Airbnb plunges on soft outlook, signalling slowing US demand
SHARES of Airbnb tumbled after the company gave a disappointing outlook for a third consecutive quarter and warned of slowing demand from United States travellers – a sign that momentum in travel spending will continue to taper off even during the peak summer season.
Airbnb expects “sequential moderation” of growth on the key metric of nights and experiences booked in the current period, the company said on Tuesday (Aug 6) in a letter to shareholders. As it is, Airbnb posted an 8.7 per cent gain for the most recent quarter, falling short of investors’ estimates. Third-quarter gains will be even flatter. Analysts had been projecting an 11 per cent boost.
The shares plunged more than 14 per cent in extended trading on Tuesday. If the declines hold on Wednesday, the stock could notch its biggest intraday decline on record.
This sets up the slowest pace of growth since 2020 as demand and travel habits return to normal following an especially brisk vacation season in 2023 that coincided with the formal end of the Covid-19 pandemic – headwinds that have dogged the broader industry. Last week, Booking Holdings gave worse-than-expected guidance, blaming “mild moderation” in the European travel market and “mild indication” of some consumers opting for lower-star hotels and shorter stays, particularly in the US.
“We are seeing shorter booking lead times globally and some signs of slowing demand from US guests,” Airbnb said in the letter regarding recent booking trends. Latin America and Asia-Pacific continue to be its fastest-growing regions, it added.
The company’s revenue for the current quarter will be US$3.67 billion to US$3.73 billion, also falling short of analysts’ consensus of US$3.84 billion, with the company blaming foreign exchange headwinds.
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Its second-quarter revenue beat estimates, jumping 11 per cent to US$2.75 billion. Nights booked rose 8.7 per cent, falling short of the 9.8 per cent increase analysts were expecting.
Airbnb, which specialises in shared homes and vacation rentals in both cities and rural locales, saw a slight acceleration in growth of North American nights booked in the second quarter. It highlighted the week of July 4 as the “single highest week of revenue ever” in the region.
The company also saw particularly strong gains among larger parties after honing its marketing materials in the US to convince more groups to choose multi-bedroom homes over hotel rooms. Nights booked for groups of more than five people jumped 16 per cent and was the fastest-growing segment in the region for a fifth quarter, Airbnb said.
The continued recovery in international travel has been a bright spot for Airbnb and the industry at large, with Latin America and Asia-Pacific being key growth markets for the company. By contrast, Airbnb said the more than doubling of nights booked in Paris during the Olympic games in the second quarter made a “relatively small” contribution to company’s EMEA business, which saw “stable” gains.
The company has been investing more in less mature markets overseas, including the introduction of limited-edition stays inspired by local cultural icons. That will likely weigh on margins in the near term, as Airbnb sees marketing costs rising faster than revenue in the third quarter, partially due to investments in new markets.
Chief executive officer Brian Chesky has said that the company he co-founded in 2007 is ready to expand beyond its core offering after spending the past year refining its existing product to make listings more reliable and affordable for guests, and to encourage more people to sign up as hosts.
That work has been paying off. The number of active listings on Airbnb surpassed eight million in the second quarter, even as it took steps to remove more than 200,000 lower-quality listings.
But investors looking for new product offerings for guests and hosts may have to wait a bit longer. Chief business officer Dave Stephenson has signalled that new services on tap for next year could include luxury amenities such as personal chefs, mid-week cleaning and in-home massages. Chesky has also said he will share more details on the company’s use of artificial intelligence later in the year. BLOOMBERG
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