Q2 2024 Airbnb Inc Earnings Call

Operator: Holder Letter with our financial results and commentary for our second quarter of 2024. These items were also posted on the Investor Relations section of Airbnb's website.

And commentary for our second quarter of 2020 for these items were also posted on the Investor Relations section of <unk> website during.

Operator: During the call, we'll make brief opening remarks and then spend the remainder of time on Q&A. Before I turn it over to Brian, I would like to remind everyone that we will be making forward-looking statements on this call that involve a number of risks and uncertainties. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described under forward-looking statements in our shareholder letter and in our most recent filings with the Securities and Exchange Commission.

During the call, we'll make brief opening remarks, and then spend the remainder of time on Q&A before I turn it over to Brian I would like to remind everyone that you'll 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.

For a variety of factors. These factors are described under forward looking statements in our shareholder letter and in our most recent filings with the Securities and Exchange Commission.

Operator: We urge you to consider these factors and remind you that we undertake no obligation to update the information contained in this call to reflect subsequent events or circumstances. You should be aware that these statements should be considered estimates only and are not a guarantee of future performance. Also, during this call, we will discuss some non-GAAP financial measures. We provided reconciliation to the most directly comparable GAAP financial measures in the shareholder letter posted on our investor relations website. These non-GAAP measures are not intended to be a substitute for GAAP results.

We urge you to consider these factors and remind you that we undertake no obligation to update the information contained on this call to reflect subsequent events or circumstances, you should be aware that these statements should be considered estimates only and are not a guarantee of future performance.

Also during this call we will discuss some non-GAAP financial measures, we've provided reconciliations to the most directly comparable GAAP financial measures in the shareholder letter posted to our Investor Relations website.

Brian: non-GAAP measures are not intended to be a substitute for our GAAP results with that I will pass the call to Brian.

Operator: With that, I will pass the call to Brian.

Brian Chesky: All right, good afternoon, everyone, and thanks for joining us. You know, Q2 marked another strong quarter for Airbnb. We had 125 million nights and experiences booked. Revenue increased 11% year-over-year to $2.75 billion. Net income was $555 million, representing a net income margin of 20%, and we generated $1 billion of free cash flow. Our total trailing 12-month free cash flow was $4.3 billion, our highest ever. And our strong cash flow allowed us to repurchase $749 million of our shares in the quarter. And, as of the end of Q2, we had $5.25 billion remaining on our share repurchase authorization program.

Brian: Alright, good afternoon, everyone and thanks for joining.

Q2 marked another strong quarter for Airbnb.

Brian: We had $125 million I can experiences booked revenue increased 11% year over year to $2 $75 billion.

Brian: Net income was $555 million, representing a net income margin of 20% and we generated $1 billion of free cash flow.

Brian: Our total trailing 12 month free cash flow was $4 3 billion our highest ever.

Brian: And our strong cash flow allowed us to repurchase $749 million of our shares in the quarter.

Brian: And at the end of as of the end of Q2, we had 525 billion remaining on our share repurchase authorization program.

Brian Chesky: Now, during Q2, we continue to make progress on our three strategic priorities, which again are making hosting mainstream, perfecting our core service, and expanding beyond the core. So I'll share a few highlights on our First, we are making hosting maintenance. Last year, we shared our commitment to make hosting just as popular as traveling interviews. We've been focused on raising awareness around the benefits of hosting and providing better tools for hosting. In Q2, we surpassed 8 million active listeners, driven by continued growth across all regions and market types. We're not just growing ears.

Brian: During Q2, we continue to make progress on our three strategic priorities, which again are making hosting mainstream perfecting our core service and expanding beyond the core so I'll share a few highlights on page <unk>.

Brian: First we are making hosting mainstream.

Brian: Last year, we shared our commitment to make hosting just as popular as traveling there maybe.

Brian: <unk> been focused on raising awareness around the benefits of hosting and providing better tools for host in Q2.

Brian: Two we surpassed 8 million active listings.

Brian: Driven by continued growth across all regions of archetypes, we're not just growing supplies.

Brian Chesky: We're also committed to ensuring that it's a high-quality supply. Since launching our updated host quality system last April, we've removed over 200,000 listings that failed to meet our guest expectations. And we'll continue to raise the overall quality of listings on Airbnb so we can consistently deliver high-quality stays. Second, we're perfecting our core service. We remain focused on making Airbnb more reliable, affordable, and an overall better service for hosting guests. We've rolled out hundreds of new features and upgrades over the past few years to do this. This includes launching major reliability initiatives, like Guest Favorites, which make it easy for guests to find the best listings on Airbnb. Now, since launch.

Brian: We're also committed to ensuring that its high quality supply.

Brian: Since launching our updated host quality system last April we removed over 200000 lifting that failed to meet our guest expectations and will continue to raise the overall quality of listings on Airbnb. So we can consistently deliver high quality state.

Brian: Second we're protecting our core service.

Brian: We remain focused on making airbnb more reliable affordable and overall better service for hosting guests.

Brian: We've rolled out hundreds of new features and upgrades over the past few years to do that.

Brian: This includes launching major reliability initiatives like guest favorites, which make it easy for guests to find the best listings and Airbnb.

Brian: Now since launch.

Brian Chesky: Last November, we saw over 150 million nights booked by guest favorite listeners. We've also made dozens of smaller changes that have led to improved usability and booking conversions. These include things like Simplified Setup and Login, and Improved Maps.

Brian: Last November we have seen over 159 million nights booked at guest favorite listings.

Brian: We've also made dozens of smaller changes that have led to improve usability and booking conversion.

Brian: These include things like simplified set up a login improved map clear.

Brian Chesky: Clear Cancellation Policies, and so much more. Now, we've made tremendous progress, and we'll never stop improving Airbnb. We're going to continue this commitment. And, perhaps most excitingly, we're expanding beyond our core. We continue to drive growth by investing in underpenetrated markets. In Q2, growth of GrossNight's book on an origin basis in our expansion markets significantly outperformed our core markets on average. Our core markets again are the US, UK, France, Australia, and Canada.

Brian: Clear cancellation policies and so much more.

Brian: Now we've made tremendous progress.

Brian: We will never stop improving Airbnb, we're going to continue this commitment.

Brian: And finally, perhaps most excitingly, we're expanding beyond our core.

Brian: We continue to drive growth by investing in Underpenetrated markets.

Speaker Change: In Q2 growth of gross nightclub an origin basis in our expansion markets. It's significantly outperformed our core markets on average are core markets again, our U S U K, France, Australia.

Speaker Change: And Canada.

Brian Chesky: This is largely due to the success of our Global Expansion Playbook, which includes a more localized product and marketing approach. We're also expanding Airbnb's brand positioning beyond travel accommodations to launch and roll out Airbnb IT, with the new category of Extraordinary Experiences that we launched in May. Now, since launch, we've seen nearly 40 million views of icons on our site.

Speaker Change: This is largely due to the success of our global expansion playbook, which includes a more localized product and marketing approach. We're also expanding <unk> brand positioning beyond travel accommodation for the launch and rollout of Airbnb icon, which the new category of extraordinary experiences that we launched in May <unk>.

Speaker Change: Since launch we've seen nearly 40 million views of icon on our site.

Brian Chesky: Helping people understand that Airbnb offers more than accommodations will be critical as we expand our offerings in the coming years. Now, looking back to Q2, we saw a number of positive trends and highlights. First, guests are increasingly booking on the Airbnb app. We've continued to optimize our mobile websites for app downloads, and we believe our approach is working.

Speaker Change: Helping people understand that <unk> offers more than a combinations will be critical as we expand our offerings in the coming years.

Speaker Change: Now looking back to Q2.

Speaker Change: A number of positive business highlights first guests are increasingly booking on the Airbnb App, we've continued to optimize our mobile websites for App downloads and we believe our approach is working nights booked at our App during Q2 increased 19% quarter over year over year now. These bookings now comprise 55% of total nights booked and this.

Brian Chesky: Nights booked on our app during Q2 increased 19% quarter-over-year. Now, these bookings now comprise 55% of total nights booked, and this is up from 50% in the prior year period. Now, in addition to our success in mobile downloads and booking, we're continuing to see growth of first-time bookers on our platform, with the highest level of growth seen in the youngest age demographic. Second, Airbnb is uniquely positioned for special events. We'll continue to see more guests choose Airbnb for major holidays and events. The week of July 4th, for example, represented our single highest week of revenue ever in North America.

Speaker Change: Up from 50% in the prior year period.

Speaker Change: Now in addition to our success in mobile downloads and bookings were continuing to see growth of first time bookers and our platform with the highest level of growth seen in the youngest age demographic.

Speaker Change: Second Airbnb is uniquely positioned for special events.

Speaker Change: Continue to see more guests choose airbnb for major holidays and events.

Speaker Change: The week of July 4th for example represented our single highest weaker revenue ever in North America, and we saw similar trends in Europe.

Brian Chesky: And we saw similar trends in Europe. Now, in anticipation of the Olympics, which were in Paris, nights booked in Paris through Q2 were more than double what they were this time last year. Additionally, cities hosting matches during the recent EuroCup in Germany saw on average a more than 20% year-over-year increase in nice books.

Speaker Change: No anticipation of the Olympics, which is apparent.

Speaker Change: Nice booked in Paris through Q2, we're more than double what they were this time last year.

Speaker Change: Additionally cities hosting matches during the recent Euro Cup in Germany.

Speaker Change: An average of more than 20% year over year increase in nights booked.

Brian Chesky: And supply has increased to meet the higher demand. So we had a 37% increase in active listings in Paris in Q2 compared to a year ago. And these events, what they really do is they highlight everybody's unique ability to disperse travel and spread economic benefits by allowing people to stay in local neighborhoods where there are no travelers, no hotels.

Speaker Change: And suppliers increase to meet the higher demand. So we have 37% increase in active listings in Paris in Q2 compared to a year ago.

Speaker Change: And these events, where they really do because they highlight <unk> unique ability to disperse travel.

Speaker Change: Spread economic benefit by allowing people to stay in local neighborhood, where there are no travelers.

Speaker Change: The hotel will start.

Brian Chesky: Finally, supply growth is improving on Airbnb. We make huge strides in supply growth, but we remain just as focused on supply quality. As we improve supply quality, we believe more people will try Airbnb, unlocking even more growth. We have two major initiatives underway to help us do this. First, we're removing low-quality supply. As I shared earlier, we've removed over 200,000 listings since April of last year.

Speaker Change: Finally supply growth is improving on airbnb.

Speaker Change: We made huge strides in supply growth remain just as focused on supply quality.

Speaker Change: As we improve quality, we believe more people try airbnb unlocking even more growth we have two major initiatives underway to help US do this first we're moving low quality supply.

Speaker Change: As I shared earlier, we have removed over 200000 listings since April of last year.

Brian Chesky: Second, we're making it easier for guests to find the best stays on Airbnb. We launched guest favorites, as well as top listing highlights, which show the top 1%, 5%, and 10% of eligible homes on Airbnb. These new features make it easy for guests to find the highest quality homes on Airbnb.

Speaker Change: Second we're making it easier for guests to find the best days on Airbnb.

Speaker Change: We launched guest favorites as well as top listing highlights, which are the top 1%, 5% or 10% of eligible homes and airbnb.

Speaker Change: These new features making it easier for guests to find the highest quality homes on airbnb.

Brian Chesky: In Q2, we also saw active listings managed by Superhosts, some of our highest quality hosts, increase 26% year over year. We're proud of our Q2 results. Now, turning to three, we're looking forward to another record summer of travel. We've been encouraged by the excitement around the Olympics in New York. And we're also encouraged by the relative strength of Latin America and Asia Pacific, which continue to be our fastest growing regions. However, we are seeing shorter booking lead times globally and some signs of slowing demand from U.S. guests, and our Q3 outlook incorporates these recent trends.

Speaker Change: In Q2, we also saw active listings manage back to your host some of our highest quality host increased 26% year over year.

Speaker Change: We're proud of our Q2 results.

Speaker Change: Now turning to Q3.

Speaker Change: We're looking forward to another record summer travel season.

Speaker Change: We are encouraged by the excitement around the Olympics and Euro Cup and we're also encouraged by the relative strength of Latin America, and Asia Pacific, which continue to be our fastest growing regions. However.

Speaker Change: However, we are seeing shorter booking lead times globally, and some signs of slowing demand from U S guest and our Q3 outlook incorporate these recent trends there as well.

Brian Chesky: We're watching these trends closely along with the impact any macroeconomic pressures might be causing, and we'll continue to execute against our growth strategy by improving our service, expanding a less penetrated market, and introducing new offerings. We believe this growth strategy will, over the long term, offset any transitory macro trends. So with that, I will now look forward to answering your questions.

Speaker Change: <unk> these trends closely along with the impact any macroeconomic pressures might be coffee.

Speaker Change: And we'll continue to execute against our growth strategy by improving our service expanding in less penetrated markets and introducing new offerings. We believe this growth strategy will over the long term offset any transitory macro trends.

Speaker Change: So with that Elena I look forward to answering your questions.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Operator: Thank you, and we will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone and tap to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Elena: Thank you and we will now begin the question and answer session.

Speaker Change: You have dialed in and we would like to ask a question. Please press star one on your telephone.

Mr Hamdan: Mr Hamdan joined the queue.

Speaker Change: If you would like to withdraw your question simply press Star one a second time.

Speaker Change: If you are called upon to ask your question and our listening via Speakerphone on your device. Please pick up your handset and ensure that your phone is not on mute when asking your question.

Operator: To be able to take as many of your questions as possible, we ask that you please limit yourself to one question. Again, it is star one if you would like to join the queue. And your first question comes from the line of Ron Josey with Citi. Your line is open.

Speaker Change: To be able to take as many of your questions as possible. We ask that you. Please limit yourself to one question.

Speaker Change: Again, it is star one if you would like to join the queue.

Speaker Change: And your first question comes from the line of Ron Josey with Citi. Your line is open.

Ronald Josey: Great, thanks for taking the question. I too, please, Brian, just with your last comments on slowing lead times and whatnot in North America, can you tell us a little bit more about that when you saw those trends sort of first hit and and then how it offsets the strength from Olympics and UEFA and everything else and that's question one and then maybe a bigger question when we think about extending beyond the core and perfecting the core service, you know, post-summer release, post-terminal release, we've seen a lot of key improvement across Airbnb with guest favorites, with icons and what's going on. How does, when we think about the coming winter release and throughout 25 and everything else, how are these newer services helping to influence the Airbnb of tomorrow? Thank you.

Ron Josey: Alright, thanks for taking the question.

Ron Josey: Two please Brian just with your last comments on slowing lead time and whatnot in North America can you tell us a little bit more about that when you saw those trends sort of firsthand.

Ron Josey: And then how it offsets the strength from Olympics, and UEFA and everything else. That's question one and then maybe a bigger question when we think about expanding beyond the core and protecting the core service.

Speaker Change: Post summer release post to rent release, we've seen a lot of key improvements across across R&D with gas.

Speaker Change: Icons and the list goes on on how does when we think about the coming winter release and throughout 'twenty, five and everything else how are these.

Speaker Change: Newer services, helping to influence called the Airbnb if tomorrow. Thank you.

Ellie: Yeah, why don't Ellie take the first one about slowing lead times and when we started seeing these trends, and I'll take the second one. Yeah. Yeah, absolutely. So, let me.

Speaker Change: Yes.

Speaker Change: I'll take the first one about floating lead times and when we started seeing these trends and I will take the second one.

Speaker Change: Yeah, absolutely. So let me, let me double click a little bit in terms of the trends really turns into India.

Ellie: Yeah, absolutely. So let me double-click a little bit on terms of the trends for lead times since the beginning of the year. In both Q1 and Q2, what we saw was that lead times were basically equivalent to what we had seen in 2023. So there wasn't really any timing shift of behavior in terms of when guests were booking.

Speaker Change: In both Q1 and Q2 Q2, what we saw with that lead times were basically equivalent with what we had seen in 2023. So there wasn't really any timing shifts of behavior in terms of when gaslit booking what we've seen more recently.

Ellie: What we've seen more recently, and in particular in July, is a shrinking of the lead times. In particular, what we've seen is that there continues to be very strong growth in shorter lead times. So anything from the same day to next week to a couple of weeks from now. But what we're not seeing the same level of strength in are those longer lead times. So two months from now, what you're booking for Thanksgiving, what you're booking for Christmas.

Speaker Change: And in particular in July is a shrinking of the lead times and in particular, what we've seen is that there continues to be very strong growth of the shorter lead times. So anything from Sunday to next week to a couple of weeks from now, but we're not seeing the same level of strength is in those longer lead time. So.

Speaker Change: Two months from now what Youre booking for Thanksgiving and what you're booking for Christmas and so it's that that I would say softness inches is longer lead times that is a big factor in terms of that outlook.

Ellie: And so it's that, I would say, softness in terms of longer lead times. That is a big factor in terms of the outlook that we've provided. What I would add additionally is that over the last couple of years as we emerged from COVID, there were several periods where we saw some volatility in terms of overall lead times and, in particular, some hesitancy for consumers to book those longer lead time trips. I suspect that's what we're seeing right now.

Speaker Change: Outlook that we've provided.

Speaker Change: I would say additionally is that over the last couple of years as we emerge from Covid. There were several periods, where we saw some volatility in terms of overall lead times and in particular, some hesitancy for consumers to book those longer lead time trips.

Speaker Change: That's what we're seeing right now and the I would say that the.

Ellie: And I would say the silver lining with regard to the trends that we see right now is not that consumers are not necessarily going to book that trip for Thanksgiving or Christmas. It just appears that they have not booked it yet. So we're closely following all of the trends on lead times. But it is a factor that informs the outlook that we've provided for.

Speaker Change: Silver lining with regard to the trends that we see right now it's not that consumers are not necessarily going to book that trip for.

Speaker Change: Giving our Christmas.

Speaker Change: It just appears that they have not booked it yet so we're we're closely following all of the trends on lead times, but it is a factor that influenced the outlook that we provided for Q3.

Speaker Change: Okay.

Speaker Change: Yeah.

Operator: And your next question comes from the line of Doug Anmuth with JP Morgan. Your line is open.

Speaker Change: Okay.

Speaker Change: And your next question comes from the line of Doug Anmuth with J P. Morgan. Your line is open sorry my apologies.

Brian Chesky: Sorry. My apologies. Sorry. Sorry.

Speaker Change: Sorry, there was a second part of the question so.

Brian Chesky: There was a second part to the question. So, Ron, to answer your question about expanding beyond the core business. Where we are is, you know, we spent 16 years building a business that's approaching $80 billion in gross booking value. That's basically one category, which we call Airbnb, which is short-term accommodation. It's been pretty amazing how far this single product has gone, and we haven't really charged for it other than, like, essentially, travel insurance. We haven't really ever really expanded beyond our core business. And we do have long-term stays, which are 70% a night, but we haven't done very much.

Speaker Change: Ron to answer your question about expanding beyond the core business.

Speaker Change: Yes.

Speaker Change: Where we are is.

Ron Josey: We spent 16 years building a business that's approaching $80 billion of gross booking value. That's basically one one category, which we call Airbnb, which is short term a combination it's been pretty amazing how far the single product has gone.

Speaker Change: And we haven't really charge other than like essentially travel insurance, we haven't really.

Brian Chesky: We began before the pandemic hit, preparing to expand Airbnb. And then when the pandemic hit, you know, we cut back a lot of our resources, we got focused, went back to our roots, and really focused on rebuilding our platform, becoming lean, becoming a functional organization. And we now have essentially the same number of employees as before the pandemic and double the revenue. And that explains why we have 41% free cash flow margin, one of the most profitable companies in tech.

Speaker Change: That's a really expanded beyond our core business and we do have long term states, which are 70% of night, we haven't done very much.

Speaker Change: We began before the pandemic.

Speaker Change: <unk> expand Airbnb and then when the pandemic hit we cut back a lot of our resources. We got focused went back to our roots and really focused on.

Speaker Change: Rebuilding our platform.

Speaker Change: Becoming lean becoming a function organization and we now have essentially the same amount of employees, that's before the pandemic and double the revenue and that explains why we are 41% free cash flow margin one of the most profitable companies in tech.

Brian Chesky: We're now beginning to prepare the next chapter of Airbnb, and I want Airbnb to be one of the most important companies of our generation. And to do that, we're going to need to do more than one thing. We're going to have to do multiple new things. We're going to have to have multiple new products and multiple new services this fall.

Speaker Change: We're now beginning to prepare the next chapter of Airbnb and I Wonder if <unk> be one of the most important companies of our generation and to do that we're going to need to do more than one thing we're going to have to do multiple new things, we have to have multiple new products and multiple new services.

Brian Chesky: Next fall, this October, we're going to be launching a new host service, which is really important. It's essentially a co-hosting marketplace. So there are people that have homes, but they don't have time. There are other people in the world that have time, but they don't have a home. And so there's a Venn diagram of people today who have both and can host. But what if we could match those two people together?

Speaker Change: This fall.

Speaker Change: October we're going to be launching a new host service, which is really important is essentially a co hosting marketplace. So there are people that have home, but they don't have time there are other people in the world of time than other home.

Speaker Change: And so there is a venn diagram of people today, who have both that can host, but what if we can match those two people together that would unlock a lot more inventory that's what we're going to be launching later in October then next year, we're going to begin to expand here can be truly beyond our core business and we're going to be launching we're going to relaunch experiences.

Brian Chesky: That would unlock a lot more inventory, and that's what we're going to be launching later in October. And next year, we're going to begin to expand Airbnb truly beyond a core business. And we're going to be launching, or we're going to relaunch experiences. I've been asked about experiences on probably every earnings call since we were public, rightly so, because it's very exciting. We've learned a lot of lessons from experiences.

Speaker Change: I've been asked about experiences probably every earnings call since <unk> been public rightly so because its very exciting we've learned a lot of lessons from experiences.

Brian Chesky: You know, they need to be more affordable. They need to be more unique to Airbnb. We need things you can only find on Airbnb. They should be merchandised as videos, not photos. They should be discoverable in the app, and we should market them. If we think we can do those five things, we think we'll have a hit on our hands, and we're working on that.

Speaker Change: They need to be more affordable they need to be more unique to airbnb, we need things you can only find airbnb they should be merchandize at videos photos, there should be discoverable in the app and we can market them. If we think we can do those five things. We think will have a hit on our hands and we're working on that we also have new guest services and new host services that we're launching next year that we're working on and then.

Brian Chesky: We also have new guest services and new host services that we're launching next year that we're working on. And then every year, starting next year, we're going to launch new products and services. You know, I look at Apple. I look at Amazon. You know, Apple at one point was selling iMacs, and Amazon was only selling books.

Speaker Change: Every year, starting next year, we're going to launch new products and services I look at Apple I look at Amazon Apple at one point with selling IMAX Amazon was only selling books.

Brian Chesky: We've gotten bigger than either of those companies just selling short-term rentals, but we're ready to go beyond short-term rentals. So, the new Airbnb, to answer your question, Ron, will be about a lot more than short-term rentals. It's going to be about long-term stays. It's going to be about guest services, host services, and many new offerings, and you'll begin to see that next year. Thank you

Speaker Change: Gotten bigger than either of those companies just selling short term rentals, but we're ready to go beyond short term rental so the new Airbnb to answer your question Ron will be about a lot more than short term rentals, it's going to be about long term stays it's going to be our guest services post services and many new offerings and youll begin to see that next year.

Speaker Change: Yes.

Speaker Change: Yes.

Operator: And your next question comes from the line of Doug Anmuth. Your line is open. Thanks for taking the questions. Ellie, just to follow up, I know you talked about the shorter booking window. Are you seeing any change in activity around pricing or class?

Speaker Change: And your next question comes from the line of Doug Anmuth.

Speaker Change: Your line is open.

Douglas Anmuth: Thanks for taking the question.

Doug Anmuth: Thanks for taking the questions just a follow up on I know you talked about the shorter booking window.

Doug Anmuth: Are you seeing any change in activity around pricing or class a property and is there anything to call out across cohorts or income levels and then Brian just circling back on expanding beyond the core are there any expansion markets in particular that you would call out where you're seeing particularly strong traction.

Ellie: Yep, so why don't Ellie take the first? I'll take the second. Yeah, so let's talk a little bit generally about ADR, the question of, you know, what are people actually purchasing on the platform. I would say, generally, so far this year, what you've seen is a little bit of ADR appreciation globally, and, in particular, obviously, though, more recently, in North America. And what we see there is a big driver of the ADR appreciation is makeshifts, which you can assume, you know, is what it sounds like people choosing more expensive or larger properties.

Brian: Yes, So why don't you take the first I'll take a stab.

Brian: So, let's talk a little bit.

Ellie: And I think, you know, part of the read through from that can be, oh, people are choosing more expensive listings, and therefore, you are, you know, you are seeing stronger demand from higher economic demographics. I think that is one way to look at it.

Brian Chesky: I think another way to look at it is that if you think about the value proposition of Airbnb, it's that we offer these larger properties, and on a per guest basis, they can be quite affordable, and, frankly, more affordable than a hotel. So I think part of that ADR makeshift appreciation that you see is, frankly, people gravitating to, you know, where we actually have some great value, which is the larger Airbnbs that do provide value on a guest level.

Brian Chesky: And to answer your question about expansion markets, maybe a framework I can give you to think about how we want to accelerate growth. Listen, we want to be growing a lot faster than we are. We want to be growing at healthy double-digit growth, double-digit growth, and I think we can. And the way we're thinking about accelerating growth is through short-term, medium-term, and long-term. The short-term is really optimizing our

Speaker Change: We want to accelerate growth listen we want to be growing a lot faster than we are we want to be growing in healthy double digit growth double digit growth and I think we can and the way we are thinking about accelerating growth is through short term medium term and long term.

Speaker Change: Short term is really optimizing our core business, it's really around affordability about having high quality stays and just conversion rate increases long term, it's really about net new products and services. So the question you asked about international interesting because it's kind of like a medium term horizon like one to three years and to frame. This airbnb as an <unk>.

Brian Chesky: It's really around affordability, about having high-quality stays, and just conversion rate increases. The long term is really about new products and services. So the question you asked about international growth is interesting because it's kind of like a medium-term horizon, like one to three years. And to frame this, Airbnb is in 220 countries and regions. We're one of the most global companies in the world on the internet, 220 countries and regions. We operate in nearly every country in the world, but there are only really five markets where we're penetrated.

Brian Chesky: And those markers are the U.S., U.K., France, Canada, and Australia. And you'd think, like, well, if there was one company in the world that would truly be, like, have a lot of international penetration, it'd be a global travel network, right? A website where you want to travel, use one platform to travel around the world.

Speaker Change: 220 countries and regions, where one of the most global companies in the world on the Internet 220 countries and regions. We operate nearly in every country in the world.

Speaker Change: There's only really five markets, where we're penetrated.

Speaker Change: And those markets are the U S UK, France, Canada and Australia.

Speaker Change: And you'd think like well if there was one company in the world that would truly be like have a lot of international penetration and be a global travel network right.

Speaker Change: A website, where you want to travel use one platform to travel around the world. So there's a number of countries just to give you a couple of examples of some of the big expansion markets, Germany, and Brazil, we've seen a lot of progress.

Brian Chesky: So there are a number of countries. Just to give you a couple of examples of our big expansion markets, Germany and Brazil, we've seen a lot of progress. Those are huge travel markets, some of the biggest travel markets in the world, and we're continuing to go bigger. In Europe, Italy and Spain, you know, we have low penetration compared to France and the UK, and these are major destinations. Then in Latin America, we've made a lot of progress in Brazil, but there are really Peru, Chile, Colombia, and Argentina.

Brian: Those are huge travel market and the biggest travel markets in the world and we're continuing to go bigger.

Brian: In Europe, Italy, and Spain, we have low penetration compared to France, and U K and these are major destinations.

Brian Chesky: These are huge opportunity markets, and Latin America is our fastest growing region alongside Asia. In Asia, you really have the big four, the big five countries. So you have China, Japan, Korea, India, and then maybe we could kind of call out Southeast Asia as a whole region. So what we're going to do is we have an international playbook that really focuses on product and market. First, you need to localize the product. You need to make sure you have the right regulations in place. You need to make sure you have the right foundation.

Operator: We've highlighted in our investor letter that we retooled our product for Asia. There are different character counts in Asia, and so it's more laborious in certain languages to type in. Like in Korea and Japan, they prefer to browse rather than search. So we've had to retool our product, and that's yielded some huge conversion rate increases. So some of these are gonna pay back sooner, like some of Switzerland, Belgium, and the Netherlands. They're gonna pay back sooner.

Operator: Japan's gonna be a longer game, but that's one of the biggest travel markets in the world. And I literally think there are tens of billions of dollars of gross booking value increase just by getting all the aforementioned countries to the current market penetration of Canada or Australia. If we can get those countries to Canada or Australia, there's tens of billions of dollars, and it's just something we're gonna focus on. It's something we haven't focused on the last four years as much.

Operator: We really wanted to solidify our core business, but now we're focused on it. Thank you for watching. And your next question comes from the line of Richard Clarke. Your line is open. Hi, I just want to unpick the Q3 revenue guidance a little bit.

Operator: And your next question comes from the line of Richard Clarke. Your line is open.

Ellie: Yeah, thanks, Richard. So, obviously, that unearned fees balanced on the balance sheet gives you some indication of the backlog. But I would not take those balance sheet items as a one for one read through in terms of the revenue that will be recognized over the course of the quarter. A couple of, you know, deviations in terms of why they might not match.

Speaker Change: <unk> revenue guidance, a little bit more I guess, the if I look from the balance sheet Youll funds held on behalf of customers.

Speaker Change: Looks like it's up about 13% year on year. So it looks like youre carrying more bookings into the quarter and then youre talking about shorter lead times. So does that mean more bookings in the quarter for the quarter. So just trying to square that with why revenue is slowing down.

Speaker Change: In your guidance.

Speaker Change: Yes, I think that's.

Speaker Change: So and obviously that that other genes balanced on.

Speaker Change: On the balance sheet gives you some indication of the backlog I would not take those balance sheet items as well.

Speaker Change: One for one read through in terms of the revenue that will be recognized over the course of Florida.

Speaker Change: A couple of a couple of deviations in terms of why they might not match. One is obviously a good portion of the bookings that we will recognize in a particular quarter or still to be booked within the quarter. That's one aspect. The second is the balance sheet items will reflect the timing of the payments M D.

Ellie: One is obviously a good portion of the bookings that we will recognize in a particular quarter but are still to be booked within the quarter. That's one aspect. The second is the balance sheet items will reflect, you know, the timing of the payments, whether it's pay less up front or the entirety of the payment. And so they're just not a one for one guide. All they do, they do obviously give a timestamp, you know, a point in time view of the backlog that we have.

Speaker Change: Whether it's pay less upfront or the entirety of the payment and so they're just not a one for one guide them all they do they do obviously give a time stamp.

Speaker Change: Point in time view of the backlog that we have.

Operator: And your next question comes from the line of Eric Sheridan with Goldman Sachs. Your line is open.

Eric Sheridan: Thanks so much for taking the question. Maybe I can ask a two-parter question, coming back to the booking window. When you see what you've seen over the last couple of years in terms of the booking window evolving from where it was pre-pandemic to where it is post-pandemic, how much different does that booking window look today versus maybe 2019 as opposed to today versus one and two years ago? And when you think about what that shift looks like, how much of that do you think in terms of a shortening booking window are elements of demand-driven dynamics Thank you.

Ellie: Thanks, thanks, Eric. So let's talk about lead times from time to time. If we look at where we were, say, in Q2 of 2019, the average lead time across the platform was within one or two days of what it was in Q2 of 24. So from the kind of pre-COVID to last quarter, there hasn't been some material shift. What you did see through the path of COVID was that initially, we saw a massive reduction in lead time because people had no confidence in terms of their ability to book far in advance.

Ellie: That reversed in, say, the 2022 to 2023 time period, when people were so eager to travel that they were booking way in advance of their kind of normalized patterns to make sure that they had the trip on the books; they got the most attractive listings at the best price by booking early. And I think fast forward to 24, and you're seeing, you know, up and up through Q2, a very much return to normal.

Speaker Change: I had the trip on the book they got the most attractive listing at the best price by booking early and I think fast forward to 'twenty four you're seeing you know up and up through Q2 are very much returned to normal. So hopefully that's helpful. In terms of the overall four year arc.

Ellie: So hopefully that's helpful in terms of the overall four-year arc. In terms of having some color commentary on what we're seeing today, just to reiterate some of the color I provided at the beginning of the call, the last minute bookings are incredibly strong. There's just a modest amount of softness that is bringing the average lead time down. And I think what we've seen in the past is, you know, from time to time, whether it be a new COVID variant, whether it be a macro headline, whether it be like last year, when the outbreak of war in Israel, people, you know, from time to time, have moments where they are not booking in the same timeframe that they And that's what we're tracking closely right now.

Speaker Change: In terms of having some color commentary in terms of what we're seeing today just to reiterate some of the color I provided at the beginning of the call. The last minute bookings are incredibly strong. So they are they are I would say much higher in growth rates than what we are guiding to in terms of the average there seems to be.

Speaker Change: A lot of desire in terms of making sure you get your your summer travel in at very elevated rates, but it's been offset by that portion of bookings, which as you know for us about half of the of the overall bookings, which are a month or longer and I think.

Speaker Change: It's a minor Ah Ah, it's a minor softness but it does have impact in terms of our backlog just given given the concentration of bookings that happened more than a month in advance and there's just a modest amount of softness that is bringing the the average lead times down and I think what we've seen in the past as you know from time to time, whether it be.

Speaker Change: Be a new COVID-19 variant, whether it would be a macro headlines whether it be like last year the outbreak of war in Israel.

Speaker Change: People from time to time have.

Operator: And as a gentle reminder, we ask that you please limit yourself to one question. Your next question comes from the line of Brian Nowak with Morgan Stanley. Your line is open. Thanks.

Brian Nowak: Thanks for taking my questions. Maybe I'll squeeze in two.

Ellie: Let me ask one question on the marketing expense comments for you, Ellie. As you mentioned in the guide, marketing expense is going to go faster than revenue in the third quarter. I guess the question is, how do we think about performance versus branded spend? Anything you've learned about your market spend over the years gives you confidence this could resonate to even faster room net growth this time around? And then one for Brian and sort of general AI and philosophy and philosophical strategy.

Ellie: There's a lot of talk sort of about, you know, top of the funnel, and Gen AI travel assist. How do you think about, you know, taking your leading supply that you have, maybe partnering with hotel partners to create a really differentiated top of the funnel alternative and hotel booking assistant using all these big language models?

Ellie: Ellie, I'll take a second to... Yeah. So Brian, let me talk a little bit about our marketing spend. Let me just back up before I talk about Q3 and remind you of the full year guide that we provided back in February. What we shared in February was that for the full year, we were looking to deliver an EBITDA margin of a minimum of 35%, which was obviously down slightly from the nearly 37% we delivered in Q2.

Ellie: And the intent of, you know, guiding to margin compression on a year of your basis was to allow us the flexibility to invest in growth. And what you've seen so far this year is that for H1, marketing as a percent of revenue was effectively flat with where it was in 23. But we do intend to lean into those growth investments in the back half of the year, starting in Q3. And that's obviously what informed the EBITDA guide that you saw in the letter.

Speaker Change: Marketing in particular and and the confidence around the various channels. Let me just let me just talk about a couple of of the components of the increase in marketing So first <unk>.

Ellie: In terms of where, you know, where we are leaning in on marketing in particular and in the confidence around the various channels, let me just talk about a couple of the components of the increase in marketing. So first, consistent with the conversation Brian Chesky just had on international markets, what you'll see in Q3 is that we will be layering on a handful of incremental markets that we will be targeting and effectively turning on our global playbook.

Speaker Change: Distant with the conversation right Jesse just had on international markets, what Youll see in Q3 is that we will be layering on.

Jesse: A handful of incremental market that we will be targeting and effectively turning on our global playbook in particular, you'll see us try or intend to extend our success that we've seen in Latin American countries, like Brazil, and Mexico to other markets in that region in places like Peru.

Ellie: In particular, you'll see us try or intend to extend our success that we've seen in Latin American countries like Brazil and Mexico to other markets in that region, places like Peru, Colombia, Chile, and Argentina. So there'll be some layering on of those incremental markets. We feel like we have had pretty good success there. Obviously, it takes time in terms of investing in a market, both from a product perspective and from a marketing perspective to reaccelerate growth.

Speaker Change: Colombia, Chile, Argentina, so there'll be some layering on of those incremental market we.

Speaker Change: We feel like we have had pretty good success. There obviously it takes time in terms of investments in the market both from a product perspective, as well as a marketing perspective to reaccelerate growth, but as the results have shown in terms of the differential between growth rates of our expansion markets in our core markets, we feel like our expansion F.

Ellie: But, you know, as the results have shown in terms of the differential between growth rates in our expansion markets and our core markets, we feel like our expansion efforts have been successful, and so rolling them out to incremental markets will be helpful over the medium term. In terms of incremental performance marketing, what we've shared with you here to date, and that has continued into Q3, is that based on a lot of optimizations that we've made to our performance marketing efforts, we've been able to maintain extremely high efficiencies. And so where we see those, we do lean in and have quite high confidence in terms of returns.

Brian Chesky: And why don't I also why don't I take your second question? So Brian, generally, I ChatGPT will launch late November 2020. When it launched, I think we all got incredibly excited. It was kind of like the moment some of us first discovered the internet or, you know, maybe when the iPhone was launched. And when it was launched, you had the feeling that everything was going to change. But I think that's still true.

Brian Chesky: But I think one of the things we've learned over the last 18 months, or nearly two years, 22 months since ChatGPT launched, is that it's going to take a lot longer than people think for applications to change. If I were to think of AI, I'd probably think of it in three layers. You have the chip.

Brian Chesky: You have the models, and you have the applications. There's been a lot of innovation on the chips. There's been a lot of innovation in the model. We have a lot of new models, and there's a prolific rate of improvement in these models. But if you look at your home screen, which of your apps is fundamentally different because of AI, like fundamentally different because of generative AI? Very little, especially in e-commerce or travel.

Brian Chesky: And the reason why is I think it's just going to take time to develop new AI paradigms. ChatGPT is an AI model, https://www.facebook.com. Over paradigms are pre-AI paradigms. And so what we need to do is we need to actually develop AI applications that are native to the model. No one's done this yet.

Brian Chesky: There's not been one app that I'm aware of that's in the top 50 apps in the app store in the United States that is a fundamentally new paradigm, as fundamentally different as multi-touch was to the iPhone in 2008. And we need that interface change. So, that's one of the things that we're working on. And I do think Airbnb will eventually be much more than a search box where you type a destination, add dates, and find a listing.

Brian Chesky: It's going to be much more of a travel concierge that's having a conversation, learning, and adapting to you. It's going to take a number of years to develop this. And so, you know, it won't be in the next year that this will happen. And I think this is probably what most of my tech friends are also saying. It's just going to take a bit more time.

Brian Chesky: But to answer your question on what's possible, a new interface paradigm would allow us to connect new businesses. So, the question is, what permission do we have to go into a business like Hotel? Well, today we have permission because we have a lot of traffic. But if we had a breakthrough interface, we'd have even more permission because suddenly we could move to the top of the funnel and not just ask, you know, where you are going, but we could point to, we could inspire where you travel. Imagine if we had an index of the world's communities.

Speaker Change: Take through interface, we'd have even more permission.

Speaker Change: Suddenly we could move top of funnel and not just asked.

Jesse: Where you're going but we can point to inspire where you travel imagine if we had an index of the world's communities. We told you. We had information about every community and we can provide the end to end trip for you. So there's a lot of opportunities as we develop new interfaces to cross sell new more inventory and just to remind everyone. We own hotel Tonight.

Brian Chesky: We told you we had information about every community, and we could provide the end-to-end trip for you. So, there's a lot of opportunities as we develop new interfaces to cross sell new inventory. And just to remind everyone, we own Hotel Tonight. We bought it before the pandemic. It's one of the most popular hotel booking apps in the world, and we are still investing in hotels. So, absolutely, there are opportunities down the road with this new interface to sell new things, including hotels and everything.

Jesse: We bought that before the pandemic, it's one of the most popular hotel booking apps in the world and we are still investing in hotels. So absolutely there are opportunities down the road with this new interface to sell new things, including hotels and everything.

Jesse: [laughter].

Jesse: Yeah.

Operator: And your next question comes from the line of Justin Post with Bank of America. Your line is open.

Speaker Change: And your next question comes from the line of Justin Post with Bank of America. Your line is open.

Justin Post: Great. Thanks for sharing my question. Just on the North America and Europe markets, presumably growing a little slower than the average for the company, any signs of cyclical or macro pressure like shorter trips or people trading down that could end, and that could maybe drive some acceleration when the period ends? And second, how do you feel about your market share in those two key regions? Thank you.

Justin Post: Great. Thanks for talking my question, just on the North America, and Europe markets, presumably growing a little slower than the average for the company.

Speaker Change: Any signs of kind of cyclical or macro pressure like shorter trips or people trading down that that could end and any and.

Speaker Change: That could maybe drive some acceleration when the period ends and second how do you feel about your market share in those two key regions. Thank you.

Speaker Change: Okay.

Ellie: Yeah, so let me talk, let me talk a little bit about what we're seeing in both North America and EMEA. I would say, you know, I would go back to my prior comments in terms of just the lead time that that commentary is true globally. So it applies to both North America and EMEA. I would say EMEA has been a relatively stable quarter to date. And so it's not necessarily part of the broader moderation story that we have shared.

Speaker Change: Yeah. So let me talk let me talk a little bit about what we're seeing in both North America and EMEA.

Ellie: In terms of North America, there are a handful of components. One is the shorter lead times, I would say. A second reason is North America has a concentration of our long-term stays nights. And what we've seen over the last year is that short-term stays have grown more quickly than long-term stays. And so the LTS growth rate is a drag on the average that has an outsized impact on North America, and we think that's been a little bit of a headwind for our California business.

Ellie: Our California business, if you include both guests who reside in California as well as guests who are traveling to California, which is what the new rules apply to, is about 10% of our GBV. So that's an area that we're watching quite closely to see how quickly consumer behavior normalizes after these regulations have been put into place. And to the comments I made earlier on ADR, I would say, you know, we haven't really seen a material move towards trade downs.

Ellie: Much to the contrary, people continue to book our larger, more expensive listings. And then, in terms of shorter trips, you know, the average trip length has gone down, but that is really a function of the mixed shift between short-term rentals growing more quickly than long-term rentals, less so people choosing a, you know, three-day trip versus a four-day trip. So I don't think we've seen the type of trade-down behavior that you're likely asking about.

Ellie: In terms of the second component of your question, market share, when we look at market share, we look at the market for night stays across accommodations. And so that obviously includes all the hotel nights that are either booked directly through a hotel or booked through an intermediary. And when we look at market share on that basis, what we see is that, in Q2, consistent with prior quarters, we continued on a year-over-year basis to gain market share in terms of total nights stayed across the universe of hotel and other travel accommodations. That is also true on a regional basis. We feel like we're doing quite well as we, across the world, continue to gain market share.

Operator: And your next question comes from the line of James Lee with Mizuho. Your line is open. Great, thanks.

James Lee: Great. Thanks for taking my questions. Two here, please.

James Lee: First, on the experiences, what are some of the frictions and difficult problems you're trying to resolve here? It seems like you have plenty of supply, plenty of listings, so that doesn't seem to be an issue. Can you help us understand some of the key pain points for both suppliers and customers? And second, one thing I noticed in North America, and EMEA, you have called out to see a shift to non-urban markets, and I just want to get some more color on that. Are urban markets, in general, are you seeing weaker demand or are you seeing increased competition?

Brian Chesky: Hey, James, I'll take the first question. So there are five things that we're looking forward to doing with experiences. The first thing is we want them to be a better price selection. Right now, we think we can offer more affordable experiences that younger people, especially Gen Z, can afford. So that's the first thing.

Speaker Change: Clearances that younger people, especially Gen Z could afford so that's the first thing.

Brian Chesky: We don't really have enough affordable listings. The second thing is we need more unique inventory. It's really good

Speaker Change: Don't really have enough affordable listings.

Speaker Change: Second thing is we need more unique inventory, it's really good inventory, perhaps good in fact, the five star rating average for experiences is higher than the five star rating for homes.

Brian Chesky: The inventory we have is good. In fact, the five-star rating average for experiences is higher than the five-star rating for homes. But we still think we can have even more unique inventory that you can only find on Airbnb that's not on another platform. And we wanna recruit some of the most interesting people in the world to be on our platform. And we're getting a lot of excitement.

Speaker Change: But we still think we can have even more unique inventory that you can only find that airbnb, that's not on another platform and we want to recruit.

Speaker Change: Some of the most interesting people in the world to be on our platform and we're getting a lot of excitement. The third is we think we can indeed merchandize them better I think experienced she murmured size like with Phil with with movies with video imagine deciding on a movie, but instead of a film trailer you had some movie Stills would you go see the movie.

Brian Chesky: The third is we think we can even merchandise them better. I think experiences should be merchandised with film, with movie, with video. Imagine deciding on a movie, but instead of a movie trailer, you had movie stills. Would you go see the movie?

Brian Chesky: You probably wouldn't. So you need a trailer. You need video. Experience should be sold through video first. The fourth is that it needs to be discoverable in the app. Right now, experiences are really hard to find because, over the last four years, we've really focused on prioritizing our core business. I mean, a lot of people come to our homepage and they don't ever see experiences. You wouldn't know we sell experiences. So, we're going to completely re-imagine our search and discovery engine to cross-sell experiences after you book a home and really target the right homes.

Speaker Change: You probably wouldn't see you need a trailer you need video experiences you sold video first.

Speaker Change: The fourth is it needs to be discoverable in the App right now experiences are really hard to find because over the last four years, we've really focused on prioritizing our core business I mean, a lot of people to come to our homepage. They don't ever see experiences wouldn't know we sell experiences. So we're going to completely re imagine our search and discovery engine.

To cross sell experiences after you book of home and to really target the right homes, we're going to show you. Other guest on the experience to provide social proof, we're going to bring some of the magic like account down the icon and some of the magic there and the final thing is awareness for expenses really low.

Brian Chesky: We're going to show you other guests on the experience to provide social proof. We're going to bring some of the magic, like the countdown and the icon, and some of the magic there. And the final thing is that awareness for experiences is really low. Most people don't know we offer experiences, even though we launched them eight years ago. So, we're going to actually market them and tell the world about them. And we can do this without a lot of incremental investment because we can market homes and experiences in the same ad. So, if we do those five things, I think we can dramatically change the trajectory of our experience.

Ellie: James, to your second question, in terms of the mixed shift to non-urban markets, we call it by letter because it's a differential in terms of the respective market segments, but there isn't, it's not a major shift. What we are seeing is that growth in non-urban markets continues to be slightly higher than that in urban areas. I think what that tells you is, you know, we have a, I would say, differentiated offering in non-urban.

Ellie: And I think the interesting thing about that portion of our business is that it has maintained a, I would say, meaningful larger share of our business demand, you know, four years post COVID than it was previously. I think, you know, over the last four years, there's been a broadening awareness of the variety of markets that Airbnb is available in, that hotels simply don't exist in. And we continue to see, you know, great demand for those markets.

Operator: And your next question comes from the line of Justin Patterson with KeyBanc. Your line is open.

Justin Patterson: Great. Thank you very much.

Ellie: Ellie, I appreciate your comments and margins and flexibility to invest this year. Could you talk about how long we should see this investment cycle persist? And when would we start seeing more meaningful returns?

Ellie: Yeah, thank you. So we obviously have not given you a guide for 25. We'll provide you with a view on 25, you know, as it approaches. But what I would say is, you know, if you look at where we have come over the last couple of years, we have obviously delivered a substantial amount of margin expansion from where we started. You know, you followed us for some time, but, you know, prior to going public, we had negative EBITDA margins.

Ellie: Thank you. Yeah, thank you.

Ellie: And, you know, four years later, we were able to deliver almost 37% margins last year. So I think we've more than demonstrated the strength of this model, both on a profitability basis as well as a free cash flow basis. What we'd like to deliver more of is growth, and that's why we have, as I said, a lower margin target for the current year. And as I said previously, you'll see us start to make those investments in the second half of the year.

Ellie: I anticipate that, you know, when you think about both our medium-term growth lever of international markets and the more long-term growth lever of, you know, expanding the core offerings, those will require some ongoing investments in order to scale and then deliver the growth. What I think you should also think about, though, is that, you know, all of our expansions to date have not been very capital intensive. So, you know, we will use some of the profitability to invest, but we don't anticipate any kind of sea change in the foreseeable future around the overall profitability level. And your next question comes from the line of Kevin Kopelman with TV Cowan. Your line is open. Great, thanks a lot. So if we adjust out the Easter impact,

Operator: And your next question comes from the line of Kevin Kopelman with TV Cowan. Your line is open.

Ellie: Yeah, thanks, Kevin. So I would say first, you know, we're not going to provide an outlook right now for Q4. But when I give you that color on the lead times, I think it's, it's pretty informative from the perspective of, it's not that people are not definitively booking over the long term if they may not have booked yet. And so, you know, as I shared previously, we have seen some, some movement in lead times over the last couple of years. And in many cases, people, you know, have come booked; they just come and book at a later time period.

Ellie: And so that's certainly something that we will be on the lookout for in terms of Q4 and beyond. I think also just thinking about how the comps play out for the balance of the year. If you'll recall where we were last year, you know, September and October were quite soft, and then November and December had a bit of a rebound. So those are the comps that will be lapping as we approach the end of the summer heading into Q4.

Nick Jones: And your next question comes from the line of Nick Jones with Citizens JMP. Your line is open. Hey, thanks for taking the question. Maybe just another one on expensive and

Operator: And your next question comes from the line of Nick Jones with Citizens JMP. Your line is open. Hey, thanks for taking the question. Maybe just another one on inexpensive and maybe philosophically higher.

Nick Jones: Yeah, I mean, we've essentially built our forecast to already have a spread effect between short term, medium term, and long term. So in the short term, I mean, the biggest driver of growth in the short term is again, conversion increases. Every 1% increase in our business is about $100 million, and we have hundreds of basis points of growth opportunities, just in conversion and usability improvements. And then affordability; we have quite a few opportunities, and then quality and reliability.

Nick Jones: Probably one of the biggest variables might be how we think about expanding internationally. You know, like some of the big Asian countries like Japan, we can be very, very nimble based on the results in Japan.

Brian Chesky: Most of these new services and offerings, though, are going to not cost very much. They're mostly headcount. We're talking about some teams, you know, like, you know, hundreds of people, not thousands of people.

Brian Chesky: So you won't really see that because this is a network effect business, and most of our traffic is going to be taking traffic we already have for the accommodations business and cross-selling new offerings. And so, you know, it's really just the cost of acquisition of supply. And that's not very expensive because, you know, we found that we can do it fairly efficiently. So most of this, it's very nimble. There's not going to be a lot of incremental investment that would materially change. The variability is sometimes probably like marketing, especially internationally. That's a question. And your next question?

Speaker Change: And so you know, it's really just the cost of acquisition of supply and that's not very expensive cars.

We found that we can do it fairly efficiently. So most of this it's very nimble theres not going to be a lot of incremental investment that would materially change.

Speaker Change: The variability is probably like marketing, especially internationally.

Speaker Change: Question.

Speaker Change: Yeah.

Speaker Change: Okay.

Operator: And your next question comes from the line Jed Kelly with Oppenheimer. Your line is: Hey, great. Thanks for asking.

Speaker Change: And your next question comes from the line of Jed Kelly with Oppenheimer. Your line is open.

Jed Kelly: Hey, great. Thanks for taking my question, just going back to the urban opportunity and potentially putting more hotels on your platform can you just talk about philosophically, how the company balances putting more supply that you might consider more commoditized and that can be cross listed but that might cause.

Speaker Change: At a higher rate. Thank you.

Jed Kelly: Okay.

Jed Kelly: Hi, Jed so.

Operator: Essentially, I think people come to Airbnb because they want to get something unique. That's what customers think when they think of Airbnb. That's why we're a noun and a verb. We're one of the only brands in the world, like Kleenex or Xerox, that's a noun and a verb. And that means it's something that didn't really exist before we created this category on a wide scale.

Jed Kelly: Essentially I think people come to airbnb, because they want to get something unique.

Speaker Change: Customers taken I think Airbnb, that's why we're in now and in Nevada, where only one the only brands in the world like clean extra Xerox.

Speaker Change: Now in <unk> and it means you can.

Jed Kelly: It's something that didn't really exist before we created this category at a wide scale.

Brian Chesky: That being said, for everyone who books an Airbnb, about nine people book a hotel. And so if we can get just one of those guests, we just haven't prioritized hotels. We think of hotels as filling in network gaps during high-occupancy nights. We generally think our travelers, if there's an incredible home at a low price, they're always going to choose that.

Jed Kelly: That being said for everyone, who books and Airbnb about nine people book a hotel.

Jed Kelly: And so if we can get just one of those guests to.

Jed Kelly: To book, an Airbnb. That's currently booking on our hotel platform. We would go from nearly half a billion ICR to $1 billion ice here and Theres two ways to do that one is the increased reliability of homes and Airbnb because the number one reason people tell us they book hotels as they are typically more reliable they know what theyre going to get Amber front desk.

Jed Kelly: The other is adding hotels in Airbnb, and we're not philosophically misaligned with adding hotels. If we were we would never have bought hotel Tonight before the pandemic. We just haven't prioritized hotels, we think of hotels as filling in network apps during high occupancy nights, we generally think our travelers if theres an incredible home at a low price.

Jed Kelly: Oh, there's always going to choose that boon occupancy goes up there are going to go towards hotels. There are also some use cases, where hotels are better and airbnb or better if you need a space for one night, you're a bit traveling alone you're a business traveler and you plug in your plug out of hotels better if you're traveling with the group you're traveling for more than three.

Brian Chesky: But when occupancy goes up, they are gonna go towards hotels. There are also some use cases where hotels are better and Airbnbs are better. If you need a space for one night, you're traveling alone, you're a business traveler, and you plug in and you plug out, a hotel is better. If you're traveling with a group, you're traveling for more than three nights, and you're traveling in a non-urban area, Airbnb is better. And then if you're doing something in between, then you're gonna have choices.

Jed Kelly: Nine.

Jed Kelly: They are traveling in the non urban area Airbnb is better and then if youre doing something in between then youre going to have choices. So we do think between filling in the network gaps and getting more of those one night business travel stays there is an opportunity to offer hotels and Airbnb and we have a lot of hotels we have.

Brian Chesky: So we do think between filling in the network gaps and getting more of those one-night business travel stays, there is an opportunity to offer hotels and Airbnb, and we have a lot of hotels. We have hundreds of thousands of boutique hotels and non-home inventory on Airbnb, and we're gonna continue to expand that over the coming years. And so there's no philosophical misalignment to add commodity inventory. The philosophical misalignment would be if that became the majority of our marketplace, and people, consumers, stopped thinking of Airbnb as unique and local. If they start thinking about us and the change of the brand, then that would be a philosophical misalignment, but I don't see that happening anytime soon.

Jed Kelly: Hundreds of thousands of.

Jed Kelly: Batik hotels.

Jed Kelly: Non home inventory on Airbnb, and we're going to continue to expand that over the coming years to come and so there's no philosophical alignment to add commodity inventory the philosophical misalignment would be if that becomes the majority of our marketplace and people consumers stopped taking care of Airbnb as unique and local if they start thinking about us and it changes the brand.

Jed Kelly: That would be a philosophical misalignment, but I don't see that happening anytime soon.

Operator: And your next question comes from Mark Mahaney with Evercore ISI. Your line is open.

Jed Kelly: And your next question comes from Mark Mahaney with Evercore ISI. Your line is open.

Mark Mahaney: I just wanted to ask you a question about Paris and the learnings you've had from this. I assume this is the biggest event for Airbnb and, you know, a massive popular event and your largest city. So just, if that's true, and I think that it is, just step back and talk about the learnings of being able to make sure you had enough supply, working with, you know, local regulators and agencies, and in terms of getting messages out to, you know, guests as well.

Wanted to ask a question about Paris and and <unk>.

Speaker Change: The learnings you've had from this I assume this is the biggest.

Mark Mahaney: Event for Airbnb in.

Speaker Change: Massive popular event in your largest city. So just if thats true and I think that is just step back and talk about the learnings of of being able to make sure you had enough supply working with.

Mark Mahaney: Local regulators and <unk> agencies and in terms of getting.

Mark Mahaney: Messages out to.

Mark Mahaney: Opportunities out to two.

Speaker Change: Guests as well like this this this this big event that you've pulled off just talk about the lessons you've been able to draw from that that will help you set you up better for the next FIFA World Cup in the next World Cup Next Olympics et cetera.

Mark Mahaney: Like this big event that you've pulled off, just talk about the lessons you've been able to draw from that that'll, you know, help you set yourself up better for the next FIFA World Cup and the next World Cup, you know, next Olympics, etc. That's a great question, Mark. I'm really...

Brian Chesky: That's a great question, Mark. I'm really glad you asked. You know, I just want to take us back down memory lane.

Mark Mahaney: That's a great question, Mark I'm really glad you asked this.

Speaker Change: I just wanted to let you take it back down memory Lane.

Brian Chesky: Because in 2007, Airbnb provided housing for a design contest. Then in 2008, we provided housing for the Democratic National Convention. Then in 2009, we provided housing for the inauguration.

Speaker Change: Because in 2007 Airbnb provided housing for declaring conference than in 2008, we provided housing for the Democratic National Convention in 2009 provided housing for the inauguration. Our first three moment when we started airbnb, which provide housing for events in fact, our original premise of our business what of housing for events.

Brian Chesky: Our first three moments when we started Airbnb were to provide housing for events. In fact, the original premise of our business was to provide housing for events. It wasn't meant to be offered for anything other than events and conferences. And the reason why is that conferences and events, and especially things like the Olympics and World Cup, are unbelievable use cases of Airbnb. And the reason why is, I think, obvious to everyone.

Mark Mahaney: Isn't meant to be ever offered for anything other than events and conferences and the reason why is because conferences and events.

Mark Mahaney: And especially things like the Olympics and World Cup are unbelievable use cases, and Airbnb and the reason why is I think obvious to everyone.

Brian Chesky: Events typically like to host more guests than they have hotel rooms available for. And people, most people, most regular people aren't looking to become Airbnb hosts and make a long-term commitment to host every week, but a lot of people, for events coming to town, are willing to host one week and make $1,000 or $2,000. And so what we did is we focused a year ago on Paris, and in the last year, we increased our supply in Paris by 37%. We now have nearly 150,000 homes in Paris. And we have 430,000 guests. Stay in Paris so far and count, and that number could continue to climb. So that's the equivalent of five Olympic stadiums.

Speaker Change: <unk> typically like to host more guests than they have hotel rooms available for and people. Most people in the most regular people aren't looking to become Airbnb host and make a long term commitment to host every week, but a lot of people or events coming to town is willing to host one week and make $1000 in $2000 and so we did.

Speaker Change: As we focused a year ago on Paris.

Speaker Change: And then the last year, we increased our supply in Paris by 37%, we now have nearly 150000 homes in Paris.

Mark Mahaney: We had 430000 guests.

Mark Mahaney: Day in Paris, so far and counting in that number to continue to climb so thats equivalent of five Olympic Stadium, and what you'd imagine five Olympic stadiums, where the guests staying in Airbnb. The fact is that the Olympics as we know it could not ever happen again without airbnb, because it's 400000 people could not a speed and a hotel.

Brian Chesky: I want you to imagine that five Olympic stadiums were the guests, staying in an Airbnb. The fact is that the Olympics, as we know them, could not ever happen again without Airbnb because those 400,000 people could not have stayed in a hotel room. And so to do that, what we did is we worked in the city of Paris. I was in Paris 10 days ago.

Mark Mahaney: Room.

Mark Mahaney: And so to do that what we did is we worked in the city of Paris.

Mark Mahaney: I was in Paris, 10 days ago, I met with President Mccrone I met with us.

Brian Chesky: I met with President Macron and his economic team. And we talked about how important Airbnb was to the Olympics happening. And we had a lot of cooperation. We were a title sponsor of the Olympics, and we targeted this event in Paris. We did a lot of local campaigns, and it was so successful that we are now looking at the top 1,000 events in the world, really large ones like the World Cup and Olympics, but also looking at where Taylor Swift is going to a concert or looking at different conferences, like we provide housing for the Berkshire Hathaway Conference in Omaha. And we worked with Warren Buffett. He got the word out. This was over a decade ago.

Mark Mahaney: With his economic team and we talked about how important an airbnb was to the Olympics happening and we had a lot of cooperation we were a title sponsor Olympics and we targeted this event of Paris, We did a lot of local campaign and so it was so successful that we are now looking at the top thousand events in the world.

Mark Mahaney: Really large ones like the World Cup and Olympics, but also like looking at where Taylor Swift is going on a concert or looking at different conferences different.

Speaker Change: Like we provide housing for the Berkshire Hathaway conference in Omaha, and we worked with Warren Buffett, you've got the word out this bill or a decade ago. So comprehensive festivals events Coachella you go down the list I think this is the best strategy, we have to recruit supply and the supply recruitment events is not property managers, there are individuals who coast occur.

Brian Chesky: So conferences, festivals, events, Coachella, you go down the list. I think this is the best strategy we have to recruit supply. And the supply recruit for an event is not property managers. They're individuals who coast occasionally that come only to Airbnb. And cities actually like when Airbnb provides housing for events because we solve a problem for them. So I'm glad you asked the question. The answer is it was widely successful, better than we ever imagined. We're working on Milan for 2026. We're looking at the LA Olympics for 2028.

Speaker Change: <unk> that come only to Airbnb and cities actually like an Airbnb provides housing for events because we solve a problem for them. So I'm glad you asked the question. The answer is it worked wildly successful better than we ever imagined we're working on <unk> for 2020.

Speaker Change: For 246, we're looking on the L. A Olympics for 2028, but we're also building a strategy for the top thousand events in the World and I think this is the strategy to only airbnb can do because we basically increased excess capacity in cities all over the world allow them to temporary as well and it's really alignment of incentives. So it's been very successful.

Brian Chesky: But we're also building a strategy for the top 1,000 events in the world, and I think this is a strategy that only Airbnb can do because we basically increase excess capacity in cities all over the world, allowing them to temporarily swell. And it's really alignment and incentives. So it's been very successful. And we plan to expand the playbook. And your next question comes from the line of Stephen Ju with UPS. Your line is open. Okay, great. Thank you. So, Brian, I want to ask on Airbnb.

Speaker Change: <unk>. We spent we continue we plan to expand the playbook.

Speaker Change: Right.

Operator: And your next question comes from the line of Stephen Ju with UPS. Your line is open. Okay, great. Thank you.

Speaker Change: And your next question comes from the line of Stephen Ju with UBS. Your line is open.

Stephen Ju: Okay, great. Thank you so Brian I wanted to ask on <unk>.

Speaker Change: <unk> rooms.

Stephen Ju: I would have thought that given it's more nascent statement the economic backdrop that this should probably be the product that should be growing the fastest. So is there anything that you can call out in terms of product fit or awareness I think I heard you call out maybe supply shortages earlier, but.

Speaker Change: Any factors that might be weighing on the growth rate here a little bit.

Speaker Change: Okay.

Speaker Change: Yeah.

Stephen Ju: Yeah, the reality is, the biggest issue with Airbnb rooms is just a small percent of our business. It's a very small percentage. So even if it, even no matter how fast it grows, it's often a very small base. It's how Airbnb started by providing a room in a house. It's very affordable, and it's very popular with Gen Z. But it is often a very small base. And so you're not going to see, you're not going to see a major change to the growth rate of the company based on that. I think the thing is, but maybe just a broad zooming out though.

Speaker Change: Yes, the reality is the.

Speaker Change: The biggest issue with every room is just a small percent of our business. It's a very small percentage so even if it even no matter how fast it grows it's often very small base.

Speaker Change: However, can be started by providing a room in the house, it's very affordable.

Speaker Change: Very popular for Gen Z.

Speaker Change: But it is off a very small base and so youre not going to see.

Speaker Change: Youre not going to see a major change.

Speaker Change: The growth rate of the company based on that I think the thing, but maybe just broad zooming out though.

Brian Chesky: Two points I'll make. The first point is that Airbnb is one of the most diverse businesses in the world. You know, we have bedrooms and homes up to tens of thousands of dollars a night in luxury villas on Airbnb. We allow you to travel by yourself or with large groups of up to 16 people. We're in every country, nearly every continent in the world, including at one point Antarctica. And so we're very, we're in urban areas, we're in vacation rental destinations, we're off the beaten path.

Speaker Change: Two points I'll make the first point as Airbnb is one of the most diverse businesses in the world.

Speaker Change: Have bedrooms and home up to tens of thousands of dollars a night luxury villas and Airbnb.

Speaker Change: We allow you to travel by yourself or with large groups of up to 16 people. We're in every country nearly in the world every continent in the world, including at one point, Antarctica and so we're very we're in urban areas, where in vacation rental destinations. We're off the beaten path. So our general philosophy is to have something for everyone to have them.

Brian Chesky: So our general philosophy is to have something for everyone, to have the most diverse array of inventory in the world. The other point I'll just make is an area down the road that would really help Airbnb rooms is to continue to invest in our system of trust. The biggest obstacle to people staying in a room is just the, like, discomfort of staying in a house with a stranger they don't know. So one of our core inventions was a system of trust.

Speaker Change: <unk> diverse.

Speaker Change: Ray of inventory in the world. The other point I'll just make is in.

Speaker Change: Area down the road that would really help MB rooms is continuing to invest in our system of trusts the biggest obstacle to people staying in a room is just.

Speaker Change: Discomfort with staying in a house of the strange that they don't know.

Speaker Change: One of our core inventions with a system of trust and as more reinvestment Warner system of Trust I didn't give them a lot more of these business units, where strangers to Lindsay either so I do think it's still a big long term opportunity for us, but it's off a smaller base.

Brian Chesky: And as we invest more in our system of trust, I think we're going to unlock more of these businesses where strangers are living together. So I do think it's still a big long-term opportunity for us, but it's off of a smaller base and it's, you know, never going to be as big as entire homes and Airbnb.

Speaker Change: Never going to be as big as entire homes and everything.

Speaker Change: Yeah.

Speaker Change: Yeah.

Operator: And your next question comes from the line of Lee Horowitz with Deutsche Bank. Your line is open.

Speaker Change: And your next question comes from the line of Lee Horowitz with Deutsche Bank. Your line is open.

Lee Horowitz: Great, thanks. Maybe one on Knights and one on pricing. So, Ellie, you're talking about putting more investments into place in the second half of this year as a means of accelerating growth. Can you help us better understand sort of the payback periods that you tend to expect on these dollars and over what time frame you may assess the ROI on these investments in terms of accelerating total company growth rates? And then maybe one on ADRs.

Lee Horowitz: Great. Thanks, maybe one on nights on one on pricing.

Speaker Change: Talking about putting more investments into place in the second half of this year as a means of accelerating growth can you help us better understand sort of the payback periods that you tend to expect on the dollars and over what timeframe you may assessing the ROI on these investments in terms of accelerating total company growth rates and then maybe one on <unk> you guys.

Speaker Change: Highlighting sort of some building demand pressures in North America.

Speaker Change: Painfully pointing towards people trading up to whole homes and persistent ADR growth for your entire business again, despite weaker growth in your highest ADR region North America I guess, when we think about the sustainability of ADR growth beyond the Q mix away from North America, and perhaps even the overall travel demand environment.

Lee Horowitz: You guys are highlighting sort of some building demand pressures in North America while simultaneously pointing toward people trading up to whole homes and persistent ADR growth. For your entire business, again, despite weaker growth in your highest ADR region in North America, I guess when we think about the sustainability of ADR growth beyond the 3Q as you mix away from North America and perhaps see the overall travel demand environment continue to soften, how do you think about your ability to continue to grow ADRs in that type of scenario? Thanks. Yeah, so first, let me let me go.

Speaker Change: Continuing to soften how do you think about your ability to continue to grow and you are seeing that kind of scenario. Thanks. So much.

Speaker Change: Okay.

Ellie: Yeah, so first, let me talk about marketing paybacks. I would say the way we view marketing paybacks is very different based on the channel of investment. From a performance marketing standpoint, obviously, the ROI is very specific and relatively short term. We think about that in terms of, you know, weeks and months, not quarters.

Speaker Change: Yeah.

Speaker Change: So first let me, let me talking about marketing paybacks, I would say and the way we do marketing paybacks is very different based on the channel and investment.

Speaker Change: From a marketing standpoint, obviously, the ROI is very specific and relatively short term, we think about that in terms of weeks.

Speaker Change: Weeks and months not quarters in terms of brands, we think about that over a longer time horizon.

Speaker Change: Think about any particular brand campaign it needs to be in market for quite some time it needs to be sustained for you not only to see the benefit that also sustained benefit.

Ellie: In terms of brands, we think about that over a longer time horizon. You know, if you think about any particular brand campaign, it needs to be in the market for quite some time, and it needs to be sustained for you not only to see the benefit, but also to sustain the benefit and convert it into actual transactions. So I think about that more from the six months to a year payback period and it requires, I would say, a consistent level of investment.

Speaker Change: Into actual transactions. So when you think about that more from me.

Speaker Change: Six months to a year.

Speaker Change: Payback period and requires a I would say a consistent level of investment and then as a third factor you know something that I mentioned in terms of an area of investment that is not programmatic, we do need to at the margin build some of our teams that are driving this growth and so that will be a gradual investment.

Ellie: And then, as a third factor, you know, something that I mentioned in terms of an area of investment that is not programmatic, we do need to, at the margin, build some of our teams that are driving this growth. And so that will be, you know, a gradual investment modestly above the headcount growth that we've been targeting over the last couple of years, but we think it will have, you know, a long payback, or should I say, a high payback in terms of driving acceleration across a variety of initiatives.

Speaker Change: Modestly above the head count growth that we've been.

Speaker Change: Targeting over the last couple of years, but we think it will have long.

Speaker Change: I should say high payback in terms of driving acceleration across a variety of initiatives.

Ellie: In terms of pricing, I think, you know, there's one question about what is happening at a geopolitical level. I think there's a broader question in terms of aggregate or global ADRs. To your question in terms of, you know, if Namer is softer than other regions, what happens to global ADR? Obviously, mix ship is a huge component in terms of the global ADRs that we report. You know, one factor in terms of the Q3 guide is the shift a little bit away from North America, which, as you highlight, does have the highest ADRs.

Speaker Change: In terms of pricing.

Speaker Change: And I think you know there's there's one question about what is happening at a geo level I think there is a broader question in terms of the aggregate aren't global 80 ours.

Speaker Change: To your question in terms of its.

Speaker Change: Namely softer than other regions and what happens to global ADR, obviously mix shift is it is a huge component in terms of the global ADR is that we report.

Speaker Change: One one factor in terms of that.

Speaker Change: Q3 guide is the shift a little bit away from North America, which as you highlight does have the highest ADR.

Ellie: Over time, we would anticipate that as regions like Latin America and APAC become larger portions of our overall business, the global ADR would come down. But those incremental nights are all accretive, and the economics behind them are still very strong. So, on a global basis, we're somewhat agnostic because we can deliver strong economics across a wide range of ADRs.

Speaker Change: Over time, we would anticipate that as regions like Latin America, and APAC become a larger portion of our overall business. The global ADR would come down, but those incremental nights are all accretive and the economics behind them still are very strong. So I would say on a go.

Speaker Change: A basis, where we're somewhat agnostic because we can deliver strong economics across a wide range in <unk>.

Speaker Change: Okay.

Brian Chesky: And ladies and gentlemen, that will conclude our question and answer session. I will now turn the conference back over to Brian Chesky for his closing remarks.

Speaker Change: And ladies and gentlemen that will conclude our question and answer session. I will now turn the conference back over to Brian <unk> for closing remarks.

Brian Chesky: All right, well, thanks everyone for joining us today. Just to recap, revenue was $2.7 billion, 11% higher than a year ago. Adjusted EBITDA was our Q2 record, and our trailing 12-month free cash flow was $4.3 billion, this is our highest yet, representing a free cash flow margin of 41%.

Brian Chesky: Alright, well thanks, all for joining US today, just to recap revenue was $2 7 billion, 11% higher than a year ago. Adjusted EBITDA was a Q2 record and our trailing 12 months free cash flow of $4 3 billion.

Speaker Change: This is our highest yet representing a free cash flow margin of 41%.

Brian Chesky: We've made significant progress over the past few weeks, but there's more to come. In October, we're going to share a set of features and upgrades as part of our 2024 winter release. This includes expanding co-hosting, setting the stage for host-provided services, and much more. So I'm proud of what we accomplished in Q2, and I look forward to sharing more with you next quarter. Thanks for joining us.

Speaker Change: We've made significant progress over the past few weeks, but there is more to come in October we're going to share a set of features and upgrades as part of our 2020 for winter release.

Speaker Change: This includes expanding wholesale co hosting setting the stage for host provided services and much more.

Brian Chesky: How do we accomplished in Q2 and I look forward to sharing more with you next quarter. Thank you for joining.

Speaker Change: Okay.

Operator: And ladies and gentlemen, that concludes today's call, and we thank you for your participation. You may now disconnect.

Speaker Change: And ladies and gentlemen that concludes today's call and we thank you for your participation you may now disconnect.

Speaker Change: Yeah.