AIRBNB gave a disappointing outlook for the fourth quarter, citing “greater volatility” in the economic environment that it expects will slow demand for travel after a record summer season.

Revenue for the three months ending in December will be US$2.13 billion to US$2.17 billion, falling short of analysts’ average estimate of US$2.18 billion, the company said on Wednesday (Nov 1) in a letter to shareholders. Airbnb expects the pace of growth in nights booked to “moderate” relative to Q3.

“We are seeing greater volatility early” in Q4, the company said, adding that it was “closely monitoring macroeconomic trends and geopolitical conflicts that may impact travel demand”.

The shares slid about 3 per cent in extended trading after closing at US$119.47 in New York. They had gained 40 per cent this year till the close on Wednesday.

Airbnb’s results add evidence to hints that the post-pandemic travel boom may be running out of steam heading into the year-end holiday season. Airlines and other travel companies including Airbnb saw record demand over the summer, a phenomenon dubbed “revenge travel”, as people proved willing to swallow high prices for flights and lodging to fulfil their pent-up post-Covid itineraries. But some travellers have started to draw the line.

The projected slowdown is coming after a sizzling summer. Airbnb’s Q3 revenue surpassed Wall Street’s expectations, jumping 18 per cent from a year earlier to US$3.4 billion. The company reported 113.2 million nights and experiences booked during the period, up 14 per cent and slightly ahead of the average estimate.

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After benefiting from long-term, domestic stays in rural areas during the pandemic, more guests have returned to cities, Airbnb said, with high-density urban nights booked rising 15 per cent in Q3 from a year ago. International travel is also back, with cross-border nights booked increasing by 17 per cent. The Asia-Pacific business has fully recovered to pre-pandemic levels.

Airbnb is conscious that the cost of stays plays a big part in its success – and its competition with hotels – and has introduced new tools to help hosts set appropriate pricing. The average nightly price of a one-bedroom listing on Airbnb in September was US$120, up 1 per cent from a year earlier, while hotel prices have increased 10 per cent to US$153, according to the company.

For San Francisco-based Airbnb, whose stock and valuation are being challenged by Wall Street more than ever, the forthcoming deceleration is another sign that it is settling into a more mature company with a moderate-growth trajectory. On the upside, Airbnb said it expects record adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) in Q4. As a result, its full-year adjusted Ebitda margin will be about 150 basis points higher than 35 per cent in 2022, the company said.

Net income in Q3 was US$4.4 billion, including a one-time tax benefit on certain deferred assets. Excluding the benefit, adjusted net income was US$1.6 billion.

Airbnb is also continuing to deal with mounting regulatory risks – most recently in New York City and Canada – that are expected to weigh on supply or room-night growth in the near term, according to Bloomberg Intelligence analysts.

New York instituted tight new rules in September requiring hosts to register with the city and meet strict building standards. Airbnb considers the move a “de facto ban” on its business that has wiped out thousands of listings in the city. Prior to September, New York represented about 1 per cent of Airbnb’s global revenue. Canada is also considering implementing measures to curb the use of Airbnb and other short-term rental platforms after rental costs have soared.

“Increased regulatory restrictions are likely to be a near-term drag,” Bloomberg Intelligence analysts Mandeep Singh and Nishant Chintala wrote after the results. But the increase in supply “has been a bright spot”. Airbnb said active listings grew by 19 per cent in Q3 from a year earlier. The company has added almost one million active listings so far this year.

Chief executive officer Brian Chesky has been working to refine the platform and adapt to the shift in post-pandemic travel patterns – such as an increase in long-term stays of 28 days or more – as well as consumer demands for quality stays and reliable service. Among the more than 50 feature updates the company announced earlier this year are more in-depth user profiles that are laying the foundation for better matching of hosts and guests, and plans for verified badges for listings to come next year.  

Next week Airbnb is also expected to introduce a dozen product upgrades to make the platform “more reliable” and help guests “understand exactly what to expect before they book”, according to the shareholder letter.

Online travel peers Expedia Group, which owns vacation-rental rival Vrbo, and Booking Holdings will report on Thursday after the close. BLOOMBERG