David I. Goulden
Executive Vice President and Chief Financial Officer at Booking
Thank you, Glenn, and good afternoon. I'll review our results for the fourth quarter, provide some color on the trends we've seen so far in the first quarter and our thoughts on 2022. All growth rates for 2021 and 2022 are relative to the comparable period in 2019 unless otherwise indicated. Information regarding reconciliation of non-GAAP results to GAAP results can be found in our earnings release. Now onto our results for the fourth quarter. On our November earnings call, we discussed the improvement in trends that we saw throughout the third quarter, driven by Europe followed by a further improvement in October, driven by Asia. You will recall the trends weekend in Europe towards the end of October, driven by a number of countries I see recent increases in the Delta infections at that time. In November, we saw a slowdown from October overall trends, mainly by Europe and this slowdown continue to worsen in December across all regions due to Omnicom variant concerns. This resulted in Q4 reported room nights declining 21% versus Q4 2019, which was 11% worse than the 10% decline in October, only a few points worse in the 18% decline in Q3. December room nights were 35% below 2019.
Moving into the fourth quarter, the slowdown in Q4 versus Q3 was driven primarily by Europe, which declined about 20% versus Q4 2019, while all other regions improved in Q4 versus Q3. Compared with Q4 2019, the U.S. continued to have strong growth in fourth quarter while Asia was still down considerably and rest of world was down modestly. However, as I mentioned, we saw a slowdown across all our regions in December, most meaningfully in Europe and in the U.S. Mobile bookings primarily through our apps represent two-third of our total room nights in the fourth quarter and for the full-year. Our apps continued to represent an increasing majority of our mobile bookings. We continue to see greater than 50% of our total room nights coming to us through the direct channel. Our direct channel increase as a percentage of our room nights in the fourth quarter and for the full -year relative to 2020 and 2019.
The international mix of our total room nights in Q4 was about 33% in line with Q3. Q4 international room nights were down almost 50% compared to Q4 2019 levels, a few points worse the decline in Q3. We continue to see growth in our domestic room nights in the fourth quarter, also a level slightly below Q3. The December slowdown was both the international and for domestic. Our cancellation rates were up a few percentage points versus 2019 in Q4 and for the full-year increased meaningfully in December due to concerns about the Omnicom variant. The booking window in Q4 of Booking.com was not sure there than it was in the fourth quarter of 2019 and contracted further in December as customers focus mainly on the short-term travel needs. To alternative accommodation of Booking.com, the global mix of room nights about 27% in Q4 and about 29% for the full-year was in line with 2019 levels. The global mix was impacted by the underperformance of Europe relative to North America. Within Europe, our mix of alternative accommodations increase in Q4 by a couple of percentage points and for the full-year by a few percentage points relative to 2019. Growth has been declined 8% in Q4, which is less than the 21% decline in room nights due to an increase in average daily rates for accommodations on a constant currency basis of about 30% versus 2019 and very strong performance of flights business.
Our accommodation constant currency ADR benefited by about 4 percentage points from an increased mix of business in North America, which is a higher ADR region and a decrease of mix in business in Asia, which is a lower ADR region. Excluding regional mix effects, some currency ADRs were up about 9% driven by rate increases in most of our regions, most notably in Europe and North America and especially in higher demand leisure oriented destinations. Constant currency ADRs were higher than we expected due in part to continued high rates flexible bookings plus generally higher pricing in North America and in Europe. Airline tickets booked in the fourth quarter were up 116% and for the full-year were up 104% versus 2019, driven by very strong growth of Priceline and by flight bookings at Booking.com.
We are encouraged to see a full-year of triple-digit growth from our flights business, which is a key component of our multi-products Connected Trip strategy. Consolidated revenue for the fourth quarter was almost $3 billion, down sequentially 36% from Q3 2021 and 11% below Q4 2019. Q4 2021 revenue was more than double the $1.2 billion of revenue we recognized in the fourth quarter of 2020. Q4 revenue was strong than expectation due to higher ADRs and a shorter booking window. Revenue was less impacted of the bookings from Omicron in Q4. Revenue as a percentage of gross bookings was about 40 basis points below Q4 2019, which was best, is on expectations as a deceleration within Q4 more negatively impacts our gross bookings in revenue in the quarter.
Excluding timing impacts, our underlying accommodation take rates were about in line with Q4 2019 levels. Our full-year revenue was almost $11 billion, which is 27% below 2019, but improved 61% versus 2020. Full-year revenue as a percentage of gross bookings was 14.3%, which was lower than 15.6% in 2019, primarily due to the timing differences between gross bookings and revenue recognition. The strong revenue results in the fourth quarter helped drive adjusted EBITDA of $940 million, which was 27% below Q4 2019. Sequentially, Q4 EBITDA was down 55%, which is better than we expected. This was driven primarily by the higher than expected revenue and lower than expected opex in our more fixed expense categories. Marketing expense, which is a highly variable expense line decreased 2% versus Q4 2019. Marketing expense as a percentage of gross bookings increased slightly versus 2019 in line with our expectations. Marketing ROIs were a little lower than our expectations due to the negative impact of cancellations late in the quarter, and this is offset by a higher than expected mix of direct business. Sales and other expenses were 21% higher than Q4 2019 due to a higher volume of merchant gross bookings and higher outsourced call center costs.
About 30% of Booking.com's gross bookings were processed through our payment platform in Q4 and about 27% for the full-year, up from 22% in 2020. We expected our more fixed expense categories in aggregate to be about in line with Q3 due to lower personnel costs offset by higher IT and G&A costs. They came in 10% lower than Q3 due to year-end finalization of our bonus expense accruals as well as lower expected IT costs. This means our Q4 personnel expenses do not reflect our run rates going into 2022. Non-GAAP net income of $354 million results in non-GAAP EPS of $50.83, which was down 32% versus Q4 2019. Our non-GAAP tax rate of 20% was higher than the 18% in Q4 2019. Our full-year non-GAAP tax rate of 20% was 1% higher than in 2019 due to a high proportion of non-deductible tax expenses and non-tax deductible expenses in relation to a lower pre-tax income versus 2019. On a GAAP basis, we had operating income of $848 million in Q4. We recorded GAAP net income of $618 million in the quarter, which includes income tax expense of $198 million.
Now onto our cash and liquidity position. Our Q4 ending cash investment balance of $14.3 billion was down versus our Q3 ending balance of $15.4 billion, primarily driven by the $1.2 billion Getaroom acquisition, partially offset by positive free cash flow about $178 million. Booking's housekeeping notes about Getaroom. The first is a closed-end of Q4. I was not meaningful to Q4 results. The second is that we did not include incremental room nights from Getaroom in our commentary about January and February. These incremental room nights will include when we release our Q1 actual results. In early January, we started returning capital to shareholders under our remaining authorization and to date purchased about $500 million. During that travel recovery continues, we still expect to complete our remaining authorization within the next 3 years.
Now onto our talks for the first quarter and to remind you, we will make comparisons with 2019 unless otherwise indicated. January room night declined about 22%, an improvement from the 35% decline in December, as concerned around the Omicron variant ease. This improvement was driven primarily by recovery in cross-border, travel within the European region and domestic travel in Europe. We saw room nights trends improving throughout January and continuing into February. Room nights in the first half of February were about in line with 2019 levels and gross bookings were higher. In the first half of February, we saw a meaningful improvement across all our regions compared to January. The U.S. has strong room night growth versus 2019 in the first half of February, while Europe had about 10% growth. Rest of world was up slightly and Asia was down about 35%.
Our mix of Internet room night recovered from about 23% in December to over 40% in the first half of February, which is the highest international mix we've seen since the start of COVID. As a reminder, our pre-COVID international mix is just over 50%. As I mentioned, the improvements we've seen in the first half of February are broad-based with large countries in Europe and international travel routes within Europe, driving the largest impact. The new cross-border bookings are seeing in Q1 in Europe on average have a longer length of stay and a shorter booking window than comparable bookings in 2019. As we have seen throughout the pandemic and travel restrictions are lifted and traveler confidence increases, bookings improved quite quickly.
Given the rapid changes during the first half of Q1, it's difficult to predict how room nights for the remainder of the quarter will develop. While it's encouraging to see the recent improvements, we are still and potentially volatile environments with high COVID infection rates in some part of the world and geopolitical uncertainty that could impact our business, especially in Europe. So far in Q1, the overall booking window of Booking.com has contracted less versus 2019 that did in Q4. We've seen recent strength in our summer booking trends and our gross bookings for summer are higher than they were at this time in 2019. The summer booking trends are stronger in Western Europe, while gross bookings for summer period are up double digits versus 2019. And gross bookings for the U.S. are also higher for the summer than they were at this time in 2019. Of course, a very high percentage of all bookings for summer are cancellable, so things could change rapidly.
Turning to the income statements. We expect the change in gross bookings in Q1 versus 2019 to be several percentage points better than the change in room nights due to an increase in ADRs and very strong point bookings. Constant currency ADRs in Q1 so far have increased versus 2019, a similar rate to Q4. We expect Q1 revenue as a percentage of gross bookings to be about 1.5 percentage points lower than in Q1 2019, as the bookings deceleration in Q4 negatively impacts revenue and the booking recovery in Q1 benefits revenue in future quarters. This 1.5% points of difference in revenues potential gross bookings could be higher if booking trends increased meaningfully from the first half of February, especially if a high percentage of these bookings office stays in future quarters. We expect marketing expenses in Q1 will trend about in line with gross bookings compared to Q1 2019. We expect sales and other expense in Q1, a percentage of gross bookings to be about the same as it was in Q4. We expect our more fixed expenses in aggregate will be about 15% higher in Q1, so in Q4 on a dollar basis due to the impact of seasonal increase in benefit costs. The 2021 year-end personnel related accrual finalizations and the impact of planned hiring as well as increases in IT expenses including some deferral from Q4. In more just explain to remind you that Q1 is our seasonally lowest quarter, we expect adjusted EBITDA to be positive, but down sequentially from Q4 significantly more than the sequential declines we saw pre-COVID, primarily due to the impact of Omicron on Q1 revenues.
As we think about the full-year ahead, we're encouraged about the strong summer bookings we are seeing so far and we are optimistic about the continued recovery of leisure travel. However, we do expect continued volatility in our top line trends driven by COVID. There are other uncertainties on the horizon, including the current geopolitical situation, which could impact travel. If you look at Russia and Ukraine combined destination markets, they represent a very low single digit percentage of our total gross bookings. All this makes it very difficult to predict how the topline will progress during the year and how the full-year will turn out. As we think about the recovery of travel in 2022 and the opportunity in front of us, we plan to invest in marketing, other incentives and improvements and expansion of our products to attract existing and new customers to our platforms and to drive additional loyalty in the future. This also requires investments in people and technology. We're excited about the opportunity to expand our business and we believe we can strengthen our position in accommodations and Bill much more complete travel solution for our customers and partners. We believe this is the right thing to do for higher longer-term return from our business.
With this in mind, there are a few factors to consider when thinking about the shape of the P&L for the full year, these fall into four buckets; revenue marketing, sales, and other expenses; and our more fixed operating expenses. Starting the revenue as a percentage of gross bookings, we expect this to be higher in 2022 than it was in 2021, but lower than in 2019. In 2021, our revenue potential gross bookings was about 130 basis points lower than 2019, mainly due to timing differences between recovery of gross bookings and revenue. In 2022, we expect this timing to be less of an impact, than it was in 2021.
Moving to marketing. There are a number of factors that come into play. We expect the environment to remain competitive, especially as a leisure travel market moves closer towards full recovery. We intend to remain disciplined and our proposed marketing ROIs and we'll continue to invest in developing the medium intent, social media channels and you will see us active in branding in the U.S. and other major markets. Although continues to be to use our marketing strength, to gain share in markets where we can with reasonable returns. We expect to run this program to drill year to track, both existing and new customers to our platforms. It's difficult to know exactly how these factors will play out across the year, but we expect marketing as a percentage of gross bookings to be a little higher than it was in 2019 and also in 2021. Of course, an increase in direct mix helps our marketing efficiency and we believe the investment we're making will results in a higher mix over time.
Turning to sales and other expenses, we expect these to be up 50 basis points higher than in 2021, as a percentage of gross bookings. This is mainly for additional payment processing costs, but also impacted by anticipated higher third party customer service expenses. The additional expenses related to payments are offset by higher payment related revenue. The last area is our more fixed operating expenses, which include personnel, G&A and IT. We expect our personnel expenses were impacted by higher than average annual wage increases, especially in the product and technology areas, and by planned headcount increase in key areas, including process technology and volume-related functions. We expect personnel expenses to be about 10% higher than in 2021. We expect the G&A and IT will both grow faster than personnel, driven by a number of factors including digital service taxes returning to hybrid work environment and the investments to enhance our customer and partner facing and internal systems.
The course we made for 2022 do not include anticipated reduction to personnel expense and increases to sell in other expense from the enhanced strategic partnership with Majorel, the Glenn spoke about. We do not anticipate much of an impact on adjusted EBITDA in '22 from this initiative, and we'll update you again in May. Also we expect the acquisition of Getaroom to have a small positive impact on our P&L in 2022. As Glenn noted, we expect that the ETraveli acquisition will close later this year, which result in a minor impact to the P&L in 2022. So when thinking about the shape of the P&L in '22, these factors have been the revenue recovery will lag the gross bookings recovery and EBITDA recovery will lag revenue recovery. Some of the lag and EBITDA versus revenue is timing, i.e. the marketing we spend on bookings, we expect to recover, I had a revenue. On top of this, we plan to make new investments in customer acquisition and then expanding our product offerings we mentioned earlier taken together. Together, we expect our EBITDA margins in 2022 to be a few points higher than you were in 2020. Looking beyond 2022, we continue to remain focused on investing to build a larger and faster growing business with more products than we had pre-COVID that delivers more EBITDA dollars or more. Earnings per share with industry leading EBITDA margins. In closing, we are confident in our ability to capture demand as the global travel market recovers. And to execute against our strategic priorities.
With that, let's take your questions. And Chris, I will turn the call over to you for Q&A.