Airbnb Q3 2024 Conference Call Summary: How Much Contribution Can New Businesses Bring?
The following is the summary of the Q3 2024 earnings call for $Airbnb(ABNB.US) . For the earnings report interpretation, please refer to Slowing Growth & Shrinking Profits, Airbnb Still Navigating Challenges .
1. Key Information Review of the Earnings Report:
2. Detailed Content of the Earnings Call
2.1. Key Information from Executives:
Business Progress
1. Strategic Initiatives:
Promoting Mainstream Hosting:
The company is committed to making hosting as popular as traveling on Airbnb, currently boasting over 8 million active listings, with growth across various regions and market types.
In the winter 2024 version launched last month, the Cohost Network was introduced, inviting other experienced hosts to help manage listings, addressing the challenges of host engagement and operations. Over 20,000 potential new co-host applications have been received within three weeks of its launch.
Enhancing Core Services:
Airbnb has launched over 535 new features and upgrades in the past three years.
The winter 2024 version includes over 50 upgrades for guests, such as recommended destinations, suggested search filters, and personalized listing highlights, making the Airbnb app more intuitive and personalized.
The company focuses on listing quality, having removed over 300,000 listings that did not meet guest expectations since last year, and will continue to invest in improving guest experiences.
Expansion Beyond Core Business:
The company is focusing on expanding into markets outside its core, with the growth rate of booked nights in expansion markets exceeding twice that of core markets in Q3.
In addition to driving growth in expansion markets, the company is preparing for a new chapter for Airbnb, planning to go beyond the accommodation business, with more related information to be announced next year.
2. Customer Demand:
Guest demand accelerated month by month in Q3, despite a slow start in July, with booked nights ultimately recovering to double-digit growth by the end of Q3.
The number of booked nights through the app increased by 18% year-on-year, accounting for 58% of total booked nights (up from 53% in the same period last year).
First-time bookers continue to grow, especially among younger travelers, with Airbnb's visitor count now exceeding 2 billion.
3. Global Market:
The company drives performance growth by investing in under-penetrated markets, focusing on finding product-market fit, enhancing brand awareness, and increasing traffic in each market.
In Japan, where Airbnb is relatively new, the company launched a brand campaign centered on domestic travel last month.
In other countries around the world, such as Vietnam, Denmark, and Poland, more local payment options are being introduced, with nearly 40 local payment methods expected to be available by next spring.
4. Supply Quality:
The company is committed to removing low-quality listings to help guests find quality accommodations.
The initiative to remove over 300,000 listings last year has shown results, with a decrease in customer service contact rates, increased guest satisfaction, and a 30% year-on-year decrease in booking cancellation rates.
The launch of "Guest Favorites" makes it easier for guests to find the best places to stay; since the introduction of the "Visitor Favorites" feature last November, over 200 million room nights have been booked through "Visitor Favorites."
2.2 Q&A Analyst Q&A
Q: Regarding supply, the company seems to no longer provide year-on-year supply growth data. I would like to understand the supply growth situation and whether there has been a significant shift towards professional landlords or co-hosting during the supply adjustment process. Has co-hosting increased the supply of listings?
A: Over the past 12 months, supply initiatives have changed, focusing more on improving supply quality while continuing to expand the supply base. Initiatives such as launching "Guest Favorites" and removing listings that do not meet quality expectations have shown results, with average ratings increasing and incident rates and customer service contact rates decreasing. In Q3, supply growth exceeded demand by several percentage points, showing a good growth trend, with a recent focus on quality improvement.
Co-hosting addresses the issue of people not having time to manage listings by matching those who have properties but no time with those who have time but no properties to increase listings. Currently, 10,000 co-hosts have been launched, with 20,000 applications received in three weeks, and millions of listings are expected to be unlocked in the future, most of which are exclusive listings by ordinary people on Airbnb.
Q: The growth in room nights accelerated in Q3. Is this from specific geographic areas? How is the recovery in the European market? How long will co-hosting take to have a significant impact in the markets where it has been launched, and what impact will it have on market growth rates in 6-12 months or 12-24 months?
A: Growth in Q3 has been recovering month by month, with the booking lead time returning to normal globally from July to September, particularly in the Europe, Middle East, and Africa (EMEA) regions, partly due to increased bookings after the Olympics. Overall, all four major regions show signs of month-by-month recovery.
Regarding co-hosting, pilot programs in places like France over the past few years have shown that co-hosts significantly attract high-quality listings, although it will take time to reach a scale that is meaningful to the current business, the results are encouraging, and the network will continue to be built in the future.
Q: The Q4 EBITDA guidance suggests a profit margin of 27% - 28%. What factors are leading to the decline in profit margins? How do you view the investment levels and profit margins for next year, especially based on the 27% figure for Q4? **
A: The profit margin in Q4 has compressed compared to the same period last year, mainly reflected in product development and marketing. Marketing continues to invest in global market expansion, including brand promotion and performance marketing. There is a timing difference in spending from Q3 to Q4, but the annual incremental marketing expenditure is relatively moderate. Looking ahead to 2025, the company has performed excellently in managing the profit and loss statement since its listing, achieving significant expansion in EBITDA profit margin. The business model is strong, profitable, and has excellent cash flow, with long-term opportunities for further margin expansion. In 2025, efforts will continue to advance core optimization, global market expansion, and new product services. The core business goal is to improve efficiency and service levels, with growth investments including existing and new expansion markets and new product launches. More details will be provided in the next earnings call.
Q: Airbnb has achieved a milestone of 2 billion visitors. What are the investment plans to attract the next wave of 1 billion+ guests? In which demographics or travel types is the current business penetration relatively low? How will new services attract new customers?
A: Airbnb's development can be divided into several stages. It is currently in the late stage of the second phase and is about to enter the third phase of expanding its core business. The core business is expected to grow from nearly 500 million nights booked annually to 1 billion nights, which will be achieved by enhancing quality, affordability, and availability, such as optimizing property management and improving pricing strategies. In terms of global markets, the current business is concentrated in a few countries, with emerging markets like Mexico and Brazil in the Americas, Germany, Italy, and Spain in Europe, and South Korea, Japan, India, and China in Asia representing mid-term growth opportunities. In the long term, the company will expand its core business, drawing on Amazon's development model from a single business to a diversified one, launching 1-2 new businesses each year. In the future, Airbnb will reimagine the Airbnb experience, starting from travel-related services and gradually expanding into broader areas.
Q: Can you introduce new markets, such as the largest expansion markets and their scale, to understand their contribution to performance growth?
A: Core markets (the United States, Canada, Australia, France, and the United Kingdom) account for about 3/4 of the total booking value, while other markets account for the remaining 15%. Normally, this should be larger. Taking Brazil as an example, as an early focus emerging market, through localized branding activities, products, and offering more payment options, its destination booking nights are three times that of pre-pandemic levels. Markets like Japan and China are large, and recent brand activities have been launched, representing mid-term growth opportunities. Although the current scale of individual markets is limited, they are expected to have a greater impact on global performance over time.
Q: Can you discuss the long-term booking growth prospects for the core business and the contribution of new vertical businesses to growth? Has the accelerated growth in Q4 enhanced confidence in investing in related initiatives, and how will it affect profit margins in the long term?
A: Factors driving growth in the core business include optimizing core experiences, such as improving the booking process, continuously enhancing products, attracting more users to book more easily, and improving personalized services. The current business is overly concentrated in core markets, with significant global market opportunities, and the growth contribution from expansion markets is expected to improve quarter by quarter. This year's results indicate that the strategy is effective, and scaling up needs to continue In successful areas, such as core experiences, the company will increase investment, and the product roadmap will be built around this, maintaining resource input to continuously improve products and achieve more revenue. In the long term, new business launches will initially incur costs, but as the business develops and scales, it will have a positive impact on growth and profit margins, although the specifics will depend on business development.
Q: What progress has been made in terms of affordability and quality, and how will this drive an increase in bookings this quarter? What is the latest status of the customer service transformation, what is effective, what is lacking, and what needs improvement, and when is it expected to be completed?
A: In terms of affordability, Airbnb initially aimed to provide alternatives to hotels, and although the reasons for user choices have diversified, affordability remains a priority. Several measures have been taken, such as adjusting cleaning fees for over 300,000 listings after introducing total price display; offering weekly and monthly discounts, with most hosts providing discounts, and 70% of bookings being for monthly stays; launching a similar listing tool to help hosts with pricing; and the latest release includes price alerts and search suggestions. At the same time, continuously increasing supply also helps lower prices, making it more competitive compared to hotels. In terms of reliability, service quality is enhanced by highlighting "guest favorites," reducing customer service contacts, improving profitability, and increasing recommendation rates, while removing listings that do not meet quality standards. Customer service is undergoing a transformation, leveraging AI, divided into three phases: the first phase allows AI to answer basic questions; the second phase achieves personalized responses; the third phase can directly handle operations, such as cancellations or rebookings. The company has hired professionals to advance this, and more progress will be shared in the future.
Q: What impact do you expect the new services launching next year to have on revenue growth? Will they immediately drive revenue growth in the second half of the year, or will they more gradually become revenue drivers by 2026?
A: The revenue impact of new service launches lies between the two. Drawing on the experiences of companies like Uber Eats, it will be more aggressive than Uber Eats, with new services set to launch immediately in over 100 cities worldwide next year, expected to bring incremental revenue. However, based on the development patterns of market platforms, new businesses need patience to start small-scale, with some businesses taking about 5 years to reach scale. While there are multiple revenue opportunities next year, they will not all be realized in the short term, and we will ensure the quality of business launches and proceed cautiously.
Investment in new services will precede revenue generation, with investment expenditures visible at the beginning of the year, and revenue will begin to grow gradually after the launch of new services. More detailed information will be provided in next year's earnings call.
Q: Can you provide the year-over-year net growth percentage of supply for this quarter?
A: Q3 supply grew by over 10% year-over-year, but there was a decline compared to before due to the removal of some listings.
Q: As the experience business is relaunched next year, how do you consider its expansion speed and scalability? Does maintaining uniqueness mean that building supply will take longer? What technical or marketing investments are planned for the relaunch of the experience business?
A: The experience business will find a balance between uniqueness and scalability. Although achieving scale growth will require years of effort, the development of the core business has proven that uniqueness and scale can coexist. In terms of technology, the company has rebuilt its technology over the past four years, laying the foundation for future multi-category business development, without the need for significant new technology investments. In marketing, the preference is to market Airbnb as a whole brand, promoting all businesses through a single application and brand rather than marketing each business separately. There will be investments, but they will not be as large upfront as those of other companies.
Q: In regions like New York City where regulations are tightening, how do you view the impact of these regulations on the business? Will there be a greater inclination to develop hotel businesses? In non-core market growth, will there be a greater reliance on brand-driven or performance marketing?
A: Taking New York City and Paris as examples, New York City banned Airbnb due to the housing crisis, but a year later, both rent and hotel prices increased. The distribution of hotels in New York City is limited, and the company remains optimistic about entering New York, planning to add more hotels on Airbnb, such as expanding into New Jersey, believing that solutions will be found in the future. In contrast, Paris views Airbnb as a solution to housing issues. During the Olympics, the number of available listings increased, and the number of guests surged, enhancing the company's popularity in Paris, with cities around the world following Paris's example. In non-core market growth, a combination of brand-driven and performance marketing will be used, with strategies formulated based on market conditions to increase market share and business growth.
Q: Will the experience business increase overall user engagement or usage frequency? For example, users may not book accommodations weekly, but they might try experience services weekly. How will product development paths and utilization change as the business grows?
A: The experience business is one of the new initiatives to increase Airbnb's usage frequency, with the potential to shift Airbnb from an annually used application to a monthly or even weekly used application. Currently, the average purchase price on Airbnb exceeds $500, which is high but has low usage frequency. The experience business will target not only travelers but also the local market, designing products suitable for booking in users' hometowns to meet the demand for activities during leisure time, such as weekends. This is similar to how iPod sales surged after compatibility with Windows. Although the experience business is initially positioned for travelers, it may attract more people to use it more frequently in the future.
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