AirBNB Promises AI Innovations, Increased Bookings

Airbnb (ABNB) released its Q1 earnings report, beating analysts' expectations. The company reported adjusted earnings of $0.18 per share, nearly doubling estimates of $0.10. Revenue reached $1.82 billion, exceeding the projected $1.79 billion, marking the highest Q1 revenue in the company's history and representing a 20% year-over-year increase.

Moreover, the firm earned a net income of $117 million, a noteworthy achievement compared to the $19 million loss reported in the first quarter of 2022.

Airbnb announced a $2.5 billion share buyback program for its Class A common stock to benefit shareholders further, representing approximately 3.1% of the company's market capitalization.

Despite the positive news, the stock fell nearly 10% in after-hours trading in the immediate aftermath of the earnings announcement as investors focused on weaker-than-expected guidance.

Total bookings for Airbnb fell short of expectations, although they still reached a new record of 121.1 million nights and experiences booked. The figure came in slightly below the expected 122.3 million; however, the shareholder letter still emphasized that "Nights and Experiences Booked grew 19% in Q1 2023 compared to a year ago.

Even with continued macroeconomic uncertainties, we have seen our highest number of active bookers, demonstrating both loyalty from our returning guests and a growing base of first-time bookers. Our current backlog of nights is approximately 25% stronger than a year ago"

Revised Expectations

Looking ahead to the second quarter, Airbnb projects revenue between $2.35 billion and $2.45 billion, with the midpoint falling slightly below analysts' expectations of $2.42 billion. The company also said it anticipates lower Adjusted EBITDA on a margin basis for the next quarter.

In terms of key performance indicators (KPIs), Airbnb expects bookings to grow at a slower pace than revenue, along with lower average daily rates (ADRs), citing a shift in the booking mix and introducing new pricing tools for hosts.

Despite the "cautious" outlook, Airbnb affirmed its full-year forecast. However, some investors remain concerned about lower margins in the next quarter due to increased marketing expenses. Notably, sales and marketing expenses for the first quarter rose by 30% from $345 million in 2022 to $450 million in 2023.

Having achieved its first-ever profit, Airbnb aims to ration more spending towards marketing to expand its presence in additional countries, including increased brand spending.

The shareholder letter said, in particular, that "while Airbnb is in over 220 countries and regions, we're still under-penetrated in many markets. As a result, we've increased our focus and investments in less mature international markets and are seeing great results.”

“Due to these efforts, Brazil and Germany have become two of our fastest growing markets and we're excited to expand the playbook around the world." These markets experienced a significant increase in gross nights booked, with 114% and 70% growth rates, respectively, compared to the pre-pandemic period.

Strong Regional Growth

Airbnb demonstrated strong growth in Gross Booking Value (GBV), with a 19% increase, with the Asia-Pacific region accounting for most of this growth, showing a boost of 48%. The available rooms (supply) grew by 18%, while bookings increased by 19%. Despite global inflationary pressures, the Average Daily Rates (ADRs) remained unchanged compared to the previous year.

Geographically, North American bookings had the least favorable performance year-on-year; however, it still contributes 48% of Airbnb's global revenue. Asia-Pacific showed the strongest sequential growth, although bookings in this region are still below pre-pandemic levels.

Europe experienced the second-weakest booking growth but saw the fastest growth in ADR.

In terms of stay duration, the company said in its shareholder letter that "long-term stays of 28 days or more accounted for 18% of gross nights booked, a decrease from 21% in Q4 2022 as growth in short-term stays accelerated relative to growth in long-term stays."

The letter also revealed that the company anticipates Q2 "long-term stays to approximate the levels seen in Q1 2023".