Yesterday, Airbnb held its first earnings call as a publicly traded company following the release of its Q4-2020 financials. For vacation rental managers listing on Airbnb, it’s worth the time to listen to the call recording or read the full transcript, but below are our takeaways for professional property management companies.
Airbnb Reaffirms Commitment to Individual Hosts
Founder and CEO Brian Chesky repeatedly articulated the company’s commitment to the individual host. In his opening, he let shareholders know, “Hosting is still at the center of Airbnb.”
“Airbnb is a community of 4 million hosts; 90% are individuals, and they are who we prioritize,” Chesky reiterated.
“These are everyday people—typically school teachers, healthcare workers, students—55% of them are women.” –Brian Chesky
2020 Revenue Down 30%
“We delivered $3.4 billion, a full-year revenue in 2020, down only 30% compared to the year earlier,” Chesky said. “In Q4, our revenue of $859 million was down only 22% year-over-year, despite the second wave of COVID cases and widespread lockdowns. . . . Our adjusted EBITDA in 2020 was slightly better than 2019, and this was despite revenue being down $1.4 billion.”
Addressing the competition and “professional hosts”
Chesky was asked about Airbnb’s competition. “With regards to more competition in our space, I mean, we’ve really been seeing this competition for like the last five years actually; I don’t think it’s really that different,” Chesky said. “What I have found though is this: I think that fundamentally, Airbnb, we’re in a bit of a different space than our competitors because Airbnb, we are focused primarily on individual host. They comprise 90% of our 4 million hosts. And OTAs are primarily focused on professional hosts. We have professional hosts, as well, and we think professional hosts will probably list on any site that provides a great experience and gives them high-quality guests. And we, of course, will do that; but we think individual hosts are less likely to want to listen to multiple platforms. We’re the only platform that has a custom-built platform designed specifically for individual hosts.”
“And so I don’t think competition is anything different, but I also think we’re a bit of a category of one, in the sense that we are really focused on the individual host as our primary opportunity area.”
Fees and Take Rate
During the call, the team was asked about Airbnb’s fees and whether we will see higher take rates or a shifting of fees from the guests to the hosts.
“In some cases, we have a mix of a low host fee and a higher guest fee. And then for some of our professional hosts, we’ll have a host-only fee, and all of it is on the host side,” Airbnb CFO Dave Stephenson replied. “And so we’ll see a mix. The mix could change over time. We continue to test and evolve to see what works best for our guests, our hosts, and we’ll just continue to evolve and iterate to make sure that we provide the best value to the overall community.”
Stephenson added, “Overall, kind of the philosophy is, as we give more back to the community in terms of services and capability, then we would—could—see opportunities for further increases in take rate. But we would always want to give more back to the community before we would increase that take rate.”
Airbnb’s 2021 Business Strategy
Chesky laid out the company’s overall strategy for 2021:
In 2021, our single priority is to prepare for the coming travel rebound. To do this, what we’re going to do is perfect the entire end-to-end experience of our core service. First, we’re going to educate the world about what makes Airbnb different—hosting. Through our marketing and communications, we will educate guests that being hosted is a better way to travel. In addition, we will inspire more people to become hosts.
Next, we will recruit more hosts and set them up for success. Once you’ve educated people about hosting, we’ll simplify the onboarding process so it’s easier to for hosts to get started; and we are improving our tools and support to help them succeed. Third, to make it easier for guests to find the perfect stay, we are simplifying every part of the guest experience as well as improving our search functionality to support more flexible travel patterns.
And finally, whenever our hosts or guests need us, we need to deliver world-class service. So, we’re actively fixing product issues that drive community contacts, we’re scaling our operations to meet the demand and continually enhancing our services. So that is our plan for 2021, educate the world about hosting, recruit more hosts and set them up for success, simplify the guest experience, and deliver world-class service.
Airbnb’s New Ad Campaign
“We launched our first large scale marketing campaign in five years, Made Possible By Hosts,” Chesky said. “Even though the brand of Airbnb is mainstream, the idea of hosting is not yet. Our goal with this campaign is to make a long-term investment in educating the world about our hosts. This campaign will help our guests to understand the benefits of being hosted and how this is unique to Airbnb. And it will create more awareness around the idea of becoming a host by making it more mainstream and aspirational.”
New “Flexible Dates” Search Feature
On Tuesday, Airbnb launched a new search option it is calling “Flexible Dates.”
“Today, more people are working from home and that needs more flexibility about when and where they travel. Because of this, we’re seeing a shift in how people search on Airbnb,” Chesky explained. “In 2021, to date, almost 40% of people searching on Airbnb have been flexible in terms of their date or their location of their stay. This is a huge change in the search paradigm and travel.”
“’Flexible Dates’ allows guests to search for homes in a whole new way,” he continued. “Instead of having to select the exact dates for a trip, guests are able to do broader searches. Now, you can search for a weekend getaway, a weeklong vacation, or even a month-long stay sometime in the next few months. This allows our guests to browse more options while being flexible on the exact dates of their trip, and we think this will be a very popular feature coming this travel season.”
Plan for acquiring more inventory
Chesky told investors that its acquisition plan for new hosts is largely organic. “The vast majority of [hosts] come direct to Airbnb,” Chesky said. “So most of our hosts, we don’t have to acquire per se. They come organically, often because they’ve heard of Airbnb. Their friends have recommended it to them, who are also hosts for – because as I mentioned before, 23% of our hosts in 2019 were prior guests.”
Airbnb also sees opportunity in pushing hosts to increase the availability in their homes. “Our existing hosts rent their homes only occasionally. So, we see huge opportunities for productivity,” Chesky said. “The average host on Airbnb makes like under $10,000 a year and they do that by renting out just occasionally. So, we think there’s a huge opportunity to increase productivity of the hosts that we already have.”
Chesky added, “In addition, we’re doing a companion campaign called Made Possible by Hosting. And that’s going to talk about all the benefits of hosting, and we’re going to really target people that are going through a life transition. As I said, people that just renovated their home, bought a new house, lost their job. Maybe, they’re retired, maybe their kids moved out of the house. So, we think this is a really great way to be able to target and recruit more hosts.”
“We’re going to allow you to become a host in less than 10 minutes. And if you need help, you can call customer service, or we’re going to match you to existing hosts to be able to support you along this journey. If we do these things, I think we’ll be able to add a significant amount of more hosts.”
Significant Decrease in Performance Marketing Spend
When asked about performance marketing, Chesky explained, “In 2019, we had elevated spending of performance marketing, and then 2020 occurred. Our business dropped by 80% in eight weeks, and we pulled back all marketing, including performance marketing. But something remarkable happened even before we started resuming our marketing spend, our traffic levels came back to 95% of the traffic levels of 2019 without any marketing spend. And what this revealed is that our brand is inherently strong. It’s a noun and verb in pop culture. And so we don’t intend to ever again spend the amount of money as a percentage of revenue on marketing in the future as we did in 2019. In Q4, more than 90% of our traffic was direct or unpaid. And we think that will continue in the future.”
Chesky continued, “Our marketing plan—therefore our strategy—is the following: A full-funnel marketing approach. The top of the funnel was actually PR. We got more than a half million articles in last year, in 2020. And we had as much share of voice as most of the other major travel companies combined. And that’s how we really built the brand of Airbnb more than anything—with with PR.”
Editorial note: much of that PR was written about Airbnb’s COVID-related policies and its IPO.
“We don’t treat performance marketing like other travel companies. We think of it as like a laser,” Chesky added. “It’s not a way to arbitrage users. It’s a way to laser in on where we want to acquire guests or hosts and key markets where we have a supplier demand mismatch. But—make no mistake—our efficiencies, we’re going to hold to a lot higher level than 2019 or years prior.”
Airbnb’s Margin expectations
Airbnb CFO Dave Stephenson said, “What we would like to—expect to—achieve over time is 30% EBITDA margins or greater.
Shorter Booking Windows
When asked about how summer bookings are trending, Stephenson replied, “I don’t have a lot of color that I can give you on summer travel bookings. I mean, one thing, which I can say is that people are booking in shorter windows. So, the greatest growth we’re seeing in the business right now are booking windows in less than 30 days; and, typically, kind of pre-COVID, you’re right. We’d be seeing much more of the bookings now for the summer travel season, and that is delayed relative to kind of historic patterns. . . . We just know that we want to be ready for the travel rebound when it occurs. We just don’t know exactly when it will occur.”
US Traveler Behavior
According to Chesky, “We did a survey recently of American travelers and we found a couple of things. The first thing we found is that people missed traveling, that’s not surprising, but we also found that people missed traveling more than any other out-of-home activity. People missed traveling more in America than going to a restaurant, going to sports, live music or other activities, but they don’t miss all kinds of traveling. Generally, people don’t miss traveling for business as much, and they generally don’t miss mass tourism. They’re generally not missing standing in a line with selfie sticks in front of a landmark, for example, or going to a crowded lobby. The kind of travel that people miss is spending meaningful time with the people they care about, their friends and their families. And so we found that the majority of people we surveyed said, they do plan to travel this year. They will do it as soon as they feel safe to do so.”
Chesky later added about the demand for experiences, “I don’t think they’re all going to desire to go back to getting on double-decker buses and waiting in line and crowded lobbies, or landmarks. They’re going to want to do really interesting activities and I think that’s what our hosts have to offer. And then for people in their own city, I think, you can only sit at home and watch so many shows on Netflix. People will want to get out of their home. And if they want to alternate to a restaurant, I think experiences are a great thing to do in their own city. So, the short answer is that we’re very focused on [experiences]. We had to take a bit of a pause last year. But they’re coming back, and we’re going to be focused on it because it’s just another way of hosting. And this is one of many ways that we’re going to continue to allow hosts, to be able to share the world with others.”
Cost reductions in Customer Service
“We are focused on improving efficiency by reducing contact rates,” Chesky said. “We are very, very focused on reducing the need for people to call us or message us because they have a problem. If they do have to call us or message us, we are going to focus on making our agents significantly more efficient. So that’s a really big focus area on the [costs] reductions.”