Airbnb records first annual profit in Q4 earnings report

US: After marking its best quarter to date for Q3 in November, Airbnb has notched its first-ever annual profit in its Q4 earnings report, capitalising on increasing resilience for travel demand, a strong US dollar and an encouraging return to intercontinental travel across Europe.

It came as the company recorded an annual profit of $1.9 billion for the entirety of 2022 [a sharp turnaround from a $352 million deficit at that stage a year before] and a fourth quarter net profit of $319 million, comfortably surpassing analysts’ forecasts of $171 million.

Revenue for the quarter that ended in December came in at $1.9 billion, a 24 per cent rise on the same quarter a year prior but lower than the two immediately preceding quarters, beating Bloomberg analysts’ average estimate of $1.86 billion.

Meanwhile, average daily rates [ADRs] dropped one per cent to $153 on the previous quarter and bookings shot up by 20 per cent to $13.5 billion.

Q4 nights and experiences booked was recorded slightly below expectations of 90.1 million at 88.2 million. Despite this, the figures were a 20 per cent rise on Q4 of 2021 despite “evolving macroeconomic uncertainties”, and Airbnb said that it was already seeing a “strong backlog for Q1 with long lead times for bookings”.

In the previous quarter, Airbnb had intimated that it was looking to re-invest more into its Experiences programme, after recording its highest-ever third quarter for nights and experiences, with the Asia-Pacific [APAC] region seeing the most growth in the segment. Co-founder and CEO, Brian Chesky, told analysts this time: “Airbnb Experiences is something that we’re beginning to really ramp up. I think you’re going to see a lot more traction in that product in the coming years.”

In a letter to its shareholders, Airbnb added that it was not expecting to extensively lay off team members as many tech companies have done in recent months. The letter highlighted that Airbnb had ended 2022 with 6,811 employees [a headcount reduction of five per cent on 2019] and that it was planning to continue hiring at a “judicious” pace in the year ahead.

Another key takeaway from Airbnb’s Q4 earnings report is the efforts that the company is going to in order to bolster its host community.

In the face of continuing competition from the likes of, Vrbo and Hopper Homes, Airbnb ended 2022 with a sustained growth in supply – resulting in 6.6 million global active listings, 900,000 more than at the start of last year. That figure though excludes China, following the news that Airbnb was shuttering its domestic tourism business and experience listings in China in July as a result of the effects of the country’s stringent lockdowns and restrictions.

In other news:

  • Airbnb announced that its first buyback programme [announced back in August and worth $2 billion] was progressing well, having “repurchased $1.5 billion of its authorised $2 billion share buyback programme”.
  • Airbnb released an update on Airbnb Setup – an initiative introduced in its 2022 Winter Release that is designed to make it easier for people to list their property/properties and start earning. Through Airbnb Setup, prospective hosts can match with a Superhost and receive one-to-one guidance, host an experienced guest as their first guest, and receive one-tap access to specialised support. The company said that, since November, twice as many prospective hosts are matching with Superhosts and more than 20,000 active hosts have opted to welcome an experienced guest as their first guest.
  • Airbnb is forecasting revenue for the current quarter to exceed market estimates and said that it would keep a tight lid on costs to protect its promising margins.
  • Airbnb expects domestic and short-distance travel to remain strong and occupancy rates in popular urban destinations to be boosted by a stronger dollar and reopening of borders, particularly with Europeans booking summer travel earlier.
  • Airbnb is predicting that average daily rates [ADRs] across its listings will fall slightly this quarter and remain pressured throughout 2023 as holidaymakers return to lower-cost urban rentals.

What this means for Airbnb

Off the back of its best quarter to date, and now its first-ever annual profit just two years after going public via its IPO, it is understandable that Brian Chesky is bullish about Airbnb’s prospects for the future and a return to the sort of demand we saw prior to the Covid-19 pandemic.

The company will take plenty of encouragement from the number of nights and experiences booked in particular, with market share gains seen in Europe and Latin America, plus a resurgence in Asia-Pacific [APAC] pointing to a piquing in consumer confidence. This confidence is increasingly evident for its future in urban destinations – markets described as the “bread and butter of Airbnb’s business” by Chesky – as reservations there accounted for more than half of the platform’s entire bookings – the first time that had occurred since the onset of lockdowns.

Chesky also stresses that the removal of Covid-19 restrictions in China will signal a continued recovery for the APAC region.

Ultimately, however, Airbnb faces many of the same challenges facing its competitors, largely to attract new hosts to its platform and also retain its existing base by driving loyalty and sustaining demand.

Among Airbnb’s biggest competitors, Vrbo is rumoured to be announcing a booking loyalty programme, Hopper Homes is already marketing to Gen Z / millennial demographics with a range of fintech products, and is investing heavily in marketing campaigns, particularly a Super Bowl advert starring Melissa McCarthy in which it promoted its giveaway of $500,000 in vacation credits.

It is a challenge that Airbnb believes it can rise to, however, as it alludes to the increase of 900,000 global listings in the space of 12 months, while Chesky believes that his company’s full funnel approach to marketing around public relations [PR] generates sufficient brand awareness itself to educate new and existing hosts and guests about its services and products.

Airbnb’s new discounting tool for hosts to display total pricing before taxes is another attempt to enhance transparency and improve the booking experience for travellers seeking out the best value, especially amid a cost-of-living crisis which is drawing more consumers back to lower-cost rentals.

Airbnb’s biggest strengths are the choice and diversity of its product – and the way in which it markets this. How it adapts to a changing world is still to be seen, though, with scope for further innovation in areas such as artificial intelligence [AI] and challenges in how successfully it balances supply and demand in increasingly constricted markets.

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