Q4 2024 Airbnb Inc Earnings Call

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Speaker Change: Good afternoon and thank you for joining Airbnb's earnings conference call for the fourth quarter of 2024. As a reminder, this conference call is being recorded and will be available for replay from the investor relations section of Airbnb's website following this call. I will now hand the call over to Angela Yang, Director of Investor Relations. Please go ahead.

Speaker Change: Good afternoon and welcome to Airbnb's fourth quarter of 2024 earnings call. Thank you for joining us today. On the call today, we have Airbnb's co-founder and CEO, Brian Chesky, and our Chief Financial Officer, Ali Mertz.

Speaker Change: Earlier today, we issued a shareholder letter with our financial results and commentary for our fourth quarter of 2024. These items were also posted on the investor relations section of Airbnb's website.

Ali Mertz: During the call, we'll make brief opening remarks and then spend the remainder of time on Q&A. Before I turn it over to Brian, I would like to remind everyone that we will be making forward-looking statements on this call and involve a number of risks and uncertainties.

Speaker Change: Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors.

Speaker Change: These factors are described under forward-looking statements in our shareholder letter and in our most recent filings with the Securities and Exchange Commission.

Speaker Change: 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.

Speaker Change: You should be aware that these statements should be considered estimates only and are not a guarantee of future performance.

Speaker Change: Also, during the call, we will discuss some non-GAAP financial measures.

Speaker Change: We provide a reconciliation to the most directly comparable GAAP financial measures in the shareholder letter posted to our investor relations website. These non-GAAP measures are not intended to be a substitute for GAAP results.

With that, I'll pass the call to Brian.

Brian Chesky: All right. Well, thank you very much. And hey, everyone, thanks for joining us today. 2024, Airbnb outpaced the travel industry's growth.

Brian Chesky: We ended the year with Q4 revenue, nights booked, and GBV all accelerating from Q3.

Brian Chesky: Now, before we get into the results, I want to just quickly touch on some of the work that got us here. You know, over the past several years, we've been preparing for Airbnb's next chapter, and we wanted to make sure that guests and hosts love our core service before we introduce something new.

Brian Chesky: So we listened to their feedback and we rolled out more than 535 features and upgrades to improve the experience.

These upgrades include major reliability efforts, like guest favorites.

Brian Chesky: Guest Favorites to make it easier for guests to find the best listings in Airbnb.

Brian Chesky: You've also made it easier to host by launching the Coast Network, which is a really simple way to find the best local host to manage your Airbnb.

Brian Chesky: Now, in just four months, the co-host network has grown to almost 100,000 listings.

Brian Chesky: At the same time, we've been driving growth in a number of product optimizations.

Brian Chesky: We made it easier for guests to find the perfect stay with enhanced search functionality and better merchandising. And this includes things like suggested destinations, more detailed maps, and a new welcome guide for guests.

Brian Chesky: We also introduced flexible payment options and local payment methods in nearly two dozen countries, making it easier for people around the world to use Airbnb. And we're in the process of rolling out a completely redesigned checkout experience that makes it even simpler to book an Airbnb.

Brian Chesky: Now, as a result, we've seen higher conversion rates and we expect these improvements to continue delivering growth in 2025.

Brian Chesky: By optimizing key parts of our product, like search, merchandising, and payments, we're seeing strong near-term results, and we're building a foundation to support the introduction of new offerings.

Brian Chesky: Finally, we've rebuilt our platform from the ground up with a new technology stack. This includes new listing management tools for hosts, and these tools make it easier for hosts to list and manage their homes, while giving them the ability to eventually offer more services.

Brian Chesky: We've also upgraded our messaging system into a single, unified platform, making communication between guests and hosts smoother and more reliable. Now with this new tech platform, we are able to innovate faster and expand beyond short-term rentals into becoming an extensible platform with a range of new offerings.

and 2025 marks the start of Airbnb's next chapter.

Now.

Today.

Brian Chesky: Our service is better than ever, and our platform is ready to support what's next.

Brian Chesky: In 2025, we will continue building on this momentum. We're executing on a multi-year growth strategy to perfect our core service, accelerate growth in global markets, and launch and scale new offerings.

Brian Chesky: Now, we've talked a lot on previous calls about how we're preparing to expand beyond our core business.

Brian Chesky: And this is the year you'll see the beginning of a new Airbnb.

Brian Chesky: So now I'm going to turn it over to Ellie to give you a financial update. Ellie?

Speaker Change: Thank you, Brian, and good afternoon. I'll start with a review of our financial results and then provide our current outlook for Q1 2025.

Brian Chesky: As Brian mentioned, we ended last year on a strong note. Nights and Experiences booked accelerated in Q4 to 12%, making it the highest year-of-year growth quarter of 2024.

Revenue also grew 12% year-over-year to $2.5 billion in Q4.

Brian Chesky: For the full year, an adjusted EBITDA totaled $4 billion, representing an adjusted EBITDA margin of 36%.

Brian Chesky: Since 2020, we've delivered over 4,000 basis points of EBITDA margin expansion.

Next, I'll turn to the balance sheet and cash flow.

Brian Chesky: During Q4, we generated $458 million of free cash flow. And for the full year,

Brian Chesky: We generated $4.5 billion, representing a free cash flow margin of 40%.

Brian Chesky: At the end of the year, we had $10.6 billion of corporate cash and investments, as well as $5.9 billion of funds held on behalf of our guests.

Brian Chesky: Our strong balance sheet allowed us to repurchase $838 million of our Class A common stock during Q4 and $3.4 billion for the full year. At the end of Q4, we had $3.3 billion remaining on our repurchase authorization.

Now let's shift to our Q1 2025 Outlook.

Brian Chesky: After closing out 2024 with our highest quarter of nights and bookings growth, we're excited about the strong demand we continue to see early in 2025.

Brian Chesky: For Q1, we expect to deliver revenue between $2.23 billion and $2.27 billion, representing 4% to 6% year-over-year growth, or 7% to 9% when excluding FSX handwins.

Brian Chesky: As we mentioned last quarter, revenue in Q1 2024 benefited from both the timing of Easter and the extra day from Leap Year, creating a hard year-over-year comparison.

Brian Chesky: Without these calendar impacts and FX headwinds, our revenue growth would be about 6 percentage points higher or 10 to 12%, which is relatively stable compared to Q4.

Brian Chesky: For Nights and Experiences books, we expect year-over-year growth in Q1-25 to be relatively in line with Q1-24 once you exclude leap day, which contributed about one percentage point of growth last year.

Brian Chesky: On profitability, we expect adjusted EBITDA and adjusted EBITDA margin to decline compared to Q1 2024, driven by the same factors impacting revenue.

Brian Chesky: That said, if you exclude the calendar and FX headwinds, adjusted EBITDA margin in Q1 would remain relatively flat year-over-year.

Brian Chesky: As we look ahead to 2025, we're focused on executing our multi-year growth strategy.

Brian Chesky: Our strategy is designed to drive long-term growth and deliver market share gains through three levers.

One, perfecting our core service.

Brian Chesky: 2. Accelerating Growth in Global Markets and 3. Launching and Scaling New Offerings

Brian Chesky: We're focused on strengthening the economics of our core business and generating strong free cash flow, while also investing in growth opportunities.

Brian Chesky: This year, we plan to invest $200 to $250 million towards launching and scaling new businesses, which we'll introduce in May.

Brian Chesky: Because these investments will roll out throughout the year, their impact on our quarterly adjusted EBITDA margin will be the most pronounced in the first nine months of 2025.

Brian Chesky: As these new businesses scale over the coming years, we expect them to make a significant contribution to revenue growth.

Brian Chesky: And so each year we'll layer in new offerings where we see long-term revenue growth opportunities. And at the same time, we'll focus on delivering strong profitability and world-class free cash flow for our core business.

And now with that, I'll open it up to Q&A.

Speaker Change: We will now begin the question and answer session. If you'd like to ask a question, press star, then the number one on your telephone keypad. We ask that you please limit your questions to one. We'll take our first question from the line of Stephen Ju with UBS. Please go ahead.

Stephen Ju: Okay, thank you. So I think in the past, in terms of the global sort of localization effort,

Stephen Ju: You've talked about Brazil, and I think in the shareholder letter, you were showing your localization efforts for Japan. So I was wondering how long it typically takes for one of these efforts to localize in any given country, you know, it takes to come together.

Stephen Ju: You guys have mentioned Argentina, Germany, South Korea, and other places.

Stephen Ju: I guess the $200 to $250 million of investments that you're planning to incur

Stephen Ju: I guess in the, you know, the front half of this year for the most part. What is that primarily going to be geared to? Is it going to be marketing? Is it going to be engineering, staff ops, or any color there would be helpful. Thank you.

Stephen Ju: Great, thank you Stephen. Let me start just giving a little bit of color in terms of our global market strategy. As a backdrop in terms of context on this strategy, we've shared over the last year that

Stephen Ju: Airbnb is a very global brand. However, our business is concentrated in our top five core markets. So that's the US, UK, Canada, France, and Australia.

Stephen Ju: those five markets comprise about 70% of our gross booking value. And so as a growth lover that we've been investing in, we've been targeting markets outside of that top five, where we think that there's a sizable opportunity for us to invest and both gain penetration in the markets and also provide a tailwind to our global growth rates.

Stephen Ju: I think what you've seen over the last, not just the Q4 results, but over 24 as well, is that

Stephen Ju: those investments and that targeting of new geos has had a meaningful impact on our growth.

Stephen Ju: In particular, what we shared in Q4 was that those markets that we've targeted are growing about double the rate of our core markets.

Stephen Ju: And to your question in terms of how long does it take, I would say it depends on the specific market. I think Brazil is a huge success case, and that's a market that we've been focused on, in particular, with adding brand marketing over the last two years.

Stephen Ju: been able to materially increase the scale of our business in that country in particular. I think there's other markets that maybe the duration for building scale will take longer.

Stephen Ju: country that I would put in that category would be Japan.

Stephen Ju: which is a market that we just commenced our brand marketing in Q4. And we're starting at a lower base of domestic awareness. So each of our targeted markets, we have to factor in where the market is, the level of awareness and consideration we have among local travelers, and the level of product optimizations we need to make to make sure that we are appropriately addressing the local audience.

Stephen Ju: So your second question is around our investments in launching and scaling the new businesses. As the letter details, we're planning to spend approximately $200 to $250 million this year.

Stephen Ju: And you should see the bulk of that investment hit both our marketing line and our product development line items. Just a little, give a little bit more color here. In terms of marketing, we will obviously be spending to build out the teams to drive the supply operations around those new offerings.

Stephen Ju: We will also be investing behind awareness of the new products and demand generation. And then on the product side, we will be slightly increasing our pace of headcount growth across our product development organization, such that we can move more quickly across our roadmap and support these new businesses.

Richard Clark: Our next question comes from the line of Richard Clark with Bernstein. Please go ahead.

Richard Clark: Hi, thanks for taking my questions. I just want to ask about the launch we've seen of Agentic AI out there. I think Airbnb avoided some of the volatility that some of your peers had, but are you leaning into those operators? Are you confident you can kind of control the AI flow through the Airbnb platform?

Thank you.

Hey Richard, yeah, I um...

Speaker Change: Here's what I think about AI. I think it's still really early.

Speaker Change: It's probably similar to like the mid to late 90s for the Internet. So I think it's going to have a profound impact on travel, but I don't think it's yet fundamentally changed for any of the large travel platforms.

Speaker Change: And so, you know, we want to be the leading company for, you know, AI-enabled traveling and eventually living. And I'll just talk a little bit about how we're going to do that.

Speaker Change: Most companies what they're actually doing is they're doing integrations these other platforms on trip planning

Speaker Change: But the trip planning, it's still early. I don't think it's quite ready for prime time.

Speaker Change: We're actually choosing a totally different approach, which is we're actually starting with customer service.

Speaker Change: So, later this year, we're going to be rolling out, as part of our summer release, AI-powered customer support. You know, as you imagine, we get millions of contacts every year, AI can do an incredible job of customer service, it's going to speak every language 24-7, it can read a corpus of thousands of pages of documents.

Speaker Change: And so we're starting with customer support. And over the coming years, what we're gonna do is we're gonna take that AI-powered customer service agent and we're gonna bring it into essentially Airbnb Search to eventually graduate to be a travel and living concierge.

Speaker Change: I think this is a really exciting time in the space because you've seen like with DeepSeek and more competition with models is models are getting cheaper or nearly free.

They're getting faster, and they're getting more intelligent.

and there are promises that are starting to get commoditized.

Speaker Change: What I think that means is a lot of value is going to accrue to the platforms. And ultimately, I think, you know, the best platforms, the best applications are going to be the ones that most accrue the value from AI. And I think we're going to be the ones to do that with traveling and living.

Speaker Change: Our next question comes from the line of Eric Sheridan with Goldman Sachs. Please go ahead.

Transcription by CastingWords

Speaker Change: All right, hey Eric, I'll answer the efficiency a little later in the second part.

So,

Speaker Change: Yeah, there's like there's like a couple like efficiencies that you could imagine. Airbnb, one is obviously customer service. I think that's like one of the biggest ones. I've kind of already covered that. But I think that's like a massive change for Airbnb. The other I assume you refer to is essentially engineering productivity.

Speaker Change: We are seeing some productivity gains. I've talked to a lot of other tech CEOs, and here's what I've heard, talking to other tech CEOs.

Speaker Change: Most of them haven't seen a material like change in engineering productivity. Most of the engineers are using AI tools. They're seeing some productivity. I don't think it's flowing to like a fundamental step change in productivity yet.

Speaker Change: I think a lot of us believe in some kind of medium term of a few years. You could easily see like a 30% increase in technology and engineering productivity. And then, of course, you know, beyond that, I mean, I think it could be like a order of magnitude more productivity because it, but that's going to be like down the road.

Speaker Change: And I think that's going to be something that almost all companies benefit from. I think the kind of younger, more innovative startup-like companies might benefit a little bit more because they'll have engineers that are more likely to adopt the tools. That's probably pretty important. But I think this is what I'm hearing from other people. And we're pretty much having the same experience.

Speaker Change: Eric, to answer your question with regard to the capital allocation strategy, I would say, you know, no meaningful change in terms of strategy, what we've stated consistently over the last two years is that

Speaker Change: The capital allocation strategy includes, one, obviously, investing in our core operations, second, valuing M&A where there's relevant opportunities, and three, returning capital to shareholders.

Speaker Change: Obviously, given the strength of our balance sheet, as well as our world class free cash flow margins, we have the capital to do all three. You can see from our 25 guidance that we are leaning in through the P&L in terms of investing slightly more in terms of the core operations, and in particular, new businesses. And then from a returning capital to shareholders, you should look at the volume of repurchase activity in 24 as a guide with regard to the magnitude in.

Speaker Change: and CPDC, and then we have our Q3, Q4, Q5, Q6, Q7, Q8, Q9, Q10, Q11, Q12, Q13, Q14, Q15, Q16, Q15, Q16, Q17, Q18, Q18, Q19, Q19, Q20, Q21, Q22, Q22, Q22, Q22, Q22, Q22.

Jessen Patterson: Our next question comes from the line of Jessen Patterson at KeyBanc. Please go ahead.

Great. Thank you very much.

Speaker Change: Can you tease out how you're thinking about the pace of product innovation versus the past? It sounds like this new tech stack should be beneficial to product velocity. So I'm curious where you saw friction points on the prior tech stack and how you think this new tech stack really positions you to execute on those growth initiatives you outlined at the start. Thank you.

Speaker Change: Yeah, hey, Justin. I mean, this tech sack probably like this project probably started, frankly,

Speaker Change: Six years ago, if I'm not mistaken. So this has been a very, very long thing. We've been doing it for quite a long time. I think the big milestone is that like, you know, most of the work is now complete and you're gonna see this year, like almost every part of the application is gonna be essentially rebuilt from the ground up.

Speaker Change: Summer release is going to be significantly larger than past ones and I expect the ones after that will be larger so it's going to just basically what it's going to lead to is the fewer engineers being able to basically shift features faster

Speaker Change: And so, you know, there's a pretty, pretty huge gain here. So I think what you should expect is this year we're going to launch significantly more upgrades than last year and every year it should increase.

Speaker Change: Our next question comes from the line of Brian Nowak with Morgan Stanley. Please go ahead.

Brian Nowak: Great, thanks for taking my questions. Good guide, guys. Just two questions. One, so Brian, as you're thinking about sort of the new products and new use cases to come from some of the growth opportunities launching in May,

Speaker Change: Can you just talk us through some of the the larger points of friction or opportunities high level that you see from a Guest and a host perspective you're looking to address with some of these products

Speaker Change: And then the second one, Eli, on the full-year margin guide, at least 34%.

Speaker Change: Can you just sort of walk us through how you're thinking about the contribution from the investments in the back half? How are you sort of gauging the origin markets versus the expansion markets sort of growth throughout the year as you kind of tumble through the comps for the margin guide?

Speaker Change: Yeah, hey Brian, I will, and are you asking, just to clarify the first, this is specifically friction point

for new products and services, not product organizations, correct?

Speaker Change: That's right, yeah, so the, you know, the $200 to $250 million, the new businesses you want to... Yep, perfect.

Speaker Change: Yes, so let me just kind of back up and just give you a little bit of our philosophy.

Speaker Change: We spent the last four or five years really trying to get to this moment where we could prepare for the next chapter of Airbnb. What we did, as I said, is we built the tech stack from the ground up.

Speaker Change: We listened to guest and host feedback, made over 500 upgrades. We built this new business organization that Dave is now leading. We've become, obviously went from break-even to quite profitable. And so I think we're now ready for this next platform, next chapter to expand beyond our core where Airbnb is, you know, just a place to stay.

Speaker Change: And to do that, here's a couple of philosophies, a couple of principles we have in our philosophy I'll share, and I'll also tell you a little about the friction.

Speaker Change: Number one, I think we can do this quite efficiently because we are not going to launch separate apps or separate brands. We're going to have one app, one brand, the Airbnb app. We want the Airbnb app kind of similar to Amazon to be one place you go for all of your traveling and living needs. A place to stay is just really, frankly, a very small part of the overall equation.

Speaker Change: Every new business we launch, we'd like to be strong enough it could stand alone, but it makes the core business stronger. I think that each business could take three to five years to scale. A great business could get to a billion dollars of revenue. It doesn't mean all of them will.

Speaker Change: and you should be able to expect like, you know, one or a couple businesses to launch every single year for the next five years.

We're going to start initially with things like

Speaker Change: very closely adjacent to travel. So, you know, when people book an Airbnb, there's a lot of like, you know, experiences and services and other things that would make their stay more special and it would even include things they wouldn't think to search for.

Speaker Change: And from there, we're just going to keep expanding, and we're going to expand out to more host services to enable them to become better hosts.

Speaker Change: and then eventually we'll move it, you know, further and further away from our core.

Speaker Change: So we're going to probably follow that path. So we're going to really, really start adjacent to travel. And part of the reason why is.

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Speaker Change: Airbnb is used by like I think 1.6 billion devices a year so it's got a pretty big volume of users but we're not very we're not a very frequently used app. People typically use this once or twice a year and I would love for Airbnb one day for people to use this once or twice a week and so that's kind of one of the goals over the long term.

Speaker Change: Great, Brian. Brian, let me talk a little bit about margins over the course of the year. So, to restate or just reiterate the guidance that we've provided for the full year, we're going to invest $250 million in terms of launching and scaling the new businesses.

Speaker Change: We anticipate that the negative impact to margin from those investments will be heavily weighted in Q1 through Q3, whereas the revenue obviously won't pick up until we've launched those new products at the end of Q2, and so we would assume that the benefit from that lift would really be concentrated in terms of our exit rate of Q4.

Speaker Change: But more broadly, I think the takeaway from our guide is that even with that investment level, we're obviously maintaining extremely strong, healthy margins for our core business. And obviously, the global floor on EBITDA gets you to that number.

Q1 EBITDA margins would actually be relatively flat.

Speaker Change: Our next question will come from the line of Ron Josie at Citi. Please go ahead.

Ron Josie: All right, thanks for taking the question. Brian, I wanted to ask a little bit more on the here and now. In the letter, you talked about recent product enhancements around search and better merchandising. I'd love to hear your thoughts on what you're finding, what you're seeing with search and merchandising and learnings there to help inform these newer experiences and products that are coming down the pike. And then the next question is just on nights and experiences brought to the acceleration this quarter. Talk to us about the contribution between just the broader travel market being relatively healthy and these newer products that are launching,

Ron Josie: Thank you for joining us. We look forward to hearing from you.

Speaker Change: Hey Ron, I'll take the first. So yeah, when you think about the here and now, you know, we called this out in our letter really around product optimizations. And Ron, I'll kind of just let this start like three parts.

Speaker Change: Step one, people come to Airbnb. It's really, we have a huge amount of traffic. We have nearly five billion visitors a year.

Speaker Change: And so it's really important that when people come to Airbnb, they are able to find the right Airbnb for them.

Speaker Change: So we've done a lot around, you know, like we introduced a personalized welcome tour. Again, people use Airbnb only a couple times a year, so it's really important to orient them. So we've got this welcome tour that's personalized to every person.

Speaker Change: Based on your past searches, we suggest destinations that we think you're going to be interested in. Based on past filters, we offer up those filters as essentially like quick filters to apply.

Speaker Change: We've also found that, you know, this is probably obvious but our mobile app converts significantly higher than our mobile website And so we've been pushing to get more people to download our mobile app and now in Q4 mobile bookings represented 60% of our overall bookings up from I think 55% the year before

Speaker Change: You know, our checkout page, this sounds like a simple thing, but the checkout page, the page to pay, not the checkout Airbnb, the page to pay, it was really, really long. And we found that if you make it shorter, simpler, that leads to a massive increase in conversion.

Speaker Change: Now, I'm just giving you a couple of examples. There's really a long list of dozens and dozens of things. And again, you know, 100 basis point increase on a GBV of $80 billion, you know, you're going to be soon approaching like $100 million optimizations just one at a time for some of these really, really big efforts.

Speaker Change: So, once you find an Airbnb, it's important that that Airbnb is affordable.

Speaker Change: and affordability is in our DNA. So we've made a lot of improvements around affordability that have also increased optimization, like showing the total price display. When guests toggle on total price display, that includes all fees, including cleaning fees.

Speaker Change: We see that people are booking higher value Airbnbs. We've also created a lot of tools for hosts.

Speaker Change: whether it's monthly and weekly, monthly discounts, price tips, search tips.

Speaker Change: All these things are essentially efforts to make Airbnb more affordable, and it's working. Because during 2024, hotel prices were up.

Speaker Change: year-over-year, while comparable Airbnb listings were down year-over-year in price. So we're making progress. And the last thing is, if you find the Airbnb is a good price, it's still really important that it's of high quality.

For every person who books an Airbnb,

Speaker Change: About 9 people book a hotel. And so, if we do, you know, around 500 million nights a year and we got the extra hotel guests to use Airbnb, we go from 500 million nights to a billion room nights. So, that's a really, really big opportunity. And we think the number one way to do that is to improve the reliability and quality of our service, especially our hosts.

Speaker Change: So the way to do that is elevate the best and cut the bottom.

Speaker Change: So we introduced Guest Favorites in October 2023. It's now gotten 250 million nights booked. If you book a Guest Favorite, customer service rates are down. Trip issues are down. Guest Net Promoter is up. Cancel issues are down. So it's really great.

Speaker Change: We also, since April 2023, we instituted a new host quality system and removed 400,000 listings that don't meet our guest expectations.

Speaker Change: So, Ron, those are essentially the three levers. We have usability, making it easier for people to find the listing by increasing conversion, affordability, getting prices to be better and more competitive, and then reliability and quality of the service. So, again, we've made.

Speaker Change: You know, hundreds of updates over the past few years on these, but these are just a couple callouts.

Speaker Change: And Ron, to answer your question in terms of quantifying the Q4 demand, I would say, you know, obviously we benefited from organic tailwinds across the industry.

Speaker Change: But in addition to that, all of the product optimizations that Brian shared, from our testing of those improvements, we estimate the exit rate, growth rate for our business, was lifted by a couple hundred basis points due to those improvements, and we see it through improvements in our booking conversion.

Speaker Change: Our next question will come from the line of James Lee at Mizuho. Please go ahead.

James Lee: Great, thanks for taking my questions. I'm sorry, I joined the call a little bit late, so I apologize if my question has been repeated. Two questions here, one on.

James Lee: experiences. Can you guys talk about maybe some of the frictions you're able to resolve in the upcoming launch?

James Lee: and any indication that you can give us on the confidence of successful launch this time. And secondly, I just want to double-click on...

Speaker Change: You know, Brian's commentary on beyond the court. Are you thinking about maybe some sort of concierge service, meaning like grocery shopping, access to spa, to gym, maybe some kind of access to recreation? Is that what we should think about when we think about adjacency to travel? Thanks.

Yeah, I can handle this. Hey James.

Speaker Change: So frictions you want to resolve with experiences. Let's ask, what were some of the challenges the first time around?

Speaker Change: Well, the first time around, I don't think we integrated the experiences really well into the products. If you go to Airbnb.com or app right now, it's pretty hard to find them.

Speaker Change: The second thing is that when you find the experiences, I don't think they were merchandised as compellingly as they could.

Speaker Change: Third, there weren't really a lot of integrations of social media. I think social media is a great distribution channel.

Speaker Change: And fourth, I think we are completely rethinking the kind of supply we're going to have. I think it's going to be really, really compelling. And then fifth, we didn't really market it that much. And I think this time we're going to be a bit more aggressive in marketing that because we're really proud of the quality of product we have.

Competence

Speaker Change: of how successful the launch is going to be. You know, I want to be measured in my response because, you know, you know, this is a second shot at it.

Speaker Change: I am extremely confident that this product is going to be incredibly, incredibly compelling though.

Speaker Change: And so I think if people give it a shot, I think they're going to be really in love with the product because people really do actually like the current Airbnb experiences, and I think this one is going to be significantly better. I probably won't say much more. Tune in in May, and I'll walk you through the entire product and the product launch.

As far as adjacencies...

Yeah, I mean, there are...

Speaker Change: you know, dozens and dozens. I mean, if you got really granular, hundreds.

of opportunities.

Speaker Change: endless. We could spend many, many years picking all the adjacencies to be able to travel somewhere and live somewhere. Remember, like, you know, 17, 18% of our nights booked are longer-term stays of more than 30 days, and that's going to become an even greater share of our business, I think, down the road. And so if you think about where all the servers need to travel or live somewhere, there's a lot of opportunities. Now, the key is not to do them, obviously, all at once.

Speaker Change: to prioritize, to pick the most differentiated services guests want the most that are, you know, the most compelling opportunities from this standpoint and just start from there. So we're not, I'm not gonna go into too many more details, but stay tuned.

Speaker Change: Our next question will come from the line of Jed Kelly at Oppenheimer. Please go ahead.

Speaker Change: Enhanced services and then just just circling back to North America. I mean, how do you view that market opportunity? I know room nights accelerated mid single digits, but I'm sure you want it to grow faster So so just how should we view the North American market? Thank you

Yeah, why don't I start with partners.

Speaker Change: I imagine eventually like Airbnb first of all we haven't done a lot of partnerships we historically have not had a robust business development or partnerships function so most of our platform we feel as kind of a little bit more of a closed ecosystem

Speaker Change: I imagine this next chapter of Airbnb is much more of an open ecosystem. And if you think about the really large tech platforms, they're kind of ecosystems, essentially. And they're ecosystems that partner with other companies and developers to build on their platform.

Speaker Change: And Airbnb is the kind of company where there are quite literally thousands of companies like cleaning companies, key exchange, like grocery companies Like there's all sorts of companies built on top of Airbnb, especially local businesses

Speaker Change: So I think that Airbnb, there is a place to be ecosystem where we could partner with local companies and global brands. So we are absolutely thinking about that. It's not the first thing we would do. We'd probably start with kind of first party before we go to third party, but third party integrations is incredibly compelling because why not, like, allow the world to build Airbnb? We don't need to build this future by ourselves.

Speaker Change: Check just to talk a little bit about North America So one to just call it the trends that we saw in the back half of the year North America like all other regions accelerated from Q3 to Q4

and other regions.

I would say second, we've mentioned this in prior calls.

Speaker Change: crossover heartland states outside of the coasts, and those are areas that we continue to, you know, work to drive penetration and increase consideration.

Speaker Change: Our next question will come from the line of Doug Edmonds with JP Morgan. Please go ahead.

Doug Edmonds: Thanks for taking the questions. Brian, can you just talk about in what markets or for what kind of listings you're seeing the co-host network work best and what's really driving them to earn twice as much as other listings? And then Ellie, I'm just curious where you might be finding the most traction in managing the cost structure to make room for some of these new investments coming up. Thanks.

Doug Edmonds: Hey Doug, Co-host Network, just to give people a little bit of background on the Co-host Network, you know we did a bunch of surveys and we talked to a lot of prospective hosts.

And here's a stat that surprised us.

Thanks for watching. Bye.

Speaker Change: More than 40% of people we surveyed say they would be interested in sharing their home on Airbnb, but the biggest obstacle to them doing that was that they felt like it was a lot of work.

Speaker Change: We also noticed there were a lot of people that were hosting Airbnb that would like to expand but they don't have another home to put in Airbnb. And so we thought, what if we created a marketplace to match people with extra time with people that have homes?

Speaker Change: and that is the co-host network. The reason why the co-host listings are so much more productive, they make about twice as much revenue as listings managed by co-hosts than other listings, is because we only invited top hosts on Airbnb to become co-hosts.

Speaker Change: So the average rating for a co-host in Airbnb is significantly higher. The majority of listings managed by co-hosts, I believe, I guess 85% help manage a guest favorite. 75% of co-hosts are actually superhosts. We launched in 10 countries with 10,000 co-hosts.

Speaker Change: Australia, Brazil, Canada, France, Germany, Italy, Mexico, Spain, U.K. and U.S.

Speaker Change: So it was those 10 countries, and that's it, you know. And since we've – and the Average Post has an exceptional rating of 4.87. That's a really, really good rating.

Speaker Change: So that was like 4 months ago, 5 months ago. Today, we went from 10,000 co-hosts to 15,000 co-hosts.

Speaker Change: We now have 100,000 listings under management. The next plan is to expand to Asia. So the two countries we're focused on are Japan and Korea. And we'll give you updates as...

as that progresses.

Speaker Change: Great, and Doug can talk about margins in terms of where there's opportunity for incremental efficiencies.

Speaker Change: Just to restate our margin guide, every year we will be looking to invest in new growth opportunities while also finding incremental efficiencies in our core business.

Speaker Change: In terms of 25 and the outlook there, I would say there's incremental opportunities across our variable costs, so areas like payment processing and customer service opportunities to just be, frankly, a little bit more efficient and to deliver some margin expansion there.

Speaker Change: Similarly, we continue to be extremely disciplined with our G&A expenses and headcount.

Speaker Change: growth, allowing for some margin expansion there as well. And then on the marketing line item, in 24, we did increase our overall marketing intensity over the course of the year, because we saw opportunities to lean into our current plan for 25 plans for a flat percent of revenue for the core business focused on marketing.

Speaker Change: Our next question will come from the line of Lee Horowitz at Deutsche Bank. Please go ahead.

Lee Horowitz: Great, thanks for taking the question. Maybe just on some of the growth markets, you guys highlighted some really healthy growth rates in these expansion regions and obviously put up nice numbers in the 4Q.

Blatt, year-on-year, I guess, how do we maybe, you know,

Lee Horowitz: put together the pieces of, you know, marketing intensity, perhaps flat year-on-year with a number of different growth regions still out there that are probably not, you know, quite as large as you want at this point. Like, do you no longer really have to invest in them? Have you reached sort of an investment sort of threshold on those? Are you going to start to get leverage on the investments that you've made in those regions? How come they don't necessarily need more marketing dollars to deleverage next year? Thanks so much.

Speaker Change: Sure, let me start with the latter question. So if you think about how we've been managing our overall marketing dollars,

Speaker Change: The majority of the spend is on brand marketing. And the way to think about brand marketing is that it is effectively a fixed amount of spend for each market in terms of the minimum amount that you need to spend for that market to be efficient. And so it is not necessarily a one-for-one like performance marketing in terms of how you need to scale it up.

Speaker Change: And so what we've done over the last couple of years is keep the growth of spending against our core markets relatively modest while adding on these incremental new markets and the incremental brand marketing dollars that it requires.

Speaker Change: And so as we look forward to 2025, the way that we're able to maintain strong growth in the core markets, but also incrementally invest in a higher level of market intensity for the expansion markets.

Speaker Change: is not to grow the core market marketing spend faster than revenue. And the way we're able to do that is our lack of strong reliance on preferred marketing, which would be entirely variable. Instead, in a market like the U.S.,

Speaker Change: We have a base fixed amount that is dedicated to brand on top of which we surgically add performance marketing And so the the broad takeaway should be that

Speaker Change: In particular, in our core markets, because they are so heavily reliant on brand, we are not adding dollar for dollar as revenue increases, and therefore, the marketing budget's allowed to expand and be more heavily dedicated to expansion markets.

Speaker Change: Our next question will come from the line of Justin Post at B of A. Please go ahead.

Justin Post: Great, thanks. A couple questions. Looks like, and we already covered it, U.S. accelerated. Looking back, what might have pressured the growth rates on a macro level, and do you see those pressures changing this year?

Justin Post: And then maybe, Ellie, you could talk a little about the take rates contemplated in your outlook. What are some of the positives and negatives for take rates? Thank you.

Justin Post: Yeah, certainly. So let's talk a little bit about North America in terms of what, you know, what 2024 looked like. You'll recall this past summer, North America in particular, we saw at the beginning of the summer peak that there was a pretty material contraction in terms of lead times, which made bookings growth in Q3 relatively muted.

Justin Post: I think the question at the time was, is this a signal of weakening demand, or is this a signal of simply a little bit of a volatility in terms of consumer behavior when people book their next trip?

Justin Post: that volatility and kind of muted bookings growth we saw over the summer was somewhat temporal. And those folks who were, you know, somewhat on the sidelines in terms of making their future bookings in the summer came back to us.

in the fall and did indeed make those bookings.

Justin Post: I think subsequent to that, we've certainly seen that past the initial uncertainty leading into the election, the consumer, and in particular the North American consumer, has been strong, and in particular has been strong in terms of contemplating future travel.

in terms of take rates.

Justin Post: If we play back last year, let's talk about the puts and takes for last year and how they impact the take rate for 2025.

Justin Post: So as you'll recall, we introduced an FX service fee mid-2024.

Justin Post: That service fee is approximately 100 basis points applied to 20% of our GBV. So on an annualized basis, you would assume that it would lift the implied take rate by about 20 basis points.

Justin Post: It did that. However, in Q3, we had some offsets. And in Q4, we also had some offsets. So specifically, in Q3, we had elevated made goods, which come in as a contra revenue and offset the lift we received from the FX service fees.

Justin Post: and then fast forward to the last quarter, the offset was a hard comp from some benefits we got to revenue in Q4 of 23 associated with breakage of gift cards.

Justin Post: So fast forward to 25, we don't anticipate any of those similar one-offs that will offset the benefit we get from the FX service fee. And so instead, for full year 25, you should assume that the implied take rate gets the full benefit of 20 basis points increased on a year-over-year basis as compared to 24.

Speaker Change: Our next question will come from the line of Ken Goralski with Wells Fargo. Please go ahead.

Thank you, too, if I may.

Speaker Change: Just on the expense side, maybe, Ellie, could you talk a little bit, looking beyond $25,000?

Speaker Change: the bookings of alternative accommodations relative to hotels and still it's very heavily weighed to hotels. Could you talk about some of the elements you think that could change that kind of price-to-value equation for consumers especially and maybe in urban markets?

Speaker Change: where alternative accommodations fed tougher time gaining share versus vacation markets where you picked up a ton of share. Thank you.

Speaker Change: So let me talk about the product investments. Brian has shared that in the letter we shared that we've spent the last couple of years effectively rebuilding the tech stack. And so I would say, you know, while that work is not fully complete, a lot of it is behind us. So I think from an investor standpoint, you should be excited that most of the hard work has been done in terms of rebuilding the tech stack and frankly, modernizing our app.

Speaker Change: So, what that means from an expense perspective is that on the go forward, we can increasingly dedicate our product resources to those consumer-facing growth additive features that, you know, obviously the consumer benefits from.

Hey, again, just on your question, a couple things.

Speaker Change: So, with regards, let's focus on North American urban markets that are very heavily dominated by hotels. The vast majority of people going to city in North America are staying in a hotel, which is good for us insofar that there's so much room to grow. So what are the, what are the, what's the value equation?

It's really four things

Speaker Change: Why do people book hotels? Well, the first reason they book a hotel is because it's pretty frictionless to book.

Speaker Change: That's why we've been working on all those product optimizations, especially usability, to make it easier to book an Airbnb.

Speaker Change: The second is they know what they're going to get. Whether you like the hotel or not, you kind of know what to expect. And so that's why we've been focused a lot on reliability, and we're going to do a lot more on reliability and quality.

Endless services that can be offered on Airbnb.

Speaker Change: And then finally, I think affordability is a reason you'd book Airbnb. In fact, we have a campaign we've been running.

Speaker Change: Some trips are better than Airbnb, and it's been incredibly successful. It highlights the difference between Airbnb and hotels, and it basically says, we're not saying we're better than Airbnb and hotels for every trip, but if you're traveling with other people, it's almost always better, and almost always significantly more affordable on Airbnb. So, just tend to like back the zoom out.

I believe, I don't know when this will happen.

But I do believe there's probably a tipping point.

Speaker Change: We're a whole bunch of guests that don't consider Airbnb or use it only for maybe non-urban markets or for really large group family travel But don't use it for business travel or urban markets

Speaker Change: There's a tipping point where if we keep making the service more reliable, we add more services, we make it more affordable, even more frictionless, eventually there's a tipping point and I think a lot of hotel travelers will come to Airbnb or use us for more of their share of wallet. So I think I can't possibly predict when this will happen, you know, but what I can predict is how much faster our service can improve and that's going to happen over the coming years pretty quickly.

Speaker Change: Our next question comes from the line of Kevin Kopelman with TD Cowen. Please go ahead.

Kevin Kopelman: Thanks. Could you give us an update on how you're thinking about advertising services in your priority list as you're rolling on new businesses? Thanks.

Kevin Kopelman: that's successful has done this. We've looked at this. We definitely think this is easily a billion dollar revenue opportunity. It's not a matter of if, it's a matter of when. It's not the most perishable opportunity, so it's not something we'll be doing this year, but it's definitely something on the horizon.

Speaker Change: Our next question comes from the line of Navid Khan at B. Riley Securities. Please go ahead.

Navid Khan: Thanks. Maybe just on the, you know, the urban demand, Brian, and you talked about how a lot of people just look hotel. Can you maybe touch on regulation and...

Speaker Change: Do you think, do you see movement there in terms of how that might become more favorable, especially in larger cities like New York might start to open up?

Speaker Change: Give us some thoughts there, and then if I have to think about regulation...

and maybe at a bigger scale.

Speaker Change: I think Europe has been pretty heavy on regulation, especially on the larger platforms. Anything in terms of either becoming a deemed gatekeeper or not, just any thoughts that would be helpful. Thank you.

Speaker Change: Yeah, sure, I'll take the first part and I'll let you know in a second.

Speaker Change: With regards to regulation, let's just frame it. So, our top 200 markets...

Take compromise comprise the vast majority of revenue

Speaker Change: 80% of those jurisdictions have regulations on the books for Airbnb, regulations as in they recognize us.

And we've now quite remitted.

Speaker Change: around $13 billion in hotel occupancy tax and we have a, you know, really a great history of partnering with cities.

Speaker Change: I think the trajectory for cities is increasingly, I think, when we first started, cities didn't really know what to make of us. This is like 10, 15 years ago. I think some people thought Airbnb was a problem.

Speaker Change: And I think, increasingly, cities are thinking of us as partners and they're thinking of us as a solution to their problems. I'll just give a couple examples. Last summer, you know, Paris had a really big problem.

Speaker Change: Millions of people were coming to Paris and they didn't have hotels to put them in.

Speaker Change: So Airbnb, we went from 100,000 to about 100,000, 150,000 homes.

Speaker Change: partnering with the IOC, the Olympic Committee, and the city of Paris, the French government. We had great support and we were able to house 700,000 guests in Paris during the Olympics. Imagine that. That's like

Speaker Change: More than 10 Olympic stadiums where the Gatsby's are staying in AirBnB.

Speaker Change: I think the Paris Olympics was so successful that the city of Milan...

Speaker Change: and the City of L.A. are now looking at how we can be a solution for their challenges with, you know, compression nights during the Olympics. And I think cities all over the world are looking at Airbnb as a solution to be able to accommodate guests for large events.

Speaker Change: where money goes into local communities and it limits hotels' ability to essentially create surge pricing.

Speaker Change: Another solution we've been is during times of disaster, you know, there was a devastating LA fire that I'm sure you're all aware of About a month ago and you know a large number of people were displaced

Speaker Change: Well, Airbnb and working with EMEA.org has housed more than 19,000 residents of Los Angeles that were displaced because of the fires.

Speaker Change: and so I think generally the conclusion here is that I think we're developing some really great momentum. I think cities are seeing us as a partner.

Speaker Change: I think that New York City remains an outlier. They banned the majority of our business.

One year later

As of, I think, last September,

Speaker Change: The last data I saw, rents, they basically banned Airbnb with the idea that rents would go down. What we've seen is rents aren't down year over year. In fact, rents are up, I think, 3% year over year. There hasn't been meaningful supply, housing stock going back in the market. And guess what happened to hotel prices? They're actually up 7% year over year.

Speaker Change: So I think New York's a cautionary tale, and I do not think cities are going to follow it. I think they're going to like CF much more as a solution to a problem.

Speaker Change: And then just on your second question related to DMA, no real change here from last quarter. It doesn't really apply to us.

Speaker Change: Our next question comes from the line of Colin Sebastian at Baird. Please go ahead.

Colin Sebastian: Thanks and good afternoon. I guess two quick ones for me. First off, I guess from a competitive standpoint,

Colin Sebastian: Brian and Ellie, the tone of the letter comes across, I think, is quite a bit stronger in terms of leading the industry. So, I'm curious if that's more the result of your performance to date.

Colin Sebastian: or is that more about what's to come in terms of putting more distance between Airbnb and competitors?

Colin Sebastian: And then secondly, on experience, I know we don't have the formal relaunch yet, although I enjoyed a nice food tour recently, purchased the platform. But just curious on the progress you are seeing in repopulating the marketplace or ingesting more and higher quality experiences before the relaunch. Thank you.

Great.

Thanks, Colin.

Colin Sebastian: Just giving a little bit of an update in terms of the competitive environment, what I would say is that our results in Q4 and 2024 support that we continue to gain market share on a year-over-year basis, both globally as well as at a regional level. This is true both from a traffic share as well as a nightstay perspective.

Colin Sebastian: And what we've seen of late is predominantly market share gains coming from hotels. I think all the product improvements that Brian has shared throughout this call, as well as the increases we've seen in terms of brand consideration, have really been attracting more, frankly, classic hotel users to try our product. And has allowed us to continue to gain market share. I think one of the underlying questions I'm sure people have is vis-a-vis

for

Colin Sebastian: What I would say there is that Ferbo obviously had a very soft comp in terms of their business contracting in the U.S. or globally in Q4 of 23. And in the last quarter, what we see is that the markets that we tend to compete against them in, in particular non-urban U.S. markets, it was actually one of our fastest growing segments in the U.S. So even in that comparison point, we feel like we're doing quite well.

Colin Sebastian: The other point I would make on the competitive front is that

Colin Sebastian: We continue to see that on the supply side, we're number one leading in terms of total supply growth.

Colin Sebastian: and number two, in terms of the new listings coming online.

Colin Sebastian: The majority come to Airbnb and the majority are exclusive. So further extending our differentiation with regard to both the breadth, but also the differentiation of the supply that is key to to the brand and key to the guest value proposition for Airbnb.

Speaker Change: Our next question will come from the line of John Colentoni with Jefferies. Please go ahead.

John Colentoni: Thanks so much for my questions. First one on conversion. When you look at how travelers interact with your booking experience and begin to think about how best to layer in new services over time,

John Colentoni: Talk about how you're planning to evolve search and discovery to help balance steering users to your new services while simultaneously maintaining conversion on accommodations.

John Colentoni: And second, I'd be curious to get your perspective on the opportunity to use new services to create some flywheel effects by which maybe you're acquiring new customers through new products or driving more multi-product bookings to help increase customer lifetime value. Thanks.

John Colentoni: Yeah, so let's talk a little bit, you asked about the conversion funnel and how we think about adding in new products, and I think the question is really, how do you, how do you launch and merchandise new products while not creating some risk to your core offering?

John Colentoni: and I think this goes to one of our key learnings in terms of the experiences product that we've had historically versus what we want to put into market in coming months.

John Colentoni: And one of the insights there is that the kind of classic generalized traveler does not come to our site or any other site to book their entire trip.

John Colentoni: Instead, they, you know, tend to book their airline, they tend to book their accommodations. Once they get through that, they're very relieved that that is behind them, and they kind of sit on the sidelines for weeks or months in advance of the trip until they start thinking about, what do I need to book to fill out my itinerary?

John Colentoni: And so when we think about how to launch these new offerings, we want to be very mindful of the guest journey and to be very thoughtful with regard to both personalization and timing around what type of product are we merchandising to the customer at what point.

John Colentoni: so that we can obviously have the best conversion impact by merchandising the right thing.

John Colentoni: In terms of the flywheel, I think as we have been considering what both near-term and long-term future offerings will be,

John Colentoni: We're very focused on adding things to the platform that not only will be solid businesses in and of themselves, but also make the core offering better. So that's part of our criteria in terms of selecting new offerings.

John Colentoni: What if added to the platform would actually, you know, likely cause people to one, book more frequently in terms of accommodations, but also come back to the app or the service on a more frequent basis than they do today, because we have a variety of offerings that may work not just on their trip, but also when they are in their home markets.

Brian Chesky: And that will conclude our Q&A session. I'll turn the call back over to Brian for any closing remarks.

Brian Chesky: All right, well, thanks, everyone, for joining us today. Just to recap, we ended 2024 with nice growth, accelerating, and...

Incredible, man. I'm heading into 2025.

Brian Chesky: Free Cash Flow was $4.5 billion for the year, representing a free cash flow margin of 40%. And our strong balance sheet enabled us to repurchase $3.4 billion of common stock.

Brian Chesky: I'm really proud of what we've accomplished, but this is just the beginning. 2025 starts, marks the start of Airbnb's next chapter. All right. Thank you all.

Brian Chesky: That concludes our call for today. Thank you all for joining. You may now disconnect.