Q1 2025 Airbnb Inc Earnings Call
These items were also posted on the Investor Relations section of Airbnb website.
During the call, we'll make brief opening remarks, and then spend the remainder of time on Q&A.
Now 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 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 you.
You should be aware that these statements should be considered estimates only and are not a guarantee of future performance.
Also during this call we will discuss some non-GAAP financial measures.
We've provided reconciliations to the most directly comparable GAAP financial measures in the shareholder letter posted to the Investor Relations website.
These non-GAAP measures are not intended to be a substitute for our GAAP results.
Brian: With that I'll pass the call to Brian.
Brian: Well good afternoon, everyone and thanks for joining us we had a strong start to 2025.
Brian: In Q1 guest on Airbnb.
Brian: Nearly 25 billion.
Brian: These results show no matter whats happening in the world people continue to choose Airbnb.
Brian: And that's because our model is inherently adaptable.
Brian: It's something we've proven time and time again.
Brian: Starting to Airbnb during the great recession of 2008.
Brian: People turn to us for a more affordable way to travel and.
Brian: And they started to hosting airbnb to earn extra income.
Brian: Then in 2020 when the pandemic.
Brian: We provided a way for people to travel close to home and as a result, our business quickly rebounded and by the end of that year, we have been public.
Brian: Today.
Brian: Things feel uncertain once again.
Brian: But just as we've shown in the past as the world changes Airbnb will continue to adapt and that's because we have millions of host offering nearly every type of home and nearly every price point from budget to luxury and neighborhoods in cities all over the world.
Brian: Your host Airbnb remains a great way to earn meaningful income.
Brian: Now before we get into Q1 results I wanted to just talk for a moment about where we are as a company.
Brian:
Brian: We've been focused on driving long term growth as well as preparing for <unk> next chapter when will offer more than a place to stay.
Brian: And we've been laying the groundwork to make this transformation for years and there are two key things we've done to get ready.
Brian: First we wanted to make sure that people loved our core services were relaunched anything new so we spent the last few years rolling out hundreds of upgrades to make me better for guests in house.
Brian: It's now easier to use more affordable and more reliable.
Brian: And just one example of this is the launch of guests favorites, which is a way for people to easily find the best place to stay on Airbnb.
Brian: Since launch over 350 million nights booked have been booked at guest favorites listings.
Brian: Okay.
Brian: We've also worked hard to improve affordability and price transparency, we're just are especially top of mind for people today.
Brian: Guests told us prices weren't transparent enough, we introduced the chagal that let them see the total price upfront.
Brian: Over 17 million guests have used over the past two years and last month, we rolled out total price display globally. So now the price you see upfront includes all fees.
Brian: But perfecting our core service wasn't enough.
Brian: To expand beyond homes, we needed an app that could support new offerings now until now our App has really done one thing which is the less you book a home.
Brian: So we rebuilt from the ground up on a new technology stack and now we can innovate faster and offer much more than homes.
La: So we're ready for <unk> next chapter on Tuesday May 13th one Bill for 2025 summer release, and you can visit our web site that day to watch the announcements and see all the details so with that I'm going to turn the call over to la for a financial update.
Brian: Thanks.
Speaker Change: Thanks, Brian and good afternoon, everyone.
Speaker Change: I'll start with a review of our Q1 financial results and then I'll walk through our outlook for Q2.
Speaker Change: As Brian mentioned, we had a strong first quarter, we had 143 million nights and experience is booked up 8% year over year.
Speaker Change: Looking at this year over year growth by region Latin America grew in the low twenties Asia Pacific grew in the mid teens Europe in the mid single digits in North America, and a low single digit.
Speaker Change: Revenue for the quarter was $2 3 billion up 6% year over year.
Speaker Change: If you exclude the impact of FX and calendar factors revenue would have grown 11%.
Speaker Change: As a reminder, those callous calendar factors include Easter falling in Q1, 2024, and the extra day from Leap day last year.
Speaker Change: We generated $417 million of adjusted EBITDA, which represents an 18% margin.
Speaker Change: Next I'll turn to our balance sheet and cash flow.
Speaker Change: We continue to generate significant cash in Q1, delivering $1 $8 billion of free cash flow.
Speaker Change: Over the past 12 months, we've generated $4 4 billion, representing a free cash flow margin of 39%.
Speaker Change: At the end of Q1, we had $11 5 billion of corporate cash and investments as well as $9 2 billion of funds held on behalf of guests.
Speaker Change: Strong balance sheet allowed us to repurchase $807 million of our common stock during the quarter.
Speaker Change: And at the end of Q1, we had $2 5 billion remaining on our repurchase authorization.
Speaker Change: Now, let's shift to our Q2 and full year of 2025 outlook.
Speaker Change: Despite the recent volatility in the global economy. We believe we are positioned to deliver strong results in Q2.
Speaker Change: We expect to deliver revenue between $2 99 billion to 3.05 billion, representing 9% to 11% year over year growth.
Speaker Change: This includes a benefit of approximately two percentage points due to the timing of Easter.
Speaker Change: For nice and experiences booked we expect year over year growth in Q2 to moderate relative to Q1.
Speaker Change: So far in Q2, we saw strong guest demand for Easter travel in Europe, and continued momentum in Latin America, which remains our fastest growing region.
Speaker Change: In the U S. We've seen relatively softer trends, which we believe is largely driven by broader economic uncertainty.
Speaker Change: On profitability, we expect adjusted EBITDA to increase year over year with adjusted EBITDA margin expected to be flat to slightly down compared to Q2 2024.
Speaker Change: Marketing expense will grow faster than revenue in Q2, mostly due to our upcoming summer release and investments in growth initiatives.
Speaker Change: For the full year, we continue to expect an adjusted EBITDA margin of at least 34, 5% in line with what we shared in February.
Speaker Change: Now that includes $200 million to $250 million of investment to launch and scale new businesses in 2025.
Speaker Change: These investments will have the biggest impact on our margins in the second half of the year since our new offerings go live on May 13th.
Speaker Change: Now as these new businesses scale over the coming years, we expect them to be significant drivers of future revenue growth.
Speaker Change: Now looking ahead, our priorities remain consistent with last quarter. As a reminder, we're continuing to drive long term growth and delivered market share gains to three key growth levers.
Speaker Change: First we are protecting our core service.
Speaker Change: As Brian mentioned, we've made significant we've made airbnb significantly better for both guests and hosts.
Speaker Change: We've been driving growth from product improvements like enhanced search and better merchandising.
Speaker Change: One example is the newly redesigned rare finds feature that better highlights popular high quality listing.
Speaker Change: We also simplified our checkout page to make booking easier.
Speaker Change: These are just a few examples of the product optimizations that are contributing to our topline.
Speaker Change: But we know there's still more work to do.
Speaker Change: Second we are accelerating growth in global markets.
Speaker Change: We're taking a much more localized approach to product and marketing and underpenetrated markets around the world.
Speaker Change: This is a multiyear strategy, but we've already seen encouraging results.
Speaker Change: For the fifth quarter in a row.
Speaker Change: Growth in these expansion markets significantly outperformed our core markets in fact, the average growth rate in Q1 and expansion markets with more than double that of our core markets.
Speaker Change: <unk> continues to lead the way in Q1 origin nights in Brazil grew 27% and first time bookers grew over 30% both accelerated from Q4.
Speaker Change: Third we are launching and scaling new offerings.
Speaker Change: This begins on may 13th.
Speaker Change: In fact more on that soon.
Speaker Change: Now to wrap up before we go to questions, we're staying close to geopolitical and macroeconomic uncertainty and monitoring any short term impact they could have.
Speaker Change: As Brian mentioned in his remarks, we have an adaptable and diversified business that has been resilient during periods of uncertainty most.
Speaker Change: Most recently as Covid.
Speaker Change: Despite signs of near term volatility remained focus on the long long term opportunity to both grow our core business and expand into new ones.
Speaker Change: We believe that our efficient operating model financial strength and significant liquidity give us the ability to pursue these multiyear initiatives in the current environment.
Speaker Change: And with that I will open it up to Q&A.
Speaker Change: Thank you we will now begin the question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue if you'd like to withdraw your question simply press Star. One again, we ask that you. Please limit yourself to one question only.
Speaker Change: Our first question comes from the line of Justin Post from Bank of America. Your line is open.
Justin Post: Great. Thank you I Wonder if you could expand a little bit on the letter on travel corridor changes are you seeing any differences in like total volumes of bookings from from just a quarter changes like like in Europe, and I know you already mentioned, Canada is that driving any change for you and then do you think there's any market share impact in.
Justin Post: The U S or do you think you're holding your share its just the whole.
Justin Post: Kind of countries are a little depressed. Thank you.
Speaker Change: Okay, Bryan why don't I take this let me let me first talk a little bit about travel corridors and in particular, you mentioned, Canada, we called it out in the letter let me tell tell you a little bit about what we are seeing in particular with regard to the inbound corridor to the U S.
Speaker Change: We absolutely have seen a decline in popularity of foreign travelers coming into the U S.
Speaker Change: What we have seen is that and number one is less popular to come to the U S. From a year ago also relative to the beginning of the year and what we're seeing in that segment is two things. One is that that segment is a very small portion of our overall business as a reminder, U S travel is predominantly domestic.
Speaker Change: And as a result that corridor of foreign travelers coming to the U S is approximately 2% to 3% of our overall business. So it's frankly not quite material at the same time, what we're seeing is within that corridor guests who would've in a prior year have come to the U S are simply choosing a different location. So I think Canada is the most obvious.
Speaker Change: Where we see Canadians are traveling at a much lower rate to the U S. But they are traveling more domestically. They are traveling to Mexico. They are going to Brazil, theyre going to France, or going to Japan, and I think what you tell that what that tells you about the distribution is that in this moment, it's not necessarily that people don't want to travel there just using <unk>.
Speaker Change: <unk> destinations and Airbnb as a platform given our distributed supply.
Speaker Change: It provides an adaptive away for them to find a new a new location. So that's the comment I would say on the on the corridor.
Speaker Change: In terms of market share in the U S. I would say that we continue to have very strong market share in the U S. We are not seeing.
Speaker Change: Any any losses of market share much to the contrary, we continued to gain market share in the U S. But we do see generally that as a market in North America for the last several quarters has been.
Speaker Change: The slowest lower across the industry.
Speaker Change: Your next question comes from the line of Richard Clarke from Bernstein. Your line is open.
Richard Clarke: Alright, Thanks for taking my question just wanted to delve a little bit into what is the behavior, you're seeing from the use cases slow down is it delayed booking windows at the higher cancellation rates shorter trips trading down.
Richard Clarke: Some nature of what you're actually seeing in I guess.
Speaker Change: Maybe a few troubled companies.
Things got a little bit better towards the end of April.
Speaker Change: Are you seeing that is there any sort of light at the end of the tunnel there.
Speaker Change: With regard to BELBUCA.
Speaker Change: Things picking up in the loss of a few days or weeks.
Speaker Change: Yeah.
Speaker Change: Thanks for the question Richard So let me double click I just talked about the corridor that is inbound to the U S. Let me talk now about what we're seeing with regard to U S. Domestic travel, which again is the lion's share of overall U S destination.
Speaker Change: Things to comment on one is we are seeing the higher income traveler somewhat impacted by the current macro.
Speaker Change: The conditions, we see in particular at the higher <unk> of our bookings.
Speaker Change: The growth is very stable and very healthy for the U S traveler.
Speaker Change: In terms of lead times, we're seeing something else, we're seeing that the short lead time, so that would be bookings that are just around the quarter that could be in two days or a week or two weeks, we're seeing relatively strong growth there, whereas in the longer lead times and in particular those bookings that are far more than say a month.
Speaker Change: Out that is where we're seeing the relative softness and so I think what you what you take from that and Doubleclick in terms of the lead times is that we do have some U S. Consumers that are waiting and seeing before they book their summer travel and I think the the one thing that gives us some comfort in.
Speaker Change: In terms of seeing the weakness at those longer lead times is that we have seen movements in terms of lead time shifts many times in the past I think the most recent call out was last summer where we saw in June and July a truncation of lead times are somewhat similar to what we're seeing today and what we saw that as that.
Speaker Change: People waited for a while but they did end up booking that trip. It was just closer to the checking day. So that's something that we're obviously monitoring quite closely both globally, but also in particular to the U S.
Speaker Change: As we believe the U S is obviously the most impacted by a lot of the headline noise currently.
Speaker Change: The one thing I would also add.
Speaker Change: Is we haven't particularly seen consumers trade down in terms of choose a lower ADR bark booking or a.
Speaker Change: A shorter trip that that has not been any.
Speaker Change: That we've seen.
Speaker Change: Your next question comes from the line of Mark Mahaney from Evercore ISI. Your line is open.
Speaker Change: I wanted to ask about what you think are the best chances for re accelerating your your units Youre nights and experiences. If we just leave aside experiences for now like what what in terms of the the core accommodations unit growth. I think you are investing to get back to double digit unit growth in all the different things you are rolling out.
Speaker Change: Co hosting is it really leaning into the expansion markets is there something else maybe marketing what are those do you are you counting on to be most impactful in order to get that get that recovery back to double digit.
Speaker Change: This growth thank you very much.
Speaker Change: Yeah, Hey, Mark.
Speaker Change: Let me take this.
Speaker Change: So, yes, I guess I would just say.
Speaker Change: We think we're just scratching the surface of how much bigger than our core business could be.
Speaker Change: And there's no reason to think it could not be double the size of it today and then the question is well what would you have to believe I think the first thing we want to do is to continue to protect our core service to do that we really have to do three things.
Speaker Change: To make easier to use we've got to make them more affordable and we got to make it more reliable.
Speaker Change: For example, starting with reliability for every person who books and Airbnb. We estimate about 90 people are booking hotels. So if we could just get one of those nine people to book, an airbnb that essentially with double the size of our business and the number one reason people say they don't use an airbnb is they don't find it historically as reliable as the hotel.
Speaker Change: Why we are really trying to elevate the best <unk> and removed the worst so we know guest favorites 350 million nights have been booked in guest favorites.
Speaker Change: We've also removed 150000 listings this has created.
Speaker Change: A lot higher customer satisfaction reduce customer service tickets and we think over time more and more people are going to come to Airbnb. So we're going to do a lot more mark on making everything more reliable on affordability, we know that that's a big driver of growth.
Speaker Change: It started as affordable alternatives hotels, we.
Speaker Change: We lost a little ground versus hotels during the pandemic, but I think in the last couple of years hotel prices have gone up more than Airbnb I want to call out that as of last month, we have rolled out total price displays globally. So now the price you see before taxes in the United States and <unk>.
Speaker Change: Really inclusive taxes say in Europe include all fees, so and.
Speaker Change: And I think this is really important because it drives customers to the best value Airbnb, which you rank higher and incentivize the best behavior for host.
Speaker Change: On the usability standpoint.
Speaker Change: The vast majority of our people come to you and we don't find the booking Airbnb last year was accessed by over $1 5 billion devices. So think about like how many people come here can be they don't find the places day part of this is having the right homes for them, but also having the right tools. So we think protecting the core is a huge driver to growth.
Speaker Change: That is really going to be a big driver in our core markets, our core markets our U S.
Speaker Change: Australia, Canada, UK, and France, and for English speaking countries, plus branch, which makes up about 70% of our growth or our business.
Speaker Change: Yes.
Speaker Change: More <unk>.
Speaker Change: Both markets emerging markets would be Spain, Italy, Germany, Mexico, Brazil, and then the big four countries in Asia or China, India.
Speaker Change: Korea, and Japan, and these markets are actually growing twice as fast as the aforementioned five core markets and we're going to step on the gas and I think that international will be one of the biggest growth drivers that will get us back to double digit growth on airbnb. So that's just a little bit it's really third horizon horizon, one but.
Speaker Change: Biggest near term opportunity is continue to increase conversion rate by making a BBB.
Speaker Change: Easier to use more quarter more reliable horizon two really.
Speaker Change: Is international growth and then of course, the longest horizon will be expanding our core business too.
Speaker Change: Offerings beyond points today.
Speaker Change: Your next question comes from the line of Jed Kelly from Oppenheimer. Your line is open.
Jed Kelly: Hey, great. Thanks for taking my questions. Just two just just circling back on the U S. I think I've asked this before but just in some of these urban markets do you think about leaning more into hotels and then just on the full year guidance.
Jed Kelly: You reiterated your margin guidance, but any any reason given the macro uncertainty for not widening the margin range. Thanks.
Jed Kelly: Yes, I can take hotels and I'll, let you know I always think of any heart Jud.
Jed Kelly: So yes.
Speaker Change: We think hotels is a massive opportunity for Airbnb in 2019, we acquired hotel Tonight and that was basically under the philosophy that while people came to Airbnb looking for a unique prices today is typically your home the vast majority of people come to Airbnb don't end up booking and one of the reasons is the window shopping and they're not ready to book.
Speaker Change: But sometimes especially in popular markets urban areas. When a lot of people are traveling airbnb homes are booked and we have a fairly high occupancy and we need other places stay in hotels, you are a great way to fill in network gap during the pandemic, we had to pause some of our efforts in some of our progress because you really wanted to focus on getting back to the base.
Speaker Change: <unk>.
Speaker Change: But now that we've made a huge amount of progress on our core business, making over 500 improvements and upgrades over the last three years, we are prepared to expand beyond our core and actually one of those expansions is hotel.
Speaker Change: One of the things you saw what we just did a promotional hotel Tonight. So now if you book a hotel and hotel Tonight, we're offering 10% credit towards an airbnb booking this of course increases <unk>.
Speaker Change: First the rate on hotel Tonight, but also introduces a number of hotel travelers to airbnb over the coming years, we're going to be doing a lot more though on airbnb application to bring more great hotels onto Airbnb, we think.
Speaker Change: Almost all the hoteliers in the World would love to have Airbnb as a distribution channel and so we think theres a lot of opportunity.
Speaker Change: Over the coming years, so absolutely can be part of our strategy.
Speaker Change: And then on the second question with regard to the margin guidance. We reiterated the plan that we had shared in February we believe it gives us.
Speaker Change: Considerable room to continue to focus on strengthening the core business, while investing in growth initiatives and no material change in terms of that that investment profile for the year.
Speaker Change: Your next question comes from the line of John calling Tony from Jefferies. Your line is open.
John Tony: Great. Thanks for the thanks.
John Tony: Thanks for the question I wanted to start with sort of the momentum in the business with growth in 2024, peaking in December and strength continuing in early 2025, I'm curious how growth has trended throughout the quarter and into April is a growth sort of at a low point right now for the year or does it sort of dip a little.
John Tony: Earlier in the quarter and has.
John Tony: Since improved from there.
Speaker Change: Second question, just sort of looking specifically at the expansion markets I'm curious if you could just sort of characterize how growth has progressed there specifically this quarter compared to last quarter. When you called it out as a key contributor to the strength that you saw.
Speaker Change: Thanks, John Let me, let me start with the first question in terms of.
Speaker Change: How is the growth has trended effectively year to date.
Speaker Change: So I think it's actually interesting to understand the path that both we and I think the industry went through in Q1.
Speaker Change: If you recall January was a very strong month, followed by softness in February you'll recall, there was a bunch of revisions to guidance in terms of the airlines and I think what they saba, but we saw a slightly less degree of it was it was a step down from January to February that coincided with.
Speaker Change: A pretty meaningful decline in consumer sentiment over that sequential month to month period and yet when we look at our full quarter results for Q1 softness that we saw in February effectively rebounded and recovered in March such that the full quarter was was generally in line with our expectations. So I think when we fast.
Speaker Change: Or today.
Speaker Change: And the headlines are quite volatile I think we do have to recall that since the beginning of the year. There has been some temporal shifts.
Speaker Change: In terms of when people are booking but from that Q1 period. What you. What you gauge is that people may pause on the booking but but what we've seen today is that they come back and do it. So I wouldn't say that April is necessarily below there has been some a.
Speaker Change: Week to week and month to month volatility since the beginning of the year.
Speaker Change: On the expansion markets.
Speaker Change: Well, what I would say I would say generally speaking, we see nice nice momentum in those markets.
Speaker Change: In particular, what I would say is that Latin America accelerated over the course of <unk>.
Full year 2024, and if you look at Latin America's growth in Q1 is actually above where we were in Q1 of last year, which I think gives you a sense of if we're able to achieve momentum in a particular market based on our product and marketing localization, we can maintain at an accelerated overtime obviously.
Speaker Change: But then the new ones that every country is slightly different but I think.
Speaker Change: Anchoring on the performance that we've had across Latin America or in Brazil. In particular, it gives you a sense of the ability to build momentum in these relatively under penetrated market.
Speaker Change: Your next question comes from the line of Lee Horowitz from Deutsche Bank. Your line is open.
Lee Horowitz: Great. Thanks for taking the question two if I could.
Speaker Change: Last quarter, you guys talked about the ability to leverage marketing expense in some of your core markets, which gives you the ability to invest in the growth markets I guess as things, perhaps slow a little bit how do you think about perhaps leaning into that slowness to take some more share to take advantage of a weaker market to pick up share, particularly.
Speaker Change: Relative to say some of your competitors that have talked to trying to be more aggressive as things slow do you still think you can leverage.
Speaker Change: Marketing in your core markets are under those assumptions.
Speaker Change: Yeah, I would say absolutely obviously, we started the year with a full year marketing plan and yet every month, we're looking at the relative efficiencies by channel by market and adjusting accordingly, So I would say broadly speaking for the year, we retain quite a bit of flexibility to put more money into.
Speaker Change: New channels that are working in markets that are working and to cut where we see less desirable results and so so far this year, we've been doing that on a regular basis as we would in prior years.
Speaker Change: Your next question comes from the line of Ron Josey from Citi. Your line is open.
Speaker Change: Yeah.
Ron Josey: Hi, Thanks for taking the question two please I wanted to ask just on the new product launch on may 13th and experiences or something else talk to us a little bit more about the plans integration plans across the site and how you think or whether any contribution from these new products are included in guidance and then on the affordability or just a volatile headlines daily that we can talk.
Ron Josey: About the love your thoughts on just how Airbnb is affordability initiatives could drive greater bookings. We saw this summer travel data, where I think U S. Gastro prioritizing staycations than more plan to drive maybe that's an opportunity for the team talk to us about that please thank you.
Ron Josey: Okay. So on the first question I believe it was what's the impact of the new business launches with regard to our guidance. So I would say.
Ron Josey: The launch date is and <unk> and we're extremely excited in terms of what is to come I wanted to start on that day, but it is it is just the beginning and so the impact on the top line in the current quarter will be relatively modest, whereas as we scale those offerings. They will obviously increasingly contribute to the topline in terms of the expense and the.
Ron Josey: The investments associated with that launch they're building over the course of the beginning of the year and as we said in the in the guidance language, you will see them or meaningfully hit them.
Ron Josey: EBITDA in terms of compression in the back half of the year as we scale the investments behind that.
Ron Josey: The launch.
Speaker Change: In terms of affordability I think your thesis here is exactly right, what we saw and it's not a it's not a purple perfect comp, but I do think it is instructive here, what we saw five years ago in terms of the pandemic was when certain.
Ron Josey: Portions of travel were inaccessible.
Speaker Change: People find other things to do on our platform.
Speaker Change: Brian and I share in terms of the opening and just to remind everyone. This business model has a huge amount of diversity in its offering which allows us to be extremely resilient and adaptable as consumer behavior changes and so as I think about the current environment that we are in you can think about for example, the U S guests theres an opportunity for us to merchant.
Speaker Change: The lower cost listing or the more proximate listing where the guest doesn't need to travel for that doesn't need to take a fight for the summer, but they can drive there's a huge amount of them.
Speaker Change: Optionality with regard to the diversity of our offerings that can allow us to better merchandize what is applicable to the guests in the current moment.
Speaker Change: Your next question comes from the line of Justin Patterson from Keybanc. Your line is open.
Justin Patterson: Great. Thank you could you talk more about the behavior of the guests for booking primarily in app versus those from a rising through the web or you're just saying greater frequency rates repeat rates, so on and so forth. Thank you.
Justin Patterson: So broadly I would say the demo is slightly different in terms of the app relative to the web I would say the broader thing to take away in terms of the movements. We've made in terms of bookings share moving to the App is that we know the app is a much better experience for the <unk>.
Speaker Change: Tumor we see this most.
Notably just in terms of of conversion rates I'm getting people to use our apps.
As compared to in particular Moab, it's a much better experience that we have have designed and so we want to migrate people to that experience you can see that the booking share has gone up quite dramatically over the last couple of years as we encourage people to use.
Speaker Change: Our app and and as a result, it's a it's a it's additive in terms of the consolidated conversion levels.
Doug Anmuth: Your next question comes from the line of Doug Anmuth from Jpmorgan. Your line is open.
Doug Anmuth: Great. Thanks for taking my question.
Speaker Change: This is a pay off for vote.
Speaker Change: First of all Brian you've been pretty vocal about user experience in travel. So curious to hear how you experienced with Airbnb to change as you move beyond places to stay and new choices, introducing your frictions and then secondly.
Speaker Change: How do you guys think about the long term sustainability of the margins of your efforts to move beyond the core scale overtime. Thank you.
Speaker Change: [laughter].
Doug Anmuth: Hey, Doug.
Doug Anmuth: I, let me just start by saying.
Speaker Change: I think one of the superpowers of Airbnb is our design team and our ability to make something incredibly easy to use.
Doug Anmuth: When we started to Airbnb, we didn't really invent the idea of vacation rental.
Doug Anmuth: Existed before us, but what was what was true is that they were very hard to book.
Doug Anmuth: Before I being B, you Couldnt actually book, a vacation rental online the messaging platforms really were nonexistent, we're very rudimentary very.
Doug Anmuth: Very few people actually left reviews people don't really have an account and so kind of one of the things. We've really tried to do when we created Airbnb what design the system of trust and Thats, something thats easier more people do it.
Doug Anmuth: So what we're noticing for example is many of them do this is we're going into they also have similar frictions as our core business did.
Doug Anmuth: Or vacation all state before we basically created a category, which is what we now call Airbnb and so that's one of the things is we're going to try to the things we're going to offer we want to be instant book, we want to be like really easy we wanted to have that great urban visa volume.
Doug Anmuth: But the other thing is.
Doug Anmuth: Couple of other things with user experience.
Doug Anmuth: A lot of companies have tried to buy designs.
Doug Anmuth: End to end travel I think designing end to end travel is very very hard it's funny.
Doug Anmuth: There is this funny thing one of the most common startup ideas for entrepreneurs to do a travel planning up.
Doug Anmuth: And yet travel planning apps almost always fail. So it's almost like a riddle why do travel planning apps sale and every everyone really tried to do it and the reason why is because to plan travels very complicated in fact, it's so complicated many people have assistance and a big part of the job that the plane travel for them and you use it infrequently.
Doug Anmuth: It's a very difficult thing to do and you do it in frequently and so therefore, a lot of companies have failed to design.
Doug Anmuth: So called connected trip.
Doug Anmuth: Zinc.
Doug Anmuth: To do this a lot of it is to design a really good user experience and I think that's one of the things that we're going to try to do to really design a great experience to be able to book your entire trip and much more I think the user interface of the important I think AI will be important way to do this as well.
Doug Anmuth: AI is I think as I said before we're really.
Doug Anmuth: We're really focused on customer service and solving the most difficult problems for customers and working backwards towards travel inspiration.
Just one thing I'll say about AI, which is definitely making the customer experience easier as we just rolled out our AI customer service agents.
Doug Anmuth: This past month.
Doug Anmuth: 50% of.
Doug Anmuth: <unk> users are now using the agent and we'll roll it out to a 100% of USD is just this month, we believe that the best AI supported customers travel agent in travel it's already led to a 15% reduction in people.
Doug Anmuth: Meeting the contact.
Doug Anmuth: Live human agents, and it's going to get significantly more personalized <unk> over the years to come so essentially that's what we're focused on we're focused on making everything instant book and easy to use we're trying to make sure that the travel experience is really really wonderful.
Doug Anmuth: Great Airbnb design, and we're going to bring more AI into the application. So that Airbnb you can really solve your own problems with great sell solved through AI customer service agents.
Doug Anmuth: Great, Let me add a little bit.
Doug Anmuth: Okay, Let me talk a little bit about long term margins I think just starting with our core business. Obviously, our core business has extremely strong EBITDA margins and cash flow generation abilities, I think you've seen us bring that up over time in particular subsequent to the pandemic and where we sit today, we see incremental efficiencies that we can.
Doug Anmuth: Do you need to drive across that core business and every year. We're seeking to do is strengthen and make more efficient that core business. So that we have incremental room to invest in growth from year to year, we may choose to invest more in growth relative to the efficiencies that we generate I think youre seeing that in the current year, but the intent.
Doug Anmuth: Both with the core and the new businesses is to invest in growth upfront and to optimize the margins over time I think that the portfolio overtime, we expect to have quite compelling margins.
Doug Anmuth: Your next.
Speaker Change: Question comes from the line of Nick Jones from citizens. Your line is open.
Speaker Change: Your next question comes from the line of Ken Goralski from Wells Fargo. Your line is open.
Speaker Change: Thank you very much I appreciate the question.
Speaker Change: Okay.
Speaker Change: Brian a question for you.
Speaker Change: As you think about the ADR and the opportunity the balance.
Speaker Change: I'll go back over the last couple of years, you've talked about making airbnb is more affordable and theirs.
Speaker Change: Various initiatives, including the rooms initiative to make.
Airbnb is more affordable do you do you expect maybe more flexibility.
Speaker Change: <unk>.
Speaker Change: Our room night prices.
Speaker Change: On Airbnb is relative to hotels.
Speaker Change: A period of weaker consumer spending, especially in the U S. Maybe in urban areas I'm just curious as how you think about the balance between potential ADR versus room nights in North America. Thank you.
Speaker Change: Sorry.
Speaker Change: Not clear with the question.
Speaker Change: I'm, sorry, let me let me rephrase.
Speaker Change: U S.
Speaker Change: You think about the opportunity.
Speaker Change: Think about the balance between pricing adr's.
Speaker Change: Average daily room nights relative to total room nights volume do you think that there's an opportunity to to have more.
Speaker Change: Your host to have more flexibility on ADR is and to see more affordability drive better room nights and ultimately greater share over the long term in a period, where there's maybe more consumer.
Speaker Change: Consumer weakness or or some pressure on the consumer wallet.
Speaker Change: Yes, Okay, yes, absolutely.
Speaker Change: The answer is yes, and I'll try to explain why this is the case.
Speaker Change: <unk>.
Speaker Change: Hotels, let's just contrast, two hotels I assume you're referring to airbnb versus hotels. So hotels have most hotels hotel rooms, all hotel rooms have a cost base right and so they need to build in our profit margin on there.
Speaker Change: On their room they call this revpar revenue per annum.
Speaker Change: And.
Speaker Change: And it's it's really important for them that they stay within some margin the vast majority of people on Airbnb Lyft only their home only on Airbnb believes most listings are exclusive to Airbnb and most of these homes are either primary homes or the second homes, but the homes don't exist to lift on airbnb they exist for.
Speaker Change: Somebody to live in some or all the time and so most of the income that people make on Airbnb average Jose Airbnb in the United States. For example makes about $50000 a year. This is supplemental income.
Speaker Change: So it's all up its typically all upside for them. So what this means is there's typically a little bit more flexibility on the airbnb host, let's say a hotel to be able to move their prices up or down because.
Speaker Change: If they didn't run on Airbnb before Airbnb, they didn't rent that night with completed loss. So really any price is upside for them as compared to hotel.
Speaker Change: One of the things we do is we try to build really great hosts tools for them and four out of five post on Airbnb are now using our hosts tools to give you a couple of examples compare lifting more than 2 million listings and airbnb have used the compare listings tool with a compare listings tool, but it shows you how your price compares to prices.
Speaker Change: Of similar Airbnb in your area, we found that when it's supposed to have more visibility they tend to provide more competitive prices.
Speaker Change: Another is weekly and monthly discounts now the vast majority of posts on Airbnb offer a discount if you rent by the week or if you rent by the month. So these are just some of the tools that we offer and we're going to continue to offer more and more tools. So our hosts are increasingly responsive, but yes to answer. Your question. We do believe that there is more flexibility and ultimately why.
A higher ADR and benefit Airbnb financial outlook on the short term and the long run affordability.
Speaker Change: Affordability aligns our interest with customers, which is the best long term incentive to alignment to align with shareholders. So we always want to drive as much value as possible to our guests.
Speaker Change: Okay can I would just also add that when we test elasticity.
Speaker Change: We often see that driving down prices is more than compensated by increased volume and that's why when we think about our pricing tools. We are not trying to necessarily drive posed to offer higher prices, we're trying to get them to the best price for their listing that will drive more bookings.
Speaker Change: And in many cases that will be to reduce your price.
Kevin Kopelman: Your next question comes from the line of Kevin Kopelman from TD Cowen Your line is open.
Kevin Kopelman: Another one on <unk> given the FX the guide seems to point to the software Adr's for Q2, how much of that is geo mix versus softening within the key regions or other factors.
Kevin Kopelman: What are you assuming for FX benefit in Q2. Thanks.
Kevin Kopelman: Yeah.
Speaker Change: Yes, so if we if we look at the guide for Q2, what was what is happening and we're seeing a couple of different factors. One is there is underlying real price appreciation.
Speaker Change: Which is which is a tailwind in terms of bringing prices up there is a movement in terms of the FX headwinds. So the FX headwind relative to Q1 is dissipating in Q2, and then is there a component is as our business mix shifts away from North America in particular that is a.
Speaker Change: Headwind right at moderate prices because the U S prices are significantly above frankly 80 hours around the world.
Speaker Change: I would note we do not get the same.
Speaker Change: FX benefit as maybe other platforms in that our exposure to for example.
Speaker Change: The Euro is is much more limited than some other platforms.
Speaker Change: Your next question comes from the line of Tom White from D. A Davidson your line is open.
Tom White: Great. Thanks for taking my questions just one on the international expansion, where because I was hoping you guys could just update us on kind of how those markets are tracking in terms of profitability relative to your kind of core markets. Both in terms of like.
Speaker Change: No.
Speaker Change: Absolute level and also just curious about the kind of the the.
Speaker Change: Pace at which they're there.
Speaker Change: We're tracking that way and then if you could share a little color on exactly what kind of investments you guys are finding or helping in those markets are helping drive the acceleration in growth you talked about thanks.
Speaker Change: Sure. So when we think about them are.
Speaker Change: Our expansion markets, what I would say generally about this businesses were able to generate very attractive contribution profit at a variety of <unk> and that typically is the biggest determinant on the overall level of profitability at a market level like the relative ADR.
Speaker Change: I would say broadly speaking when we think about investing in a new market and there is some fixed cost upfront in terms of say launching brand campaigns and that does drag margins down but over time, we are able to scale into the marketing loan as well as make some efficiencies in terms of the underlying.
Speaker Change: And variable cost if they have not already been localized and so I'll go back to my first comment that.
Speaker Change: Independent of a pretty wide range of 80 hours, we're able to deliver very attractive unit economics across the globe.
Speaker Change: In terms of like what the types of investments, we're making in those markets are it really falls into two very simple buckets. One is product and the other is marketing on the product side, we've been taking a localized approach to look at specific markets to say, what do we need to do to either the the glue.
Speaker Change: Product or for example, the payment stack to enable more local customers to use airbnb.
Speaker Change: And.
Speaker Change: We've been very choice of what those localization to make sure that they're worth the effort and they arent to localize, but when theyre important and they can be quite meaningful in terms of driving growth in a particular market I think some of the obvious cases are around.
Speaker Change: <unk> seen the booking flow to be locally nuance and in particular to offer the right payment methods for a specific type of customer. So that's one area of investment on product. The next Gen is obviously marketing.
Speaker Change: When we talk about going into a particular expansion market. What that means is that we are applying effectively the full funnel of our marketing approach to that market. So it is inclusive of some amount of brand marketing and performance marketing.
Speaker Change: Comms policy et cetera, such that we are hands on to deliver differential outcome for that market.
Speaker Change: Versus the light touch approach of some of our long tail markets.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Stephen Ju from UBS. Your line is open.
Speaker Change: Great. Thank you, so Brian and Ali.
Speaker Change: I think we in the analyst community sort of outside looking in are always.
Speaker Change: Probably overly focused on the advertising and the monetization monetization angle of product development.
Speaker Change: But can you talk about like an recenter of where your priorities are because based on everything that youre talking about whether it's experiences or the international expansion cohorts staying in O'brien your prior analogy with lateral things to sell like Amazon.
Speaker Change: It does sound like we should be thinking more about transaction growth versus things that you are doing to capture a greater portion of the unit economics. So it can you kind of reset or us on in terms of like what do you think the primary drivers of gross bookings won't be revenue will be effects.
Speaker Change: I mean, maybe I can talk at a high level, if you were to elaborate.
Speaker Change: Yes, you have the right mental model I've always believed that what we should do is.
Speaker Change: Focus on the things that are either most perishable opportunities.
Speaker Change: Sure.
Speaker Change: Things that our guests and hosts are asking for.
Speaker Change: And so most of what we've done is to try to do one of those two things.
Speaker Change: So whether we're increasing reliability affordability, making a be more more used more easier to use those are really in response to what our guests notes are telling us that I'd say the first priority is being responsive to their feedback and listening to them and the vast majority of the 500 improvements. We've made over last three years was based on feedback from our guests.
Speaker Change: Yes.
Speaker Change: So then everything else is really a matter of.
Speaker Change: <unk>.
Speaker Change: Just a sequencing and the sequencing that we've chosen is just based on some of the opportunities that are most perishable and so frankly number one would actually be beyond improving our core business. It would be international expansion and so the international markets are critical we think.
Speaker Change: Like what Latin America, and what Asia, having common for example is that the average population is younger and these markets are more likely to be on social media and therefore also less predisposed to staying in hotels and there are huge populations huge economy is growing very very quickly. So we think these are huge opportunities for investment and one of the most.
Speaker Change: <unk> things that we can do at Airbnb is to continue to grow our network effect and this network effect is really a global network and so we really wanted to match the travel corridor and then obviously expanding beyond a place to stay we are prioritizing things that increase yes volume growth versus unit economics that being said there are a number of.
Speaker Change: Things that we are looking at.
Speaker Change: That would increase monetization of Airbnb, especially on the <unk> side and the reason why is because almost everything we've done for host we've given away without charging anything incremental from a take rate standpoint in the last five years, we've increased air cover coverage to $3 million, we don't charge more yes, we can.
Speaker Change: Go down the list of other things that we offer we don't take any additional take rate.
Speaker Change: Code listings. They just hosted on Airbnb, we want to grow unit volume. So we think that growing network effect increasing market share is the most important priority for us in the near term.
Speaker Change: Yeah.
Speaker Change: Your next question comes from the line of Deepak <unk> from Cantor Fitzgerald. Your line is open.
Jack: Thanks, guys. This is Jack on for Deepak just one for you real quick.
Speaker Change: Are you guys seeing hosts suggest pricing for some of the early demand softness in the U S.
Jack: End of.
Jack: Moreover, do you expect the marketplace to be relatively price sticky or is it going to be more dynamic should the macro get any worse from here. Thank you.
Jack: I would say we haven't seen any.
Jack: Meaningful shifts to the downside in terms of host resetting their pricing.
Jack: But to prices of the call earlier I do think there is considerable opportunity for us to encourage hosts.
Jack: You bring down their prices generally, but but certainly in this macro to capture more demand.
Jack: I would call it an opportunity as opposed to something that we're seeing both actively due to that.
Speaker Change: Your next question comes from the line of Conor Cunningham from Melius Research. Your line is open.
Conor Cunningham: Hi, everyone. Thank you so airlines and hotel spend a ton of time talking about the resiliency of loyalty programs during downturns in Macau I know you guys don't want to copy them, but.
Conor Cunningham: Can you just give us some updated thoughts on on a subscription model or a loyalty program. It just seems much more likely that that thing is that that type of opportunities on the table. After you move into experiences or something else.
Conor Cunningham: Along that line. So if you could just talk about that that would be helpful. Thank you.
Conor Cunningham: Yeah totally agree with you I think it is absolutely something that we're looking at either an accurate will be thinking about this as well.
Conor Cunningham: What I, what I've always.
Conor Cunningham: What I've always was very intentional about what that we never wanted to necessarily have a essentially like a subsidy program, which to me is in a way the price for not having a lot of loyalty on your platform and we have a lot of loyalty.
Conor Cunningham: A lot of these.
Conor Cunningham: These other programs they tried to get people to join our loyalty programs that you've been having account information that you can have a relationship with the guests.
Conor Cunningham: Airbnb, we verify their identity. The vast majority of people have profiles, we have $200 million verified identities on the platform on Airbnb today, I think that's more than any or almost any other platform in the United States.
Conor Cunningham: For any not just travel but beyond travel.
Conor Cunningham: Around two out of three people, who book in our May leave a review so we havent really good retention, we have really good participation.
Conor Cunningham: But I've always thought that there could be a membership program potentially even a paid subscription or membership program Airbnb, where you pay more to get.
Conor Cunningham: <unk> differentiated offerings and better service.
Conor Cunningham: I think we're looking at a variety of models, there, where it's not necessarily subsidizing.
Conor Cunningham: The business, we already have but.
Conor Cunningham: Really increasing usage and increasing share of wallet and I think that.
Conor Cunningham: Amazon Prime one of the things is compelling about it is they actually were able to get people not just to come back here to Amazon, but to use it more frequently and so I think any program that increase the share of wallet or it gets people not necessary to come back to airbnb, but to use it more frequently for a greater part of their lives not necessarily just every year, but east man.
Conor Cunningham: And every month or every week.
Conor Cunningham: <unk> in your own city would be really really compelling to us.
Speaker Change: Your next question comes from the line of Alex <unk> from Redburn Atlantic Your line is open.
Speaker Change: Good evening. Thank you very much for taking the question.
Speaker Change: As of Q4 results when he talked about the margin targets you you said that.
Speaker Change: FX was a headwind because of the transaction exposure that you have more of your costs are in dollars.
Speaker Change: Honestly I'm not 100%.
Speaker Change: You said the margin certainly wouldnt have gone down as much.
Speaker Change: This wasn't.
Speaker Change: It wasn't a guy has got to be tell me I'm wrong, if I am on that obviously.
Speaker Change: Capex is done entirely the other way now and it would be a tailwind to your numbers. So I would have imagined all else equal.
Speaker Change: Did not.
Speaker Change: The margin target for the full year would have seen a tailwind.
Speaker Change: But as that full benefit your U S dollar cost base set of appeal.
Speaker Change: Revenues could you just talk about why that's not happening. Thank you.
Speaker Change: Yeah. Thanks, Thanks for the question. So certainly yes between now and February.
Speaker Change: Sorry since February we have seen a change in the FX rates.
Speaker Change: As of February we were assuming that FX would be a pretty meaningful headwind for the remainder of the year fast forward to where we are today, it's obviously less of a headwind.
Speaker Change: A couple of things that that I would note.
Speaker Change: One is that we the positivity we've seen out of Europe in terms of the weakening of the dollar is not necessarily relevant for our entire portfolio. We do have some we do continue to have some FX headwinds and out of Latin America that do impact them for certain portion of our business second is we do do some revenue.
Speaker Change: <unk> such that the tailwind that that some are seeing does not entirely materialize in terms of our hedge portfolio for revenue.
Speaker Change: And then I would say third in terms of managing to the guidance that we provided you. There are some puts and takes with regard to overall volumes.
Speaker Change: Underlying ADR as well as FX adjusted ADR.
Brian: And that concludes our question and answer session I will now turn the call back over to Brian for closing remarks.
Brian: Alright, everyone well, thanks for joining us today.
Speaker Change: Incredibly proud of our results and I'm really excited to share what we've been working on an airbnb.
Speaker Change: Make sure to watch our 2025, some a relief to see what's next until then thanks.