Q2 2023 Airbnb Inc Earnings Call
Good afternoon, and thank you for joining Airbnb earnings conference call for the second quarter of 2023 as a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section of Airbnb website. Following this call.
I will now hand, the call over to Kelly Martin VP of Finance. Please go ahead.
Good afternoon, and welcome to Airbnb is second quarter of 2023 earnings call. Thank you for joining us today.
On the call today with 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 second 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'd like to remember 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 due to a variety of factors. These factors are described under forward looking statements in our shareholder letter and in our most.
<unk> filings with the Securities and Exchange Commission.
Or as 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 the non-GAAP financial measures, we've provided reconciliations to the most directly comparable GAAP financial measures in the shareholder letter posted to our Investor Relations website.
These non-GAAP measures are not intended to be a substitute for our GAAP results.
And with that I will pass the call to Brian .
[laughter] alright, thank you.
Good afternoon, everyone.
Thanks for joining us today I'm excited to share our results with you.
Q2 was another strong quarter for Airbnb.
We had over 115 million nitrogen experiences booked revenue of $2 $5 billion grew 18% year over year and.
And when you exclude foreign exchange, our revenue increased 19% year over year.
Net income was $650 million, representing a net income margin of 26%, our highest second quarter ever and free cash flow for the quarter was $900 million.
Up 13% year over year.
In fact.
On a trailing 12 month basis, our free cash flow was $3 9 billion and this represented a trailing 12 month free cash flow margin of 43%.
Because of our strong cash flow and balance sheet, we've been able to repurchase two and a half a billion dollars of our stock in the last 12 months, which is more than offset the impact of share dilution.
Now during the quarter, we saw a number of positive business trends.
First yes demand and Airbnb remains strong nitrogen experiences book increased 11% in Q2 compared to a year ago. After bookers grew in every region and we had more first time bookers compared to a year ago.
We've now had more than one and a half billion guest arrival starting airbnb.
Second guests are traveling further cross border nights booked increased 16% in Q2 compared to a year ago and were especially encouraged by the continued recovery of Asia Pacific. We are inbound international travel increased 80% compared to this time last year.
And we also saw cross border Nice book to North America increased 20% year over year.
And finally, the third trend we're seeing is that guests are staying longer on airbnb.
Millions of people remain flexible about where they live and work and we see this reflected in our bookings in Q2 long term stays remains 18% of total nights booked and throughout the quarter. We saw an acceleration in year over year growth in bookings for month. These days.
Now, while the ability to travel and work remotely.
It's been an important part of long term stay growth.
People are also extending their typical weekend state by an extra night or two and four.
In the past six quarters long stays long weekend stays have been the fastest growing trip type on Airbnb I think this is just evidence of the incremental flexibility people have put pandemic now.
So given that we're halfway through 2023 I just wanted to provide a very quick update on the progress we've made across our three strategic priorities.
First we are focused on making hosting mainstream.
With supply growth stagnated at the beginning of Covid, we developed a new strategy recruit more host.
Since then we've been focused on raising awareness around hosting making it easier to get started and improving our tools for host.
And our strategy is working.
In Q2 supply grow 19% year over year and this is actually up from 18% in Q1.
In fact in every quarter since we've gone public we've seen an acceleration in total active listings growth.
And we're continuing to see strong supply growth across all regions, all market types and all price points.
In fact, we added a record number of new listings in Q2, and we ended the quarter with more than 7 million total active listings.
Second we're protecting our core service.
We want people to love our service and that means obsessing over every detail Miller.
Millions of people have given us feedback on how to improve Airbnb we've listened.
On May 3rd we introduced over 50, new features and upgrades as part of our 2023 summer release.
Now many of these new features and upgrades were aimed at addressing affordability.
Starting with new pricing tools for host.
<unk> told us that our pricing tools are difficult to use so we redesigned our tools and we made it easier for host to add discounts or promotions.
They also told us that they have trouble setting competitive prices.
So we added a new feature called similar listings to help them see listings.
Are there areas they know what the charge.
Now we have received very positive feedback from our host and the changes are already having an impact post have started lowering their prices and some of them are offering weekly and monthly.
With more of them offered weekly and monthly discounts and as more host adopt these tools we.
We believe we'll be able to drive greater affordability and value for guests.
We also rolled out more affordable monthly stays.
Guests are staying longer and airbnb.
So we took steps to make longer stays more affordable.
We significantly reduced fees for stays longer than three months, we started offering U S guests the option to save money by paying with their bank account and we made it easier for host to offer a monthly discount <unk>.
As a result, the percentage of our new active listings to offer a monthly discount jumped from 22% just 50%.
Now we took another step to address affordability with the launch of Airbnb rooms.
Every room's takes us back to our founding ethos of sharing.
It's one of the most affordable ways to travel.
Barely rooms have an average price of only $67 per night.
Significantly lower than the average hotel room.
Given the increased price sensitivity for many guests.
Especially the next generation of travelers. This is going to remain an important category for Airbnb.
And finally.
Our third strategic priority is expand beyond the core.
We spent the past few years perfecting our core service, we've rolled out hundreds of new features and upgrades and today.
Our core is stronger and more profitable than ever.
We're not stopping there because we have some big ideas.
But where to take care of them be next.
We're building the foundational capabilities for these new products and services that we plan to launch in the years to come.
Now before I turn to Q&A.
I want to tell you about our recent campaign the highlights what makes airbnb unique.
Airbnb is known for one of a kind lifting.
As I'm sure you know.
The Barbie movie just came out in theaters.
And in celebration of the Premier.
We partnered with Warner Brothers Martel to transform a home is the Barbie Malibu Dream House, and we launched it as part of our only on Airbnb campaign.
Only on Airbnb taps into global pop culture moments inspiring gas with some of the most iconic homes in the world.
The Barbie Malibu Dream House has been a sensation and it is now Airbnb is most popular listing ever.
We saw 13000 press it.
And more than 250 million social media impressions since it was announced and to give you a sense of how much that is that is twice more than twice as many press. It as were generated from our IPO.
Only on Airbnb campaigns are an effective way to introduce airbnb and our unique inventory to new guests and there will be an important part of our playbook going forward.
So those are the results that we have to share for Q2 and with that David and I look forward to answering your questions.
Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad. We ask that you. Please limit yourself to one question and one follow up to allow everyone an opportunity to ask a question.
If you find your question has been asked you may remove yourself from the queue by pressing star one again.
Well go to our first question from Mario Lu with Barclays.
Great. Thanks for taking my question. So the first one is on the third quarter ADR Guide you said it.
Upward pressure.
In the corner can you help explain what you mean by the listing type mix shift that's kind of lifting up ADR.
Yeah.
Yes, the listing type mix shifts.
Just simply the mix of types of listings that are geographic proposal a sizeable location that's driving the next and so edr's coming out due to that and it's also coming up in the third quarter driven by foreign exchange.
Okay got it and then in terms of.
The recession on the operational take rate you guys mentioned that you're offering a lower take rate, especially for stays.
After the third month does that mean over time should we expect this number to come down or are there kind of offsets that you are going to provide to keep the operation will take rate flat.
Yes, yes.
Hey, Mario I can answer that.
We always want to make sure that we're providing the very best value for our guests and we identified this as a huge opportunity where we could drive incremental conversion by taking take rates down after the third month and we saw some really great results that being said I do not expect our take rate to change materially there may be some segments or <unk>.
Types or geographies, where we would want to take it down but that could be offset by other areas that could come up and so generally I would expect it to be pretty stable and the way that we're going to see margin expansion is by launching incremental services for guests and hosts over the coming years.
Great. Thank you.
Okay.
Well move next to Jed Kelly at Oppenheimer.
Okay, great great. Thanks for taking my question just following up on the listing tight or are you still adding more of that like vacation rental single unit inventory versus some of like call. It the smaller units.
Urban vacation in urban areas and then can you just give us an update on how we should think about your marketing into the back half. Thank you.
Yes, Hey, Jed I can start and then I'll hand over to Dave.
So our supply I mean, let me just back up our supply has actually been really really strong and you might remember the Vienna Covid. We were we flagged this as something we need to work on and that's why we created an initial called mainstreaming hosting and the results have been very successful in fact supply growth is growing 19% year over year and in fact urban.
Actually growing faster in vacation rental urban is growing 20%, whereas the cashless growing 19% so that is pretty stable.
And as far as the number of individual hosts versus what we describe as professional hosts.
Around 90% of our hosts remain individuals'.
And I hand over to David.
Yeah on the marketing our marketing expenses as a percentage of revenue we expect to remain relatively flat year over year on a total year basis from 2023 of our 2022, we did pull forward more marketing into the first half of the year relative to the second half of this year, we've been really pleased with the results.
And then remember that.
90% of our traffic remains direct or unpaid and I think that's an important differentiator versus others and then when we do things like the Barbie Dream House and other big.
Thats like that we're able to kind of drive more awareness about airbnb about the uniqueness of our offerings and assist a powerful strategy for marketing.
Yes, maybe I'll just add one thing about marketing.
It's a full funnel approach and last year, we got 600000 articles written about us. So people talk a lot about airbnb and now I think what Youre also seeing in social media, whether it's the only on program Barbie or just generally everybody in social media is just a topic of conversation I think that is just a testament to when you invest in the brand when your brands in <unk> and you have some.
Unique you get a lot of those benefits and I think it's going to be consistent and we will have pretty consistent marketing spend as a percent of revenue over time because of the strength of the brand.
Thank you.
We'll go next to Doug Anmuth at J P. Morgan.
Hey, this is Pedro and Pablo Thanks for taking my question. So first one for ADESA affordability or are you actually seeing that consumers are coming to your platform soon.
And walking away.
Couple of opportunities that you guys are.
Kathryn or just quickly before okay with higher prices right now.
Secondly on your own.
For the full year.
Versus Q.
To your point.
Yes.
I don't we're not able to hear the second question I don't think.
Can you can you spend more time.
Yes, sorry on your full year guidance for adjusted EBIDTA, where did you see offline consumer confidence surveys.
This quarter.
Yes, so I'll take the first question and I'll hand over to Dave on affordability.
Our prices have.
Have obviously risen since pre pandemic and the growth has been incredible and the business is nearly about twice the size that was pre pandemic that being said.
In the long run Airbnb started as an affordable alternative to hotels and I think that we always have to remember that for every dollar of people spend on airbnb to spend as much as many as $10 in the world. The hotel. So we're still a very small player in a very large market and I think that one of our big opportunity is to make sure we continue to be affordable.
Last year, we got a lot of feedback from the community that <unk> wasn't as affordable as it used to be so we made a bunch of changes we highlighted some of these in my opening remarks.
What we've seen though since then to answer your question people the booked prices on Airbnb on average are lower than the listed prices. So we do see people gravitating towards more affordable stays listen Airbnb, It's partly why we launched a feature called similar listings, which help us see the listings that were getting booked in <unk>.
So I think discovered was the most popular listings that made the most money offered in many times the very best value and so this wasn't a sense a win win for guests in the house by really trying to build better tools.
I also just want to point out one thing, which is our prices are essentially flat year over year I think there are about 1% year over year, but in North America.
Our prices are now down 1% now when you take out mix shift because people are booking larger homes are prices in North America actually down, 4% and if you compare us to hotels, depending upon which data you take hotels are up somewhere between 4% or as much as 10% and it seems like hotels are suggesting based on silver.
Public remarks that they arent they arent going to come down in fact, those prices might come up so to answer your question I think people come to Airbnb for one of a kind spaces at great value and if we can keep prices very affordable and then also focus on reliability I think theres going be a lot of demand to come.
Okay.
And then in terms of profitability I'm, just really proud of our continued progress of increasing our overall margins overtime. We made some hard choices in the midst of COVID-19 to reduce our fixed costs get back to the core and focus on our overall profitability. The major shifts so things like our marketing expenses that we just talked about where 90% of.
Traffic remains direct or unpaid it gives us a lot of leverage for improving our overall profitability and we're going to continue to do that this year, we continue to make great improvements in our overall variable costs things like operations and support costs for community support infrastructure costs et cetera, and then we've just been doing excellent job of being.
Very judicious with our fixed cost growth. So we've moderated our head count growth overall, we're growing modestly and we're investing behind the things that matter most for our guest center host and I think that focus is actually enabling us to deliver even more innovation as Bryan talked about on the call like we've had over 500 improvements too.
<unk> in the last several years and so we're going to continue to manage our fixed cost closely focusing on things that matter. So.
So for the back half of the year, we feel comfortable we're going to be able to.
<unk>, our EBITDA margins over the prior year.
And I think I'll, just add that I think that we found that as we get more efficient and we actually grow faster. So I think being incredibly disciplined incredibly focused incredibly lean has actually been great for growth.
Okay.
Okay. Thank you.
Yeah.
And our next question comes from Stephen Ju at Credit Suisse.
Okay. Thank you so Brian .
The shareholder letter is teasing us a little bit with the commentary about expand beyond the core but there really isn't much therapy honest statement itself. So in addition to experiences. Please share any updates in terms of what you may be doing there.
But what could be some of these new directions, you might be thinking about that might be products and <unk>.
Services for either the hosts or the consumer.
Yes.
Stephen.
Thanks for the question. It's one of my favorite questions. What are we going to do next.
Let me, let me just start and back up I just want to recap how I think about this whole space.
Before we talk about span beyond the quarter I just want to say one thing about the core.
Which is that.
The hotel industry is more than about 10 times the size of Airbnb and I think that almost anyone that stays in the hotel could consider staying in an airbnb I mean, the spaces are one of a kind, they're often better value, but we need to make sure that we continue to drive value and I think the next big focus for Airbnb is reliability, if we can make.
Airbnb, even nearly as reliable and many marks and hotel I think youre going to open up a whole new generation of travelers to Airbnb. So I think there is a lot more runway just in the core business I think we're only scratching the surface and that's partly why we are so focused on protecting our core now beyond that let's talk about <unk>.
What's next starting from the most near Adjacencies Al International one of the things. We've seen is that Airbnb has a lot of we've got a lot of scale in United States and we've got a lot of scale in top markets in Europe , but actually Airbnb underpenetrated and most countries around the world.
Just to give you. An example, a couple of years ago. A few years ago. We were concerned about the lack of penetration we had in Germany. We're also pretty nascent in Brazil since the beginning of the pandemic, Brazil was more than double the size in Germany more than 60% larger and Germany is on track now to be one of the largest countries in the world on Airbnb.
So we're going to take that playbook, and we're going to bring it to Asia, and we're starting with Japan, and Korea, But Asia Asia Pacific is a frontier is a huge opportunity for growth I think that is just one of many markets, including Latin America and the other thing I would just point out within Europe is the.
Beyond UK beyond France beyond some of the really top markets Theres a lot of countries in Europe , where we're not actually that penetrated so there's a lot of international expansion.
Next will be longer stays.
For the pandemic only 13% of our business was for monthly space now, it's 18% and it's stable and we don't think it's coming down in fact I think this is a huge opportunity I think all you have to believe zoom is here to stay to belief flexibility here to stay or do you believe that you're going to see a lot more people either living nomad glee or some people traveling for the summer going away for the wind.
<unk> or extended weekend, which is a whole new category between travel on housing.
That is probably one of the most underrated markets and Airbnb.
We have experience at ICR experiences, we're going to have a breakout before the pandemic and instead, we had to put them on hold but the thing we've learned is that people love experiences.
95% of reviews that are left for experiences and in a five star review and for our core business of home at 84%. So that means that people on a statistical basis like experience, even more than home and so we think that product is being is ready to scale and so I've been spending a lot of time I think you're going to see some growth in the years to come and I'll just.
Add a couple more things and then let me preface by saying I don't usually like to foreshadow new things before we launch am I going to get you to tune into our releases, which we do every may and November but theres a lot of service opportunities on guest and host I think that whether it's.
Amazon or etsy or Alibaba they've shown there is an entire suite of services that you can offer for host I know I get a lot of questions out paid placement, which is absolutely on the table, but there's many other services as well for host and then in guest services think of all the services you could get in a hotel or at a resort and then think of all of the services that hotel Couldnt maybe afford.
To offer because there are sub scale by Airbnb in many markets. We've got a lot of critical scale. So these are just some of the I would just even call. It nearer term opportunities, but we do have some pretty big ideas I think AI is basically like a once in a generation platform shift probably bigger than the shift to mobile probably more akin to something.
About the internet as far as what it can do for new new businesses, and new business opportunities and I think that it is a huge opportunity for us.
It's really been the leading edge of innovation.
So that's what we're doing I'm very very excited about it and I will just say that we made a lot of progress last three years building, a strong business being profitable, but my strength and CEO is really about expanding beyond the core and so this is where I think we're going to be entering a sweet spot in the coming years to come.
Thank you.
Okay.
[laughter].
Well move next to Bernie Mcternan at Needham <unk> company.
Great. Thanks for taking the questions. Maybe just start just if you could just discuss the booking trends throughout the quarter, where April was up 10% go into June plus 15% anything that you.
You saw that.
Driving that better performance throughout the quarter and then on pricing.
You mentioned, the new pricing tools focused on affordability are we seeing the full impact of impact of that in <unk> or how should we expect that to trend throughout the coming quarters.
Okay.
So let me start with the booking trends and what we saw was what we shared in the letter which is that the global booking trends increase from 10% growth year over year in April to 15% in June and if you remember what we saw in Q2 was a hard comparison year over year, specifically driven by Europe .
Where there were delayed bookings in 2022, the compressed more bookings into Q2 that pressure moderated through the quarter, which is the primary reason why youre seeing that acceleration I think interestingly, we actually saw acceleration in total growth on nights booked from Q1 to Q2 in North America, and so I think that was telling us.
Just the strength and resiliency of the North American consumer and we're continuing to see that strength lead into Q3, which is why we're forecasting further acceleration of nice growth from Q2 into Q3.
We're seeing great growth in Asia Pacific as we called out in the letter over 80% growth in APE.
APAC and I'm really pleased with our growth in Latin America, and that's twice the size that it was pre COVID-19 and it's growing really nicely.
Okay.
And then in terms of the pricing tools.
I think that we have seen a number of.
The positive impact from our pricing tools as we've talked about earlier than North America, ADR actually being down 1% year over year. When you exclude the impact of mix, it's actually down 4%.
I don't think we've seen the full impact of all of those I think we're going to continue to improve and make the pricing tools better for our hosts and then to make it more transparent for what the prices are that they should charge. So that they know what a competitive rate is and I think we will continue to make sure that we're providing great value because while our prices are either.
Moderating reading coming down that's in the face of other competing platform is actually increasing rates and so I think the value gap continues to grow which just shows the benefit of booking on airbnb expanding.
Great. Thanks, Dave.
Okay.
We'll go next to Jacob see that TD Cowen.
Hi, This is Jacob in for Kevin. Thanks for taking my question, we've been getting a lot of questions from investors on potential initiatives that airbnb to do moving forward to increase take rate, which could maybe include leading advertisers bid on a platform was wondering if you could provide any details there.
Also you discussed a bit in this call.
You had already rolled out expanse expansion tools in Germany and Brazil.
Wondering if you could comment on any of the results that you're seeing so far thanks.
Yes.
So with regards to increasing take rate.
One of the things I've learned.
Actually Dave with somebody who told me that something from Jeff Bezos at Amazon He said that.
One of the things you have to do is the business leaders do you have to be focused and you have to focus on the most perishable opportunities first.
Thank you.
The most perishable initial opportunity Airbnb was to get focused and disciplined in really rationalize our cost base and then when we saw a travel recovery it was about gaining market share.
And I think that's still.
That's still where we're focused on so advertising on the platform as a common request certainly its a common thing I get asked on earnings call. It is absolutely on the table I think you can do a very good job at it is not one of the most perishable opportunities is just why we haven't prioritized. It we're really prioritizing getting air can be too as much scale as possible and continue to grow.
But it is absolutely on the table and just just to just to dive in just a little bit deeper.
There is such an opportunity for us to build differentiated tools services and offerings for host.
Think about it over the last few years, we've made as Dave referenced almost by over 500 upgrades and innovation.
Probably around half of those have been for literally hundreds of improvements and most of these we don't charge for they have nothing to do with our take rate our take rate was what it was even before all these like air cover which is top to bottom protection with $3 million of damage protection that is free to our hosts and our competitors don't offer it I do think though while we always have.
To make sure we're providing more value for host for whatever recharging theres a lot of opportunities obviously, an advertising platform is one.
Matching people with homes that need that don't have time to host with host who can host, but don't have the home really matching that marketplace, because I think unlock a lot more a lot more business that we call the coastal creating a coast marketplace is really interesting and there is a plethora of other services on the host side and again there is also a plethora of services.
On the gas side as well so those for instance.
The things that make the experience better I would say would be more perishable with regards to Germany, and Brazil, I think Dave just talked about in a second but before I do I'll just say that we are I think the most international travel company in the World. We are not concentrating Europe , we're not concentrated North America, we're truly everywhere we're normally.
Every country and region in the World, It's truly a global travel network and I think we have a really good playbook for how to expand into these markets and I think Germany, and Brazil was a really interesting playbook, where we didn't just focus on brand, but we also focus on PR social media, we leverage like local celebrities that often will be promotions with airbnb and so there's a and this is it.
In addition to localizing, our product and really making sure we have a key product and we have good supply in the corridor. Because these people will travel to I think Germany, and Brazil are good stories, Germany is more than 60% larger than it was before the pandemic I believe Brazil is like 110% larger I don't know if Dave do you want to go into anything else.
I think you hit it well I'll just reinforce a couple of things I mean, the step one in any of these markets is make sure that we well look clients the product the product can be very consistent globally, but often payment methods are areas, where we need to make sure that we're being very localized.
And then the full funnel approach is key and making sure that we have all of the elements social and PR celebrities and brand and search engine marketing, we often start and some of these markets just a search engine marketing, but that's too narrow and we need the full funnel to see the effect and I think where we have that portfolio approach you get the results that we're seeing in Brazil.
Germany is why we're expanding out on to Asia for both like Japan, and South Korea, and then I'll, even go back to the potential initiatives for long because I think it's important to double click on the fact that you have.
Remember that the majority of our hosts our individual hosts and the things that we need to build or for those individuals. So for example, adding advertising we have to be mindful that we don't just add something like that that can disproportionately benefit professional hosts over individuals and take the balance of the marketplace out of balance and I think it's really important.
To do that because that's what's unique and different about airbnb, where not built on the backs of professional hosts we're glad they're there we're glad they're part of the ecosystem, but it's even more important that we support our individual host community.
Great. Thank you.
We'll go next to Brian Nowak at Morgan Stanley .
Thanks for taking my question, Dave just to go back to an earlier question on ADR as being up in the <unk> I get geographic size location et cetera, but could you just give us a little more detail about that so we can understand sort of is that geographic comp structure. What are the sizes youre talking about just trying to understand how to think about the drivers of the ADR growth in the <unk>.
Third quarter and the durability of that growth in the into next year.
I think what we're seeing in the near term for Q3 is what we've included here.
Anticipating it to be up year over year, driven by foreign exchange and the mix shift of larger homes and geographic mix I think over time, because we're seeing things like Latin America growing nicely Asia growing nicely in some more of the cross border travel you could see some moderation of our edr over.
Time, but again were tightened moderation, we're talking a percentage point here or there we have better visibility into Q3, right now which could be up year over year longer term it could be flat ish to maybe moderately down.
Overtime, but at the same time, we keep predicting that ADR is youre going to decrease in each quarter.
Amazingly resilient.
The last number of quarters so.
I don't have much more to say beyond that.
We'll go to our next question from James Lee at Mizuho.
Okay.
Great. Thanks for taking my questions. Two here one on ADR you guys Hope, obviously North America decreased by 1%.
Just wonder if you can maybe unpack between like for like it maybe mix shifts. So we can better understand that dynamic and also secondly, maybe can you talk about the price elasticity as you're allowing.
Hosts to use the tools to adjust pricing what do you see from consumer out there travelers out there in terms of reacting to those price changes.
Sure, we absolutely measure the price elasticity of our pricing and we see good benefit from lower pricing driving increased nights overall.
Obviously affordability is super important in People's minds, all around the world, we definitely see it specifically in North America, where calendar prices have increased and that is the.
Average price available on Airbnb have gone up the booking prices and what people are actually booking are declining. So that's just shows you. The the desire for people that have great value.
In North America, specifically, what we saw was it was down 1% year over year, but like for likes. So it means the same property on average excluding mix of size location and tight was actually down 4%. So on a like for like basis are <unk> in North America was actually down for <unk>.
And that's very different than what we're seeing.
Hotel industry kind of touting increases of 6% to 10% or more so that's where the the gap and value continues to widen.
Okay and one more question here, Dave a lot of investors are asking about maybe student loan forgiveness exploration and I was wondering how you think about this issue.
Anything that's contemplating into your guidance for FY2023.
Yes, I don't have a specific point of view on the student loan forgiveness and impact on our guidance I think what we're seeing is that in the face of people keep waiting for the economic shoe to drop and concerned about whether or not people are willing to travel and whether the economy is going to have a drag on our overall results and it's just not what.
We're seeing we're seeing.
Strong resilience in travel that people are prioritizing travel over other things and all the work that we're doing to make sure that we're providing great value and even.
Either moderating right, having prices come down just gives us greater value relative to alternatives, which I think is the tailwind on why we're continuing to buy all of our estimates gained share of total accommodation nights, both quarter over quarter and year over year.
Okay, great. Thank you.
Yes.
Yeah.
We will go next to Ken Garosci at Wells Fargo Securities.
Hi, Thank you I.
I wanted to come.
Coming back to the ADR issue and Brian If you could talk about.
It was very helpful detail on the 4% kind of like for like in North America, but how do I, how do I square Dave's comments that you will see overall ADR kind of flattish over the medium term.
With your comments that you want to continue to drive affordability I know you've introduced some tools and youre seeing some impact there.
And then maybe the follow up to that is how how will you know when when the marketplace is imbalance.
And where you've kind of reached equilibrium in ADR is in the right place. Thank you.
Okay.
Hey, Ken I'll start so.
I think affordability on our prices have to be taken into account relative to the rest of the market. Obviously inflation is up most everything in the world with more expensive today than it was a year ago and I presume that will be the case next year. At this time, we know for example that while our price in North America like for like or down 4%.
Hotels are.
At least 4% higher than some estimates or they might even be approaching double digits higher and based on recent call comments I've been hearing I think they expect for prices to continue to go up so if we live in a world where airbnb prices do not go up in the Eaton remain flat or stable.
And hotels continue to rise then airbnb continues to become more affordable relative to hotels, which are still much larger audience than airbnb.
That brings up a different question, which is you know.
How do you balance the right prices for gas and how it is good to the marketplace.
So.
We are post these arent just like suppliers, we have no relationship with so our goal is not to drive down prices to the lowest possible the prices have to find the balance between the very best affordability for guest while still making sure hosts can make any meaningful income and it's still <unk>.
Really valuable income for them to earn now one of the things. We've seen is there is a lot of sensitivity you can look at that we can show host that when you lower your prices to a point you actually will get more business. Because most hosts have very low occupancy. They are not like hotel. Our hotel is usually booked like 2025 Nike.
A month, maybe some hotels are booked 30 days a month most hosts are not booked most nights and so the big deal is that they lowered the price just a little bit they will add more bookings more nights and they'll end up making more money. There is a point where they lowered so much though that is no longer worth their while and that is the secret sauce for us to be able to perfectly balanced.
Client demand to make sure that both sides, it's working for them and I think that equilibrium that balance between guests and how is that kind of is our one of our secret sauces.
Thank you.
Yeah.
Okay.
And next we'll move to Tom champion at Piper Sandler.
Hi, good afternoon, it looks like you've built some tools too.
Stimulator offer long term stays in and I'm just curious what you think that will.
Ultimately due to the rate, which is kind of hovered around the 18% rate for for <unk>.
Room nights for the last couple of quarters, now where do you see that going over time, and then Dave I guess a question for you another very strong quarter for <unk>.
EBITDA margins, what do you what do you see the long term margin potential of the business over time, just curious if you've updated that thank you.
Hey, Tom I'll take the first one.
So long term stays are 18% of our nights booked long term stays obviously defined by a month or longer and as I mentioned before they were around 13% for the pandemic now.
Very hard to predict exactly how it will change in the next 1234 quarters from now so I'm not going to make a prediction about where 18% might be in Q4 or next Q1, but what I can say with a fair amount of confidence as I think in the next decade is going to be a lot higher than 18% I think the overall wins are towards longer and longer.
Dave and the reason why is because more than ever in any time in human history, you've got hundreds of millions of people and one day, perhaps more than 1 billion people that have a job by a laptop that has some incremental flexibility that did not exist 10, or 20 years ago think about the number of people that are young that don't have a family and can actually.
Work from a laptop and move around.
Then you have people families to have kids in school, they can't do that but their kids are in school in the summer so youre going to see more and more people still go away for the summer. Many people are thinking about growing wafer. The winter people are moving away from headquarters, but they might come back and give a work for extended period. So I think the basic thing we think is going to happen.
Is there is going to be a lot more flexibility in the future and I think there's going to be a category that is not travel and it's not classic housing housing as in one year leases or real estate theres going to be a category in between and it doesn't even really havent name, but our stays of 30 days or longer I mean, it is around 100 million.
Nights booked a year that is actually a major new category of business that didn't really exist in a meaningful way when we started airbnb and if anyone in the world wants to book, a stay of a month or longer.
And they had on our books sight unseen. So we're going to book a place they can't visit and do a tour of all ahead of time I think airbnb is going to be the leading place to do and there really isn't another global player that you can do with this so ultimately I can't predict the short term, but the long term, we're very bullish and we actually have a lot more features and upgrades in this area of monthly stateside.
We will increase adoption and also to be able to get people that only want to host on a monthly basis to come on Airbnb that would actually unlocked lots of new listings.
Dave I'll hand over to you.
Yes. Thanks for the question on EBIT margins I am really proud of our progress towards that we've made some substantial progress based on things like the change in our marketing approach improvements variable costs are fixed cost leverage.
Also remember that the higher average daily rates have helped our overall margins and kind of accelerated overall profitability.
That said we are in growth mode, I'm really not focused on optimizing margins I'm proud of the fact that we can grow well and drive great profitable growth, but we are focused on growth I think the extent the we'll expand our margins over time I think the biggest opportunity would be with some of the services that Brian mentioned.
Earlier in the call as we add guest or host services I think that will increase the lovers of revenue that we can gain and much of that revenue flow through to our kind of higher overall profitability.
But all of that said I don't have a new long term target I'm just proud of the fact that we've been able to deliver the profitability we have as quickly as we have.
Thank you both.
Thank you.
Next well move to Mark Mahaney at Evercore ISI.
Okay I wanted to ask Dave I wanted ask a financial question on on the impact of AI and <unk> AI and I want to ask it this way, which is if you think about the P&L impact of these investments over time and applications do you think it's more likely to lead to improved monetization or improved cost efficiencies and I'm sure you're going to answer.
It's both but if you were to lean more on one way or the other which one would it be thanks a lot.
Thanks Mark.
Absolutely. It is both I think it's timing.
In the near term I mean, remember that we actually use a fair amount of AI right now on the product like we do it for our party prevention technology, a lot of our matching technologies, while the underlying technologies, we had actually AI driven it's not so much Jen AI, which is such a huge kind of future opportunity I think we will see more.
Leverage in our fixed cost base so meeting.
Fewer people to do more work overall, and so I think that that's going to help both on our fixed costs into more variable costs. So.
Youll see us be able to automate more customer service contacts it's harder over time, so near term I think you'll see this is one of the things we're going to be able to benefit from our fixed and variable cost leverage and then over more time and I think it'd be great to have Brian chime in on our future approach. Its gen AI would be how do we even.
Make the service better for our guests and our hosts I think theres a huge unlock there, but it may take a little more time.
Yeah, I'll just share a few things I mean, I think obviously as Dave said, probably efficiency in the short term growth in our long term.
Before I talk about the long term, let me just double click on one part of the near term that Dave referred to which is customer service. So.
Customers.
Strength of Airbnb is that we're one of a kind we have 7 million active listings more than 7 million listings that everyone is unique.
And that is really special but the problem with Airbnb is this one of a kind and sometimes you don't know what youre going to get and so I think that if we can continue to increase reliability and then if there's something that goes unexpected if customer service can quickly fix remediate the issue and I think there will be a tipping point, where many people that don't consider airbnb and the only.
And hotels would consider airbnb and to give you a little more color.
About this customer service before I go to the future.
There are so many more types of issues that could arise staying in airbnb than a hotel first of all when you call hotel, they're usually 111 property and they are aware of every property every room, where nearly every country in the world often a gastro house will call us and they will even potentially speak a different language then the person on the other side the host the guests in house there are nearly 70 <unk>.
Current policies that you could be adjudicating. Many of these are 100 pages long so imagine a customer service agent trying to quickly deal with an issue with somebody from two people from two different countries.
In a in a neighborhood that the agent may never even heard of what AI can do and we're using our pilots to GBP four is AI can read all of our policies.
No human cadaver quickly read all those policies it could be the case history of both guests and hosts it gets summarized the key issue and it could even recommend what the ruling should be.
Based on our policies and that can then write a macro that the customer service agent can basically adopt and amend if we get all of this right. It's going to two things in the near term, it's going to actually make customer service a lot more effective because agents will actually be able to handle a lot more tickets in may a ticket you will never even have to talk to an agent, but also the service to be more reliable which will unlock.
More growth now this of course leads to the bigger question.
What can we do with AI and I just wanted to offer a minute or two of thoughts and I've shared this last earnings, but it's worth repeating.
If you were to go to chat GBT right now and you're asking a question and I ready to go to church COPD and ask a question, we're going to get mostly the same answer.
And the reason why is it doesn't know who you are and it doesn't know who I am so it doesn't really go with like immutable truth like how far is the earth to noon or something like that.
There is no conditional answers to that but it turns out in life, there's a whole bunch of questions and travel is one of these areas where the answer isn't right for everyone, where should I travel where should I stay who should I go with what should I break every one of these questions depends on who you are and so we're not going to be building like large research labs to develop these large language.
Models those are like infrastructure projects building bridges, but we're going to build applications on top of the bridge is like the car and I think Airbnb is best in class at designing interfaces I think you've seen that over the last few years and we can design I think a breakthrough interface for AI I do not think that the AI interfaces chat chat I do not think is the right interfere.
Because if you want to interface that multimodal it's taxed.
Image and video and you can it's much faster than typing to be able to see what you want. So we think there is a whole new interface and also I think it's really important that we provide a lot of personalization that we learned more about you that youre not just the United with the customer and that's partly why we are investing more and more on account profiles personalization.
And really understanding the guests we want to know more about every gas and airbnb, even any travel company knows about their customer in the world and if we do that we can provide much more personalized service and that our app can almost be like an AI cons years that can match suite of local experiences local homes local places all over the world and I think the last thing I'll, just say of AI.
I think the companies that will best succeed in AI.
Think of it this way what's company's best adopted a mobile what's company's bath adopted the internet it with the companies that were most innovative and most product led and I think we are very much a product. Let's design led technology led company and we always wanted to be on the frontier of new tax. So we're working on that and I think you'll see some exciting things in the years to come.
Okay.
Thank you Brian Thank you David.
And that does conclude the question and answer session. At this time I would like to turn the call back over to Brian Cheskey for closing remarks.
All right everyone. Thank you for joining us today I just want to recap revenue was $2 $5 billion, that's 18% higher than a year ago.
Net income and adjusted EBITDA were both Q2 record.
And our trailing 12 months free cash flow was $3 9 billion.
Now this represents a free cash flow margin of 43%.
We've made a tremendous amount of progress in the first half of the year, but in many ways. We're just getting started.
In November we will share a new set of features and upgrades as part of our 2023 winter release I am proud of what we accomplished in Q2 and I look forward to sharing more with you next quarter.
And this concludes today's conference call. Thank you for your participation you may now disconnect.
Yeah.
Yeah.
Okay.