Q3 2024 Airbnb Inc Earnings Call
These items were also posted on the Investor Relations section of Abb's websites.
During the call with 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 look at making forward looking statements on this call and involve a number of restaurant uncertainties.
Actual results may differ materially from those expressed or implied in the forward looking statements due to a variety of factors.
These factors are described under forward looking statements in our shareholder letter and in our most recent filings with the Securities and Exchange Commission.
We urge you to consider these factors and remind you that we undertake no obligation to update the information contained on this call to reflect subsequent events or circumstances.
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.
non-GAAP measures are not intended to be a substitute for our GAAP results.
I'll pass the call to Brian.
Brian: Alright, good afternoon, everyone and thanks for joining.
Brian: Airbnb had a strong third quarter nice and experiences both accelerated throughout Q3 and into Q4 despite.
Brian: Despite a slower start to the quarter due to shorter booking lead times compared to last year bookings grew steadily each month returned to double digit growth by the end of Q3.
Brian: We had 123 million nice and experience.
Brian: Revenue grew 10% year over year to $3 7 billion.
Brian: Net income was $1 4 billion, representing net income margins of 37%.
Brian: And we generated $1 $1 billion of free cash flow.
Speaker Change: In fact.
Speaker Change: Our total trailing 12 month free cash flow was $4 1 billion.
Speaker Change: Which allowed us to repurchase $1 $1 billion per shares in the quarter.
Speaker Change: And as of the end of Q3, we had $4 $2 billion remaining on our repurchase authorization.
Speaker Change: During Q3, we continued to make progress across our three strategic initiatives, which are making hosting mainstream.
Speaker Change: We're expecting our core service.
Expanding beyond the core.
Speaker Change: Now, let me share a few highlights about each.
Speaker Change: Yes.
Speaker Change: We're making hosting mainstream.
Speaker Change: We are focused on making hosting just as popular as traveling on Airbnb.
Speaker Change: Today, we have over 8 million active listings with growth across all regions and market types to retain and attract new host, we prioritize making hosting easier.
Speaker Change: Last month as part of our 2020 for winter release, we introduced co host network and easy way to find the best local hosts to manage your Airbnb.
Speaker Change: Co host our some of our most experienced host they provide personalized support ranging from listing setup to managing bookings and communicating with guests.
Speaker Change: Second we're protecting our core service.
Speaker Change: Over the past three years, we've launched more than 535, new features and upgrades to make airbnb or better service.
Speaker Change: Our 2020 for winter release included over 50 upgrades for guests that make airbnb, a more intuitive and personalized app.
Speaker Change: This includes features like recommended destination.
Speaker Change: Yes, its search filters and personal lines listing highlights.
Speaker Change: We're also focused on one of the top issues for guest listing quality.
Speaker Change: Since last year, we've removed over 300000 listings that failed to meet guest expectations.
Speaker Change: And we'll continue to invest in improving the quality of guest stays.
Finally, we're expanding beyond our core outs.
Speaker Change: Outside of our core market.
Speaker Change: There are many countries and regions that remain underpenetrated.
Speaker Change: And we're focused on these expansion markets as part of our global market strategy.
Speaker Change: We're seeing great results.
Speaker Change: In Q3, the growth rate of nice booked in our expansion markets and more than double that of our core markets.
Speaker Change: Now in addition to driving growth in our expansion markets. We're also preparing for and there can be some next chapter which will take us beyond the accommodation and <unk>.
Speaker Change: You'll see more about this next year.
Speaker Change: We also saw a number of parts of the business highlights in Q3.
Speaker Change: Burst guest demand accelerated throughout the quarter.
Speaker Change: As I mentioned earlier.
Speaker Change: After a slower starting July bookings accelerated each month in Q3.
Speaker Change: Global lead times also normalized throughout the quarter now.
Speaker Change: Now part of this growth has been driven by our App strategy.
Speaker Change: Nice booked on our App increased 18% year over year in Q3.
Speaker Change: As bookings now accounts for 58% of nights booked.
Speaker Change: Now this is up from 53% in the same period last year.
Speaker Change: And we also saw continued growth of first time, bookers, which is the highest with the highest growth among young travelers. This is quite exciting.
Speaker Change: And I'm really excited to share that we recently surpassed $2 billion guest arrivals on Airbnb.
Speaker Change: Second our market strategy, our global market strategy is working.
Speaker Change: We continue to drive growth by investing in Underpenetrated markets.
Speaker Change: Our timing and investment will level a level will vary by market. Our strategy is consistent to make airbnb local and relevant in more places around the world.
Speaker Change: Now in each market, we focus on finding product market fit increase.
Speaker Change: Increasing brand awareness and driving traffic.
Speaker Change: I wanted to just use one country as an example, which is Japan.
Speaker Change: Airbnb is still pretty new.
Speaker Change: In Japan and <unk>.
Speaker Change: Pretty much familiar to most Japanese travelers.
Speaker Change: So to raise awareness, we launched a brand campaign last month's centered on domestic travel.
Speaker Change: Beyond Japan, we are also introducing more local payment options and countries around the world but.
Speaker Change: Denmark in Poland and in fact by spring of next year, we expect to offer nearly 40 local payment methods around the world.
Speaker Change: Now finally to <unk>.
Speaker Change: High quality is improving on Airbnb.
Speaker Change: We are focused on removing low quality supply as well as make it easier for guests to find the best places to stay.
Speaker Change: I shared that we removed over 300000 listings last year and we're seeing that.
Speaker Change: Already seeing this pay off customer service contact rates have decreased guests NPS has improved and we're also reducing house cancellations, which are now almost 30% lower than a year ago.
Speaker Change: And we've made it so much easier for guests to find the best place to stay with guest favorites.
Speaker Change: In fact since launching guest favorites a year ago.
Speaker Change: Last November.
Speaker Change: Over 200 million nights.
Speaker Change: <unk> booked a guest favorite listings.
Speaker Change: Alright next I want to share briefly some highlights from our 2024, when our release, which leads last month on October 16.
Speaker Change: Starting with the core network.
Speaker Change: We know that hosting Airbnb is one of the best ways to make money from your home.
Speaker Change: But not everyone has the time to host.
So that's why we introduced coast network.
Speaker Change: Easy way for people to find the best to find and hire the best local coast to manage their airbnb.
Carlos offer personalized support for host need everything from setting up your listing to manage your bookings and communicating with guest.
Speaker Change: These are a super experienced test with an exceptional track record, 73% are Super House, and 84% manage a guest favorite now when we announced this on October 16.
Speaker Change: We launched the coast network with 10000 cohost across 10 countries.
Speaker Change: And in the three weeks since we launched we've already received interest from over 20000 potential new co host this.
Speaker Change: This is huge this is way bigger than we were expecting.
Speaker Change: And we're making coasting easier.
Speaker Change: We believe that coast network will allow us to lock even more high quality supply.
Speaker Change: And we also introduced 50 upgrades for guests that make it maybe a more intuitive and personalize app.
Speaker Change: And some of the features include a personalized welcome tour of the App for first time guests.
Jeff: Jeff this destination when guests cap the search bar will recommend locations on their search and booking history.
Jeff: And for our size lifting highlights so when a guest views. The listing we will highlight the details that are relevant to their search and there are dozens of new features just like a.
Jeff: This is quite literally at the beginning of a more personalized airbnb.
Jeff: Now turning to Q4 last quarter, we talked about shorter booking lead times.
Jeff: But as I shared nascent experiences book accelerated throughout the quarter returning to double digit growth by the end of Q3.
Jeff: While we know the comps from last year will get harder in the back of the quarter. We are anticipating that nights booked will accelerate in Q4 relative to Q3.
Jeff: That early and I look forward to answering your questions.
Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Speaker Change: First question comes from the line of Richard Clark with Bernstein. Your line is open.
Richard Clark: Hi, good afternoon. Thanks for taking my questions. Just a question on supply it looks like you stopped giving us the year on year supply growth I guess because of the removal. So just any color on what's happening to maybe gross supply growth.
Speaker Change: Whether the removals youll doing.
Speaker Change: In addition, as Youre doing is seeing any meaningful shift towards <unk>.
Speaker Change: <unk> as you guys see that prices or co listed supply.
Speaker Change: And then maybe any color on whether this kind of hosting is unlocking supply yet you talked about adding <unk>, but youre getting additional supply due to the kind of hosting initiatives.
Speaker Change: Yes, Thanks, Richard Let me talk a little bit about what we've seen on supply.
Speaker Change: As you probably noted our initiatives around supply has really morphed over the last 12 months, we continue to focus on growing our overall supply base, but we incrementally are focused on making sure that we are delivering very high quality levels of supply across the world to our.
Speaker Change: Guests and the two important features that we've done to drive quality or obviously, the introduction of guest favorites a year ago.
Speaker Change: Then second the removals that you called out over the last 12 months and the interesting thing is we've seen what we'd hoped to have seen from these quality initiatives in particular, what we see is that based on encouraging our guests to use guest favorites and taking down those listings that we believe do not meet our quality expectations or those of our guests.
Speaker Change: What we see is that the average rating of our states goes up.
Speaker Change: Incident rates go down and customer service contacts go down as well. So we're seeing the intended impact of those quality efforts, which we need which we believe one improves the guest experience second allows for improvements of rebooking rates overtime and third more broadly increases booking confidence around airbnb to this.
Speaker Change: Specific question in terms of what has happened to supply growth. It continues to be strong and in Q3, we continue to see supply growth.
Speaker Change: Exceed demand by a couple of points. So it continues to be very healthy, but again the focus more recently has been on ink.
Incrementally raising the quality bar on Airbnb, not just adding more supply to the platform.
Speaker Change: Brian you want to talk about co listen you reject may take that Islam, Yes, let me take yes, I can take that.
<unk> a great question.
Speaker Change: Sure.
Speaker Change: Airbnb I think we're just scratching the surface of how big this company could become and.
Speaker Change: And the growth rate.
Speaker Change: Demand is going to fall probably in line with the growth of the supply.
Speaker Change: So one of the questions. We had was well how do we get millions more listings and airbnb.
Speaker Change: And how do we not just get millions of property manage listings, how do we get millions of regular everyday people to put their homes and airbnb.
Speaker Change: Well, we are doing obviously, a lot of research and we've asked people.
Speaker Change: And we learned two things.
Speaker Change: The first thing we learned is that people are very interested in making extra money in the home. They already have it makes sense. They pay for this asset they can make tens of thousands of dollars a year why wouldn't you want to put on Airbnb, but secondly thing we learned was that the number one reason people don't host is because a lot of people say they don't have the time and so that's why we asked ourselves so what if we get mad.
Speaker Change: People with home.
Speaker Change: That don't have time with people, who have extra time, but don't have homes, the venn diagram with potentially unlock millions more of listings in the best part of all this would be an alternative to some of the third party property management companies. If you want to have one of the best post an airbnb and the average five star rating.
Speaker Change: For co hosting Airbnb is significantly higher than the average rating of a third party property manager. So that's what we did with the coast network now we start with 10000 co host we have 20000 people that are applied in the three weeks.
Speaker Change: And this is going to be something that we're going to be focusing on in the coming years to come but to answer your question very directly Richard not only with this unlock more supply I think in the coming years. This can unlock millions of lifting.
Speaker Change: They.
Speaker Change: The vast majority of them are going to be everyday people theyre going to lift exclusively on airbnb.
Speaker Change: Thanks, Thanks very much.
Speaker Change: And your next question comes from the line of Mark Mahaney with Evercore ISI. Your line is open.
Mark Mahaney: Hey, Thanks, two questions. Please you talked about this acceleration or improvement in room nights as you kind of went through the quarter did that come from any particular geographic areas. We'd heard that Europe was one a market that was recovering maybe faster than others was that your experience as well and then just back on the co hosting experience you've had this out in.
Mark Mahaney: A series of markets for a while is it how long how long to we see materiality come through it like have you seen these.
Mark Mahaney: In relatively small markets, where you've rolled it out as it become material to the growth rate in those markets already in the six to 12 months period or is this take it's just more of like a 12 to 24 months process. Thank you.
Speaker Change: Thanks, Mark Let me let me first.
Speaker Change: Answer your first question with regard to the acceleration of the business.
Speaker Change: What we shared in the letter was that for you.
Speaker Change: If you rewind to where we were back at the time of the last earnings call. We called out that there was a bit of softness globally related to lead times, specifically, what we shared was that we were seeing.
Speaker Change: The strength of last minute bookings, but relative softness in terms of the longer lead times and what we saw over the course of the quarter.
Speaker Change: Specific to both the regions that you call out but globally was that lead times over the course of July August and September normalized.
Speaker Change: Back almost in line to where we were in 'twenty three.
Speaker Change: You saw that most notably in EMEA and I think probably some of the.
Speaker Change: Long lead times softness that we're seeing in EMEA with certainly related to some distraction around the Olympics, because we certainly saw the bookings pick up after after the.
Speaker Change: The Olympics past, but more broadly that acceleration was seen.
Speaker Change: Across all four major regions.
Speaker Change: And then on the co hosting Brian gave you I think a broad answer in terms of the expectations there.
Speaker Change: The reasons that we had confidence in terms of launching the co-host network more broadly is the pilots that we've had over the last several years in particular in France. What we've seen is that the co-host themselves are very incremental in terms of going out and attracting high quality listings themselves. Obviously it will take.
Speaker Change: Time for us to scale co hosting to a level that is.
Speaker Change: Meaningful relative to the scale of our current business, but what we've seen from the pilots is extremely encouraging and we will continue to build out the network from from from here on.
Speaker Change: Okay.
Speaker Change: And your next question is going to come from the line of Brian Nowak with Morgan Stanley. Your line is open.
Speaker Change: Thanks for taking my questions I have two.
Speaker Change: The first one.
Speaker Change: I think the four Q EBITDA guide sort of implies a margin somewhere in the twenty's around 27% to 28% is there any sort of timing factors you can call out that are sort of driving the margin down to that level and then how do we sort of think about philosophically the levels of investment in sort of the philosophy.
Investment in margins into into next year, just sort of go off this 27 number in the fourth quarter.
Speaker Change: Okay.
Speaker Change: Yes, so Brian talking a little bit about Q4, obviously the guide does imply a.
Several points margin compression relative to last Q4, you should see that most specifically in terms of both the product development line item as well as marketing.
Speaker Change: In marketing, we continue to invest in our global expansion markets in our common strategy around icons and then also performance marketing, where we're seeing really great efficiencies. There is also a little bit of timing difference in terms of some spend from Q3 heading into Q4.
Speaker Change: But in aggregate the the level of incremental marketing spend on a year over year basis is relatively modest.
Speaker Change: And your second question is how do we think about the level of investment and philosophy around margins in 'twenty five.
Speaker Change: Let me give you a little bit of color in terms of our overall approach as we head into 2025, obviously, we will give more color in the following earnings call, but let me just talk a little bit about the approach today. So if you think about how we've been managing our P&L I think it's important.
Speaker Change: Well aware of our history, but I think it's important to reflect on how well we manage the overall P&L. Since we went public we have been extremely disciplined in terms of delivering over 400 basis points of EBITDA margin expansion since 2020 going from negative margins in 2019, and 2020 to over 35 person.
Speaker Change: Consistent with our outlook this year.
Speaker Change: And we've demonstrated consistently over the last several years that our business model is extremely strong it's extremely profitable and obviously has world class levels of cash flow generation and over the long term I think you can expect that there is opportunity for further margin expansion, but would you be willing to where we are right now.
Speaker Change:
Speaker Change: <unk> talked a lot about this we see a huge.
Speaker Change: Incredible opportunity to invest in growth both investing in growth in our core accommodations business as well as our new offerings and so as we head into 2025, we will continue to lean into our growth initiatives around core optimizations global markets expansions and new products and services, which are then the question is how exactly will you be advantaged.
Speaker Change: In the P&L, let's say for the core business. Our goal is every year to make the core business better and more efficient and deliver greater value for our guests and hosts and the way. We do that is to find incremental efficiencies every year across in particular variable costs and invest some of that into greater server.
Speaker Change: Levels on both sides of the marketplace. In addition to that in terms of the growth investments in 2005, we will be investing in our existing expansion markets as well as a handful of incremental expansion markets and we will be launching new products with our upcoming in 2025 spring release. The good news about these investments is that we intend for them to be.
Speaker Change: Relatively capital light consistent with our core business, but we will be adding members to our teams and our spending to our marketing to support these growth levers, we will provide greater detail on the exact level of investment and growth expectations on our next call early next year.
Speaker Change: And your next question comes from the line of Justin Patterson with Keybanc. Your line is open.
Speaker Change: Yeah.
Speaker Change: Great. Thanks for taking the question Bryan you recently surpassed the 2 billion guests milestone did that next $1 billion much faster than your first $1 billion I think look at the business today. What are you what investments here related to Meg attracts that next 1 billion plus guests to Airbnb.
Speaker Change: Look at just the types of people taking trips today, what demographics do you under indexed on and how do you think some of these service releases and didn't really bring that next wave of customers and thank you.
Speaker Change: Okay.
Speaker Change: Jonathan that's a great question.
Speaker Change: Maybe I'll just start by stepping back it's pretty crazy.
Speaker Change: Airbnb has been used by $2 billion guest because I remember when we started airbnb I remember telling investors.
Speaker Change: One day this company be huge thousands of people will use it.
Speaker Change: And I think theres been a.
Speaker Change: A common like pattern, where we keep saying, it's going to be big and it's even bigger than we imagined.
Speaker Change: I think the reason why is.
Speaker Change: The travel industry as you know you guys cover us.
Speaker Change: Approximately size the oil on the street and people love traveling and one thing I know about the future as more people to travel in the past and I think that will be created with the new category.
Speaker Change: This is a business that is approaching half a billion dollars ninth book a year and so the question is how do we get to a 1 billion nights here or how do we get our company to even be an order of magnitude bigger than one day because of 143 years old I start with <unk> 26, and I feel like I've got a couple of decades ahead of me and so the question is where do we go from here.
Speaker Change: <unk>.
Speaker Change: If you think about the history of this company.
Speaker Change: I think you could maybe break it up into a few chapters. The first chapter was when we had this idea Joe and Eni 2800, <unk>, Germany, and we went on a really crazy hydro growth rocket ship and that was phase one.
Speaker Change: And then I would say the second chapter which were probably in now but exiting was the beginning of the pandemic. When we lost 80% of our business and then we had to right size. The company become really profitable go public listening to customer feedback and really strengthen the foundation for the next chapter of the company and Thats kind of the phase we're in.
Speaker Change: And I think the next chapter of Airbnb, starting next May.
Speaker Change: I think the next chapter is really about taking airbnb and expanding it beyond our core business and so I will outline three areas that are going to allow us to grow and lets just start with the shortest horizon to a longer horizon. The shortest horizons actually just our core business again, we do.
Speaker Change: We're approaching 500 million room nights booked a year I think our core business could certainly get to $1 billion at the year I'm not going to put a time horizon on it but the way we're going to do that is we're going to continue to increase quality for everyone, who stays and airbnb nine people staying at a hotel.
Speaker Change: The question is what if we could just one of those other people to stay in the Airbnb.
Speaker Change: How do you get $1 billion and so we think quality managing quality is a key part of it I think our work on affordability and usability are also going to be really really critical so we're going to continue to focus on the core business.
Speaker Change: The next horizon of our global market.
Speaker Change: A huge percent of our business is still concentrated in five countries U S, Canada, Australia, France UK.
Speaker Change: Those are what we call our core markets.
Speaker Change: There are massive opportunities in emerging markets.
Theres nine of them that I am focused on in the Americas, It's Mexico and Brazil.
Speaker Change: Europe is Germany, Italy, and Spain.
Speaker Change: And in Asia, the Big four countries, which are Korea, Japan, India and China.
Speaker Change: I think this is what I would describe as a medium term horizon and by the way just to zoom out for a second if there was one company in the world.
Speaker Change: You can bet on to expand internationally.
It will be a global travel network.
Speaker Change: I think there's a huge amount of opportunity here.
Speaker Change: And the biggest opportunity by far is expanding beyond our core business.
Speaker Change: I'm reminded of the Amazon one of the biggest companies in the world and they started as the online bookseller.
Speaker Change: And can you imagine if Amazon was only selling books today, how big they would become and yet we've for the last 17 years for the most part have only sold one thing which is basically vacation rentals airbnb homes by the night.
Speaker Change: And so I think that we have a huge opportunity to expand beyond our core business of accommodations Amazon wind from books to what do they do first chapter books dated Cds and Dvds when people used to buy those and that was a very close adjacency and eventually they sold everything and then they even filled things beyond consumers to enterprise.
Speaker Change: They are going to be it's going to go on its own journey.
Speaker Change: I expect is every year now for the coming years, we will launch one to two new businesses that will generate a $1 billion or more of revenue incrementally a year.
Speaker Change: I'm not going to able to share everything we're doing or even most of the things we're doing we'd like to.
Speaker Change: Reveal them during our release, but one thing that we've previewed to you was we are going to be reimagining airbnb experiences and those are going to be coming next may but we have some really cool other things that we're working on.
Speaker Change: And it's going to basically be starting with the nearest adjacency around travel and over the next decade, we're going to go far beyond travel.
Speaker Change: Okay.
And your next question comes from the line of Justin Post with Bank of America. Your line is open.
Speaker Change: Great. Thanks for taking my question I, just wanted to ask about the new markets. If you could give us the expansion markets, maybe some of the biggest ones. There I know Japan is one of them and then how big they are so we can think about the growth growth growth contribution next year. Thank you.
Speaker Change: Okay.
Speaker Change: Yes, Jason let me just give you some context in terms of our over overall kind of concentration of the business. So if we think about the core markets and again remember those are U S, Canada, Australia, France, and the U K. They currently represent about three quarters of our gross booking value and then the rest of the world is obviously a quarter.
Speaker Change: The expansion markets that we're focused on are kind of 15% approximately of the remainder but in a normalized where else should be significantly larger.
Speaker Change: If you just to give you a sense in terms of kind of the success that we've had that encourage us to keep going down this path and adding more expansion markets.
Speaker Change: Call out actually Brazil, because it was one of our first expansion markets that we began to focus on about two years ago.
Speaker Change: <unk> introduced localized brand campaigns, we localize the products, we provided incremental payment methods to make it more locally relevant and if we look at the success of that specific market, where do you see what would you what you would see is that.
Speaker Change: Brazil from a destination nights perspective is actually about three times as large as it was pre pandemic and you can see just like paying attention to a particular market deploying our full funnel marketing strategy being very thoughtful about product market fit allows us to scale. These currently smaller portions of our business too.
Speaker Change: Her time significantly large larger proportion on the other end of the spectrum I would highlight Japan, which we obviously called out in our shareholder letter given the recency of our of the launch of our brand campaign. There is obviously a.
Speaker Change: The only large market, but we are relatively new in the eyes of Japanese travelers until a data opportunity to really introduce ourselves to the local traveler have them understand the opportunity locally to used airbnb domestically and begin to scale that visits.
Speaker Change: Commensurately and so when you think about the scale of these markets, where we are today, Brian and I characterize this as a medium term opportunity because the immediate opportunity is large but it will take time for us to scale. These individual markets such that they have an increasing impact in terms of our consolidated global result.
Speaker Change: Given the relative concentration today.
Speaker Change: And your next question comes from the line of Lee Horowitz with Deutsche Bank. Your line is open.
Speaker Change: Great. Thanks, so much a couple if I could maybe youre all my travel peers have given color as to what they think their long term bookings growth algo looks like I mean, I guess given your leverage alternative accommodations. The presumption is that you guys should be able to grow faster, but can you give any color maybe on sort of what you see as the long term growth algorithm for your core business and then.
Speaker Change: What new verticals may add to that on top of that and one follow up if I could.
Speaker Change: Yes.
Speaker Change: Early before you answer the question can I guess, just say one quick thing.
Speaker Change: I don't think we do alternative accommodations.
Speaker Change: I think alternative accommodations is what our competitors' otas too I think alternative accommodations is a bit of a catch all that includes property managed homes.
Speaker Change: Departments, but tico tells.
Speaker Change: Never heard a customer say alternative accommodations I hear them say Airbnb Im going to book in here, maybe Amit good Airbnb and I think we're really in a category of our own. So just so you know I just think we don't refer to it and we don't think of it as alternative accommodations.
Speaker Change: Over to you.
Speaker Change: Yeah. Thanks, Lee so when we think about.
Speaker Change: Overall growth algorithm in our growth drivers, it's exactly as Brian had described earlier in terms of talking about the opportunity it really starts with focusing on our core offering and.
Speaker Change: Optimizing it such that we are effectively limiting the barriers to try and airbnb relative to alternatives and particularly hotels and so that's why we focus so much on things like affordability and reliability, because we know for many consumers even though they are aware of Airbnb. There is a gap in terms of their booking.
Speaker Change: It's around what they are going to get from us and so every quarter, we work it at reducing that gap of consideration and when we look at the business from that perspective, Theres a huge amount of growth room ahead, even in our core markets. Because we know so many consumers consider continue to consider themselves as.
Speaker Change: Hotel guests not necessarily airbnb guests and so a lot of the optimization and marketing are both raising consideration.
Speaker Change: As well as helping people frankly get through our platform more easily by making it easier to book, making it more personalized and getting them. The right listing. So we continue to focus on these core optimizations, because we believe it's a it's a it's a considerable future.
Speaker Change: Current I should say in future growth lever that we will continue to pay dividends and particularly in our core markets, but more globally more.
Speaker Change: Generally globally across our platform.
Speaker Change: Second component is what I just spoke about in terms of responding to Justin our business today is over concentrated in our core markets and is not necessarily reflective of the commensurate business opportunity across the globe and so over the next couple of years you should see.
Speaker Change: Assuming that our go to market strategy is successful and you should see the contribution to growth of those expansion markets grow every single quarter and I think the results that we've delivered so far this year suggest that that is that is working.
Speaker Change: We just need to continue to scale those businesses such that they contribute to global growth.
Speaker Change: More significantly.
Speaker Change: Great and then to the extent that sort of your improving <unk> outlook. The acceleration is really nice is an output of some of the investments that you guys are putting into place driving the kind of gains that you want does this give you confidence to folks.
Speaker Change: Throw fuel on the fire and aggressive invest more aggressively behind those initiatives and maybe how we should think about.
Speaker Change: That interplay should play through in terms of margin over the longer term.
Well I think where we've seen success.
Speaker Change: One of the areas is core optimizations and so we have built out the product roadmap around that because where we see success in terms of improvements we are making to the booking flow. We continue to keep a stable set of resources against those challenges. So that every single quarter. The prize is getting better and we're delivering more gains.
Speaker Change: From those product improvements.
Speaker Change: And your next question comes from the line of James Lee with Mizuho. Your line is open.
James Lee: Great. Thanks for taking my questions two questions on core initiatives here.
Speaker Change: Can you guys talk about the progress you've made in the affordability and quality that's driving maybe some of the.
Speaker Change: Increased bookings that we've seen during the quarter and also can you give us an update on your customer service transformation, maybe what's working what's not what's yet to be improve and when do you expect to complete the process. Thanks.
Speaker Change: Yes, I got this.
Speaker Change: Hey, James This is a great questions I'm really excited about it so I'll take each affordability and reliability and customer service affordability.
Speaker Change: It's funny.
Speaker Change: The first tagline every airbnb ever had was an affordable alternative to a hotel.
Speaker Change: And it was the number one reason that people first tried to use Airbnb now I think today, that's not the main reason people use airbnb I think they use them because they want to travel like a local they want more space they want homes and real neighborhood better equipped but this is really really important that we don't ever leave our roots of affordability and I think.
Speaker Change: And the pandemic I think there was so much demand there was constrained supply prices went up and I think we drifted from our affordability routes. So a couple of years ago, we actually got very very serious about driving more affordable on Airbnb and we did a few things.
Speaker Change: First thing we did is we heard a lot of complaints about rising cleaning fees in excess of fees and Airbnb. So we introduced total price display told us price plays exactly what it sounds like you can click a toggle and see the total price upfront.
Speaker Change: And since we've done that more than 300000 listings have removed or lower the cleaning fee. So this has been huge.
Speaker Change: Next we introduced <unk>.
Speaker Change: Equally in monthly discounts and now more than.
Speaker Change: We have introduced more entry points of weekly monthly discount.
Speaker Change: Third the hosts now offer discounts in fact more than half of our host Alpha E monthly discount and now 70% of our nights booked are for multi state.
Speaker Change: We introduced a similar listings tool. So what we noticed was a lot of host were overestimating, what they could make on a nightly basis, especially new house. So we built the tool for you to see other listings in your neighborhood and 2 million host of use this tool and basically when most of US use this tool they realize that they need to make sure.
Speaker Change: There are competitive and so it brings their prices in line.
Speaker Change: Now.
Speaker Change: Over the past release on October 16, we also added a couple more different features like price tips post can now view suggested prices based on timber listening to their area and search tips. So throughout the guests search and we're going to offer relevant tips to help them find last minute state and probably the most important thing.
Speaker Change: You can do to drive affordability has just continued to increase supply, but we know about almost every marketplace is that as supply goes up relative to demand prices come down and so that's a really big effort for us the results have been the following in the last two years, while airbnb prices on a like for like basis. If you.
Speaker Change: Net out mix shift.
Speaker Change: Made fairly constant hotel prices have gone up considerably. So we believe that we have actually become more competitive from a <unk> standpoint relative hotels last year that portability.
Speaker Change: Now reliability reliability as I said is probably the most important things that we can do to drive more growth in our core business, if we do nearly $500 million nicely year.
Speaker Change: And bookings the question is how do we get the next $100 million and there is no silver bullet, but the closest thing to a silver bullet is quality and reliability and theres a lot of things, we're doing quite literally dozens, but if I could just pick to the.
Speaker Change: The two things I'd pick.
Speaker Change: At the top.
Speaker Change: Guest favorites hydro in the 2 million Beth listings and Airbnb. We also highlight the best 1%, 5% and 10% lifting as already mentioned, we have done 200 million nights booked just in guest favorites. Now. This is amazing wise, it's great because number one customer service contact. These listings are down our profitability on a per booking basis goes up.
Speaker Change: NPS is up because mps's up that means that rebooking rates are up that also means word of mouth is up but most importantly, a lot of people that wouldn't have considered staying in airbnb now what I'm going to go out a limb and say that while the average airbnb is not as reliable as the hotel I believe the average guest favorite is and we.
Speaker Change: $2 million to choose from $2 million lifting is more inventories in Hilton and Marriott nearly combined by the way. So theres a lot of selection here at the bottom end just like any company you need to make sure you are rewarded the top performers and you also deal with the people that arent performing we've removed more than 300000 listings over the last year.
Speaker Change: The last two years of host that Werent meeting our quality standards. So these are just some of the things we're doing on reliability. The lastest customer service and we are going through a really exciting transformation on customer service.
Speaker Change: I don't want to be one of the Ceos just brings up AI every earnings call because I think you got to have to measure, but we are seeing some.
Speaker Change: Really great progress on AI powered customer service.
Speaker Change: Way, we think about customer service powered by AI is in three phases phase one is the phase. We're in right. Now if you were do most of the first of all most of our customer context, we get over 10 million contacts a year most of the contacts that we anticipate getting in the coming years aren't going to be phone calls, they're going to be chatting through the app I really personally.
Speaker Change: I don't like calling customer service and having to dial them I want to be able to chat and chat AI can intercept.
Speaker Change: So we think in the future the vast majority of our chats are going to be intercepted and handled directly by the AI agent and so theres really three phases to this phase one is just answer basic general questions. We're rolling out a pilot they can answer basic general questions.
Speaker Change: Phase II is personalization to be able to personalize the questions phase III is it take actions that will give you. An example, let me just give you. One example, let's.
Speaker Change: Let's say I were to contact customer service and I would say.
Speaker Change: How do I cancel a reservation.
Speaker Change: In phase one what we're doing now.
Speaker Change: <unk> will answer probably even better than the average customer service agent how to cancel a reservation. So I'll say curious how you've canceled reservation step by step.
Speaker Change: As to personalization, they'll say, hey, Brian I see you have a reservation coming up in Los Angeles next week.
Speaker Change: Here's how you cancel that reservation and phase III is taking actions it would say hey, Brian I see you have a reservation coming to Los Angeles would you like me to cancel that for Ya just.
Speaker Change: Just tell me, yes, and I'll do it for you I can even handle rebooking. So this is where we think customer service can go enabled by AI and we've hired some of the best people in the world to work on that I'm really excited to tell you more progress about it.
Speaker Change: And your next question comes from the line of Doug Anmuth with J P. Morgan Your line is open.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: And Doug if you could check to see if your line is on mute.
And moving forward to our next question from Kevin Kopelman with.
Speaker Change: With TD Securities. Your line is open.
Speaker Change: Thanks, a lot question on the new services that are expected to come out next year should we think of those new services is driving some revenue growth right off of that for the second half next year are you anticipating more gradual rollout some more of a 2026 revenue drivers. Thanks.
Speaker Change: Yes, I can take that and let you feel free to add Kevin.
Speaker Change: The answer is a little bit of both I mean.
Speaker Change: We are.
Yeah.
The way like let's just back up so Uber, let's just take over.
Speaker Change: With that company.
Speaker Change: Done really well when they launched Uber eats they launched in one market and they had a city by city market and with very very gradual.
We are not going to do that we're going to be much more aggressive when we launch some new offerings next year, they're going to be available immediately and more than 100 cities around the world. So we believe in trying to reach scale a little more quickly just given how big and how mature VR. So because of that we do think there will be some incremental revenue.
Speaker Change: <unk> next year that will hit the financials, but.
Speaker Change: But I also just wanted to like step back and just say that what we've learned from Uber eats from Amazon's category expansion from door Dash from we can go down the list of marketplaces is when something is built off a small base you've got to be patient.
Speaker Change: There is a multibillion dollar revenue opportunities multiple of them that will be introduced next year, but I also would point people to a five year horizon for a number of these things to really reach scale not they won't reach scale in just a year or two and part of that is the network effect business do you want to roll it out carefully we want them.
Speaker Change: Make sure it's <unk>.
Speaker Change: Really well done lead you want add anything.
Speaker Change: No. The only thing I'd add is Kevin we'll obviously give you much more detailed color next year on the next earnings call, but what you should anticipate is that so is the investment behind those new services will front run the revenue. So you'll begin to see those expenses or those investments I should say at the beginning of the year.
Speaker Change: Whereas the revenue will start to scale once we've released a new offering.
Speaker Change: And your next question comes from the line of Patrick Scholes with true list. Your line is open.
Speaker Change: Great. Thank you good evening.
Speaker Change: To go back to the first question that was asked and ask.
Speaker Change: Ask it maybe a little more direct can you provide us.
Speaker Change: In percentage terms, what your year over year.
Net unit growth.
Speaker Change: In the quarter. Thank you.
Speaker Change: On supply.
Speaker Change: Yes, correct.
Speaker Change: Yes, we had over over 10% growth of supply as of the end of Q3, which is down several points based on the removals.
Speaker Change: Your next question comes from the line of John <unk> with Jefferies. Your line is open.
Speaker Change: Yes.
Speaker Change: Great. Thanks for taking my questions I wanted to ask about the experiences offering as you get closer to the relaunch next year. How are you thinking about sort of the pace of expansion and scalability I know.
Speaker Change: You'd like to keep experiences unique like youre accommodations, offering, but I'm curious if that means it will take longer to build supply behind it and maybe you could also sort of give us a sense for any investments in tech or marketing that you plan to make around the relaunch of experiences.
Speaker Change: Yes, John really good question.
Speaker Change: I think we are able to reach a sweet spot, where I think we can but we're going to offer something that's really really unique and will scale now I wanted to just moderate expectations that again. These journeys theyre going to be multi year journeys that I do not think that there is a choice I don't think we need to make a choice between you mean unique or.
Speaker Change: Being at scale I think by the way I think our core business proof that a business that's approaching $100 billion in gross sales a year.
Speaker Change: And it's pretty unique it's pretty different than a hotel.
Speaker Change: So I am not going to certainly promise of experiences we will get to that size, but we do think we have something thats very unique very scalable available around the world.
Speaker Change: As far as the tech and marketing.
Speaker Change: The great thing about our business is are you not anticipate very many businesses in the next five years are going to need significant investment.
Speaker Change: Certainly nothing like.
Speaker Change: Many other companies, where they have a lot of either capital allocation or major technical investments or even major marketing investments here's another way of saying it we've already made most of the technology investments when you see the last four years, a huge amount of what we've done is rebuilt the company from the ground up or not.
Speaker Change: Just to make it stronger.
Speaker Change: To offer homes to make it an extensible platform.
Speaker Change: The companies that we learned from again was Amazon I know I talk a lot about Apple a lot of people like referenced Apple when they talk about them because of the big launches that Apple Amazon is a very good reference point initially as you know they built the bookstore they were based on like they.
Speaker Change: They had to rebuild the platform and abstract the platform you might call. It platform I think to be able to offer many of our verticals and so we want to take the NB platform that works for vacation rentals and build it for the next decade for like 50 or 100 different categories just like Amazon.
Speaker Change: Now I can put a timeline on when we offer them, but we've rebuilt the technology already most of it to be able to do that now with marketing I don't think we're going to have to market everything as standalone businesses, we really like the idea of marketing all live Airbnb and marketing Theres. These two choices are you or how is the brands.
Speaker Change: We're a branded house, we're a branded house, where one app for one brand and we want to market everything in one app. So that's a little bit more how we're going to approach it and so I think for those reasons. We will of course be investing I want to be clear with you of course be investing but it's not going to be like many other companies where they have to go deep into the Reds get these new business off the ground.
Speaker Change: And your next question comes from the line of Jed Kelly with Oppenheimer. Your line is open.
Speaker Change: Great great. Thanks, Thanks for taking my questions.
Speaker Change: Just two if I may can you talk about in areas, such as New York City, where the regulations are becoming increasingly difficult can you talk about how we should view those in Europe and potentially leaning more into hotels and then as you grow outside some of these non core markets is it going to be more brand driven.
Speaker Change: Or will you lean more into performance marketing thanks.
Speaker Change: Hey, Jed I'll take us.
Speaker Change: Yeah, So let's talk about New York.
Speaker Change: Actually I would like to talk about two cities I'd like to talk about a tale of two cities.
Speaker Change: New York City in Paris, because both cities made some major decisions on Airbnb recently I don't want to distinguish the difference between the two.
Speaker Change: New York City has what might be described as the affordable housing crisis, and that's a very real thing.
Speaker Change: And so they decided one of the ways. They try to deal with that was banning airbnb and a year ago Airbnb with band and the theory was that if you have an airbnb a bunch of homes will come back onto the rental market and prices will come down.
Speaker Change: For the first time, we've gotten a year long longitudinal study of what happens to be a ban airbnb into a city.
Speaker Change: Brent prices in New York City are not down in fact are up three 5% and by the way hotel prices are now up 7%. So a year after banning airbnb, it's more expensive to live there and it's even more expensive the travel there and I think that New York is now a cautionary tale of how to deal with Airbnb now the other side of Paris.
Speaker Change: France.
Speaker Change: A couple of years ago, when we knew the Olympics were coming to Paris.
Speaker Change: We started working with the city of Paris, and I think the Paris took a different approach instead of thinking about airbnb as a problem. They thought of <unk> as a solution to their problems, which are they werent going to have enough housing for the Olympics.
Speaker Change: So in the last year, we went from a 100000 homes in Paris to a 150000 homes in Paris, and I am pleased to announce that 700000 guest data and Paris over the course of the Olympics 700000.
Speaker Change: It's like eight or nine Olympic stadiums, where the guest or favorability in Paris has not been higher in years and cities all over the world are now coming to Airbnb, and saying we want to be Paris, not New York can you help us because there are thousands of events going around the world. So I think that's the most important point I would make that New York and Paris.
Speaker Change: <unk> two cities and we can be a solution to the problem. We are not the problem, but specific to New York I would just say two things number one I remain optimistic that there will be a path to us to reenter in New York and people will be able to stay on homes and Airbnb because there is a constrained number of hotels in New York and by the way most hotels.
Speaker Change: Our only in Manhattan, and Theyre in Midtown Manhattan, do you want to stay in any part of the part of Manhattan, Brooklyn, and the Bronx, Staten Island Queens.
Speaker Change: Youre going to be pretty limited.
Speaker Change: And to answer the other part of your question, Yes, we absolutely welcome hotels on Airbnb, and we are going to be adding more hotels airbnb because for everybody to win.
Speaker Change: Hotels don't have to lose we owned hotel Tonight, and we believe that you should be able to find homes and hotels on Airbnb. So yes. We are focused on hotels in New York City on Airbnb, where focus on Airbnb in say, New Jersey State Jersey City, which is actually closer in Manhattan, the other parts of Manhattan.
Speaker Change: And I am optimistic that Europe.
Speaker Change: There will be a workable solution at some point in the future I don't know when that will be and they can follow the lead of Paris.
Speaker Change: And as a reminder, if you would like to ask a question. Please press the star and one on your telephone keypad.
Speaker Change: Our next question comes from the line of Stephen Ju with UBS. Your line is open.
Speaker Change: Great. Thanks, so thanks for taking the question so Brian I guess.
Speaker Change: On the experiences again.
Speaker Change: I'm wondering if there is going to be an angle, where this could be something that increases the overall engagement or even raise to your overall frequency.
Speaker Change: Of usage for you because maybe I don't stay in an Airbnb every weekend, but maybe.
Speaker Change: Maybe I try at Airbnb experience every week.
Speaker Change: I'm wondering like how the product development path and how utilization will shift tushar.
Speaker Change: <unk> growth thanks.
Speaker Change: 100% I mean, this is a great point Stephen.
Speaker Change: Experience is like listen.
Speaker Change: Like.
Speaker Change: Airbnb is typically something you book once or twice a year very very few people will book Airbnb is every month unless you would like us incredibly prolific traveler and so we've struggled a little bit from the point where on the one hand.
Speaker Change: Like our average purchase prices over $500. So like like the economics are great on the other hand, we have the challenge of low frequency most people don't travel that frequently.
Speaker Change: Experiences are going to be I think one of many new offerings that you can increase the frequency that can make airbnb go from an annual app to a monthly usage app or even <unk> for some people weekly usage App and the reason why is because experiences will not be limited just to when you travel.
Speaker Change: Just like they are today, we are designing products.
Speaker Change: <unk> and new services that will be great. When you travel, but you could book them in your own hometown like and I think there is a real problem, which is.
Speaker Change: What do you what do you want to do on a Saturday this year what your family.
Speaker Change: Other than the things already do Friday night, what do you do I've been going to restaurants stay home and watch Netflix I think there is a market for local to want to do unique things and I think traveling as how theyre going to be exposed experiences, but I do think a subset of those people will try them back home and I think the really big opportunity here kind of similar to ipod when <unk> launched.
You can only use it with the Macintosh and they're really big game for the ipod was once it became windows compatible when itunes available windows. All the people that then on the Mac Goodbye the ipod and those self serves so I do think there is a potential play for that down the road the experiences we're going to position it first and foremost to travelers, but it's not going to be exclusive travelers and I do think people are going to come to.
More frequently.
Speaker Change: Yeah.
Speaker Change: And there are no further questions at this time I would now like to turn the call back over to Brian Husky.
Brian Husky: Alright, well I just wanted to thank everyone for joining us today and just to recap revenue was $3 7 billion, which is 10% higher than a year ago adjusted EBITDA was $2 billion.
Brian Husky: And our trailing 12 months free cash flow was $4 1 billion. Now this is representing a free cash flow margin of 38% or.
Brian Husky: Our strong balance sheet enabled us to repurchase $1 $1 billion of our common stock this quarter and we're continuing to innovate in our product just keeps getting better.
Brian Husky: So probably accomplished and I'm excited for what's ahead. Thank you all for joining.
Speaker Change: This concludes today's conference call you may now disconnect.
Please wait the conference will begin shortly.
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: No.
Speaker Change: Thanks.
[music].
Speaker Change: No.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Yes.