Airbnb Shares Slide After Company Warns of Moderating Growth
Third-quarter revenue will range from $4.02 billion to $4.1 billion, the company said in a statement late Wednesday. That translates into an 8% gain from a year earlier at the lower end, falling noticeably short of the nearly 13% growth in the prior three months. Airbnb projected tougher growth rates toward the end of the current period and into the fourth quarter.
'We are not satisfied with a company growing approximately 10% year-over-year — we want the company to re-accelerate,' Chief Executive Officer Brian Chesky said in a call with analysts on Wednesday. 'I do not think we're coming close to reaching any type of saturation in any market around home sharing.'
Airbnb's outlook, combined with a lukewarm forecast issued by online travel peer Booking Holdings Inc., underscored how broader economic uncertainty is weighing on travel demand. The forecast overshadowed what were otherwise strong second-quarter results, which largely exceeded expectations. The company saw especially strong demand in Latin America and Asia Pacific, with more first-time bookers in Brazil and Japan specifically.
Airbnb shares fell as much as 9.1% to $118.57 on Thursday after markets opened in New York, their biggest intraday decline since April.
Reservations by North American travelers proved to be a particularly large drag in the second quarter, contributing low single-digit growth in nights booked. If it weren't for the slow gains in the region — which makes up about 30% of Airbnb's total nights and seats booked — the company would've posted double-digit growth during the quarter. Also working against Airbnb is the fact that travel demand in the second half of last year proved surprisingly strong as travelers booked trips that they had initially delayed.
On Wednesday, Airbnb announced a new share repurchase program of as much as $6 billion, after it beat expectations to generate $1 billion in free cash flow in the second quarter.
Overall, total nights and seats booked grew 7.4% to 134.4 million in the second quarter. Revenue was $3.1 billion, exceeding expectations for $3.03 billion. Net income was $642 million. Analysts were expecting $599.3 million.
The company did not break out results for its Experiences and new a la carte Services offerings that it launched in May, which allows travelers to book tour activities as well as hire professionals such as chefs, personal trainers or photographers. But it said that awareness is growing and guest feedback has been positive early on. It has also received 'significant interest from potential activity hosts,' with more than 60,000 applications submitted since launch.
These new verticals will help add $1 billion or more in revenue annually, Chesky has said, though it will take a few years for them to scale up.
Airbnb restated the amount it plans to invest into the new businesses, with a new pledge of $200 million. That figure is in line with the lower bound of the range it provided investors in February. The impact of these investments on earnings margins will be most pronounced in the second half of this year, it has said.
The launch of new businesses has also put the company in a 'better position' to reward its customers through a loyalty program, Chief Business Officer Dave Stephenson told Bloomberg in an interview last week, saying that one is under consideration for the future.
Chesky elaborated further on the opportunity when asked on an earnings call with analysts on Wednesday, and reiterated that Airbnb will not offer a points program like its hospitality competitors.
'A loyalty or membership program is a very, very compelling thing for Airbnb,' he said. 'I do think we are sometimes at a competitive disadvantage vis-a-vis OTAs and hotels because they have a lot of programs that we don't. So I think there is a lot of upside if we were to have a program.'
'If we were to do something, I don't think it would be a traditional points program,' he added. 'I think it would be something much more interesting and novel. I absolutely think you should see something from us in the future. Not imminently but in the future.'
(Updates with Thursday trading in the fifth paragraph.)
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