Spain may have won the trophy, but Airbnb has won the economic battle.
With more than 150,000 homes in the US listed on the platform for the event for the first time, Airbnb took full advantage of the “soccer” coming to town. Buoyed by this success, management has raised guidance for revenue growth and adjusted ebitda.
The market has responded, with the share price up 33% in the past month. Two decades after Brian Chesky and Joe Gebbia rented out air mattresses in their apartment in San Francisco when a design conference led to a shortage of rooms, the company has a market cap of $110bn.
But with North America having just reported the strongest growth rate in almost three years in terms of nights and seats booked (a measure of volume), the bigger question is this: how much of the benefit from the Fifa World Cup quarter will actually stick?
The growth in listings is only one side of the story. Airbnb is a two-sided marketplace, which means it needs to appeal to hosts and guests alike. An increase of 11% in the number of first-time bookers in this quarter (the highest rate in four years) suggests it is doing exactly that.
But it isn’t easy, as these parties have diametrically opposed desires. Hosts want to charge more and reduce their risk. Guests want to pay less and feel as if they are in a serviced hotel rather than someone’s apartment. This creates tension relating to all kinds of issues, such as cleaning fees, especially as Airbnb has historically favoured its hosts. To be fair, if there are no properties listed on the platform, there’s nothing for guests to consider.
With gross booking value up by 16% to $27.2bn, Airbnb is clearly doing something right. Revenue rose 17% in dollars, or 13% on a constant currency basis.
Perhaps more interestingly, nights and seats booked increased by 10%. The rest of the growth came from a higher average daily rate (ADR) and the mix effect of what guests were booking on the platform.
Speaking of mix, an important trend on the platform is cost sharing and group trips. Airbnb measures bedroom nights booked (nights multiplied by bedroom count), a metric that grew by 12%. This is faster than the growth in nights and seats booked, which confirms that guests are increasingly reserving larger properties as they travel together in groups. Interestingly, “entire homes” was the fastest-growing class of properties booked, particularly homes of four or more bedrooms.
But with more than 1-billion bedroom nights booked on a trailing 12-month basis, the platform is far more than just a football solution. Other regions are also growing, including Latin America, with 20% growth in nights and seats booked. The Europe, Middle East and Africa region was good for high single-digit growth in nights and seats booked, along with 5% growth in ADR in local currency.
To support (and drive) this global demand, Airbnb has rebuilt its platform to be an AI-native company. These initiatives have reduced the customer support cost per booking by 16% year on year. This speaks directly to operating leverage as the platform scales. There are also benefits across search recommendations, pricing tools and flexible listing management capabilities.
At heart, Airbnb has always been a tech company. The tech-savviness of the user base is evident in the latest numbers, with 64% of total bookings being done on the Airbnb app in the latest quarter (up from 59% a year ago). The users are also receptive to cross-selling opportunities, with paid guest travel insurance up 60% year on year. This is an ideal way to drive further sales with marginal (or no) customer acquisition costs.
With guidance for the third quarter of revenue growth of 15%–17%, management is telling the market that World Cup momentum will continue. That’s a bold forecast, especially as fuel prices look set to rise even more.
Travel is all about going from A to C, D or E — not just to B. The further you go, the more fuel prices matter. Sure, the travel market has been resilient to the fuel price spike, but Fifa World Cups come around only every four years.
For now, the market is buying management’s story, but any disappointment relating to the guidance could teach a harsh lesson to those who chase parabolic moves. That’s exactly the issue: as great as Airbnb is, I don’t want to buy it on a price/sales multiple of 8.4 after a major growth spurt. For context, the three-year average multiple is 7.8. Call me a cynic, but multiple mean reversion has saved me from pain many times — especially when the macroeconomic backdrop looks dicey.
