Q1 2023 Airbnb Inc Earnings Call
Good afternoon.
For joining urban earnings conference call for the first quarter of 'twenty to 'twenty three as a reminder.
This conference call will be available for replay from the Investor Relations section of Airbnb.
That's cool.
I'll now hand, the call over to early March the VP of Finance. Please go ahead.
Good afternoon, and welcome to Airbnb is first quarter of 2023 earnings call.
Are you for joining us today.
On the call today, we have Airbnb as co founder and CEO , Brian Cheskey, and our Chief Financial Officer, Dave Stevenson.
Earlier today, we issued a shareholder letter with our financial results and commentary for our first quarter of 2023.
These items were also posted on the Investor Relations section of Airbnb its web site.
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 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.
<unk> results may differ materially from those expressed or implied in the forward looking statements due to a variety of factors. These.
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 instrument information contained on this call to reflect subsequent events or circumstances, you should it 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 and a share holder letter posted to our IR website.
non-GAAP measures are not intended to be a substitute for our GAAP results.
Okay.
Yeah.
The call.
Alright.
[laughter].
Alright, good afternoon, everyone. Thanks for joining I'm excited to share our Q1 results with you now we.
We had a strong start to 2023, we had over 120 million nights and experienced was booked in Q1.
With a record high.
Revenue of $1 $8 billion.
Grew 20% year over year.
Foreign exchange, our revenue increased 24% year over year.
Net income was $117 million, making this our most profitable Q1 on a GAAP basis.
And free cash flow for the quarter was $1 6 billion.
In fact on a trailing 12 month basis, our free cash flow was $3 8 billion.
This represented a trailing 12 month free cash flow margin up 44%.
Because of our strong balance sheet, we were able to repurchase $2 billion of our stock in the last nine months.
And today.
We're pleased to announce that our board just approved a new repurchase authorization for up to $2 5 billion of our class a common stock.
Now during the quarter, we saw a number of really positive business trends.
First more guests are traveling and airbnb than ever before nice and experiences book increased 19% in Q1 compared to a year ago, and we've seen our highest number of active bookers ever despite continued macroeconomic uncertainties.
During the quarter. We also saw guests booking trips further in advance supporting a strong backlog for Q2.
Second where guests are traveling overseas and returning to cities.
Cross border growth Nice book increased 30%, 36% in Q1 compared to last year now.
Now we were especially encouraged by the continued recovery of Asia Pacific nights booked in Q1 increased more than 40% year over year.
We saw international travel from other regions to Asia Pacific increased one <unk>.
And 60% during the quarter compared to this time last year.
Additionally, cross border nights booked to North America increased once again with.
With 34% of year over year growth in Q1 relative to 31% last quarter.
And we've also seen high density urban nights booked increased 20% year over year.
Third our continuing use airbnb for longer stays.
In Q1 long term stays where 918% of total growth nice book.
And over the past three years, we've seen new use cases emerge as guests across all regions and age groups use airbnb for long term stays.
And finally supply growth continued to accelerate in.
In Q1, we grew supply 18% year over year.
This is up from 16% in Q4.
We saw double digit supply growth around the world with the fastest growth in North America, and Latin America.
Urban and non urban supply growth in fact, both grew 18%.
Now looking ahead, we remain focused on our three strategic priorities.
First we're making hosting mainstream.
We werent hosting to be as popular as traveling on Airbnb and.
And to do this we're raising awareness around hosting making it easier to get started.
And providing even better tools for our host.
And our approach is working.
In every quarter since we went public.
We have seen acceleration in the year over year growth of our total active listings.
Second we're protecting our core service.
We want people to love our service and that means obsessing over every single detail.
Last week, we introduced over 50, new features and upgrades as part of our 2023 summer release.
Everything we launched was based on direct feedback from our guests and hosts this.
This included pricing tools transparent checkout instruction faster customer service and more.
And we also responded input on rising prices with the rollout of Airbnb rooms, and all new take on the original Airbnb now, let me share a little bit more about will be launched in a moment.
And finally, we're expanding beyond our core.
We have some big ideas for where to take Airbnb neck.
We are building the foundation for new products and services that we plan to launch in 2024 and beyond at.
At the same time Airbnb is still underpenetrated in many markets around the world.
So we're increasing our focus on these less mature markets and we are already seeing positive results. So let me just give you two examples.
In Germany, and Brazil, we rolled out our expansion playbook for accelerated growth.
And as a result, we are now to pay are now two of our fastest growing market.
And this playbook has in fact worked so well that we are now expanding it to other markets around the world.
Now before I go to questions I want to talk a little bit about our 2023 summer release.
Last week, we introduced the most extensive set of improvements ever to Airbnb.
And it was all based on feedback from our community.
We took a design driven approach to protecting our core service.
We created a blueprint of the entire experience.
Every screen every policy and every interaction with customer service.
We then analyzed millions of calls and thousands with social media post <unk>.
We hosted listening sessions with gas and host all over the world.
We mapped all this feedback against our blueprint that we prioritize the most common issues and.
And on May 3rd we introduced <unk> and then build over 50, new features and upgrades for guests and hosts.
So let me share a few highlights with you.
First the total price of flight.
Guests told us our prices arent transparent enough with.
With total price display guests can now view the total price with feed before taxes across the entire app.
Second new pricing tools for host.
We heard from host that it's hard to use our pricing tools and it's difficult to know what the chart.
So to help our hosts that more competitive prices. They can now see other airbnb are priced in their area.
And this includes listings that are both in high demand and getting booked as well as those things that are not.
And finally, we also made it simpler to add discounts and promotions for host.
And third is more affordable states.
Longer stays on Airbnb can be expensive.
So we're doing a few things about it.
We're reducing our fees after three months U.
U S guests can now save money by paying with their bank account and hosts can easily set monthly discount and offer more flexible cancellations.
Finally, we also introduced Airbnb rooms.
And all new take on the original Airbnb private rooms.
Airbnb rooms gets us back to the idea that started at all.
Back to our founding ethos of sharing.
And there are also one of the most affordable way to travel with an average price of only $67 a night.
In fact over 80% of the air can be rooms are under $100 a night.
And then the current macroeconomic environment.
People want to travel affordably.
They've told us that they want to know more about who they are staying with before they book.
So thats why every SMB room comes with a host past quarter, which helps guests get to know their host before they book.
The response to last week, and our 2023 some relief.
Exceeded our expectations.
Press coverage was overwhelmingly positive and we got over 3000 articles and this is the most press we've ever had from the launch.
Social media or tweaks got 19 million impressions. It really went far right on social but the most important thing we heard is that our guests and our hosts feel like we're listening to their top concerns.
But we're not done listening it will never stop improving airbnb.
So with that I look forward David to answering your questions.
Thank you at this time I'll remind everyone in order to ask a question Press Star then.
One on your telephone keypad.
Go first to Eric Sheridan at Goldman Sachs.
Thank you so much for taking the question I want to come back to the summer release from from a couple of days ago and come back to the concept of a room can you help us spend to understand what you think that will do in terms of generating supply growth and coupled with the generating demand and new traveler growth to the platform as you look out over the next 12 months.
And months thanks, so much.
Yes, Im here how are you doing.
Yes.
<unk>.
I am very excited about airbnb rooms, because airbnb rooms, as one of the most affordable ways to travel on Airbnb.
Doing a lot of listening to guests on Airbnb I'm wondering if they told us is especially in this.
Ontic environment Theyre looking for affordable ways to travel on Airbnb and the average price in every room is $67. A night took an incredible value and we wanted to do is offer a product that we thought could capture this affordability segment that we think more and more people are going to be interested in this economy and also launch a product that will be very relevant.
To the next generation of travelers.
Essentially I wanted to launch a product that the 26th <unk> would've wanted and we looked at our private rooms product.
We already had 1 million listings all over the world, but there was a bit of an obstacle during the pandemic people werent comfortable staying with one another and to get people more comfortable we realized that we needed to help people understand the host youre staying with before they book and so that's why we launched the Airbnb hosts passport I think this is going to help a lot of people that are looking at.
Save money are interested in that local travel experience be encouraged to stay in the <unk> room. We also added new privacy features to understand if there is a lock in the bedroom door at the bathroom is private and we think all of these different features are going to definitely help the army rooms.
Final thing I would say Eric is that we are a major brand campaign coming this summer, where we are going to be promoting airbnb rooms. If we are successful I think this is going to bring in a whole new cohort of younger travelers people that maybe weren't inclined to travel may now.
To be able to travel and hopefully should lift the overall marketplace for airbnb.
Great. Thanks, Brian .
Next we'll move to Justin Patterson at Keybanc.
Great. Thank you very much.
I can first to follow up on Erik's question around the summer release, Brian you recently made some comments about AI.
By being a meaningful opportunity for Airbnb going forward could you talk about how.
That just reshaped or helps you re imagine the travel experience going forward and some of that.
The initiatives you might lean into around AI, and then Dave I appreciate you're only giving guideposts on the full year versus explicit guidance given the room night comp next spent shipped in Q2 as well as the dynamic around new pricing tools in the summer release could you help us understand a little bit more some of the assumptions that go into the second half.
And about flattish year over year margin. Thank you.
Great well why don't I start just in with AI.
Yes.
No.
This is certainly the biggest revolution in travel and tech since I came to Silicon Valley.
As big of a platform shift that the internet and many people think it might be even bigger and I'll give you kind of a big of a bit of a overview of how we think about AI.
All of this is going to be built on the base model. The base model to the large language model think of those as GBT for Google has a couple of base model, Microsoft <unk> and <unk>. These are like major infrastructure investments. Some of these models might cost tens of billions of dollar towards the compute power and so think of that as essentially like.
Building a highway it's a major infrastructure projects and we're not going to do that we're not an infrastructure company, but we're going to build the cars on the highway I know, it's we're going to design the interface and the tuning of the model on top of the AI on top of the base model. So on top of the base model is the tuning of the model and the tuning up the models. It can be based on the customer data you have and.
Ill just paint a picture for you.
If you were to ask a question to chat GBT and if I were to ask questions chat with GBT, we're both going to get pretty much. The same answer and the reason both of us are going to get pretty close to the same answer is because <unk> doesn't know that if you and I didn't know anything about us.
Now this is totally fine for many questions like how far is it from this destination that destination.
And it turns out that a lot of questions and travel arent really search question, they're matching questions. Another question that the answer depends on who you are and what your preferences are so for example, I think that going forward Airbnb is going to be pretty different instead of asking you questions like where you're going and when are you going I want.
For us to build a robust profile about you learn more about you and ask you to bigger and more fundamental questions.
Are you and what do you want <unk>.
Ultimately what I think are leased building is not just a service or a product, but where we are in the largest sense is our global travel community and the role of Airbnb and that travel community is to be the ultimate hubs.
US with AI is building the ultimate AI <unk> peers that good understand you.
And we could build these world class interfaces.
And our model. Unlike most other travel companies, we know a lot more about our guests can host. This is partly why we're investing in the host passport we want to continue to learn more about people and then our job is to match you to accommodations other travel services and eventually things beyond travel so thats the big vision of where we're going to go I think it is an incredibly exciting opportunity.
And by giving you some tactical things we can be doing in the next 12 months number one is customer service. This is going to be one of the biggest benefits to airbnb one of the strengths of Airbnb is that Airbnb is offering is one of our clients.
The problem with Airbnb is our service is also one of our client and so therefore, historically less consistent than a hotel I think AI can level, the playing field from a service perspective relative to hotels, because hotels upfront desk Airbnb doesn't but we have literally millions of people staying on it every night and imagine they call customer serve.
We have agents that have to adjudicate between 70 different user policies. Some of these are as many as 100 pages long with AI is going to view it would be able to give us better service cheaper and faster by augmenting the agents and I think this is going to be something that is a huge transformation. It's all hands on deck and you said it would be improvements later this year into next year.
One number two we are now building AI into R. R.
Our product and let me just give you an example.
A few months ago open AI launch plug ins and in fact, we were actually supposed to be one of the launch partners for the plug ins on open AI chat GBT, but I told Sam we were literally one of the first to work with them that both great before launch I decided to pull the plug on it and the reason why I decided that the interface.
A pure tax base with widget at the bottom was probably not the right interface for travel ultimately I think the right interface for travel is multimodal its rich media. It's photo it's video it's much more immersive and Jamie for is available in our App. So we are going to be building <unk> into our interface and I think.
That's the real opportunity for us. So you should see some big changes next year with AI built into our App. The final thing I'll say is developer productivity and productivity of our workforce generally I think our employees could easily be especially your developers, 30% more productive in the short to medium term and this will allow us significantly.
Greater throughput through tools like hubs co pilot. So all of this is to say I'm really excited on the short term and the long term and the last thing I'll, just say I think the companies that will most benefit from the shift of AI are.
We're going to be the companies to have the most innovative cultures.
Kind of what happened in the nineties with the Internet and the last couple of years is any indication having lots of over 340 features innovations I think we're definitely going to be right at the forefront of this revolution.
Okay.
And then in terms of profitability. We're just really proud of the progress we've made in our operating efficiency. We made some very difficult choices in the midst of COVID-19 to rationalize and streamline the company get focus get back to our roots and we made substantial progress in our profitability ever sense wherever you got it.
<unk>, obviously reduced head count by 25%, we've only grown at moderately since we've made substantial changes in our marketing efficiency continued to make good improvements in our operating costs everything from community support to cost of payments to infrastructure costs basically we become a better more rigorous operating company overall.
<unk>.
And that progress has been great for us going forward, because even as our businesses rebounded we have stuck to our core strong core operating mode and so even this year as we anticipate moderation in edr's the improvements that we're going to continue to make in communities.
Support infrastructure costs payments and our fixed cost leverage will be enough to offset any of the pressures that we're seeing in average daily rates.
Alright, Thank you Paul.
We'll go next to Mark Mahaney require.
Mcgwire Si.
Okay. Thanks, two questions across the online travel space. There is this dynamic of marketing costs being much more front end loaded this year.
Dave any commentary on what from your perspective why that is.
And then <unk>.
Could you just double click a little bit Brian on the Brazil, and Germany. Examples that you talked about if there's anything specific that you could say that you did that cause those to kind of.
Accelerated up to become to your fastest growing markets. So that we can think about how replicable those efforts would be in other markets that would be really helpful. Thank you.
Yes, sure Dave why don't you take the first one yes, great. Thanks Mark.
In terms of the Frontloading of marketing cost. This year, it's just we're learning to operate better.
We had seen such great success in our brand marketing campaigns strong return on investments in that last year and what we learned is that we just felt like we needed to do that earlier in the year get even more ahead of our peak travel summer season, with our brand marketing earlier, we get that message out in the year. The better we can kind of reap that investment for the full year.
So this is purely about moving up to spend on brand marketing earlier and to a lesser extent, but it is.
Element of it as well as investing in some of these new geographies, where we haven't historically had brand marketing until actually expanding that marketing into more countries. So our marketing expenses as a percentage of revenue will remain largely the same in 2023 as it was in 2022, it's just that we're frontloading as more of the marketing to get the message out early.
Yeah.
Yes, and Mark I'll, just share a little bit about Brazil and Germany.
So airbnb is one of the most international companies in the World. We're in 220 countries and regions and many years ago, we developed a playbook.
Expand internationally outside of the United States and that playbook included PR included having some people on the ground, although generally and many of the markets are going to need that it included a brand marketing campaign and made sure that our product was adequately localized and it's just a really full funnel approach and now we've added social media and Influencers as well.
So <unk>.
Recently over the course of the pandemic, we were not as focused on international expansion and Thats. Because we are mainly focused on recovery and some of the new travel segments like longer term state over the last three years, obviously as you know we've gotten really really focused back to basics and our company is significantly more profitable now we've done over $3 $8 billion in trailing <unk>.
On free cash flow. So we feel like now is a really good time to focus on international expansion. So we started with Germany, and Brazil and again it was full funnel involved a lot of PR involve brand marketing, bringing our marketing AD campaigns, you're probably seeing United States. Two of these markets localizing, our product and working with local influencers. So it's a pretty full funnel approach.
The results have been incredibly positive these are now to over passenger growing market.
So we're now looking at bringing this playbook to other markets around the world and I'll give you a couple of examples number one is Asia Pacific, We think Theres a huge opportunity in Asia. We are massively underpenetrated. This is going to be probably the fastest growing market internationally over the next five years.
And the problem with Asia historically over the last three years is Asia market. As you know is it very much cross border market and what the borders being historically kind of locked down and there hasnt been as much travel the recovery in Asia has been delayed now people are starting to travel in Asia disproportionately has a lot of young travelers and Airbnb as you know is very popular among young travelers.
Do we think Japan, Korea, China, India, and southeast Asia are going to be huge opportunities for growth.
Next is the Euro we're very big in France were very big in the U K, we're now seeing great growth in Germany, but there's a lot of markets in Europe , we haven't ever really run robust brand marketing campaigns now.
Now, we're getting more aggressive in Italy, we're getting more aggressive in Spain, and we're now looking at other markets in Northern Europe , and I think there's actually a lot of Greenfield in Europe , because we've really only focus on a few of the really big market and we already see we focus the big markets like France and U K. We are now really strong and I think we can have similar penetration in other countries in Europe and then.
Finally, as Latin America, we're seeing a lot of growth in Brazil, and we're now going to bring it to some other really large markets like Colombia, and some other markets within Latin America. So I think international is going to be a pretty big boon to growth over the next two to three years. The one thing Ive learned about Airbnb is no matter how different every country is the playbook doesn't have to vary that much it works quite well.
In every market and especially at work with Airbnb, because it's very much a cross border network effect business.
Thank you, Brian So I just don't want to leave the question without just reinforcing that well the clinical case, it's working for us in that.
The percent of our traffic remains director of unpaid and Thats been the case.
Since Covid and continues to be the case with this investment is working very well for us.
Okay. Thank you Dave Thank you Brian .
Thank you.
We'll move next to Richard Clark at Sanford Bernstein.
Hi, good afternoon. Thanks for taking my questions two if I may.
So the full year results you mentioned, how you control supply against the demand I guess at this point you were talking about the supply growing at about 18% to your point into Q2 demand growing maybe more like 10% to 12%.
Which one of those numbers is the right way to think about growth going forward should we be extrapolating the 18%.
The 10% to 12%.
And then just very quickly you obviously shifted to sharing the whole prices any impact you've seen from that is that impacting conversions is that impacting supply what's been the impact of that change.
Yes.
Why don't I start at a high level.
Sure.
I think our long term growth is going to only be as strong as our supply. If we were to back out what happened in 2000 22021 is that demand grew faster than supply and initially this was a great thing, but the problem is when demand growth faster than supply and the supply constraint prices generally go up and as prices have risen.
While that's been good for the bottom line affordability in this economy is a major issue and so one of the most important things we can do to make airbnb affordable is to make sure we have enough supply in the platform and so a year ago, we identified supply growth as a major strategic initiative that we really needed to accelerate and we created initiative called <unk>.
Streaming hosting the ideas, we wanted hosting to be as mainstream is traveling and we did a number of things. We said in order to mainstream hosting we need to make it safe easy and cool. So we launched air cover which is top to bottom protection. No. One else offers that are can be set up and we did some marketing campaigns for the first time in many years, we've since seen.
901000 incremental listings is now accelerating every single quarter since the IPO and I think what's going to happen is all the supply coming on the market will keep prices from going up my hope is that while the hotel Ceos have said they expect demand to.
Drive prices up this summer we want to actually have prices moderate we think that's going to bring in a whole new generation of travelers to airbnb. So ultimately I think that that's a very very important consideration of the marketplace. The more affordable we are just like Amazon, but more to affordable we are with a wider selection the more people will come to Airbnb.
The high level now with regards to total price. This is primarily a U S issue, but in the U S. As you know there is a bit of a issue where some host had higher cleaning fees and we heard a lot from gap and I think what's the total price display is going to do is they're going to push demand to listing that are have an overall better value of the total price.
And when people turn on the price cargo, we see that people are booking listings with lower cleaning fees or no cleaning fees and I think this is going to have really good practice in the marketplace of driving demand to the best value listings rewarding those house and making sure every single hosts remains competitive. So it's just beginning we set a pilot in December .
Into the second quarter, which makes up for a hard comparison of night scrubbed here in the second Corps.
Thanks, Thanks, very much thank you Richard.
We'll take our next question from Brian Morgan Stanley .
Great. Thanks for taking my questions I have I have to the the first one Bryan just go back to your last answer about affordability issue in the economy.
On the air Bnb platform have you seen any signs of trade down or shorter stays or price changes or lower traffic conversions are of impacts of that more price sensitive user on the platform yet that's the first one and then the second one they've actually to go back to your your last answer as well I think in the past you've spoken about how you know there's a lot of <unk>.
Moving pieces around the shape of the year, but 2022 is a reasonable way to think about the the shape of the room nights or bookings for the year, how how should we think about that now that sort of thinking through the comp structure and how the two Q3 Q comps are are quite similar thanks.
David you want to take the second and I'll get on with a person.
Yeah, I mean it is it.
<unk> kind of a perfectly predict the exact shape of demand and obviously omicron has impacted the shake on nights demand probably more than the impact of revenue. We continue to see is the revenue Guy that we have here is you know revenue growth between 12 and 16% in the second quarter and I think that there's some of the pressures that we're seeing there on overall revenue.
Rose is frankly this bad some of the elevated ADR rates superseding just higher overall kind of pricing, especially in North America, but some of the <unk>, we're seeing for future growth in the back half of the year a lot of areas that Brian spelled about things like continuing to acceleration in Latin America exploration in Asia Pacific and more cross.
Border travel so I think some of those things are the benefits were seeing in the back half of the year Q2 is turning out to be a little bit tougher comp given omicron last year, but we're seeing overall stable demand for the back half.
Highlight in the letter that we have 25% or more.
Bookings on the books at this time this year for the back half of the year. Then we did this time last year. So just gives us confidence in people's willingness to be interested in <unk>.
And I can just take the first question, which is what we're seeing Brian is that.
People are most price sensitive at least currently in North America.
Especially United States and in the United States, the lowest price listings have the highest occupancy. So yeah people do want low price lifting and we expect that as airbnb rates continue to normalize and hopefully our rates do not increase at that hotel over the next couple of years that we're going to see it continue.
Increase in occupancy for more lifting thinner bnb and also it's partly why we're so bullish about the prospect for everybody rooms, not just to bring people to airbnb that want affordable option, but really new travelers that have never really travel very much before especially Jesse.
Great. Thank you both.
Thank you.
Next I'll go to Iran. Jesse at city.
Great. Thanks for taking the question Bryan you talked about expanding the core and and I wanted to ask you a bit more about new ideas for products or the vision for the air B. The economy overall I think we've mentioned in the past some marketplace for local homes for her so services and other sponsored listing donor idea Tony insights on on sort of how you think about extending decor and.
And the vision for there'll be me economy, and then just a quick follow up to I'll just the experiences rebuild you know that in a recent poll is an experience to talk to us a little bit more about how you feel that product is progressing. Thank you guys.
Yeah, right I mean, great great question Uhm.
Just to kind of step back.
Before the pandemic, we were really already focused on expanding beyond the core in fact, we had 10 different divisions that are being D. We added home Division, we had experienced the division will be the transportation Division. We had a magazine division. So we had a lot of effort and then obviously the pandemic occurred and we had to get focus back to basics and what we wanted to do over the last few years as before.
Four we work on new things, we wanted to perfect. Our core service one of the great source of inspiration I had with Apple.
And I remember in the mid 2000, and 2006 and Apple had not yet launched the iPhone, but how many of US wanted Apple that came out with a phone.
And the answer is a lot of people and the reason people wanted Apple spammed or the phone just because they love their I pod.
How many of US wanted gateway to come out with a phone and the answer is probably not many cause we didn't love or gateway computer and so I think that one of the things I've told our team is we have numerous expansion opportunities, but we need permission to expand beyond our core we need people to first love of course service. So that's why I over the last three years, we've been focused on really protecting of course.
Service that being said.
Our core services is stronger than ever it's more profitable than ever and I think we're now ready to expand beyond the core core so as we speak we are working actively on new products and services.
New products and services are gonna be shipping beginning next year, you're gonna see a number of things shift next may as part of that 2024 summer relief and we're gonna see even more things shift later in the year and the years to come now obviously, there's a lot of opportunities. There's guest services, there's host services I'm not going to go into a lot of detail.
You, obviously want to tune in to talk but I think it's important to note that I think that the biggest idea everybody has are in front of us I don't want to think that the biggest the idea I ever had when I was 26 work atmosphere doesn't apart in my <unk> I think that there's so much more everybody can offer and part of it it just making sure we continue to learn more.
Robust Clara file building <unk> model continue to increase trust in the platform and then we can do is go into adjacencies within our core, but then including that expand beyond of course, so I think you're going to see a lot of new opportunities with regards to experiences.
I remain bullish about the product I think there is a massive opportunity for someone to build a huge product around experiences, whether it's us and whether we're able to execute that product. We still have to prove that you know one of my great investors whenever it really messes, Mark and Jason You said, there's no bad ideas just ideas that are too early and.
A lot of life is timing and experiences I think will be launched in July 16th at lunch right like leading into the pandemic. It was probably early I think the timing is probably know better that we did is we decided let's take a pause a new submissions, let's retool the product and hopefully put out something that is even more relevant to this next generation that are looking for things to do so I.
[noise] remained really bullish on all of this.
Thank you Brian .
We'll go next.
<unk>.
Great. Thanks for taking the question. The first one is on a D. R's came better than expected in the first quarter you guys mentioned in India Ah saw eight per cent growth any anything to point out to within that region for its its strength and then is a full year gross still expected to be down.
<unk> mid single digits.
Okay.
Yeah, and 80 hours and it's just been interesting how persistent really higher average daily rates have remained and that has been consistent across the globe I think even more particularly the 80 our rates that we saw in North America hasn't been persistently high so.
These are a lot of the reasons why we've been watching so many of the tools and capabilities, Brian talked about on the call today, making sure that we're finding good affordability for our guests for things like air Bnb rooms, and giving tools for a host you didn't kind of price better. So I don't have any more to just get on that except that we think that the 80 hours.
As we continue to see growth in Europe , Latin America Asia should moderate a bit here in a second quarter and we want to continue to make sure we're getting great value too I guess.
In terms of full your expectations, you know the year over year growth and 80 or should be.
I think still probably down the neck of mid single digit range is really no change in our expectations on 80 Barbara.
Got it. Thank you and then the second question is on competition. One of your competitors is launching a loyalty program in July and the U S. Just curious if you thinks that as a potential threat to the <unk> business and so you don't have one and any data points you can share with.
With regards to what percentage.
Are exclusive to perform thanks.
I always believed that the best loyalty program with people loving your product and.
And if you love your products they come back and I think that's the reason why nearly 90 per cent of our traffic is direct organic and we have really strong rapoca rates. So I mean, you know we haven't needed to have a loyalty program to have really good loyalty an air bnb because people really love the experience and ultimately I think it's just a matter of Ah <unk>.
Continuing to innovate ulcer.
Ultimately wearing the inspiration business people want to have good trips and the best trip wins and whatever company is most focused on listen to customer feedback innovating as quickly as possible and taking giant leaps of experiences I think it's going to be the most successful. So we're really bullish about this now that being said for years, we've looked at a loyalty pro.
Graham and I don't think a classic points program, which is essentially a subsidy to buy loyalty is the right approach for us, but we do think there is really compelling interesting ways to reward our very best get something we've been actively thinking about.
Great. Thank you.
We'll take our next question from your challenge at JMP Securities.
Great. Thanks for taking my questions. So you're adding a lot of great solutions for house, and gas and and the outlet comments and release. It sounds like this is contributing a little bit to some of the ADR pressure. So how do you how do you balance your efforts to continue to increase supply, making it easier for supply to join while redistributing demand to available supply.
Is there a risk of incremental ADR compression as a result of some of these efforts.
Uhm I can start so.
Okay, I think part of our part of our secret sauce is our ability to really try to elegantly balance supply and demand one of the great things. We've seen is the marketplace has a a natural equilibrium that it finds in itself. For example, the fastest growing markets of supply are also turn out to be.
The fastest growing market for demand demand creates apply what ends up happening is a lot of these individual house get book, they start making a bunch of money. Obviously, you know the vast majority of them get booked within days of lifting and when does up happening is they tend to open up more night. They tell their friends about it and then supply increases, but we've also found a number of tact.
In fact performance marketing is a very important way to rebalance supply and demand you know other companies tend to use it as an arbitrage business to buy lots of customers. We've never thought of it that way, we think of supply performance marketing really as a laser the laser in on balancing supply and demand in markets all over the world and frankly, the more supply.
We add the more we think we're gonna have really great value lifting that will ultimately attract more demand. So I think we're able to balance this out throughout the coming year.
Great. Thank you.
[laughter].
Mr. Kelly Oppenheimer. Please go ahead.
Hey, great. Thanks for taking my question just going back to the cabin in the shareholder level letter of you know your current backlog of nights being approximately 25% stronger than it was a year ago can you just reconcile that with the the the two Q guide and you know how how should we expect a normal.
Seasonality trends coming forward and then my second question Bryan as you've done a great job with apartments and rooms growing supply in the U S. Can you take that Apartment's initiative, and then implement it in Europe and other regions of the world. Thank you.
The 25% I mean, I think what it's doing is just demonstrating the strength and demand I think would if you go back beginning of two one people booked much earlier here in 2023, then they have historically, so we had longer overall booking rates for the back half of the year, So received that springs and so.
To the extent that that man just shifts or an ear that's why the.
Growth rate in backlog can she'll be higher than what we are projecting took 19 any kind of given period.
In terms of normalcy.
It's.
The specific percentage of backlog.
Direct translation to kinda nightspot, but what we are seeing is strong demand across the globe and very staple demand in North America.
And just to clarify question. When you say apartments are you referring to the air Bnb friendly apartment.
Yeah with landlords real estate developers.
Yeah, Yeah, Yeah February setup.
100 per cent yeah, we believe that this can be expanded all over the world. We wanted to use the United States as a proof of concept. Obviously that was we thought the first place to start. So he started without 175 buildings. We now have I think over 250 buildings. We have you know <unk> some of the biggest real estate developers in a.
America on the platform.
And that's been our proof of concept, but assuming this work and all indications are it is going to work. The response was actually exceeded our expectations at least from landlord's been yeah, we'd love to bring this to Europe , Latin America and Asia.
Thank you.
We'll move next to Justin Palestine Bank of America.
Great a couple of questions I guess, the first thing about competition as you move into Europe , you might see a big competitor bookings can you talk about your model were you charged but the host and and the guest versus there's more heavily weighted to the host do you think that works well in in in Europe , and and how do you think about the differences there.
And then and then maybe for Dave on the marketing spend definitely seems like a timing is different how do you think about marketing Roy is this year versus prior years, how should how should we think about that thank you.
Did you want to take the second question first.
I'm sure the marketing our eyes, I mean again I'm very pleased with our overall marketing strategy I'm happy that are 90 per cent of our traffic remains director and paid does great returns and the brand marketing returns on that we've seen have been quite strong which was more expanding into something napkins.
Also the return on our search engine marketing has been quite good we're maintaining high our lives there and making sure that we're we have opportunities to drive incremental profit. We do we do so so I don't know I feel really good about the investment for making I liked the improved timing that we have here in 2023.
And I liked the overall approach this full phone a marketing that Brian was talking about what we add amplify our branded search engine marketing with things like social N. P. R. And we have got full formal approach that works really well and that's the kind of success for senior Brazil and Germany.
Yeah, maybe maybe Justin before I.
Where I answer about our model in Europe I just wanted to also add something.
Most travel companies their strategy is like basically paid marketing alright performance marketing and brand marketing I think a call out I just want to make it P. R. Social media is a huge benefit to Airbnb historically, we have the largest share voice and travel last week. We got 3000 articles I mean that was like more than a third of the amount of press he got hurt.
I P. O. So we think that there's a lot of opportunity for me to continue to be front and center in People's Minds N P R and social media and even in pop culture and T. V shows movies song et cetera, et cetera. So I think the name of the game. It's all paid media and then earn media and earn immediate is a really important part of international stories International expansion because earn me that really.
It creates trust more than paid media you know uhm now with regards to Europe .
The one thing I just want to point out is we actually have both models, we have a model where we have a guest fee and Jose. We also have a model where we have a host only fee and hosts can choose and we have this kind of choice for her especially for larger property managers, ultimately, especially with our total price display I don't think it's a major issue for gas I think ultimately they're going to be looking at the <unk>.
Total price and we have not seen the major behavior change I think yeah for most sensitive to total price, they're becoming more savvy, they're getting trained on total price and that is partly why we removed our product towards an option of showing people prototype as long as we remain competitive as long as we offer the best product and we offer the overall best value for your total price I think that's ultimately what gas they're gonna care about.
Great. Thank you [laughter].
And as a reminder, please limit yourself to one question to allow everyone an opportunity to ask a question.
So next to Steven Chu at Credit Suisse.
Okay. Thank you so Brian can you talk about eventual rollout plans for pay overtime to other parts of the world like Brazil.
You know given the propensity among users there is two users who use this type of product and.
Oh fast the therapy M. D rooms question. Another way you know between this and pay every time it seems like you're in a position to expand your audience, though can.
Can you talk about how much latent demand you may potentially on loft with what looks like higher service levels.
<unk> that bargain shopper. Thanks.
Yeah, So I'll I'll talk.
One of the things I mean, what you'll notice is a lot of <unk> are updates last week or based on affordability, though we announced a partnership with corner, which is pay overtime, where you can pay and many of poor installment I also want to add we also announced a partnership with stripes, where you can pay by bank account for monthly state. This is real.
The importance of meat, you don't have to pay for a credit card to pay basically what is essentially rent and that also will increase conversion by lowering caught so we're really focused and a lot of what we're focused on is starting the payment service the United States kind of similar to everybody from the apartment and assuming these partnerships work no doubt we're going to be spending these to market all over the world and you're correct.
A lot of countries people pay in installments more than even in the United States, So, yes, Brazil and markets emerging markets over the World I think this will absolutely be a very compelling offering we just like to get the product right and are more like established markets.
Date before expanding a globally, but all indications are that is going to be very successful now as far as.
Expanding our audience, yes, I mean, ultimately the biggest market opportunity for any company is always the next generation I mean, the great thing about young people as more of them every year and if you can continue to be the most relevant brand for young audience, then you're gonna continue to be able to ride that growth and that's gonna definitely be a boon for first.
<unk> and the Great thing about young people is you know.
15 years ago, I was 26, and my friends and I didn't have a lot of money now many of US have families were much older. We have more money and so what we Wanna do with capture the next generation travelers and then they'll grow with us and I think that there would be room.
Gary entry level product, it's a great way to introduce people to Airbnb I noticed for example, when I used to talk to you face. If he said that like diapers with a very important entry product the Amazon for families right you buy diapers and then also you need other thing. This is maybe an extreme example, but I think air Bnb rooms is a great way for new travelers Airbnb and if you think about it.
Between M B room, allowing the pricing tool for hosted priced more affordably total price, which we should treat the cleaning fees down and other discount product I think we're gonna have really one of the most affordable products and travel barna.
Thank you.
We'll go next to John calling tiny at Jefferies.
Great. Thanks for taking my questions active listening is expanded more this quarter than your recent quarters. When you look at the profile. These new active listings overall, how did these listings compare to your existing portfolio you know what what portion of the hosts are individuals.
Urban versus suburban versus vacation destinations et cetera.
Then on sales and marketing with front end loaded spending on brain investments can you just sort of walk through the shape of marketing throughout the year.
Yeah, Dave I want to take both of them.
Sure I think we talked about the shape of marketing during the year. The we are bringing in more front and loading on our brand marketing spend especially here into Q1 and Q2, so it's several hundred basis points.
Higher in Q2 than it was in two two last year and then for the for your total marketing costs will be roughly the same as they were in the prior year. So.
Don't have much more to say on Congress cheaper marketing beyond that in terms of active listings. I think this is what's been really continued strength in our business, which is that we are focused on the individual homes and individual hosts 90 per cent of our house that continues to be the case, the new house, we're bringing on cause we <unk>.
Our tools to the needs of those individual also that's making sure that it's easy to list that we give them air cover for hosting they they know that their home as well protected we give them the.
The great payment capabilities, the customer support that they require all those things make it easier for individuals and what's been great to see is that our mix of individuals her and professional whole since remained very stable for that the the other thing that's been interesting about just start listing scope overall cause it tends to grow.
So where are we have the biggest demand and so the areas you know as urban to come back or urban growth has been kept in line with that kind of gross so as we keep expanding at an increasing our business around the world the listings come right along with it.
Mmm.
Alright, thank you.
We'll go next to attack M S at J P. Morgan.
Thanks for answering the question I, just want to ask about long term space.
Is down versus recent periods and you're talking about some of the changes in payments and cheese coming up or or longterm stay swelling more with normalization and the economy are really just more of a mixture of issue towards shorter stays thanks.
Yeah, Hey, Doug Uhm.
I think it's important to step back and say that what we saw even before the pandemic with that long term stays were growing and they have been our fastest growing segment by trip like I think with the pandemic did is it probably accelerated from inevitable growth and this huge opportunity for us and I also thing.
We're never going back to the way the worldwide before the pandemic I do think there is some little bit of a post pandemic equilibrium that you're starting to see and we're also seeing a mixture because cross border urbanites are now up that being said I remain extremely bullish on long term state I think that's gonna be one of the big growth opportunity for air Bnb over the next five years.
And the reason why is because people are permanently more flexible even bothered that want people back to the office I think there's still going at the incremental flexibility more people go away for the summer more people may be going there for the holidays and ultimately with AI, you're gonna see an acceleration of people having more distributed in more global Workforces. So all you have to do.
It is believed zoom, it's here to stay to believe longterm today for you to stay and that's we're betting on but the biggest feedback we've gone on our longterm state product was it was just sometimes a little more expensive book longterm stay on air Bnb cause the partner with Bill for short term state. So we made over a dozen upgrades to longterm stays in a lot of them are based on affordability. So starting.
We now have a monthly dial for you to really discover monthly stayed with this really cool dial like an iPad quick wheel allows you to search from one month to a year an air Bnb you can pay by bank account. This Dave's my credit card processing fees you can pay over time, we have more flexible cancellation policy now can cancel a longterm stay up to one month before check.
And we have new discounting tools for hosts on weekly stays and monthly state and we have many other upgrades as well for a monthly state. So I think we're gonna see a lot more growth and one of the big opportunities I think Doug that we're gonna see if more people are starting to come near me to list exclusively longterm state people that have no intention of hosting on.
Nightly basis will host longterm. Another thing we believe it's going to happen is we think long term stays can be a gateway to short term stays there might be hope that uncomfortable hosting on a nightly basis for they're used to having a panic and they might go to airbnb to rent monthly and over time, you might be able to get them more comfortable on a short term basis. So we think this is a really big opportunity for us but.
I do think there is some normalization in the pandemic equilibrium, but I believe this is still a major growth opportunity for years account.
Thank you bye.
Okay.
Well the next next tele Horowitz at Deutsche Bank.
Great. Thanks for asking him questions Uhm, Brian maybe start going back to that.
Alright.
Give me some of the numbers coming out of your laundry.
The industry has grown incrementally mortgage.
Here are so can you help us understand from you received it.
Change in a competitive environment over the last 12 months.
Expectations are for <unk>.
Competition.
Next couple of years.
And then can you talk about how you think about balancing margins and and the last name is beyond this year I was wondering <unk>. It starts with an international in that sense of our essentials.
I guess with this in mind, how do you think of that have more than 10 progressed in the coming years, giving you a message.
Thank you both.
[noise] alright, yeah, Hayley I'll start with the first one competitive environment.
I think it's important to note that airbnb is more than double the size.
Stomach and most of the travel industry is only a little bit larger than they were before the pandemic.
In a major mix shift share towards Airbnb.
I think we're starting to see some of the old ways of travelling recover specifically urban and cross border, but ultimately we're really focused on innovating. We're focused on playing around game and you know I think that we're going to continue to focus on a few areas and we're gonna continue to mainstream hosting and we say, we're gonna be adding more.
Supply of homes than any other company next we're going to be focused on perfecting our core service I think there's potentially down the road, a tipping point, where a whole new cohort of people could be comfortable using air bnb. The biggest obstacle to airbnb historically has been reliability and consistency as I said the biggest strength we have is.
One of our clients the biggest weakness we have it's just hard to be asking fitness hotel, but again with AI being able to supplement and augment customer service and with many of our other initiatives to perfect and who our service I think we can introduce a whole new category of travelers to Airbnb and this doesn't even include many of the opportunities we have with younger travelers.
With new market and new products and services are only an air Bnb I also just generally what to say one of the big guiding principles I have.
The focus on the things the only Airbnb can do and if we focus on the things the only urban b can do them in a sense you're.
You're going to come to air Bnb, and we're gonna have a lot of demand a lot of traffic and ebony rooms, or just one of many examples of something that only air Bnb offers and so we're going to continue to be competitive, but we're also going to focus on things will only be offer.
Dave.
Yeah, I think what are the things I'm really proud of is the ability for us to both grow and grow profitably can have very strong margins, having a 44% kind of free cash flow margin.
I'm very proud of.
Isn't going forward just remember that we are still heavily in growth mode, and we're gonna continue to invest behind gross for the future. The good news is that I'm doing this year, we're able to do to be very rigorous in our investments across her piano make improvements in our cost structure buying fixed costs leverage and do all that wall.
<unk> kind of gross for the future. So what they think you should speak going forward is that we will continue to have a profitable business focused on growth and that over time will continue to have opportunities to expand margins, but that's not my primary focus right now of our primary focus is in investing for growth and as you mentioned one of those.
Areas for opportunities will be to increase our investment in areas, where we're significantly underpenetrated and seeing great success highlighted a couple of those areas on the call today.
And that does conclude today's question and answer session. At this time I'd like to turn the conference back over to Brian Cheskey for closing remarks.
Alright, well. Thank you everyone for joining us today just to recap we are strong start to 2023 revenue with $1 billion, which is 20% higher than a year ago net income and adjusted EBITDA. We're both records for Q1.
And a trailing 12 months free cash flow was $3.8 billion in that represent a free cash flow margin of 44 per cent.
I'm really proud of the progress we made if you look at over the last few years, how much more profitable companies become I think a lot of that has been based on our discipline in our execution.
And basically you know speaking of execution.
Product just keeps getting better and we continue to innovate with more than 50 upgrades and features last week and many more ahead. Later this year I'm proud of what we're doing and I'm really excited for the road ahead. So thank you all and will talk next quarter.
And that does conclude today's conference again. Thank you for your participation you may now disconnect.
Please wait the conference will begin shortly.
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