travelers who are vaccinated, we've seen a significant improvement in room nights booked by Europeans to travel to the U.S. as well as the reverse. Also, we are pleased to see more gross bookings on the books for the Christmas New Year period than we saw at this time in 2019 in the U.S. and Western Europe.
Turning to the income statement. We expect Q4 gross bookings to decline by a few points less than room nights, driven by higher reported ADRs and flight bookings versus 2019. We expect less of an increase in our ADRs in Q4 than in Q3 due to less of a benefit from regional mix as the Asia region continues to recover, but also due to lower occupancy rate after the peak travel season.
We expect Q4 revenue to decline more than gross bookings due to a couple of factors. The first is that due to the short booking window in Q3, a lower percentage of Q3 bookings than normal will stay in Q4. The second is due to our expectation that the booking window will contract less in Q4 than it did in Q3, resulting in more bookings made in the quarter that are expected to check in, in future quarters. As a result, we expect our revenue as a percentage of gross bookings to be more 1% below Q4 2019. This also means we expect Q4 revenue to have a greater sequential decrease from Q3 than we saw in 2019, and we expect Q4 revenue to decline more it did in Q3.
We expect Q4 marketing expense as a percentage of gross bookings to increase slightly versus 2019 as we expect to invest in capturing demand and increasing awareness during the continuing global recovery of travel demand. We expect Q4 sales and other expenses to be lower than they were in Q3 due to lower merchant transaction volumes. However, we expect sales and other expense in the fourth quarter to be higher than in Q4 2019 due to higher merchant volumes and mix. We expect our more fixed expense categories in Q4 in aggregate to be about in line with Q3 on a dollar basis. We expect Q4 EBITDA to be positive, but driven largely by the higher than normal seasonal decrease in revenue, we expect a much greater seasonal sequential decrease in EBITDA from Q3 to Q4 than normal.
In conclusion, we are pleased with our recovery in the top-line in Q3, which led to strong financial results for the quarter. The financial strength we saw in Q3 was helped by the concentration of stays in the quarter which will lead to some differences in the comparison of Q4 to Q3 relative to what we've seen in prior years. October room night trends improved relative to September driven by some encouraging trends in Asia. However, recently, the rising case counts across Europe increases the uncertainty about how trends will progress in November and December. In closing, we're confident in our ability to capture demand as the global recovery continues and execute against our strategic priorities.
With that, I will now take your questions. Eli, I'll turn over to you to open the line for questions.