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 first quarter and provide some color on the trends we've seen so far in the second quarter. All growth rates for 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 on to our results for the first quarter. On our February earnings call, we discussed the improvement in trends we've seen so far in 2022, with room nights getting back to about flat versus 2019 in the first half of February after declining 21% in January. Just hours after our earnings call on February 23, the tailwind news broke that Russia had invaded Ukraine. As a result, we saw an immediate negative impact on our room night trends, particularly in Eastern Europe. Despite this impact towards the end of the month, room nights for the full month of February came in about in line with 2019 levels. In early March, we suspended the booking of travel services in Russia and Belarus. This led to a lot of new bookings as well as significantly elevated levels of cancellations of reservations for these countries. Additionally, we saw some slowdown in booking trends within Europe as travelers took in the news of the invasion. We disclosed that total room nights for the week ending March six were down about 10%, and that slowdown was driven by Eastern Europe, primarily Russia, and to a lesser extent, by Western Europe which remained modestly above 2019 levels.
I'm pleased to say that compared with the first week in March, we saw our overall trend improved during March driven mainly by Europe, resulting in room nights being down about 4% for the month, which is only a modest pullback from where we were in February. For the first quarter, room nights were down 9%, an improvement from down 21% in Q4 and our best quarter results since the onset of the pandemic. Excluding Russia, Ukraine and Belarus, our room nights were down about 2% in March and down about 6% for the first full quarter. The Q1 on a regional level, room nights in Europe and the rest of the world were both down mid-single digits. Asia was down about 35% with all three improving from Q4 levels. The U.S. has strong growth versus Q1 2019, similar to what we saw in Q4. Mobile bookings, primarily through our apps, represented about 60% of our total room nights in the first quarter. Our apps were over 2/3 of our mobile bookings and over 40% of total room nights. In the first quarter, we continue to see an increased mix of our total room nights coming to us through the direct channel versus Q1 2019 and Q1 2022. The international mix of our total room nights in Q1 was about 40%, an encouraging increase from about 33% in Q4. Q1 international room nights were down about 30% compared to Q1 2019 levels, an improvement from the almost 40% -- for the almost 50% decline in Q4. The improvements in international bookings we saw continued to be driven mainly by travel plans within Europe. And these cross-border bookings continue to have, on average, longer length of stay and a shorter booking window than comparable bookings in 2019.
We saw strong growth in our domestic room nights for the first quarter, also an improvement from Q4. Our cancellation rates were about in line with 2019 levels in Q1 despite the impact of the Russian invasion of Ukraine. The booking window in Q1 at Booking.com contrasted less versus 2019 than it did in Q4, and this booking window expanded versus the first quarter of 2021. For our alternative accommodations at Booking.com, the global mix of room nights increased to about 31% in Q1, a couple of points higher than 2021. Within Europe, our mix of alternative accommodation continues to be meaningfully higher than the global average. Gross bookings increased 7% in Q1 versus 2019 and were up 10% excluding Russia, Ukraine and Belarus. This 7% increase in gross bookings was 16 percentage points better than the 9% room night decline due to 18% higher accommodation constant currency ADRs, and also due to strong flight bookings across the group, partially offset by about four percentage points of negative FX movements. As Glenn mentioned in his remarks, the $27 billion of gross bookings in Q1 is a new record for us, higher than the previous record of $25 billion in Q1 2019. On March 23, 2022 was the first month our gross booking exceeded $10 million in a single month. This was up 17% versus March 2019 and compares to up 18% in February and down 11% in January. Our accommodation constant currency ADRs benefited by about three percentage points from regional mix and about 15 percentage points from rate increases in most of our regions, notably -- most notably Europe and North America and especially in higher-demand, leisure-oriented destinations.
Constant currency ADR growth versus 2019 accelerated from 13% in Q4 and to 18% in Q1, primarily due to higher rates in Europe. Airline tickets booked in the first quarter were up 152% versus 2019 and up 69% versus 2021, driven by continued expansion of Booking.com's flight platform as well as continued flight ticket growth at Priceline. Consolidated revenue for the first quarter was $2.7 billion, which was down 7% versus 2019 and down about 2% on a constant currency basis. Revenue as a percentage of gross bookings was about 150 basis points below Q1 2019, in line with our expectations, due primarily to differences between gross bookings -- the timing differences between gross bookings and revenue recognition. Our underlying accommodation take rates were about in line with Q1 2019 levels. Marketing expense, which is a highly variable expense line, decreased 4% versus Q1 2019. Marketing expense as a percentage of gross bookings decreased about 50 basis points versus Q1 2019, which is better than our expectations, mainly due to higher-than-expected marketing ROIs. Sales and other expenses were up 58% versus Q1 2019 due to a higher volume of merchant gross bookings and higher third-party call center costs. About 34% of Booking.com's gross bookings were processed through our payments platform in Q1, up from 13% in Q1 2019. Compared to Q1 2021, sales and other expenses as a percentage of gross bookings were about 30 basis points higher. Our [Indecipherable] fixed expenses in aggregate were about in line with our expectations, up 12% versus Q4 and up 17% versus Q1 2021.
Adjusted EBITDA was $310 million for the quarter, which was better than our expectations due to higher-than-expected ADRs and the better-than-expected leverage on our variable expenses. However, sequentially, EBITDA was down 67%, which is significantly more than the seasonal declines you saw pre-COVID and aligns with our commentary in February. Non-GAAP net income of $161 million results in non-GAAP EPS of $3.90, which was down 65% versus Q1 2019. Our Q1 non-GAAP tax rate of 16% was lower than 90% in Q1 2019 due to a greater impact from a discrete tax benefit on a lower base earnings. On a GAAP basis, we had operating income of $174 million in Q1. We recorded a GAAP net loss of $700 million in the quarter, which included an unrealized loss on our strategic investments of about $987 million and a $36 million loss on assets held for sale related to the major strategic partnership we discussed last quarter. Now on to our cash and liquidity position. Our Q1 ending cash investment balance of about $12.8 billion was down versus our Q4 ending balance of $14.3 billion, primarily driven by the payments of $1.1 billion from share repurchases in Q1 and the decline in value of our strategic investments. These factors, which reduced our cash investment balance, were partially offset by positive free cash flow of about $1.6 billion, which is driven entirely by change in working capital resulting from an increase in our deferred merchant bookings balance.
As we disclosed on last quarter, we started returning capital to shareholders in early January. And in addition to share purchases in Q1, we repurchased about $325 million of our shares in April, which brings our outstanding authorization to just over $9 billion. As we said before, we expect to complete our main authorization within the next three years. Now moving on to our thoughts for the second quarter. April room nights increased about 10% versus 2019, an improvement from the 4% decline in March, driven primarily by Europe. Excluding Russia, Ukraine and Belarus, April room nights increased about 16% versus 2019. All regions showed improving room night growth in April. Europe was up high teens percent in April and up about 30%, excluding Russia, Belarus and Ukraine. Growth in the U.S. was very strong. Rest of World had double-digit growth, and Asia recurred to down high teens percent all versus 2019. The international mix of our room nights in April was over 45%, an encouraging increase from the 40% in Q1. April international room nights were down slightly compared to 2019 levels, an improvement from down 30% in Q1. International demand, driven mainly by travel plans in Europe, accounted for most of the improvements in room nights in April versus Q1. Domestic room nights also improved in April to very strong growth versus 2019. April gross bookings increased over 30% versus 2019 driven by growth in room nights, continued accommodation ADR strength as well as continued strength in flight bookings.
April gross bookings increased to almost $11 billion, which was a new monthly record. April gross bookings typically decline from March pre-COVID. Whilst it's encouraging to see continued improvements in trends into April, the environment is still uncertain and difficult to predict with confidence how room nights for the remainder of the quarter will develop. While many countries are lifting travel restrictions, COVID is still a factor, which can impact travel and of course, the war in Ukraine continues to create volatility and macro uncertainty. We do expect the recent strength of ADRs to continue for the remainder of the quarter. And as a result, we expect the difference between the level of room night growth and gross bookings growth for the full second quarter to be around 20 points, which is similar to what it was in April. In April, the overall booking window of Booking.com continues to move back closer to 2019 levels. And we continue to see strength in our summer booking trends, and our gross bookings for summer are now 50% higher than they were at this time in 2019. And within Western Europe and North America, both up over 30% albeit with a higher mix of canceled bookings. If the current trends continue, we could see a record summer travel season, and we're gearing up to prepare for that across all parts of our business.
Turning back to Q2, given recent booking trends combined with lengthening booking window, we expect Q2 revenue as a percentage of gross bookings to be about 200 basis points lower than it was in Q2 2019. This 200 basis points of difference in revenue as a percentage of gross bookings is mainly timing related, and the impact could be greater if booking transact -- sorry, from April, especially if a high percentage of these bookings with stay in future quarters. The timing impact on take rates in Q2 is driven by a combination of the acceleration in gross bookings from up 7% in Q1 to up over 30% so far in Q2, coupled with the lengthening booking window from Q1 to Q2. We expect our underlying accommodation take rates to remain stable. We expect marketing expense as a percentage of gross bookings to be slightly higher than in Q2 2019, which is consistent with our prior commentary about the opportunities for us to lean into our recovering travel market in 2022. We expect Q2 sales and other expenses as a percentage of gross bookings to be about 60 basis points higher than it was in Q2 2021 due to higher merchant gross booking mix and higher third-party call center costs. We expect our more fixed expenses in aggregate to be about 15% higher than in Q2 2021, with personnel down slightly and both G&A and IT up meaningfully versus Q2 last year.
The overall year-on-year increase -- the year-on-year increase in G&A is driven by higher digital sales taxes, which are tied to revenue, as well as increased office expenses due to return to hybrid work environments. We expect IT to increase year-over-year at similar rates to what we saw in Q1. If we were to see similar top line growth rate for the rest of the quarter as we saw in April, we expect adjusted EBITDA to be over $900 million for the quarter. The expected timing difference between gross bookings and revenue, which is the primary driver of our expected 200 basis points lower take rate than Q1 2019, will have a significant net impact on EBITDA in Q2 as our more variable expense lines are linked to bookings. If we normalize the timing impact on our take rates in Q2 2022 to be the same as it was in Q2 2019, adjusted EBITDA in Q2 2022 will be slightly higher than it was in Q2 2019. Now turning to the enhanced strategic partnership with Majorel we discussed last quarter. As a reminder, Majorel, one of our most trusted long-term external customer support partners, will begin employing most of the customer service representatives that previously worked for Booking.com outside of the Netherlands and the U.K. We currently anticipate finalizing this partnership around the middle of the year. And following the anticipated closing on a quarterly basis in the second half of 2022, we expect that personnel expenses will be lower by about $25 million a quarter, but G&A expenses will be lower by $6 million a quarter, and our S&O expenses will increase to offset the lower personnel and G&A expenses.
As we said last quarter, we do not anticipate much of an impact on adjusted EBITDA in 2022 from this initiative. Beyond 2022, we believe this partnership will help reduce further expense growth and enable a more efficient ramp-up of our customer service function. Outside of the P&L geography changes to the personnel G&A and sales and expense line from Majorel, we are maintaining the full year P&L commentary we provided last quarter. As a reminder, the expected timing -- we expect timing to negatively impact take rates. The precise impact of timing on our take rates for the year is difficult to predict, as it's impacted by the rate of recovery of bookings coming into and during the year, and also by the length of booking windows during the year. We do note that relative to 2021, there was a negative impact on our take rates due to timing in Q1 2022. Our current best estimates of take rates in 2022 is just below 15%, which is lower than 2019 primarily due to timing. We expect that our underlying accommodation take rates will remain stable. Timing also negatively impacts adjusted EBITDA and EBITDA margins for the year. If not for the impact of timing, our expectations for full year EBITDA margins would be a few points higher than our guidance for the year. We're encouraged by our better-than-expected Q1 results and the strengthening trends we've seen in April, and we are confident that our focus on customer acquisition and expanding our product offerings is the right approach for 2022.
We'll now take your questions. Charlotte, over to you, please, for Q&A.