Over the last two weeks, investors heard from CEOs at both Airbnb and Expedia/Vrbo about their first quarter performance. According to Airbnb’s CEO Brian Chesky, “2020 was a year that none of us will ever forget. It was also a year when travel fundamentally changed forever. Airbnb changed as well. We sharpened our focus on our core business of hosting. And we got back to our roots, back to what is truly special by Airbnb: the everyday people who host their homes and offer experiences. And we emerged as a stronger and more efficient company. Our business rebounded faster than anyone expected, and it showed that as the world changes, we are able to adapt.”
Related: Expedia CEO Discusses Vrbo’s Q1 2021 Performance
Airbnb’s business plan in a nutshell “includes educating the world about hosting, recruiting more hosts, simplifying the guest experience, and delivering a world-class service.”
Airbnb reported that its first-quarter loss more than tripled, to $1.17 billion, as travel remained depressed by the pandemic and the company was weighed down by costs from past borrowing. However, revenue in Q1 was $887 million, a 5 percent year-over-year increase. “Our adjusted EBITDA loss was $59 million,” Chesky said. “This was approximately $190 million better than the same period in 2019, and it was $275 million better than a year ago on essentially the same revenue.”
Listing Growth and Vacation Rental Managers: 30% Increase in non-urban and vacation rental
Airbnb has 4 million hosts listing 5.6 million properties. During the call with investors, Chesky acknowledged “vacation rentals” for the first time since before announcing its IPO. Airbnb’s S-1 only mentioned the term “vacation rentals” once in reference to the Google Vacation Rentals platform. Words matter, and Chesky’s recognition of this sector of the short-term rental industry is notable.
CEO Brian Chesky (Chesky): But what we have today are hosts that offer 5.6 million listing. And these 5.6 million listings more about 1 million more than we had this time in 2019 and what we’ve actually seen is a large growth in non-urban listing. So we actually have a 30% growth in non-urban and vacation rental listings as well.
Vacation Rental Managers, aka Professional Hosts
Chesky: Let’s talk about pro hosts and hotels. Obviously, Airbnb created a new category in travel because we created tools that allowed everyday people and individuals become hosts. And yes, out of 4 million hosts, 3.5 million are individuals. That being said, we welcome all hospitality providers on Airbnb. And we have hundreds of thousands of professional hosts and professional hospitality providers.
The way we think about it is when a guest comes to Airbnb, they’re looking for a place to stay. And so we don’t want them to leave without having found something they want. Typically, they come to look for individual hosts, that’s what we’re known for. But we want to make sure that we have professional hosts and hotels to serve those customers and to fill in our network gaps.
So we’re continuing to develop new tools and services over the coming years to continue to welcome these providers onto our platform. And I think they’re going to obviously benefit from all the demand that we have.
Airbnb Says Travel Has Transformed and Urban, Cross-Border Travel Is Coming Back
Chesky: We expect this rebound to be unlike anything that we have ever seen before, and we expect travel to be very different than before. People are discovering that they don’t have to be tethered to one location to live and work. . . . And when people do travel, they’re staying longer. 24 percent of our nights booked in Q1 were for stays of 28 nights or longer. People are not just traveling in Airbnb, they’re now living on Airbnb. . . . The world is never going back to the way it was, and that means that travel is never going back to the way it was either.
But the other thing that we’re seeing is that travel is going to be very different than before. Probably the biggest changes are the following: number one, I don’t think business travel is ever coming back the way it was before the pandemic. It’s at least not going to look like it did. I do think a new kind of business travel may emerge. Many employees are working remotely. They’re going to need to go back to headquarters occasionally. You’re going to see longer stays going in cities. And so we’re seeing elevated bookings in urban markets for stays of longer than 28 days.
The two trends I do think are going to inverse are we are going to see a recovery of urban travel and the recovery of cross-border. This has been our bread and butter before the pandemic, and I think those are significant tailwinds for us.
Airbnb Is Looking for More Supply
Chesky: We are recruiting more hosts, and we are setting them up for success. To build on the momentum of our marketing campaign, we launched an accompanying digital campaign that’s focused on recruiting new hosts. And we’ve completely redesigned the end-to-end experience of being a host on Airbnb. We’re making it easier for anyone to start hosting.
We’re making it even easier to become a host by reducing number of steps to become a host. And as we reduce the number of steps, conversion rate for hosts gets even easier.
Because Airbnb, we started actually after the Great Recession in 2008. And at that time, there were many hosts, many people that were looking at Airbnb as a financial lifeline. I think if you think about the number of hosts on Airbnb, the top occupations of our hosts are health care workers, educators and people in food and hospitality. These are industries that have been hit really, really hard. So our job is to tell the story of hosting, the fact that on Airbnb you can make $8,000 on average if you have one listing, which is 5x you can make what an average American got in the stimulus check.
CFO David Stephenson Discussed Supply and Demand
Stephenson: On supply and demand, really, what we’re seeing, because cross-border and urban travel has not yet fully rebounded, the places that we’re seeing surpluses or deficits in demand or a surplus of supply would be more urban markets. And where we can see some tightening of it, especially U.S. non-urban for the peak in the summer is clearly going to be the most constrained of our markets.
So we’re actively working against each of those areas. But on each side, on the supply side, making sure that we are doing our best to recruit hosts and bring on as more supply as possible for peak periods in constrained markets. And then we’re also using — go back to our marketing expenses before, where we use search engine marketing is in targeted approach, especially in markets where we have maybe surplus supply and not maybe enough demand, and so being kind of pointed at that. So we look at every individual market as different, and we will use different levers to try to manage that balance over time.
Increasing Take Rate
Chesky: We absolutely see lots of opportunities to increase our monetization and take rate for both guests and hosts. For example, one of the things we’ve said is that many of these tools and services we’ve offered in the last five years, they’re incremental, we haven’t charged for. For example, unlike our competitors, we offer free protection of $1 million against theft, property damage and personal liability in countries all over the world. And as we added these services, we do not charge incrementally for these. Our general principle is we always want to give away more value than we’re taking, but we do think there’s opportunities for us to do―to offer some more tools and services to increase take rate.
Now that being said, focus is critical. . . . But make no mistake, we have many opportunities in the years ahead.
Airbnb is Seeing More Whole-Home Stays
Chesky: Now what we’re seeing is a pretty big expansion of people booking entire homes, typically even more bedrooms, the number of guests per reservation has increased considerably. And so correspondingly, people are spending more money. I think that trend, of course, will get normalized over some period of time when other geographies recover and urban recovers. But I do think that we are going to see sustained confidence, there’s no question.
Booking Window Increasing
Stephenson: Regarding the booking window, we’re seeing the booking window, obviously, in 2020 shrank dramatically, right? People were hesitant to travel. They only started booking when they had high confidence that they were going to travel. What we’ve seen here early in Q1 of ’21 is the booking windows have expanded. And in March, we actually saw booking windows consistent with those from March of 2019. And so the windows are expanding. I think that what you’re seeing is still even more confidence in the U.S. So that the willingness of travel and the booking window in the U.S. has expanded further than it has in Europe.
But we’re starting to see some greater acceleration of our European business. We’re seeing the European nights increasing the rate of year-over-year growth every month of the year since the beginning of the year, including through April and May. And we’re seeing that as things like the lockdowns in France are removed. And after the UK Prime Minister announced plans to exit lockdown in February, we started seeing more acceleration in Europe.
So the booking window trends are positive and give us encouragement for what we’re going to see in the back half of the year. But we’ll just have to see what the lockdowns and other kind of travel restrictions look like for Europe for the back half.
Airbnb’s Forecast for Remainder of 2021
Stephenson: We’re highly confident in the rebound that it’s going to be coming. All the early indications are that it’s there. But it’s hard to kind of precisely pin down what Q3 and Q4 are going to do. So what we did do is give some perspective on what we expect out of Q2. And that is that our gross booking value in Q2 of this year will be higher than in Q2 of 2019, and that our revenue rate in Q2 will be similar to that of 2019, and that our EBITDA will be― our adjusted EBITDA will be―breakeven to slightly positive in Q2 of this year. So I think those are kind of the key things. Because as you said, as rebound comes back, the pace at which it comes back in the geographies that come back will affect the mix on those ADRs. And we do expect the ADRs to moderate, but it’s hard to perfectly pinpoint down the specific of that mix.
Look for an Announcement from Airbnb on May 24
Chesky: Now I want to wrap by highlighting a major announcement that we have coming up in less than two weeks. On May 24, we will announce the most comprehensive update to the Airbnb service in 12 years. As part of this special announcement, we’re going to share insights on how travel is fundamentally changing, along with updates we’ve made to prepare for what’s ahead. We’re going to unveil a simpler and more inspiring guest experience. And we are going to show you upgrades that make it even easier to be a host on Airbnb. So watch the announcement with the airbnb.com on Monday, May 24.