Q1 2022 Airbnb Inc Earnings Call
Earlier today, we issued a shareholder letter with our financial results and commentary for our first quarter of 2020 two.
Items were also posted on the Investor Relations section of Airbnb website.
During the call, we'll make brief opening remarks, and then spend the remainder of time on Q&A.
Before I turn it over to Brian I would like to remind everyone that we will be making forward looking statements on this call that involve a number of risks and uncertainties.
Actual results may differ materially from those expressed or implied in the forward looking statements due to a variety of factors.
These factors are described under forward looking statements in our shareholder letter and in our most recent filings with the Securities and Exchange Commission.
We urge you to consider these factors and remind you that we undertake no obligation to update the information contained on this call to reflect subsequent events or circumstances, you should be aware that these statements should be considered estimates only and are not a guarantee of future performance.
Also during this call we will discuss some non-GAAP financial measures, we've provided reconciliations to the most directly comparable GAAP financial measures in the shareholder letter posted to our Investor Relations website.
These non-GAAP measures are not intended to be a substitute for our GAAP results.
And with that I will pass the call to Brian .
Yes.
Alright, Thank you very much Kelly and good afternoon, everyone. Thanks for joining.
I am excited to share our Q1 results with you.
Now despite the pandemic the war in Ukraine, and macroeconomic headwinds Q1 was another incredible quarter.
Exceeded 100 million nights and experience is booked for the first time ever GB.
<unk> was $17 billion, which was 73% above Q1 2019.
<unk> was $1 $5 billion exceeding Q1 2018 by 80%.
Loss was $19 million now this is a significant improvement from the same periods in 2018 and 2021.
EBITDA was $229 million.
Now this is our first positive adjusted EBITDA for Q1.
This represented.
<unk> EBIT margin of a positive 15%.
Now this is compared to a negative 7% a year ago.
30% in Q1 2018.
And finally.
We generated $1 $2 billion of free cash flow in the quarter.
This was also an all time high.
And what these results show is.
Is that two years into the pandemic.
Airbnb is stronger than ever before.
Now why is this.
Well millions of people are now more flexible about where they live and they work and as a result, the spreading out to thousands of talented cities.
And they are staying for weeks months or even entire seasons out of time now.
And that's through our adaptability innovation, we've been able to quickly respond to the changing role of the travel and these incredible results were driven by a number of positive business trends.
First guests are booking more than ever before.
Q1.
Gross nice book.
Grew 32% compared to Q1 2019.
And this is despite.
The pandemic.
In Ukraine.
And macroeconomic headwinds.
People are also more confident booking travel further in advance and we're seeing strong demand for summer bookings and be up.
Second.
Yes to returning to cities and they're crossing borders. So I'll just continue to travel domestically and continue to go to real destinations that airbnb.
We're also seeing gas returned to cities and cross borders at or even above pre pandemic rates.
Third guest.
Guests are also staying longer even living on Airbnb.
Now while short term stays rebounded strongly in Q1 2022 stays of a month or longer continued to be our fastest growing category by tripling compared to 2019.
And nearly half of our nights booked in Q1.
We're for stays of weaker longer.
One in five nights booked.
Our first phase of a month or longer.
So the world is clearly becoming more flexible about where people can work and getting ahead of this trend last week, we announced that Airbnb employees can live and work anywhere and we've designed a way for them to live and work around the world while collaborating in a highly collaborative way.
And experiencing the in person connection that makes <unk> special.
<unk>.
Now fourth our innovations are inspiring guests to discover thousands of new places.
In 2021.
We deliver more than 150 upgrades across every aspect of our service.
And among these upgrades was the innovative and flexible feature.
Now the iron flexible feature has now been used more than 2 billion times 2 billion.
And just to use on flexible.
Are more likely to book homes and less popular location.
This is really important because this allows us to point demand to where we have supply and helps distribute guests more widely and communities all around the world.
We're not stopping there.
On May 11th next Wednesday.
We will be announcing the airbnb 2022 summer release.
This is a new airbnb for a new world of travel.
With a completely new way to search gas.
Guests will be able to discover millions of unique homes and airbnb, they never thought to search for.
And when they book guests will have the confidence knowing the airbnb has their back each step of the way.
And so you can watch this announcement right on our homepage next Wednesday at nine a M. Eastern standard time non am Eastern standard time next Wednesday, right on our homepage I hope you can tune and because I'm really excited about what we have to share.
And then finally.
Our community our host committee continues to expand.
We see destinations the strongest demand showing the most supply growth.
With not urban active listings actually growing 15% globally.
And we're also showing an increase in total urban supply as demand returns to cities.
And we believe that the upgrades, we announced last year, including our new host Onboarding flow and air cover.
Are supporting this growth and enabling success for new host.
So.
To recap.
We had our best Q1 ever.
Nitrogen experiences book <unk> were our highest ever.
Revenue and adjusted EBITDA were records for Q1.
And we generated more than $1 billion.
In free cash flow in the quarter.
With these results.
Airbnb is stronger than ever before.
Now before I go to questions.
I just want to talk for a minute.
About our efforts in Ukraine.
Because over the past few months millions of lives have been devastated by the war.
And when the crisis broke out.
We knew that our platform can help refugees fleeing the crisis.
And within four days of the invasion Ukraine.
We announced that <unk> dot org, which provides free housing.
Up to 100000 refugees fleeing from Ukraine.
And over 30000 hosts have already signed up to open their homes to refugees for three or four discount.
But then.
Something even more remarkable happened.
People started booking homes for host in Ukraine.
Hosts they never intended to stay with.
Just to provide release dates.
And soon.
170000 people joined in.
And they booked approximately 600000 nights booked in Ukraine and.
And because we waived our feeds.
$20 million with directly to host in Ukraine.
And I think that speaks to the power of our community.
And they are a reminder.
That in the world the darkness.
In a world destruction.
Kind of still exist.
And so I'm really proud of our business results this quarter.
I'm also proud of how help we've been able to be to thousands of people in need.
And with all of that Dave and I look forward to answering your questions.
If you'd like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you like to remove that question. Please press star one again.
Again to ask a question press star one.
As a reminder.
A speaker phone please remember to pick up your handset before asking your question. We will pause briefly ask questions are registered.
The first question comes from Colin Sebastian with Baird. Please proceed.
Hi, Thanks, good afternoon, and congrats on the strong quarter a.
Couple of questions for me I guess first off Brian drilling down a bit on some of the broader use cases that emerged through the pandemic at a high level the trends clearly a sound very good I'm, hoping you could unpack that a little bit more in terms of the sustainability of longer stays and other use cases in markets that are furthest along in their recovery.
Where where offices are reopening and lives are sort of getting back to normal if youre able to break that down a bit more and then secondly on the plans for advertising and marketing you're keeping that it looks like fixed as a percentage of revenues, so a little bit higher.
Spend on marketing and advertising Keith can you talk about that.
With all the product updates the rebound in travel and maybe the competitive landscape. If you could talk about the the strategy with respect to the advertising and marketing. Thank you.
Yeah excellent thanks Colin.
So why don't I wanted to answer these at a high level and Dave feel free to jump in with some more specifics.
So let's start with the question of calling some of the broader use cases, you talked about.
And let's let's back up.
So when we started airbnb it was really just a way for people to book a home for just a few days at a time.
But even before the pandemic.
Actually long term stays stays of a month or longer were our fastest growing category or segment of trip by tripling.
The already growing very quickly before the pandemic and I think with the pandemic did.
I think it accelerated the adoption of longer term stay as an airbnb buy hard to say, how many but certainly by year's.
And I think it's important to understand why this is happening.
Right now what's happened is that for millions of people. They don't need to go back to an office five days a week and the vast majority of companies are not requiring employees to come back to an office. Many have moved to a hybrid or entirely remote model and I think that we're going to see going forward is it going.
See more and more flexibility because I think companies ultimately want to attract the very best people. The best people are going to be everywhere and so so long as we believe that people don't need to go back to an office five days a week millions of people than we believe in a world of more flexibility. So long as we believe in a world where people will consider.
The dial in on Zoom, we will again believe in a world of more flexibility.
So what we are going to continue to see we think over the coming years is continued and sustained growth for stays of longer than a month and stays longer than a week. I don't think this is a temporary phenomenon I think that the genie is out of the bottle and flexibility is here to stay and I think flexibility after compensation will probably.
The most important benefit that an employer can offer and just to give you a small anecdote.
Last week last Thursday, we announced that Airbnb employees can live and work anywhere in the world. The response internally, what's great, but even more impressive was the response externally because eight our career page was visited 800000 times after that announcement.
And so I think that this just speaks to the durability of this use case and I think that it's going to continue now with regards to advertising I think it's just important that I share a little bit of a recap of how we think about marketing and Dave feel free to talk a little more detail. So we are calling a little bit obviously different approach to marketing and advertising dollars.
Here, we take a full funnel approach to marketing that combines PR brand marketing and performance marketing and we're not really focused on buying customers.
We're focused primarily in investing in our brand and educating the world about what makes it airbnb unique so we think of marketing primarily as education.
And I think this explains why 90% of our traffic or more is director unpaid.
Airbnb is a now newberg used all over the world and it was really not advertising PR and word of mouth that built our brand and just to give you. An example, the lessons pandemic started there have been more than 1 million articles written about airbnb.
55% of articles that used to have the word travel and it also had the word airbnb in it. So it's pretty it's so so advertising is really a form of supplemental education for us it's not the core driver of growth. We think the core driver of growth Airbnb is innovation, it's about building a product that people.
Love and the role of marketing isn't to by customer the role of marketing for US is to educate people about our new features and our new offerings.
Do you want to know if you want to go into a little more detail about advertising.
I think you covered it fairly well I mean, we're very proud of the approach to marketing because the fulsome approach is working incredibly well for us as I said, we are actually increasing our marketing dollars. We're just keeping their marketing expenses as a percent of revenue relatively consistent to the level. We had in 2021, and we think it's being really effective for us.
Thanks very much.
Thank you.
Yeah.
Thank you. The next question comes from Bernie Mcternan with Needham <unk> Company. Please proceed.
Great. Thank you so much for taking the questions I guess first just wanted to get any insights on how supply and demand are growing relative to each other versus what was happening before the pandemic.
Even just utilization how it's trending how it was trending before the pandemic and how it is trending now and then secondly on capital allocation with over $1 billion of free cash flow in the quarter 9 billion of cash on the balance sheet can you remind us and just your thoughts on if theres any sort of capital allocation, whether it's returning it to shareholders M&A continuing to invest.
And the product would love to hear your thoughts there.
So why don't I do this.
Well, let me just talk at a high level about the first question.
And then Dave why don't you take both to customers at a more specific level. So let me just say at a high level around supply and demand.
Number one.
I think we're going to have plenty of supply the summer for the demand we're expecting a lot of demand for the summer, but we are not supply constrained any night of the year not even close at a global level the.
The challenge that most travel companies is that a lot of people tried to go to the same place the same city on the same date in cities essentially like Mark travel Otas typically get sold out so like a lot of people try to go to New York City on New year's Eve and there's only so many places to stay in New York and so you tend to get sold out.
Now key as Airbnb, where in a 100000 talented cities all over the world and we see a couple of phenomenon. So I think it's important to point out. The first thing we see is the <unk>.
Fast growing supply markets are actually our fastest growing demand markets.
As the market experiences more demand more supply get some box and I think the reason why it's primarily because the vast majority of hosting our individuals. The vast majority of new hosts get a booking within three days and when a regular person gets the booking and the booking might be three or four times of dollars. They tend to tell their friends about it and so as more people get booked they create more worried.
Mount and this unlocks more supply so we have a global network where demand in a sense stimulates more supply. Additionally, the I'm flexible feature is critical.
Does it allows us to point demand to where we have supply.
So if somebody is types in Paris on <unk>.
June four to fifth we are limited to the property comparison, those states, but if somebody says or flexible we can point them to other dates in Paris that are a little lower season or other accounts around Paris to have available supply. So I think these are really important but Dave I don't know if you want to go into a little more specifics about either utilization and also kind of the capital allocation theory.
Yes, I would just double click on a couple of areas. I mean, one is we just have more supply than we've ever had.
Our history and as Brian mentioned on the call.
That we grow more supply in the areas that we have the greatest demand like non urban active listings grew 21% in North America, and 15% below Lake globally.
The area, where it's kind of self healing, where we have the demand is where we ended up having the supply and redistribution is also incredibly important because we have listings and all type of types of markets. We're not globally constrained in any given night, which is different than if you only had supply in one type of market and then what it does with the.
And spikes in that particular more narrow market type like vacation rentals, you don't have anywhere else to distribute demand, but because we're all around the world and every kind of community. We end up with the benefit of being able to redistribute demand to other places. So I think thats been incredibly strong for us.
Regarding the capital allocation, yes.
Nine 3 billion metric as the CFO and the continued pandemic, having a strong balance sheet continues to allow us to sleep well at night.
We have noted previously that we're going to use about $1 billion of our cash to play pay for employee tax obligations as they exercise their shares and so that will be a use of cash this year.
And beyond that we're continuing to be in growth mode. We will continue to have a balance sheet that enables us to be ready to invest when and where we find that as appropriate.
It does enable us to do M&A in the future.
Desired, although M&A is not our primary driver of growth, we still plan to grow organically as our primary means but we'll continue to evaluate our balance sheet use and make sure that we are deploying capital appropriately.
Great. Thank you both.
Thank you next question comes from Mario Lu with Barclays. Please proceed.
Great. Thanks for taking my questions. The first one for Brian .
Well the strategy question.
So now that the total room nights have fully recovered versus 2019, how do you decide when is the right time in the company's focus to other potential growth areas, such as experiences hotels and flights versus continuing to hone in on the core product.
Great.
So let me let me take that.
So thanks, Mario so basically.
We learned some really important lessons during the pandemic.
I started this company with my two friends when I was 26 I just turned 26 the service company and we have this enormous amount of success.
The things that happens when you were first time entrepreneur enormous amount of success as you do something well and you think you can kind of do everything well, we pursued a lot of things before the pandemic and I remember growing up by the teacher said you can do everything you want your life not at the same time, though and I think that.
When the pandemic happened.
There was a silver lining to our to the crisis for US which is we got really focused we took all of our best people. We paused a lot of the new initiatives, we put our very best people on the most important problem for the company, which was stimulated and core business, but I think what we saw is not only did that happen, but the total addressable market for short term stays.
Than we ever imagined and we are also able to extend it to long term states.
Our general approach now going forward is to be incredibly focused we're going to absolutely be pursuing new opportunities, but we want to focus on the most perishable opportunities right now.
And right now the most Paris shop opportunities as this last year, we had what was probably the travel rebound with century, certainly I've never seen a sharp rebound like last year since I started airbnb and I think this year, it's going to be even bigger than last year, because last year. It was a little bit tempered by the delta and other strains.
And I think what youre going to see this year is a true pickup of demand and cross border travel. So we're focused on this year is the perishable opportunity I'm trying to capture as much market share as possible and get as many people who haven't traveling a couple of years to try airbnb because for many people Airbnb is no longer an alternative way to travel it's the deferred.
<unk>.
But that being said we are absolutely looking at new opportunities and new services nothing we pause from the pandemic that is out of is off the table to presume and Airbnb experiences. For example is a big area of investment in the coming years and so we're starting to ramp up that product. This year I think more.
Even more next year youre going to see some major new offerings around air can be experiences instead of demand and I think that some of our best ideas are ahead of us.
And I don't want to feel like the best ideas. We had were in my twenties of 30, So I think that there's some really big opportunities going forward, but the name of the game is focused just a few things at a time the most perishable opportunities get as much scale as possible get that scale into an ecosystem and then you can do a variety of line extensions for guest ampere hubs.
Great Boston, Bryan and then just one on the travel demand.
Post the summer months I know you guys talked about the fourth quarter seeing a little bit higher than historical.
But how do we compare that versus the 30% figure that you provided in terms of as the summer travel.
Travel season is it higher or lower any anything you can say in terms of the demand for summer.
Yeah, Dave I'll, let you take that.
Yeah.
Say that where the 30% in the summer periods, we're seeing consistent is that strong or stronger on a relative to basis. In Q4, I think thats. The fact that people are willing to plan out into the fourth quarter that are in the.
Higher rates than they've done in the past just shows the resilience that people have for traveling so now the Q4 demand is as strong relative to the Q3 demand.
We're stronger.
Great. Thanks, Dave.
Thank you. The next question comes from Brian Nowak with Morgan Stanley . Please proceed.
Great. Thanks for taking my questions.
Brian I have a couple for you.
The $2 billion $2 billion 2 billion I am flexible searches that's up quite a bit from 800 million last time around I guess I'd be curious to hear about what what are you seeing when people use that I am flexible is that leading to higher conversion is that leading to higher utilization of some some radios.
So the search sort of what are you seeing that sort of driving that quick inflection in that product.
And then to go back to one of your earlier answers about your your innovation in your forties now what what are still the areas on the host front, where you see sort of low hanging fruit opportunities to improve it to drive more and more host growth.
Yes, great.
Great questions, Brian Good to talk to you again.
So let me go let me start with guests and let me then go to host.
So youre right I think that I don't mean, just preface it by saying that last year, we launched.
I'm flexible the reasonably launched it as we saw more people, we're flexible and the challenge is this.
For 25 years travel search has basically been the same there's a search box and search box ask you, where you're going and I'd presume that you know where you're going in fact, you have to come to these websites for intents and then ask you when are you going and so most otas arent really in the business inspiration they are in business of converting traffic into <unk>.
King.
And this is good but we always thought that the Holy Grail of.
On my travel was to inspire people about where to go now.
Now.
The results of our flexible has exceeded our expectations. It's been used 2 billion time and for a travel product to be used 2 billion times and people in the US trial product typically a couple of times a year, it's pretty unusual. So what are we seeing the result, I think the primary thing we're seeing with <unk> flexible is we're seeing a very strong amount of engagement with <unk>.
Flexible people see a lot more properties and a lot more markets. We're seeing people book properties outside of a lot of the popular tourist destination and we're seeing an ability to redistribute travel demand.
Beyond the top popular hotspots like Rome, Paris, Las Vegas, New York, Los Angeles. So that's really the most important thing that I am flexible can do I'm flexible can be India inspiration game and point the mandatory have supply and so our measures of success or how often do people come back to the website, how many properties do.
A wish list how frequently are located the product on the exploration side and on the demand side, how well re pointing to match, where we have available supply rather than just kind of being at the mercy of wherever they think they want to go and when do you want to go when they come to Airbnb and so I think that what you're seeing in the Q1 result is that clearly the product is <unk>.
Working because I think that I am flexible at the feature has helped drive a fair amount of that growth now with regards to the host spread.
Youre right its very important that we continue to innovate on the host side <unk>.
Last year, we made a number of improvements to.
So to the host side of our product number one our general principle is the easier you make something the more people do it that's a really basic principle of the Internet. If you make something easier reduce friction where people do it and hosting the easily make it the more people will become a host so what we did last year as we reduced the number of steps to being a host of 10.
We added a new product called ask a super host I think 170000 perspective post have used the products to where they stay or a question. They can ask one of our very best House, and then probably most importantly, Brian last year.
We launched air cover for host Air cover provides a $1 million protection against property damage of $1 million personal liability coverage and it's free if we did not charge anything incremental towards transaction III and we're the only company in travel to offer this for free all these feature sets to our host now going forward this year.
We have a number of new innovations that I'm really excited about I'm not going to go into all the details I'd like to kind of save it until we announce it but I'll stay at a high level. We are looking at feature that bring more people into hosting ecosystem. So we wanted to provide even more ways to make it easier for her to list we want to.
<unk> more support for them to make it easier to host and we want to provide even more kind of control. So people can decide.
Yeah, Guy who sees their property when its available things like that so we have some really exciting announcements on.
On may 11th.
You'll hear some interesting features that are going to be launching and then we're also going to have a product where these later in the year in November as well. So we'll have a couple of big update on those two fronts, but again, it's all about making hosting easier and making it even more appealing for people, who arent hosts to become post and if we can do that and make hosting mainstream that will.
Fulfill our growth for years to come.
Great. Thanks, Brian Super helpful.
Thank you.
Thank you. The next question comes from <unk> Khan with <unk>. Please proceed.
Yeah, Thanks, a lot.
A question for Dave.
So Dan.
Nothing along the kind of things.
As for India asked me down.
In aggregate.
<unk>.
I mean do you expect to be.
And then what are you baking in in terms of this new product <unk>.
Coming up next week.
Alright on ADR, what was shown in the past is that <unk> are up substantially from where they were back in 2019. So they were up 37% year over three years.
What we saw throughout the time in 2021 was that by Q4 about half of that ADR increase was driven by just mix. So regional mix like North America, and Europe , and the type of homes. So non urban hole and some mix was driving about half of the price appreciation.
And then the other half was driven by price appreciation itself, so about half and half on.
The drivers are ADR here in Q1 price appreciation has become a larger percentage overall of the driver of Edr and mix is that a little bit less than half so it shifted even a little bit more.
So what we're going to see and we've shown this in the outlook is that Q2 of this year <unk> will be relatively flat with Q2 of the prior year and so that'll give you a sense that ABR remaining elevated both due to mix and due to price appreciation.
They will likely moderate throughout the back half of the year as mix continues to adjust more towards cities more cross border, which have lower average daily rates, but price appreciation has remained high and stickier and so I think the level of decrease in ADR I think it would be maybe lower than what we anticipated at the beginning of the year.
Sure.
And then I think I don't know.
Give me more on your question around new product introductions will be talking about next week.
Yes, we'll give you those details on that contribution.
Nothing concrete.
Outlook contemplate any contribution from those products.
Yes, I mean, our outlook for Q2 clearly includes.
The results from the investments we've made to date and we're very bullish on these continued improvements to continue to drive the strong results that you've seen so we're not giving guidance out beyond Q2 at this time.
Got it thank you.
Yeah.
Thank you. The next question comes from Stephen Ju with Credit Suisse. Please proceed.
Okay. Thank you so Brian .
The rising consumer demand for longer term stays has been something you've been highlighting in terms of a fundamental change in behavior for some time now so can.
Can you share with us how the reception from the host has been in terms of their willingness to accept longer term space versus the more traditional shorter burst because I guess, what I'm trying to get out is whether there.
Or is there any sort of extra push you guys may need to do in order to enable that longer duration supply.
With the 6 million host you have now or is this just a matter of demand I should say of lighting up the supply.
And I guess.
Second.
I get that things are pretty depressed right now, but going back to the world pre pandemic like what were some of the bigger of corridors of travel in Asia. So we can start thinking about what the shape of the recovery there can be thanks.
Yeah. Thank you very much Steven.
Now, yes, so let's start with rising demand for long term stays what has been the reception of post.
This is this is actually.
One of the most interesting.
Point I would say.
Which is.
I think when we really started looking at this category. My assumption was it would be a different type of host strike. Some host wanted to lift their place for short term basis.
And the other different host wanted to list their properties for a long term basis and this is what you say C. On Craigslist right. There's a short term stay category I mean, theres apartment categories and they're not the same people.
On Airbnb is totally different.
The vast majority of host on Airbnb, who initially list their homes for a short term basis have now included a monthly state discount.
And that is critical so we have a large percent of people to have a multistate discount or are available to host on a long term basis. So I think that's the most important thing I would say, which is that they obviously are interested in it now why our host interesting that well theres a number of reasons one is seasonality some people live in highly seasonal areas.
We're on high season, they want to rent by the night, because they have a really great yield but during low season held low occupancies, so they'll move children.
In some markets and urban markets, where there are some restrictions on the number of night you can.
Rent on a short term basis below 30 days.
But they don't have restrictions on 30 plus days so for the most part will host see long term stays at as a way to increase their annual occupancy and they generally you want to go nicely to get as many bookings as possible, but during low season or whether its limits, but go to monthly and they are really the same house now there are some host to only do short.
Term there are some host to only do long term, but what we see is generally open mindedness from most dose to offer bolt and the great thing about our product, but you hardly have to do anything different to offer long term states, having long term discounts as key theres, some new amenities, having verified Wi Fi is poor and that you're going to live someplace. So theres a number of tactical.
Thing.
But I think generally speaking the product as it exists work for short term or long term space in the vast majority of hosts are open to it. So the answer is there is receptive.
I think your second question was what were the biggest corridor in Asia.
Well, yes, so let's start Asia was a is a highly cross border market.
Let's kind of break it out Asia Pacific could start actually with Australia, which is of course part of Asia Pacific Australia is it primarily outbound market and it's very much a cross border International market is obviously, Australia is very much in a kind of quote unquote and so we're seeing a real rapid recovery and our Australia demand bit.
Matt.
Japan has historically been an inbound business and a lot of our demand in Japan has come from other countries that is starting to see some uptick but that's going to take a little bit of time, China is primarily an outbound business people go to China, but primarily they travel and these China and they go to other communities, especially around Asia.
And what we see in Southeast Asia, primarily as these are absolutely inbound and outbound market, they're very much cross border. So I guess the high level is the vast majority of the markets in Asia Pacific Our cross border.
A lot of that travel is intra Asia travel, there's a fair amount of travel, though where its inside and outside of the Asia and.
Very very optimistic about the ability of our <unk> business to more than fully recover because what we've seen is the longer people can travel the more pent up demand. There is I don't think travel ever. It is going to go out of style people are going to continue to travel and so I think that we're very very optimistic that Asia is going to follow the recovery curves.
Europe , North America, and Latin America, just on a little different time scale.
And sorry, just to give you.
One staff just to give you a couple of staff on the first question 87%.
Of all available listings on Airbnb.
<unk> long term states.
52% of post offer.
Monthly discounts.
And these discounts are 85% of our long term states.
Thank you.
Thank you. The next question comes from James Lee with Mizuho. Please proceed.
Great. Thanks for taking my questions two here.
Yours is inflation, having an impact on consumer behavior, maybe for example, consumer trading down from hotels to home accommodation and also in terms of market share within home accommodations as you see mix shift to urban markets, where you have strength in supply how's.
How does that compare versus your peers, who may be more non urban focused thanks.
Yeah.
Yes.
Maybe why don't we do that Steve why don't I answer a high level of the second question because I just wanted to share a point about our urban business and then maybe you can go into the details about both the inflation impact on consumer behavior and kind of how we're comparing to our peers and urban markets.
James The thing I would just say about our business is.
I think that our business is uniquely resilient in a uniquely adaptable model and the reason our model is adaptable is because we're not just a U S business. We're not just the European business, We're a global business and we're strong in Europe , North America Asia, Latin America Africa, where global we're in 220 countries.
The reason, it's one of the global companies in the World, We're not just a vacation rental business.
And vacation rental markets.
Our bread and butter is urban.
Cross border was really how we got our start so we're very much in urban or rural vacation rental and in off the grid, even have homes totally off the grid.
We have homes that are 2030 Bucks a night in tens of thousands of hours a night. So we're really at all price points.
Cater to families and individuals. So we've nearly every type of home at every price point.
Kind of space in nearly every type of community around the world and so I think that we've been able to be uniquely resilient and the other thing I'll, just say about our urban market business as we're seeing record long term stays I'm doing this call for example from New York City, and Airbnb, where I have four a month.
And we're seeing in New York City for example, a huge uptick in long term state because a lot of people have to come here working remotely.
At a time, so that's just a little bit of how we think about it Dave I'll hand, it over to you can go into a little bit more detail.
Yes, I mean, we're just not seeing price appreciation impact our business negatively we had our strongest quarter ever we.
Even stronger demand for Q3, and Q4 than we've ever had.
I think Brian hits around the head because we have every type of home in every type of community everything from budget, you've shared homes to luxury homes people can make a choice about what kind of property.
Their particular budget and their needs and so I think it's that strength of diversity of product that will continue to support our business going forward and then I think you also hit on it which is this mix shift to urban markets, which has traditionally been our strength at Airbnb when you compare it to others.
Who don't have the same amount of supply and capabilities built no cities, it's going to give us kind of a further tailwind and really what we're seeing right. Now is continued strength of the domestic business that was up 65% versus 2019 strengthen our non urban business is up 80% versus Q19.
Q1, 19, exactly remains incredibly strong and now we're seeing the mix shift towards <unk>.
Urban markets back towards 2019, and the cross border back to 2019, and so I think that tailwind is going to continue to help our business going forward.
Okay.
Great. Thank you.
Okay.
Thank you. The next question comes from Jed Kelly with Oppenheimer. Please proceed.
Great Great. Thanks for taking my question just.
Thinking about you know.
On how higher interest rates and then like a potential risk.
Assertion.
How do you think that would impact your supply and then just thinking about the top line for the back half of the year.
You know in APAC opening up and more and more cross border more urban you think revenue or I guess bookings will be driven more by volume or by Adr's. Thank you.
Yes, so why don't I take the first question.
About higher interest rates for the recessions and back on supply and if you take the second question.
Jed.
No way to know for sure.
On your question, but I'm pretty sure I have a sense of it.
Airbnb.
<unk> launched on August 11th 2008.
And so you'll you'll remember what the world would like in August 2008, and we really got going January February March of 2009 in the depths of the great recession.
And the reason that Airbnb. Initially grew was that people were having trouble paying their rent.
Trouble keeping their homes and people turn to Airbnb to list their homes and what we generally see is in recession people change their behavior and they changed their behavior.
Based on kind of price considerations and so will generally expect in a recession. If that were to happen is that probably more people would turn to hosting.
That would be number one so that's what you would expect and number two <unk>.
Travelers would probably become more budget conscious and that would probably have a benefit to airbnb as well now the downside of course, the recession as often times, you where people travel, but again I think we're a pretty resistant business.
Whether it's kind of it's good or bad we're pretty adaptable model. So that's what I would expect on the supply side, that's the more difficult when the economy is the more people are going to supplement income and a lot of handful then we'll turn to hosting Dave I'll hand over to you.
Yeah, and just to double click on that I think even in a recessionary environment. If people are more constrained on the dollars you have to spend to travel definitely will come back to airbnb, because we're a better value of that travel and going back to the earlier point, we have all types of price points budget deluxe and consumers can figure out what meets their best budget needs and so I think.
It actually.
We are a better option than many other alternatives in a recessionary environment.
And then in terms of the back half of the year expectations. The revenue will be driven more by volume then edr's, we give our outlook on <unk> for Q2 of being flat year over year. They may moderate a little bit in the back half depending on mix, but I think that the biggest driver of revenue maybe outperforming current.
<unk> could be a further strengthening of the European business or acceleration of that maybe normalization of cancellation rates across the globe could also be a tailwind.
Pack coming back more strongly more quickly will certainly help the results, but I don't think it will be the major driver of this year North America and European travel in the store just such a large percentage of our business at the moment.
APAC will be super important over the long term, but less of an immediate driver here in 2022.
Thank you.
Thank you. The next question comes from Mark Mahaney with Evercore. Please proceed.
Okay, Hey, Brian when I applaud you by the way for their efforts with the Ukraine, you came up with a creative and direct way for people to help out so I applaud you for that.
And then.
I also want to give you some comfort in terms of your thoughts on innovation and age I think most studies show that peak innovation occurs when people reach 50. So if you can just make it through the next 10 years you'll be good.
Our findings.
And then finally, just because you touched most of the questions I've thought about where have already been asked but let's get back to experiences. So it sounded like maybe your I know you've got the core business and that's what you're really focused on but it.
It sounds like you may start leaning in a little bit more to experiences. So just flesh that out a little bit and I know, it's relatively small versus the core opportunity now but.
Some point I assume youre going to lean more aggressively into experiences and I assume that there'd be hosts demand to do that so because theres, probably a lot of win wins all around that so just talk about the timing of when you think you may want to lean more aggressively into experiences. Thank you.
Yeah.
Alright, well thanks, Mark it's great to hear from you again first of all yes, I'm 40, I Hope I got a good 10 years than me and I think I'm a pretty late bloomer. So maybe give me give me even more than 10 years.
And so what I wanted to do at that time, well one of the things I want to do is experiences I think that experiences is a massive massive opportunity.
When we started at Airbnb Air homes took off and I remember, saying at the time Mark.
We monetize People's biggest ASUR already which is their home what do we do next when you go to the next largest asset.
And then actually turns out to your home is not your largest asset from a vacancy standpoint I think it's your time for most people. Your time ultimately can generate more revenue for the average person in the property can and so that's a bit of an insight of where experiences can it also came from the fact that a lot of people book I mean, not just to save money, but they have a local travel experience and I think experienced.
So a great way to do that and so I was expecting 2020 to be the breakout year for experiences and we prepared for that and of course, the opposite happen. The pandemic occurred and we put the product on hold and the last two years when people arent really comfortable leaving their house they have to mask on it's not really been the right condition to double down.
On experiences, but now that the light is at the end of the tunnel of the pandemic, we think People's first trips won't be to meet strangers and go on experiences. We think the first chips, we want to have or to reunite with family unite with friends get a big home together and so we think that this summer, though people will book experiences I think the summer still a little more about home.
<unk>, just because people are getting comfortable getting out of their house.
That being said.
I think this summer you're going to start to see a ramp up of experiences I think next year and beyond it's going to be a massive opportunity and I am incredibly excited about it and one of the reasons I'm. So excited about it is that our guests actually from a customer satisfaction standpoint, like I spent more than homes. They actually leave at significantly higher five star rating as a percentage of their ratings.
For experiences at home, but people like homes. The retention is really good. So we think that's just scratching the surface and so to answer your question definitively we are going to be ramping up we're going to be getting more aggressive experiences. It will be a slower on ramp this year, but by next year, we're going to be going full throttle and I'm really excited about this opportunity and it's a little hard.
I don't want to make too many predictions about how big it will become but my general sense is that is kind of probably bigger than most of us imagine just because I think people are looking for interesting things to do with people people are lonely they want to meet one another they wanted to do activities. They can only go to so many restaurants. They can only watch somebody shows on Netflix and many physical <unk>.
Entities are being digitized and so people ultimately want to have real experience in the real World I think travel is a great way to do that and the final thing I would say mark is.
Increasingly people aren't just booking homes in Paris, you got to Paris, you can see the Eiffel tower, you Gotta look, but if you go to a small counted France, what do you do other than go to a restaurant experience, it's a great way to do something interesting and new.
Every community in the world, especially ones that don't have the Eiffel tower.
That's those are just some of the reasons why I am incredibly bullish about this product, but it's going to take some time to really ramp up.
Okay. Thank you Brian .
Thank you. The next question comes from Justin Post with Bank of America. Please proceed.
Great. Thank you.
A lot of my questions have been answered, but on the urban supply side I imagine you had some churn on health issues and other factors. What are you seeing in urban markets and could you see a big big uptick there as demand comes back how are you thinking about that and then maybe one follow up.
Yes, if you don't take this one.
Sure sure I think one of the key things remember about our supply is that the vast majority of our hoster individual house and they don't get rid of their home.
They're using their own home or maybe a second home too to host so even in the midst of the pandemic or other kind of recessionary environment without getting rid of their own home or their second home, which means that they are ready for host and there'll be there when the demand is coming back and that's what we're seeing now with our urban demand. So.
The urban demand is starting to come back it's now back towards 2019 levels and our hosts are ready for them and our growth in hosts in the urban markets has also increased so we're seeing an increase in our listing.
Listings for both our high density and and urban markets overall, and that's where we kind of continue to see as the demand comes back the supply is there to meet it.
Great and then a follow up on <unk>, I think you're saying around flat year over year could you just talk about the normal seasonality for <unk> why is it mix that could that causes them to down and how does that how do you think about the back half seasonality on ADR.
Yes, I think if you could again, we've been up 5% year over year in Q1 is going to be flat relative on a year over year basis. In Q2, you can kind of see a little bit of a decrease of seasonality for Q3 Q4, you can maybe look at some of the seasonality back to 19, which we'll show you that Q3 and Q4 up moderately.
Lower ADR, so substantially you could use that as a little bit of a guide.
And then just know that the mix change is being offset a lot by.
Strong price appreciation that is continuing.
Continuing to prop up the AVR overall, so I think that is.
Bit of the unknown for exactly where it lands in the back half of the year, what I can see as you know very clearly what is going to happen in Q2, which will be flat year over year.
Great. Thank you.
Thank you. The next question comes from Ron Josey with Citi. Please proceed.
Great. Thanks for taking the question I wanted to ask a little bit more about cross border just given the rebound that we saw this quarter and rebounded from seeing just can you talk about the dynamics, maybe Brian on on whether this cross border is mostly call. It North America users going overseas are you seeing more EMEA users coming to the U S or any sort of insights around there and then and then Dave on just overall.
<unk> EBITA understood.
More more leverage and margin expansion in the first half, but it's really impressive to see the continued call. It leverage across most of your line items can you just remind us option support.
And gross margin, what's driving that thank you.
Yeah, Hey, Ron I can start.
The cross border is I would say North America, Europe , Australia, Latin America pretty much everywhere about Asia, and it's really going in all directions. So people are coming into North America people North America are leaving.
They're absolutely go into Europe , there's a lot of travel within Europe , and we are now also seeing Europeans coming to the United States and go kind of in other locations as well. So the great thing is the network effect is kind of moving in multiple directions, whereas say last year. It was much more domestic and kind of really limited the corridor. So we're really starting to open so Dave I'll, let <unk>.
Take the rest of the answer.
Yes.
The EBITDA I really pleased and proud of the work that we've done to improve our overall profitability, we made some really difficult choices.
In the midst of the pandemic to reduce our overall workforce and focus on the core of our business. We think that actually that focus is enabling us to deliver even more likely I think we've actually <unk>.
Levered more innovation and productivity as a company by being very deliberate and focused in the more narrow area versus trying to do everything all at once and that's been very effective with us.
Actually have 16% fewer people at the end of Q1 'twenty two than we did at the end of Q1 2020, before we had our layoffs and yet I think it would be more productive than ever before and then we're getting nice also on top of that fixed cost leverage yes, we're getting nice improvement in our variable costs and our <unk>.
Option support it was 15% of revenue here in the first quarter and seeing nice improvement versus our ops and support in <unk>.
Higher quarters ops.
The ops and support will include.
Largely our community support operations in our trust and safety activities. Those are the elements that are within ops and support we're going to continue to invest in those areas. Because we think those are differentiators for us and they are doing those really well supports our individual host community, but we're making nice strides and improvement in leverage so the regained.
The continued profitability and one of the things we noted in the letter is that we're expecting for the full year.
A modest expansion in our overall EBITDA margin rate.
That's nice to see versus 2021, and I'm really excited that in 2022, we'll have our first full year of net income profitability.
<unk> just not a full net income basis to be profitable this year shows excellent.
That's great. Thank you guys.
Thank you. The next question comes from Lee Horowitz.
Each bank. Please proceed.
Great. Thanks for taking the questions two if I could high level demand across the accommodation business.
Bruce incredibly sticky through the front half of this recovery and your comments suggest even into the back half to what do you kind of a stickiness in consumer.
Patterns in terms of the way that they travel even as things open up in hotels, perhaps gain a bit of share and then maybe.
On costs as well wage inflation and the inability to kind of find talent has been cropping up across a lot of the names that we cover you guys haven't necessarily comment too much here, but how if at all or are you seeing wage inflation potentially place model as we move through 2022. Thanks so much.
Okay.
Alright. Thanks, do you want to do you want a ticket.
Sure sorry, sorry can I, sorry can I actually can I ask.
Clarifying I didn't quite understand the first question can you ask it again.
Just in terms of in the meantime, we're enabling.
Can you clarify the first question.
Yes, My first question as soon as demand for the industry.
Yeah.
Our alternative accommodations has proven incredibly sticky despite reopening more mortgages come online online those sorts of things I guess to what you all just kind of stickiness in consumer travel patterns.
Oh why is the sticky so sorry, I just want make sure I understand are you, saying why did like it was obvious why people are booking homes last year, because people aren't traveling for business they weren't going to urban mark if they weren't crossing borders they were staying nearby but youre asking why when they were trying to wear yoga dance.
Why they are still sticky okay got it okay.
Okay I got it. Thank you and then let me do that and then you can take the second question. So.
I mean, I think it is important to note that.
Like we were growing really fast before the pandemic and the reason we are growing fast is number one I think a lot of people want to have a local experience. They travel number two they want to save money when they travel number three airbnb allows them to travel with groups and increasingly people are traveling and group number for Airbnb allows them to travel.
Stay in nearly every comedian or all hotels are in limited markets around the world and number five the longer away from home. The more you want to be in a home and length of stay is going up. So I think all of those reasons explained the stickiness maybe said another way, it's another way of saying.
Rural demand increased during the pandemic and people are still traveling to rural areas.
People are still traveling domestically.
Does the very popular demand use case during the pandemic people don't have to go back to the office five days a week. So people are still booking weekly stays a monthly states. So again domestic non urban and longer stays where three use cases that weren't really our original bread and butter original bread and butter was urban cross border.
In a short term, but these three trends are sustaining theres still sustaining and the reason why is I think the genie is out of the bottle people have permanent flexibility and people now realize theres a lot of great places to go beyond the top hundred tourist destinations that being said, what we're seeing is a recovery of cross border and urban it's actually both above 2019.
So in short the old ways, the bread and butter of Airbnb Cross border urban are back and the new use cases for the use cases that we're accelerating pandemic art here to stay and the combination of those two things is why I think this business is so sticky and maybe a more fundamental way of saying it is people love.
The experience they have and so when people lesson, we intend to do more of it Dave I'll turn it over to you.
No.
In terms of wage inflation. This we did $1 $5 billion of revenue in Q1, with just 6200 people and we don't need as you said, we actually up 16% fewer people than we did in Q1 of 2020, we don't need to add incremental people to have this business grow dramatically were significantly larger today as a business with significantly fewer <unk>.
People, so really wage inflation is not a major driver of costs.
Our investing in our employees in order to enable them to live anywhere move anywhere within the country. If they move someplace else were not going to alter their pay for being in a different part of the country.
And we're going to support them work 90 days and other countries around the world. So we think that kind of investment will benefit us by having lower attrition and being able to attract the best talent in the world. So we think that's going to be a great investment for the future to have the best talent to unlock all the innovation that Bryan has talked about on the call today.
Great incredibly helpful. Thank you both.
Thank you that concludes the Q&A session I would like to pass the conference back to Brian Chesapeake for additional remarks.
Alright, well, thank you all for joining us today.
Credibly proud of what we accomplished this quarter.
We hit New records with Knights and experiences booked and GBP we.
We had our first positive Q1, adjusted EBITDA and our highest free cash flow ever 1.2 billion free cash flow.
But we're just getting started because youre going to be accelerating our pace of innovation and I'm really excited to announce the biggest change to airbnb and a decade, that's going to be next Wednesday may 11.
At nine a M. Eastern standard time, you can watch the special event right from your homepage until then thank you I'll see you soon.
That concludes the Airbnb Q1, 2022 earnings call. Thank you for your participation you may now disconnect your line.
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