Airbnb CEO Brian Chesky joins Yahoo Finance Live to discuss company earnings, summer travel demand expectations, affordability, profit growth, and the outlook for Airbnb.
Video Transcript
[AUDIO LOGO]
– Shares of Airbnb are lower this morning on a muted outlook here. Taking a look at ABNB ticker symbol there on the Yahoo Finance platform. The company anticipating strong summer travel demand, tempering some expectations that demand will match that of the post-COVID boom in 2022. The projected slowdown in revenue growth, it falls below some analysts’ expectations out there, speculation that booking growth would fall further behind, spooking investors there.
Despite the dreary outlook, though, Airbnb saw strong gains in revenue and bookings, making 2023 the company’s first profitable first quarter. CEO Brian Chesky joins me now. Brian, thanks so much for taking some time.
BRIAN CHESKY: Thank you for having me today.
– Absolutely. Let’s talk about what was said on the call as well here. We’re taking a look at shares. Of course, the stock is going to move in whichever direction it does on any given basis, but particularly on the back of earnings and on the back of some of the commentary.
And I believe you said that long-term growth is only as strong as supply here, pointing back to 2020, 2021, where demand grew faster than supply. So is an expected byproduct that as more rooms come online, which is what you’re looking to do through the winter release and now even the summer release as well, that the average daily rate will continue to moderate just a little bit lower?
BRIAN CHESKY: Yeah. I mean, I think one of the biggest marketplace of the internet is Amazon. And what Amazon has taught us is that the widest selection of products at the lowest price brings the most amount of customers.
The same is true of Airbnb. We had incredible demand in 2020, 2021. But a lot of new people didn’t put their homes in Airbnb. They were a little apprehensive listing their homes and having strangers in their house during a pandemic.
And so demand increased faster than supply. Obviously, prices went up. That actually was really good for the financial statement.
But we’re really focused on now is making sure supply is growing. Supply is growing 18% year-over-year. We’ve had sequential accelerated growth in supply. And as we do that, prices will stay modulated. And what we’ve heard from hotels is that they’re expecting prices to go up this summer. So if we can stay the most affordable option to travel, we’ll continue to drive a lot of demand.
– Yeah, certainly. And so when we think about some of the outsized factors that you and the management team– that were steering the Airbnb performance during the quarter, what would you point to? Because, I mean, this was still the first profitable first quarter for the company.
BRIAN CHESKY: Yeah. Well, I mean, revenue was up 20%. Ex-FX, it was 24%. I mean, maybe the thing I would really point to is free cash flow. We’ve now done $3.8 billion in free cash flow in the trailing 12 months. So when people say there’s unicorns by market cap and revenue, and then there’s a unicorn by free cash flow. And that’s what we are almost four times over.
So I think the company is incredibly efficient. And we can use that cash to be able to be more aggressive in the coming years, to look at things like international expansion, things like that. So we’re feeling really, really strong.
– Is the generation of that free cash flow sustainable from what you’re seeing right now in the operation of the business?
BRIAN CHESKY: Absolutely. Yeah, absolutely. What we said in our outlook is even though there’s going to be some changes in timing for Q2, mostly because of Omicron, we are still expecting the same guide for EBITDA for the year. And we’re still feeling very strong.
– Let’s talk about the revenue guide as well. That was something that investors paid close attention to. It got some questions on the call as well. And $2.35 billion to $2.45 billion is what you’re guiding for in the second quarter. When you look out further than that this year, what are some of the dynamics at play that are really driving the revenue forecasts here?
BRIAN CHESKY: I think affordability is probably the number one thing. I mean, a year ago if I came here, I would have told you the number one thing is flexibility. People were now more flexible. They can travel anywhere. And that’s why we launched Airbnb Categories.
Over the last year, with inflation, people have less money to spend on travel and they did a year ago. And now rising fuel costs mean that it’s even harder– more expensive to fly. And so we’re seeing that people are much more price conscious.
That is a big focus on us. And we’re seeing– we have been seeing a little pressure in North America especially, so really trying to make sure that average daily rates don’t continue to go up, perhaps even go down by making sure we have enough supply, we have enough discounting tools, we show up-front pricings, which steers people to best total value. These are really important things.
– What we’ve heard over the course of this earnings season, too, from CEOs and CFOs as well is how they’re looking into their crystal ball, trying to forecast a recession, what that impact might look like on their business. From what we heard from some of the bank CEOs, it’s Q3 2023 is what they’re pointing towards here. For the services sector, it’s been different, especially within travel, because there’s been this countercyclical recovery. Does anything about the services spending in travel among the consumers signal to you Q3 recession?
BRIAN CHESKY: I really cannot speculate on a recession. I can say for certain, though, that people are absolutely looking for more affordable options, and they still want to travel on Airbnb. So we’re really focused on making sure we have the most affordable options. And if we do, I think we’re going to continue to see a lot of growth.
– Some of the Yahoo Finance viewer questions that we always receive– and one of them, real talk, from myself as well, there are certain places that I, honestly, just won’t travel because it comes down to safety. What mechanisms have you been able to put in place to make sure that the platform, the experience for both the host and the people that are traveling there is more safe, at the end of the day?
BRIAN CHESKY: And say what’s part of safety in particular.
– And safety in the stay, making sure that you’re getting somewhere, and it’s what you expected out of the trip.
BRIAN CHESKY: Yeah, I mean, I think it’s really, really important that we say that we’ve been listening to guests. We’ve been listening to the feedback we’ve had. And over the last year, we’ve made over 100 upgrades. We made 53 upgrades last week. The whole thing works on a reputation system. We now have reservation screening for hosts.
We have 24/7 customer support. And we now have two-minute support that we talked about last week. So if you have an issue, you can call us our team is staff to be able to help you in two minutes or less.
And, ultimately, I think people, when they use Airbnb for the first time, one of the things that’s a surprise is how well it works. 70% of people, when they stay in an Airbnb, leave a review. The vast majority of them are five stars.
– Wow. When we think about– and you mentioned what we discussed last week. What does success look like in terms of some of the key performance indicators that you would track on the back of the summer 2023 release as well?
BRIAN CHESKY: I think that success is going to look like people feeling like Airbnb is a better value, and Airbnb’s experience is more consistent, and people feel like we heard them, we listened, and the product is getting better and better. Ultimately, if you just step back, almost anyone who travels somewhere in the world and they need somewhere to sleep, I think they could consider staying in a home. I think our market could be significantly greater.
The biggest strength of our Airbnb is we’re one of a kind. The biggest risk of Airbnb is we’re one of a kind. And sometimes we’re not as consistent as a hotel. I think that if we can continue to remain the most affordable big company to offer travel and we continue to make Airbnb more consistent, I think we’re going to see a lot more growth later this year and next year.
– For some of the viewers, for anybody who goes to the Yahoo Finance platform and types in the ticker symbol ABNB, they’re going to be realizing as well that for all of the travel space, even though that there has been this countercyclical recovery, that there are going to be some pretty tough comps that get lapped on the back half of this year as well. How do you go about managing the investor expectation, communicating, and through that transparency, to the Street exactly what you’re seeing within the data at Airbnb?
BRIAN CHESKY: Well, I think part of it is just being out there, like I am today. It doesn’t matter whether the stock goes up or it goes down. You’ve got to be able to be open, transparent, walk people through what’s happening.
And I think what’s happening is we are today double the size as we were before the pandemic. The rest of the travel industry is far behind as far as trailing, as far as the recovery standpoint. And so it’s really just telling a story about what’s happening. And what’s happening is the fundamentals of this business have never been stronger.
Supply is growing faster than ever, growing now 18%, accelerating. We are getting prices down in North America. I think that’s going to stimulate a lot more demand.
And the other thing I’d say is we have a lot of big new opportunities on the horizon. One of those is international expansion. We’re seeing a lot of growth in Germany and Brazil, where we’ve launched our international playbook. We’re going to be expanding out to other geographies around the world. And then we have some pretty exciting new products and services that we’re going to be launching next year and beyond.
– OK, two questions, one on that international expansion. First, relative to the existing either accommodations or hotel framework that many people had had in some of those international entities, where are you seeing those travelers taking price on Airbnb as compared to some of those legacy companies in the accommodations landscape?
BRIAN CHESKY: Yeah, so I think that we’re seeing a number of changes happening in the economy right now within travel. I think that a lot of people are starting to travel more cross-border again. They’re looking for more affordable options.
If you’ve noticed, the last three years, there’s not been a lot of cross-border travel. There hasn’t been as much urban travel. As city centers haven’t been fully reopened, people haven’t felt comfortable.
This year, this summer, I think we’re going to start to see people taking a lot more big trips, traveling internationally. And as they’re traveling internationally, they’re going to want to save money. And, as you know, an international trip is more expensive because of the cost of international flight. And so if you have a long international flight that’s expensive, you want to save on accommodations. That is part of the reason why we think Airbnb Rooms, which is an all-new take on the original Airbnb Private Room, is a big option because the average price per night is $67.
I think a lot of people are also realizing as long as they can pay for the flight, traveling to other countries is typically a lot cheaper. For example, you can stay in Asia for a fraction of the cost per night in the average accommodation as North America. But you got to, obviously, get there. So as long as we can provide affordable options from accommodations, it could spur a lot more international travel.
– We’ve got to wrap. You’re a busy guy. You’ve got a lot of travels that you do as well. What keeps you up at night as the CEO of Airbnb?
BRIAN CHESKY: I think what keeps me up at night is that we seize every opportunity in front of us. And I think right now, we have a once-in-a-generation opportunity with this revolution around AI. I think there’s an opportunity for us to completely reimagine this platform and unlock the next decade of growth for Airbnb.
And I don’t want to miss it. If I was running a tech company in the mid ’90s, it would have been the internet. And the stock price going up or down or this thing happening, you wouldn’t remember any of that 25 years later. But you would have remembered being at that period of time part of a technological revolution. You would have asked yourself, did we seize the moment? And that’s what I’m focused on.
– Well, I certainly do hope that you’re still getting some good rest at the end of the day, too. CEO of Airbnb Brian Chesky– Brian, thanks so much for taking the time.
BRIAN CHESKY: Thank you for having me today.
