Q4 2022 Airbnb Inc Earnings Call
Good afternoon, and thank you for joining Airbnb earnings conference call for the fourth quarter of 2022.
As a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section of Airbnb. Its website. Following this call.
I will now hand, the call over to Ellie Merle VP of Finance. Please go ahead.
Thank you good afternoon, and welcome to Airbnb is fourth quarter of 2022 earnings call. Thank you for joining us today on the call today, we have <unk> co founder and CEO , Brian <unk>, and our Chief Financial Officer, Dave Stevenson.
Earlier today, we issued a shareholder letter with our financial results and commentary for our fourth quarter of 2022. These.
These 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 and involve a number of risks and uncertainties actual results may differ materially from those expressed or implied in the forward looking statements. Peter 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 IR 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 .
Okay.
Alright, well, thank you very much Lee and good afternoon, everyone. Thanks for joining.
Before I share our results.
I wanted to tell a quick personal story.
As you may have seen I've started hosting again.
Last November I listed my guest room on Airbnb.
By lifting is called beyond the airbags and the room guests Dan is an astonishingly themed around the early years of Airbnb.
Theres remember dealing the walls.
For the original air Bud to old photos, and <unk> boxes of Obama OS and kept Mccain's breakfast cereal.
Suraj I'd welcome basket waiting for them on the first night, you can make to enter together followed by dessert.
Chesspiece chip.
<unk> cookies for my cherished family recipe that I got off Google <unk>.
The next day with towards the F&B offices with my Golden Retriever, <unk>, Nova and I'd tell the story of building Airbnb.
Now why am I doing this well because I love hosting Joe and I were the first hosts on Airbnb 15 years ago, and having yesterday in your home with you is the original idea behind Airbnb.
Been an amazing way to connect with people.
But I also believe.
The companies that make the best products make products for themselves and.
And Airbnb will only be as successful as our hosts and.
And the best way to understand our host is to be one.
Since I presumed hosting I've got new firsthand insight.
And for in some of the new products will be early say, including some exciting updates. This may as part of our 2023 summer release.
Now before we get into our quarterly results I want to recap the full year of 2022.
While we're three years out from the start of the pandemic, we are still living with its impact and we've also seen high inflation recessionary fears and the war in Ukraine, all of which we're still dealing with in 2023.
And yet through all this.
People continue to travel.
And 2022 was a record year for Airbnb.
Revenue of $8 4 billion grew 40% year over year and when you exclude foreign exchange our revenue increased by 46% year over year net.
Net income was $1 9 billion.
Which marks 2022, as our first profitable year full year on a GAAP basis.
And finally free cash flow was $3 4 billion.
And this $3 $4 billion of free cash flow represented a free cash flow margin of over 40%.
Because of our strong balance sheet, we are able to begin buying back stock last year, and we've repurchased $1 5 billion in shares in just the past five months.
Now during the height of the pandemic, we made some very difficult choices to reduce our spending making us a leaner and more focused company.
And we've kept this disciplined ever since.
And over each of the past two years, we've only modestly increased our head count.
In fact.
Compared to 2019.
Our head count is actually down 5%.
Our revenue is up 75%.
And every single quarter in 2022.
Outperform paths comparable periods in.
In Q4 net income was $319 million now this is $264 million higher than a year ago.
Adjusted EBITDA was $5 6 million.
Just 52% higher than Q4 of 2021.
And we generated $455 million free cash flow and this is 20% higher than Q4 2021.
During the quarter we saw.
Saw a number of positive business trends.
First guest demand and Airbnb remains strong.
<unk> experiences booked increased 20% in Q4.
We had our highest number of active book Theres ever in Q4, demonstrating guest excitement that travel on airbnb, despite evolving macro economic uncertainties during.
During the quarter. We also continued to see gas booking trips further advance supporting a strong backlog for Q1.
Second.
Guests are increasingly returning to cities and crossing border and this is the bread and butter verbally before the pandemic now both segments continued accelerated while non urban of domestic travel remains strong cross border growth Nice book increased 49% compared to last year high density Urban night grew 22% and globally.
We saw cross border travel to all regions increased despite continued foreign currency volatility.
Third our guests continue to book longer stays on Airbnb.
During Q4 long term stays remained stable from a year ago at 21% of total growth nights booked on Airbnb.
And finally, we saw tremendous growth in our supply on Airbnb.
We ended 2022 with $6 6 million active lifting now.
Now excluding all of the mainland China lifting we removed in July we encourage supply by 900000, lifting or 16% compared to a year ago, representing an acceleration in growth in listings relative to Q3 now.
Now why are lifting accelerating in growth. We believe there is probably two factors that drove this growth first demand and drive supply.
Post our attracted a supplemental income that they can earn on the Airbnb, which is often critical during tough times.
Second our product improvements are working over the past two years, we've made it more attractive and easier to become a host.
Just this past November we introduced Airbnb setup, where prospective hosts can connect with super hosts for free one to one guidance all the way through their first reservation.
A number of new active hosts recruited.
With the help of our Super hosts increased by more than 20% compared to prelaunch.
But we are not stopping there.
In 2023, we're focused on three strategic priorities.
First.
We want to make hosting mainstream.
If you are listening to this call you've likely traveling airbnb or you know someone who has.
We want hosting on Airbnb to be just as popular and.
And to achieve this we'll continue to raise awareness around hosting.
Easier to get started and provide even better tools for host.
Second we are perfecting our core service.
We want people love, our service and that means obsessing over every single detail.
And we've listened to our hosting guest and based on their feedback, we're making a large number of upgrades to our service this year, including improving customer service.
Any easier to find the right home and delivering greater value and much much more and youll see more of this in.
And of course coming in the coming months, especially our December release and.
And finally third we're expanding beyond the core we have some pretty big ideas for where to take care of it can be next and this year, we're going to build the foundation for future products and services that will provide incremental growth for many years to come.
So with that Dave and I look forward to answering your questions.
Thank you.
If you would like to ask a question press star followed by the number one on your telephone keypad.
We asked today that you limit yourself to one question and one follow up thank you.
We'll pause for just a moment to compile the Q&A roster.
Your first question today comes from the line of Jed Kelly with Oppenheimer. Your line is now open.
Hey, Greg.
Thanks for taking my questions.
Great quarter and great execution.
Just two if I may just one can you talk about how your urban supply is trending and sort of some of the initiatives you're doing around apartments, and then Brian you did mentioned head count.
In Silicon Valley. There is obviously a lot of layoffs, you're one of the companies that are growing having expanding margins. So can you talk about like your ability to attract top tech count Tech talent to execute on some of the initiatives you just talked about thank you.
Okay.
Yes so.
Let's start with the first one urban supply growth.
Let me kind of course start by just talking a little bit more about how we think about supply the great thing about our supply is that the vast majority of hosts that come to airbnb comp organically and thats because of our global network. In fact, the number one source of hosts our prior guests and in Q4, 36% of our hosts were prior guests.
And one of the other things we see is the fastest growing markets, where we have supply is also the fastest growing markets. We have demand and I think what's happening is a lot of our hosts irregular people and as they get more bookings they tend to tell their friends and so this network is something that has kind of stopped growing effect to it now in addition to that we've been doing a <unk>.
Number of initiatives number one we have been focused to make hosting easier with airbnb setup and between that and a new campaign, we've been running Chad called Airbnb, which is basically this idea that if you have a space you have an airbnb between these two initiatives we've seen twice the amount of traffic to our hosts landing page. This is the landing page to learn.
About hosting.
Then we also have made big improvements to making hosting easier.
Now in addition, you might have seen that last November we announced the new initiative called Airbnb from the apartment Airbnb friendly apartments, I think kind of mark a large amount of inventory in multifamily homes in urban areas and we worked with great star and the number of the other largest real estate developers in the United States, We have 175 buildings.
In Phoenix, and Jacksonville, and Houston, and other cities and the response from landlords have been very very positive. So we are seeing a lot of traction.
Traction on urban supply I don't Dave you want to add anything before I talk about head count.
Yes.
It really well because this has been historic strengths of ours has been kind of the urban part of the business and has taken longer for that to kind of recover its now well above 2019 rates and that's actually part of the areas that accelerated our growth during the Q4, So we're very happy with where round with urban and as Brian said the early days of Airbnb friendly apartments has been very well adopted.
And we are excited about the potential in that part of the business.
And then just on your question Jed on head count.
Something really interesting happened. So obviously in 2020, we had to make some really difficult decisions and we became a much smaller and more focused company and the audience. As a result of that is that we got more efficient and more profitable, but there was a less obvious results. What ended up happening is we had fewer people.
And meetings and people can move a lot faster and be concentrated all of our very best people and put them on only a few problems.
That's been an explanation for why the company has grown really quickly, but also I think it's made us a much more attractive place to work because it's much easier to get work done and we have a general philosophy that we want the very best people in every field the commentary Airbnb in every function. We are functionally organized and I think that we're one of the few tech companies.
Isn't doing layoffs, we're not cutting we're not freezing we're actually stepping on the gas, but in our mind stepping on the gas doesn't mean, adding a huge amount of people we're going to continue to stay really lean, but we're really focused on just really hiring in key positions and we and again I kind of use this analogy that we are not building like a giant Navy.
It's more like the special forces.
Focused on so we've had a lot of success with talent and of course, we're getting a lot of inbound.
Thank you had to cover a couple of things one is in our head count is actually it's still 5% below where it was in 2019 and you have a revenue is 75% higher so we're nearly twice as big as we were previously with fewer people and let's say another is our live and work anywhere approach our approach to being very intentional about how we do.
Gather in person, we believe that actually working together in person is very important just need to do in a very coordinated way so actually having people being back in the office on random days of the week is not very effective but being doing it.
Very controlled and plan full way is respectful of employees time and is more efficient for the company.
Employees Love It I think Thats also enabling us to attract great talent.
Thank you.
Okay.
Your next question comes from the line of Richard Clark with Sanford C. Bernstein. Your line is now open.
Hi, there thanks for taking my questions.
Two if I may the first one just around I guess some of the changes that might come over the coming years with regard to the distribution landscape.
One of your rivals is going to wrap that the vacation rental business into our loyalty program lots of talk around conversational AI and what where that can do to the distribution landscape. So just any comment as to whether airbnb needs to do anything further on the distribution platform and then second one a little bit more per se, but obviously in the 10-Q.
<unk> was a very good quarter as the take rate.
Anything particular, there on take rate.
To achieve that result.
Okay.
Dave you want to start with take rate and I'll end with.
Distribution program, yes.
Theres nothing in particular that we've done with take rate the absolute on a time adjusted basis.
The amount that we take from each night stay has been very stable and so any variation that take rate of revenue over gross booking values just variation quarter to quarter. So.
Nothing on take rate.
And maybe Richard.
Can you just clarify what you mean by distribution landscape do you mean like the competitive environment or the competitive landscape competitive environment with regard to distribution, whether you see any threat to increased threat.
Our loyalty program wrapping around your competitors and maybe the conversation.
Our AI coming into various other search platforms at the moment.
No I mean, Mike I think there's two things on the competitive front I mean, we have a lot of competitors and a lot of different categories, but I think there may be kind of stands in a class of its own I mean, we're now and <unk> used all over the world. We're not just the U S business, we're not just the European business, where our global business. We're not just vacation rentals were also urban in cross border and off.
The grid, we're known as an affordable way to travel, but you also have a luxe offering and everything in between.
So I think we have a pretty unique offering and I think ultimately.
90% of our traffic comes direct and Thats, because we have something that's unique the vast majority of our homes don't exist anywhere else and what we're really just focused on doing is we're obsessing over providing the very best experience for guests and if we do that and we perfect that experience and then we do really great marketing I think we'll do quite well the only thing I'll say Richard on.
The distribution front as we have some unique assets that most other travel brands don't have let's take PR.
There were 600000 articles written about Airbnb last year, everybody is on social media a lot and a lot of people are talking about airbnb on social media. So we generally have a slightly different approach distribution, where we think just continually innovating on our product is great. The best loyalty program is building a product people love so much they want to come back and you'll have to pay them to come.
I'm back.
And we just take a full funnel approach to marketing around.
And we think of our general advertising is really educating people on new products now as far as the changing landscape for technology.
I'm actually very excited about.
The possibilities the AI I think Airbnb will uniquely benefit from this and the reason why is because airbnb as a fairly difficult product challenge, which is unlike hotels, we don't have skewed theres no representative inventory every single one of our $6 6 million listings are unique guests.
Guests left more than 100 million reviews last year and just parse through all of these reviews is very laborious and I think that AI is going to really benefit our long tail of data and the fact that our search problem isn't really a search problem. So much as a matching problem right. If there's like 50000 homes in a city, what's the right one for you.
It's less of a search problem that a matching problem and I think that AI is going to be a really great opportunity for us and just stay tuned for some developments there.
That's great thanks very much.
Your next question comes from the line of Ron Josey with Citi.
Your line is now open.
Thanks for taking the question.
Brian You mentioned investments for 2023 and extending beyond the core that's been a key question that we consistently get in terms of whats next and any insights you can provide there would be helpful. Maybe just is it building out the tech infrastructure or is it more sort of newer products that are coming down the pike in and then I believe in the letter we talked about $1 4 billion.
Guest arrivals and so I was wondering if you could talk more about the brand the awareness overall and just that that user mix in terms of returning users versus newer users. Thank you.
Yes awesome.
Let me, let me start with investments of 233 so.
The good news is that.
So we're investing this year and some new products and services to expand beyond the core I don't think youre going to see any material changes to the P&L.
We kind of think.
I started with my two friends, we didn't have any very many resources back then and the great thing about urban these businesses, we're essentially a global network. So I think that we can incubate new opportunities products and services for relatively low amount of investment.
And as far as what Youre going to see.
I would say theres going to be innovations on the guests and hosts side on.
On the hosts size our general principle is that we want to always deliver more value for house number charging and we have a 3% take rate on the host side and we've been giving away a lot of products for free like air cover and we launched air cover for host.
Novembers ago.
NPS for claims reimbursement claims has gone up 70 points, that's been pretty amazing and our general view on hosts are we going to primarily get away most of our products services and innovation to them, but we do think there's some opportunities for ecosystem services. The hosts may pay for.
On the gas side, we started very modestly you might have seen that we launched travel insurance, which is now in eight countries and thats been really really successful, but I think there is many more opportunities are around the like services.
Obviously airbnb experiences is something that we're beginning to really ramp up.
You're going to see a lot more traction in that product in the coming years.
I think theres going to be a lot more around.
Creating a step change in new service level and matching people to the right homes and experiences for them. So that's what I would say services on the host side servicing the gas side, there's going to be a lot of opportunities to revisit some of the and then travel opportunities that we have and youll stay tuned for some co innovation.
Oh, I'm, sorry, and then on the brand awareness sorry brand awareness on the <unk>.
<unk> awareness.
Again, we generally try to as I said the last part we generally focus on a full funnel approach.
90% of our traffic is now direct.
Saying that since we went public it's always been about 90% we have extremely high efficiency on things like performance marketing and generally the way we approach our brand is that Airbnb is a pretty ubiquitous brands. So we're really wanted to do now is continue to invest in awareness around our different innovation and theyre going to be two things number one we're.
Going to be focused on.
Educating people on our new services and offerings. So for example, there are many categories you've been running campaigns around that and people have viewed $500 million.
People viewed listings 5 million times certainly categories were also continue to raise awareness around hosting.
Grow as fast as we have hosts now as far as how.
How much traffic is coming from new returning and update you want to share anything about that but where our brand is yes, I mean, the majority of our bookings come from past guests and it's actually been the strong guest retention that we've had of years since the beginning of Airbnb and thats been a powerful driver of our growth, but I think what's also interesting is that we've introduced airbnb millions of.
New users since Covid and the performance of those new users.
Bookings frequency of those new users from 'twenty, one that we saw into 'twenty. Two has been very strong and so we're really pleased with the new users that we've been able to attract that looked very very similar to the historic type of users that we've had on airbnb.
Great. Thank you Brian Thank you Dave.
Youre welcome.
Your next question comes from the line of Mark Mahaney with Evercore.
Your line is now open.
Okay. Two questions. Please I know you'd mentioned that.
Yes to host ratio I think you said something like 36% or something.
I imagine you've got cohort data that shows that.
That the percentage of guests that have converted into being hosts or an additionally, our hosts is actually higher maybe much higher could you just qualify that or quantify that at all I'm sure. That's a pipeline, but just how robust is that pipeline. When you look at the cohort data and then just very briefly on China.
Just on the China outbound you just can you just remind us.
How material that was to your business back when back in 2019. So we can get a sense of I know, you've said that the China outbound market will gradually reopen but as it fully reopens how much of an opportunity that is for you. Thank you.
Yes, I mean I'll start mark.
Yes, we've seen that a third in Q4, 2020% to 36% of new available hosts who started out as guests Airbnb.
This is more than prior year. So this has been going up actually like year over year.
That number is coming up and it kind of makes sense as <unk> becomes more ubiquitous but also it makes sense because a lot of people connect with our hosts and the realized Wow I can do this too and the vast majority of our new listings are by individual not property managers. So there is kind of interesting network effect, where.
It's become hosts and then hosts become guest.
As far as China.
We expect the recovery to be pretty gradual in China, We think the Big Prize in China is the outbound business, we think that we're going to be hundreds of millions of people that want to lead China to travel the world and we think our F&B is going to be the best way for essentially Gen Z people to travel.
I think they really want an authentic experience when they're traveling around the world that being said, we are expecting a pretty gradual recovery in China.
And China kind of pre pre COVID-19 was in the low low single digit percentage of our gross book value. So it gives you some perspective of our opportunity I think we think very often could be large over an extended period of time, but it will take a while for it to be larger.
Mainly if things just yeah.
And just one other thing yes, you are right that the cohorts are trending up. So for example, I think in Q4 2021, 33% of guests became hosts in 2020, 28% in 2019, 23%. So it is picking up.
Yes, that's good that's cool alright, thank you.
Yes.
Your next question comes from the line of Brian Nowak with Morgan Stanley .
Your line is now open.
Great. Thanks for taking my questions I have two just the first one and this is I'll talk about guests and hosts could you just sort of help us understand a little bit how fast did your new guests grow in 2022, and how are you thinking about sort of new guest growth in 'twenty, three and sort of talk about EBITDA margins or what's your what's your first cut it.
How fast guests could grow this year and then the second one just any update on metrics or quantifying adoption around flexible or any of the other tools that you rolled out to sort of better improve the load balancing between supply and demand.
Great, Yes, Dave you want it yes.
Sure.
On the new gas, we don't disclose the exact number of the.
New guest growth like I said I think the thing that I'm really pleased as we've introduced airbnb to millions of new guests since COVID-19 and that they are performing.
Similarly, if not even stronger than kind of historic guests in terms of their rebooking rates. So I feel really good about the position we have for new guests a big piece of it is some of the brand marketing that Brian mentioned earlier is just making sure. We have a lot of awareness of Airbnb, but just to also make sure that we're giving strong consideration.
Of Airbnb as a true option.
For them and again in this.
Last several years, we've been able to introduce airbnb to millions of new people that might not have thought about triangle before so I think that's been really helpful.
And don't have a lot to say on flexible except that we have a very strong adoption of the feature.
We think that it is.
Great way for us to distribute demand to where we have supply.
And the flexibility features are.
A key benefit for Airbnb, because we have this more difficult problems that as Brian mentioned earlier of matching and trying to match the right guests to the REIT hosts and the highly flexible gives us the ability to do a better match.
Yeah, and one of the things I would just say Bryan is that.
We've seen a permanent like shift in some of the travel booking behaviors on Airbnb since before the pandemic and a lot of those changes have endured.
Probably one of the most pronounced one does it just is incremental flexibility for people. We noticed more people are searching with more locations and using more flexibility features and even before we built. These features we were seeing people entering a lot of different data variations.
When they were searching and so we were just really responding to where things are going and I think where this goes down. The road is there is always going to be business travelers and families that know exactly where they want to go and when they want to go but I think the long term gain here is increasingly wearing 100000 market people have not heard of 100000 places. So the name of the game is pointing demand to wherever you have available.
Global supply and that's kind of a big part of our product strategy.
Great. Thank you both.
Your next question comes from the line of Lee Horowitz with Deutsche Bank. Your line is now open.
Great. Thanks, So maybe an AVR.
Guys continue to surpass expectations with FX neutral growth.
Hey man in the corner at mid single digits up year on year. We appreciate them looking at 'twenty, three pricing initiatives and mix will impact your ability to grow.
We've seen underlying pricing continue to offset mix impacts. So when you think about 2020 and why can't MBR grow again, given the strength of the overall industry.
And supportive of pricing fragrance.
Yeah. Thanks, Thanks from the ADR.
We're pleasantly.
Theres two edges of the Edr Adr's were up 5% year over year in Q4, excluding the impact of foreign exchange, obviously foreign exchange brings it down to kind of minus 1%. When you bring back nights that come say from euro or GBP denominated.
Denominated nights.
And what we've forecasted for the going forward is modest decline year over year in Edr's, largely driven by changes in mix right people going back to cities. Some cities are accelerating more cross border travel mix towards lower ADR regions.
It's a double edge sword clearly for the financials. It's helpful to have the higher rate ADR rates, because they drive greater revenue greater flow through a greater profitability, but obviously also ADR and a 36% higher than they were in 2019. So it's more expensive for guests to stay on Airbnb and frankly other places I think the benefit that we've had.
Is that even while edr's or higher we're providing great value to <unk>.
<unk>.
On Airbnb still can provide a great location and there may be a fully stocked kitchen, Washington dryer. All the reasons why you might want to stay in the airbnb versus other alternatives.
And so as we look forward in the year, we just wanted to make sure that we continue to provide great value to our guests and that's why we're building some of the tools.
Ryan just talked about which are things like giving tools two hosts to make sure that they understand the prices that guests are paying and making sure that they are providing continue to provide great value to guests. So.
Then the other thing we're doing is even as <unk> might come down modestly through the year through largely through mix and maybe some through pricing is just making sure that we're being really rigorous in our cost structure and just kind of support declining ADR, which is why we anticipate our EBITDA margins for the full year to be roughly the same.
As 2022 and that the headwinds from lower ADR rates will be offset by our efficiencies that we kind of drive internally.
Great. Thanks helpful. And then one follow up on supply if I could clearly the product initiatives that are driving impressive supply growth as evidenced by accelerated rates and you guys are showing at this point when I think about how that plays through into 2020 is there anything that we should be thinking about that can keep you from maintaining at these elevated rates.
Particularly given the fact that you will continue to iterate on the supply and funnel to make it easier for hosts to come to the platform.
Yeah, very proud of the continued growth in our supply and we highlighted in the letter because it's super important that we do our best to get or how the balanced marketplace right. If we get too much supply too quickly then hosts aren't happy because they're not getting enough bookings, we don't get enough supply early enough.
Guests are not happy because they don't get the kind of selection they want and actually what we highlighted the letter is that.
We have grown our supply by 26% since 2019 and yet or not.
<unk> experiences booked have grown by 24%. So we've actually kind of a nice balance in that and then I am very proud of the fact that we've had $6 6 million active listings here in the last year and 901000 more from the beginning of the year, which just shows the strength of Airbnb and why hosts want to come to where there is demand and there.
Then, we'll just make it easier for hosts to become hosts on Airbnb. So this will be a forever journey for us to keep providing supply wherever there is demand and I think we.
Doing it incredibly well from a loss.
10, 12 years, and we will continue to do that.
Yes, I think I think we I'll just say look I think we're I think we're building a bit more of a muscle to around this.
I think it's been a really big focus of ours.
Whether it's the product innovation the awareness focusing on even building.
Supply in key markets I think it's been a really great muscle, but team has built.
Understood. Thank you.
Your next question comes from the line of John <unk> with Jefferies. Your line is now open.
Hey, Thanks for taking my questions.
Wanted to start with the new pricing and discounting tools that youre rolling out it sounds like.
The expectation is that theyre going to be sort of a net headwind to ADR. So can you just walk through.
The strategic rationale for the new products I assume it's about sort of improved customer experience, but it would be great to get your perspective on that and second native experiences on a quarter on quarter basis, and <unk> seem to be back on trend with the east the historical seasonality we saw pre pandemic.
Is this sort of the right way to think about the trend in nights and experiences throughout the cadence of the year. Thanks.
Alright, Hey, John I'll start.
On pricing and discounts so, let's just take a step back Airbnb. We started 15 years ago. When we started we started as an affordable alternative to hotel.
Think that affordability and great value is one of the key reasons that people use airbnb and we have to continue to make sure that we have that value and as long as people feel like they have the best product at the best out there at D&B, either trying to deliver a huge amount of growth in years to come and so it's really three things that we're doing the first thing is transparent pricing.
All in pricing display.
In Europe in many countries around the world, we actually do show total price, but in the United States. The convention for travel companies to show a low base rate and then when you get to checkout theres additional fee, but we spent a lot of time listen to or I guess another thing we've heard from our guests.
Not not.
A lot of them wanted to Youll see the total price upfront and so you spent a bunch of time in December we rolled out total pricing includes all fees before taxes.
Since we've rolled it out the impact on our bookings has been neutral I know there was a lot of it.
There was a lot of speculation around what happened to show up on pricing, but I think that the response has been very positive and we chose the very specific implementation and inflammation. We chose as a price toggle, where you can turn it on or off the basic idea is get people that control of how they want to see prices, but also the active trim the toggle on house people understand.
Why are prices are changing and why they might be displayed differently and competitors. So again the impact has been neutral on bookings in the short run, but I actually think the impact on bookings in long run is going to be very positive because it's just a better experience and give people more control the.
The second thing is we are now prioritizing and better value lifting and search results. So in other words, we're going to take the total price in.
The total price into account when we're prioritizing bookings and then the third thing we're going to be doing is we are building new tools pricing tools for hosts so that they understand the final price that they're selling to guests one of the things we learned when we talked to hope that they don't always know the final price gaps are paying and if they did they modulate some of the fees I think in the short run.
It may have some modest impact on ADR, but in the long run I think what youre going to do with drive a lot more demand Airbnb and update you want to add anything will take the second question.
No I think you hit on all the key points on Edr, we're not anticipating a significant decrease in ADR as a result of your pricing tools. We just want to make sure that we're being transparent and helping hosts make sure that they are setting prices that are appropriate for their listings.
I think that on the nitrogen experiences trends.
We're finally, beginning to reach a point, where the year over year comparisons are much more consistent and so I think two.
2023 won't look exactly like 2022, but it's a much better guide than kind of historic years. So we are getting back to <unk>.
You'd be able to use year over year as trend line for your forecasting.
Okay.
Your next question.
It comes from the line of.
Mario Lu with Barclays.
Your line is now open.
Great. Thanks for taking the questions first one on the listings growth number the 900000 year on year.
I was wondering if you could help break down that number further for example, where most of these listings completely new listings.
Or were you know a good portion of it reactivated ones say in urban areas.
Just trying to see how much of this growth.
Organic versus travel and normalize them. Thanks.
Yes.
Yes, I mean, one of the thing.
But listings is think about how all those things work in any given year, we have brand new listings, we have reactivated listings and then we have deactivated listings at some combination of each of those three I would say that the trends of each of those have been kind of up into the right. In other words, I think showing improvement in fewer activations and.
Strengthening of our new Activations and so the sum total of each of those is all contributing towards our growth.
But I don't have any other more specific breakout to give to you.
I mean, I think the other maybe the only other highlight I would give is it wasn't and just kind of one region like we were seeing broad based growth of listings around the world and then even by lifting type. It was like one of the earlier questions about housing listing growth or an urban again in urban was one of the accelerating areas, we've seen really nice growth.
Urban where that comes back it just leads back to this marketplace dynamic that we have for Airbnb, which is we.
Both work hard to get listings proactively on our own and get them more organically, where theres demand and where there's not demand. That's also where youll see the activations or fewer listing growth tends to be self healing over time.
Great. Thanks, Dave and the second one is on the lead time for bookings.
In your outlook you mentioned Europeans were booking some travel earlier this year.
So any any commentary you can provide on just globally, how lead times look thus far versus pre pandemic and any puts and takes to consider when thinking about the 20% room night growth is sustainable for the rest of the year.
Yes, we're really pleased with the European lead times coming up Europeans will tend to book their summer travel here at the beginning of the year and to see the bookings even earlier on Airbnb relative to our historic rates has been really great to see just I think shows the optimism that they have for kind of travel.
This summer and then broad base.
Youre seeing a slightly longer lead time more generally across airbnb overall, so again I just think that shows.
Nice optimism for people feeling confident that they can book.
Booked for their summer travel season.
So I think alright.
Susan.
Alright, thank you.
Thanks.
As a reminder, please limit yourself to one question.
Your next question comes from the line of Justin Post with Bank of America. Your line is now open.
Great.
If you could give it in the K, but can you give us the mix of Asia and 22 I don't know if you can now and then secondly, how do you think about the Asia recovery in China Cross border impacting our results over the next 12 months. Thanks.
Yes.
In the next 12 months Asia is still recovering Asia still been down versus 2022, I mean, 2019, and but they were the fastest growing region in the fourth quarter. So we think it's pretty.
Optimistic about the opportunity and as Brian mentioned about China like the long term outlook for for example, Chinese outbound travelers is something that we feel very bullish on for over the long term.
And in terms of the fourth quarter.
APAC was 12% of the business in the fourth quarter.
Okay.
Okay. Thank you.
Maybe I'll just I'll, just say that I think that Asia Pacific is a huge growth area for us going forward and it's been a little bit of a slower recovery and I think the reason why is Asia.
Historically more of a cross border market a lot of people in Asia is basically travel across countries. They don't have as big of the domestic market in any of these countries for the most part and Thats whats been a slower recovery, but I think the one thing we have seen that that just means probably more pent up demand in Asia index is even higher on GNC travelers, which is a strong suite of Airbnb. So we're really bullish over the.
Few years on Asia.
Great. Thank you.
Yeah.
Your next question comes from the line of Lloyd Walmsley with UBS. Your line is now open.
Hi, Thanks for taking the question this is Chris on for Lloyd.
Just can you start by helping us think about the range of outcomes for <unk> in the <unk> 23 Guide I guess as we kind of lay out your guidance, saying that take rates would be very similar to <unk> 22 levels and get you to say $27 billion potentially of gross bookings in <unk> 23.
And you assume maybe a slight detail on room night I could get to a situation, where <unk> are potentially flat or better I guess is.
King to ADR as being down slightly on a year over year basis, I guess, what would need to happen here for <unk> to be flat flat to better on a year over year basis and won't you.
Okay.
Well to be.
Flat to better would be if there is stronger overall, just pricing and if the mix came in differently for example, maybe.
Urban didn't come in quite as strong as or cross border Latin America Asia didn't come in quite as strong so lot of our ETR forecast for Q1 comes from the anticipated continued growth of urban cross border and regional mix and Thats.
We are forecasting a down four.
No.
Just down slightly year over year.
The implied take rate.
Be directionally the same as last year, maybe not precisely the same but I think.
I think you look back at 2022 and it'll be a good guide for your take rate.
Okay.
Okay got it and just maybe one quick follow up question on the product side as you guys were talking about.
So the kind of expansion opportunities how should we be thinking about hotel within that or should we be thinking about more of the expansion opportunity as being related to the core business and experiences in 'twenty three.
Chris I would just say.
All of the above.
I think hotels are important ways to fill our network gaps I think people come to it because we have something unique they can't get anywhere else, but we also have a huge amount of traffic and so we want to make sure people come to me they don't leave without finding something.
I think you can think about our product a few ways number one our core business has a huge amount of growth ahead of us.
And so we just want to first perfect the core experience by making it easier to find the right Airbnb providing.
Providing better service each step of the way and providing better value.
Next we have a lot of emerging use cases, those emerging use cases are longer stays obviously, which is more than a fifth of our nights booked.
We also have experiences that we're really focused on and continuing to fill our network apps and then finally beyond just all of those are obviously new products that surgeons over the horizon. So we kind of have a very balanced portfolio of all of the above.
Okay got it thank you.
Your next question comes from the line of Kevin Kopelman with Cowen. Your line is now open.
Great. Thanks, a lot.
So quick one given you have $10 billion in cash on the balance sheet and generated $3 billion in cash flow last year, not including the funds held on behalf of guests can you just give us an update on how youre thinking about capital allocation.
And share repurchases and do you see a potential for repurchases to go beyond offsetting stock complex.
Okay.
Yes, it really pleased with our cash position, we ended with $9 6 billion of cash on the balance sheet at the end of the year that is after buying back $1 5 billion in stock we have $500 million left on the existing.
Repurchase approval.
We would anticipate there'll be executing earlier in the year, but clearly we're also still in growth mode. Like we are using this balance sheet to make sure that we can invest in growth for the business in the future clearly keep enough cash for potential M&A opportunities, which could exist.
And then.
To the extent that we can return stock.
Cash to shareholders through share repurchases that will be our primary vehicle unit dissipate. This year, we're going to have about $1 billion of stock based compensation.
Or at least be offsetting that through share repurchases and but.
How do you think more to say beyond that at this time, but we will continue to evaluate what the appropriate amount of cash is to keep and how much. We should continue to have returned to shareholders but.
Remember, we are still heavily in growth, but we want to be able to invest in the long term growth of this business.
Thanks, Dave.
Okay.
Your next question comes from the line of Stephen Ju with Credit Suisse. Your line is now open.
Okay, great. Thank you. So can you talk about the typical behavior from the new hosts when they are on boarded.
They start making only a small number of days available and as time goes on and they get more comfortable with hosting.
Maybe make more time slots available.
The course of the year because it seems like we're all your preoccupied with a total hosts number.
As honest as children.
But I'm wondering if the aggregate availability of growth as it has historically been a number that's been much higher than the property elsewhere. Thanks.
Yeah, Hey, Stephen I can I can start.
The general trend, we see is that most people come to Airbnb with.
More casual intent to host occasionally sometimes people come to me to host kind of one off basis. For example, this past weekend in Phoenix, we saw a really big surge of new listings for Super Bowl.
What we notice is that overtime hosts generally increase the number of days available and they tend to get more productive every year.
So more and more nights get booked on a single lifting and then we also see a number of post add a second third or fourth lifting depending upon what markets. They're in so the general idea is that hosts get more productive. They eventually book more nights.
They they're ADR typically goes up as they accumulate more reviews, one of things we recommend new hosts do it when they don't have reviews, the start a little bit more affordably and then as they accumulate great reviews. They can command a little bit higher kind of market pricing and so those are the general trends, we see a general uptick in ADR as they get more review isn't it.
Build the reputation they add more nice and then occasionally youll see some people add additional listings depending upon the kind of segment they're in.
Yes.
Thank you.
Your next question comes from the line of Doug Anmuth with Jpmorgan.
Your line is now open.
Thanks for taking the questions I just wanted to circle back on your comments on EBITDA margins for 'twenty, three you talked about maintaining margins.
The variable cost efficiencies kind of being the offsets to lower ADR. So just walk us through a little bit more on those cost efficiencies.
What you were thinking about and then kind of related how should we think about marketing spending sounds like youre going to shift more of the brand into <unk>.
<unk> is that just driven by a pull forward in bookings or more just a shift in your strategy. Thanks.
Yes.
We anticipate our EBITDA margins for this year is that one of the headwinds as anticipated ADR decline that we talked about earlier on the call and that the ways in which we are going to be able to offset the margin impact of those declines will be through fixed cost discipline, we're going to continue to grow but we're going to grow modestly so think of our head count growth.
Two.
Three 4% range.
So we'll keep having very good fixed cost discipline, we've already I'll address marketing a minute because we've already addressed a lot of the marketing reductions, but we're just seeing strong improvements in our variable cost reductions as well everything from community support costs cost payments costs infrastructure costs.
All of those areas are just important and ongoing efforts for us to drive profitability as I mentioned earlier, we're still in heavy growth mode. I have not in profit maximization mode. I have a long list of things that we can invest in to drive further profitability, but I know that I can also afford with our head count growth.
<unk> ability improvements that can offset the ADR declines and that's what we'll be investing in this year and then we.
Can keep working on the other variable cost improvements over time and then in terms of marketing we have had the major step change reduction in our marketing expense that was actually a strategic change all the way back in 2019, that's proven to be truly effective from 2020, all the way through 2022, and what we'd see in 2020.
Three is that marketing costs as a percentage of revenue full year will be about the same as what it was in 2022, but what we are doing is shifting some of the timing.
Just getting even earlier in the year to make sure that we're getting our message out to guests all around the world. So they are ready to kind of make their bookings for peak summer travel season, which is in the summer and so I think it's just we're getting more efficient and effective with the timing and we think bringing forward a little bit more marketing into Q1.
It's a more effective use of our dollars.
Thank you.
Your next question comes from the line of Nick Jones with JMP Securities. Your line is now open.
Great. Thanks for taking my question could I go back to kind of the airbnb friendly apartments.
What does it look like to get property managers on board with this and I guess, how much of the apartments that theyre managing start to get unlocked and I guess, what kind of runway do you see in these key markets to add on kind of meaningfully more property managers. Thanks.
Yes, I can start Nik.
So yes, I mean this new program is something that we developed because actually we started getting a lot of inbound from real estate developers and they started.
We started saying if we made our buildings are to be friendly would it make the building more appealing, especially to young people that are moving to markets certain certain cities and so we did a partnership we started with working with great Star equity residential over 10 other companies and we've launched we have a 175 buildings and.
Houston Phoenix Jacksonville.
And the vast majority of these units are kind of.
If they were put on Airbnb, there would be a typical kind of ADR theyre, usually one bedroom studios.
The tenants sign a sublease.
To a fixed number of days here they can rent typically less than 180 days. So the whole idea is these are peoples primary homes and they rent them. When they are gone and I think we're going to get a lot of demand because theres a lot of benefits to landlord number one a landlord gets visibility control around.
Doing what they are building number two they get a lot of free demand of people that want to lease their apartments and three they get it.
On the commission.
So based on what we're seeing there's been a lot of positive word of mouth.
Many REIT and developers are engaging with airbnb.
We think we're gonna be all spend a lot of traffic to them and so I think this is a program that's going to grow quite a lot and I also think what is strategic to us beyond the all the incremental apartments that unlocks is were now developing relationships with many of the biggest landlords in United States and as that happens I think youre going to see leases generally being more friendly at Airbnb.
Okay.
Great. Thank you.
Your next question comes from the line of Bernie Mcternan with meet him. Your line is now open great.
Thank you for taking the questions.
On margin so.
Two impacts on Edr is the mix shift in the pricing it sounds like mix shift is contemplated in that flat EBITDA margin guide for 'twenty, three but can you still achieve flat EBITDA margins, if that pricing benefit does come out modestly of ADR.
As a follow up just if there is an estimate for how much FX weighed on EBITDA margins in 'twenty two that'd be helpful. Thank you.
Yes on the.
Two impacts I mean, as you said large forecast that we have for Edr moderation is due to the mix shift clearly we want to make sure that we are giving tools to hosts to price effectively so that we have great value.
We're not.
It will be time will tell how much change we're seeing ADR from those overall changes I do have.
A fair amount of levers as I said over time that I can pull in order to continue to improve the cost efficiency and <unk> come down more than I will need to pull through more levers, but I feel confident we can deliver our EBIT margin.
Troll in the face of whatever ADR headwinds that we see this year. So I think that's the main.
And piece and then your second question again.
Oh, just if there is an estimate for how much FX weighed on EBITDA margins. This year given the differential between where revenues are generated in where the costs are in the U S.
Maybe we can follow up offline on that I mean, it was a material probably several hundred million dollars, but would have to give you the.
Maybe with more offline on the specific calculation understood. Thank you.
Great. Thanks for the call.
Your next question comes from the line of Tom White with D. A Davidson your line is now open.
Great. Thanks for taking my question.
Color or metrics you guys can provide on how cohorts of guests that you acquired during the height of the pandemic have been performing over the last several months kind of relative to customers acquired pre pandemic I'm just curious whether.
It looks like there might be any meaningful differences when it comes to I don't know if frequency spend levels repeat rates and anything like that.
No the actual frequencies take rate spend rates of ox had been very consistent with kind of pre COVID-19.
Covid.
Acquired gas so we feel really good about new guests coming on and having them.
Very similar to historic Gus.
So very consistent.
Thank you.
Okay.
Your next question comes from the line of Deepak <unk> with Wolfe Research. Your line is now open.
Great. Thanks for taking the questions just a couple ones closed.
It's nice to see the supply goes but can you talk about trends on the utilization side I know you don't look at occupancy in a traditional sense, but any color on how the product initiatives like the changing the search experience.
Im flexible from 2020 do is kind of helping with utilization of our occupancy on the platform and then the second question mix of long term stays remained stable near 20%.
How should we think about that for 2023 is that.
Potential opportunity in an area of focus for 2023, what sort of product initiatives can you do to kind of take that mix higher given that it obviously helps with the marketplace balance. Thank you so much.
Yes, Thanks, Deepak on the supply growth I think the best measure to look at if you just look at the growth in supply that we have versus 2019 that we grew at 26% and our nights and experiences book grew 24% largely in line, we're not seeing any major shifts in overall kind of utilization rate.
Give us any concern we feel like we continue to keep an aggregate this nice balance of growing supply and growing demand and we want to keep that relative balance as I mentioned earlier in the call. If one gets out of whack too much than either of the hosts aren't happy with the guests arent happy, but I am very pleased with the way in which we've been able to keep that balance.
And then in terms of long term stays I mean have you actually rewind the tape all the way back to pre Covid time.
Q1 of 2019, our long term stays from about 13% of the nights by the end of the year as maybe 16% a night. So so think 13% to 16 last year was kind of 19% to 21 or so 21% obviously in the fourth quarter. So it's been elevated and fairly stable I think what we see in Q1. This year is that we can.
Turning to see really strong growth in short term stays in short term stays kind of outpacing our growth a little bit and versus long term stays here in the first quarter. So anticipate it coming down just a little bit here in the first quarter on a mixed basis, but it's largely just driven by the short term acceleration that we're seeing and it's still remaining significantly elevate.
Over 2019 rates.
Got it. Thank you so much that makes sense. Thank you.
Okay.
This concludes our Q&A session for today I'll turn the call back over to Brian for closing remarks.
Alright, well, thank you for joining us today to recap we had another record year in 2022 revenue and adjusted EBITDA were both record highs.
And free cash flow was $3 4 billion.
Yes, I'm really proud of these results and before I go I just want to say.
How proud I am of our team.
Think about what we what this team has been through the last three years initially, losing 80% of our business kind of rebuilding the company from the ground up and now just becoming a much more focused disciplined company, but this is a lot of momentum inside the company and looking forward, we're already seeing some really strong demand in Q1.
Humor confidence to travel remains really high I think part of that is like no matter what happens in the world.
People want to travel.
And for many people the offices now zoom the malls now Amazon the theaters now Netflix travel is going to become a very important way that people experience. The world. This year and so therefore this is going to be an exciting year for airbnb and for traveling all around the world. So with that thank you all and we'll talk to you next quarter.
This concludes today's conference call. Thank you for attending you may now disconnect.
Please wait the conference will begin shortly.
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