Has Airbnb finally come back to life?

On February 14th, Beijing time, after the US stock market closed, $Airbnb(ABNB.US) announced its Q4 financial report for the fiscal year 2024, not only showing strong performance for the quarter, but also providing significantly better-than-expected guidance for profit margins in 2025. There are many highlights, detailed points are as follows:

1. The most core operational indicator—Airbnb's Gross Booking Value (GBV) reached $17.55 billion this quarter, a year-on-year increase of 13.4%, accelerating by a full 3.4 percentage points compared to the previous quarter, significantly higher than the market expectation of 11%. The significance of this signal is that one of the market's biggest concerns about Airbnb is the continuous slowdown in booking growth, with even the risk of slipping into single-digit growth. This performance may indicate a re-acceleration of growth, at least signaling that the decline is no longer ongoing.

Mainly, this quarter's total nights booked saw a year-on-year growth rate increase from 8.5% in the previous quarter to 12.3%, accelerating by 3.8 percentage points, and far exceeding the market expectation of 9.6%. According to Dolphin Research's understanding, high-frequency data from sources like AirDNA indeed points to an acceleration of booking growth of about 2.5 percentage points in Q4 compared to Q3, indicating that the market expected growth to accelerate quarter-on-quarter, but the actual acceleration was even higher.

By region, the company disclosed that the night bookings in North America grew in the low single digits year-on-year, slightly accelerating compared to the previous quarter, while the Average Daily Rate (ADR) increased by 3% year-on-year. The European region may continue to benefit from the Olympic Games, with night bookings growing in the low double digits year-on-year.

In contrast, night bookings in South America and the Asia-Pacific region both grew in the low 20s year-on-year. It was disclosed that the strong growth in these two regions was attributed to the company's large-scale promotional campaigns in South America and the robust cross-border travel growth in the Asia-Pacific region, represented by China (with a year-on-year increase of 25% in outbound travel bookings by Chinese tourists).

It is evident that the stabilization of growth in North America, along with the strong growth in night bookings in South America and the Asia-Pacific region, are the main contributors to Airbnb's overall strong performance this quarter.

3. This quarter, Airbnb confirmed revenue of $2.48 billion, a year-on-year increase of 11.8%, also showing quarter-on-quarter acceleration, and significantly better than the expected growth rate of 9.2%. However, the monetization rate slightly decreased by 19 basis points year-on-year, marking a decline in the take rate for three consecutive quarters. The company explained that the slight decline in the monetization rate was due to a one-time recognition of unused gift cards in revenue during the same period last year. We speculate that the change in the revenue regional structure (tilting towards Latin America and the Asia-Pacific region) may also have had a certain drag on the take rate.

Nevertheless, this quarter's gross margin was 82.8%, slightly up from 82.7% in the same period last year (the market expectation was also this figure). It did not decline under the aforementioned negative impact on the take rate, suggesting that the company should have achieved some efficiency improvements in internal cost control 4. One of the market's main concerns about Airbnb is that the company's management has repeatedly indicated a significant increase in investment in new businesses, which will lead to continued compression of profit margins.

In reality, when excluding equity incentives, the expenditures for marketing and product development increased by 28% and 21% year-on-year, respectively, far exceeding the revenue growth during the same period. It is indeed evident that the company is making substantial investments in new products and new markets. The proportion of these two expenses relative to revenue has increased by about 3 percentage points compared to the same period last year.

However, profit margins are indeed declining, with the adjusted EBITDA margin decreasing by about 2.4 percentage points to 30.8%. But the market's original expectations were much more pessimistic, at only 26.9%. The actual contraction in profits is much smaller than the market's concerns.

5. For the first quarter of 2025, the company expects revenue in the range of $2.23 to $2.27 billion, with the midpoint slightly lower than the market expectation of $2.29 billion, which generally aligns with expectations. In other indicators, the company expects the number of nights booked in Q1 2025 to be roughly flat compared to last year after excluding the impact of last year's leap month (a 1 percentage point benefit). Based on last year's growth of 9.5% versus the market expectation of 8.3%, the guidance for the growth in nights booked in Q1 2025 is generally in line with expectations after accounting for the leap month effect. The company expects the average revenue per booking to decline slightly year-on-year, mainly due to exchange rate factors. It can be said that the growth expectations are generally in line with expectations, and there are no obvious signs of a slowdown in trend.

However, on the profit side, after the adjusted EBITDA significantly exceeded expectations this quarter, the company's expectations for profit margins in the next quarter and for the full year 2025 are clearly better. For Q1 2025, the company’s adjusted EBITDA margin guidance, after excluding the impact of exchange rate fluctuations and the leap month, is expected to be roughly flat compared to the same period last year (around 20%). Meanwhile, the market expects the adjusted EBITDA margin under GAAP to be only 16%.

The market generally expects the adjusted EBITDA for the full year 2025 to be 33.5%, while the company's guidance this time is at least 34.5%.

Dolphin Research's View:

Summarizing the previous analysis, we can see that Airbnb's stock surged by about 15% after the earnings report, which can be described as a significant increase. The core reason lies in the fact that this earnings report positively addressed two major concerns that the market had previously: 1) On the growth front, the company's growth rate in nights booked has clearly outperformed its peers, with a slowdown from over 20% to all less than 10% in the first three quarters of 2024. The market is relatively concerned about whether Airbnb's growth will remain around 10%, losing its growth advantage compared to peers; 2) In terms of profit, in order to explore new businesses, the management has repeatedly emphasized that they will increase expenditure, and the financial data also verifies this viewpoint. The adjusted EBITDA profit margin for the entire year of 2024 has narrowed by 40bps compared to last year (as 4Q24 was better than expected, the market originally believed the decline would be greater). Moreover, the market is concerned that the decline in profit margin in 2025 will further exceed that of 2024 (by more than 200bps).

However, we can see that on one hand, the number of room nights booked in 4Q has significantly accelerated quarter-on-quarter, and the guidance for growth in the next quarter is the same as that of the same period last year, at least not worsening, with marginally positive signs. In terms of profit, whether for this quarter, the next quarter, or the profit margin for the entire year of 2025, all are significantly better than expected. This shows that the investment in new businesses does not exert as much pressure on profitability as the market worries.

Due to the market's generally cautious and pessimistic attitude towards Airbnb, the strong rebound in sentiment after this performance reversal is understandable. However, from a valuation perspective, the company's market value before the earnings release corresponded to approximately 17x~18x 2026 adjusted EBITDA, which is clearly not cheap, but in the current context of overall high valuations in the US stock market, it is not considered very expensive.

The following is a detailed interpretation:

1. Emerging markets drive accelerated growth, has the growth inflection point arrived?

The core operating metric—Airbnb's total booking value (GBV) reached $17.55 billion this season, a year-on-year increase of 13.4%, accelerating by a full 3.4 percentage points compared to the previous quarter, significantly higher than the market expectation of 11%. The key significance of this signal is that one of the biggest concerns of the market regarding Airbnb has been the continuous slowdown in booking growth, with even the risk of sliding into single-digit growth. This performance may mark a signal that the company is entering a phase of re-acceleration, at least no longer in continuous decline.

From the perspective of price and volume, this season Airbnb's total room night booking growth rate increased significantly from 8.5% in the previous quarter to 12.3%, accelerating by 3.8 percentage points, which is also far higher than the market expectation of 9.6%. According to Dolphin Research's understanding, high-frequency data from sources like AirDNA indeed points to an acceleration of approximately 2.5 percentage points in booking volume from 3Q to 4Q, indicating that the market had anticipated accelerated growth, but the actual acceleration was even higher.

In terms of price, this season's average daily rate reached $158, a year-on-year increase of 0.9%, slightly lower than the expected $159. Considering the growth situation by region, we speculate that this is mainly due to an increased proportion of bookings from underdeveloped regions.

By region, the company disclosed that the number of room nights booked in North America increased by a low single-digit percentage year-on-year, slightly accelerating compared to the previous quarter, while the ADR grew by 3% year-on-year.

The European region may continue to benefit from the Olympic Games, with a year-on-year growth in room nights of low double digits, and the ADR also increased by 6% year-on-year (excluding exchange rate effects).

The emerging South American region saw a year-on-year growth in room nights booked of low-20s. It was disclosed that the company began extensive promotional activities in South America in the second half of the year, resulting in a 15% increase in the number of first-time users compared to Q3.

The Asia-Pacific region also experienced a low-20s growth in room nights booked, primarily driven by cross-border travel. Among them, the number of bookings for outbound travel by Chinese tourists increased by 25% year-on-year.

In summary, the stabilization of growth in North America, along with the strong growth rate of over 20% in room nights booked in South America and the Asia-Pacific region, should be the main contributors to Airbnb's overall strong performance this season.

II. Despite a slight decline in monetization rate, revenue is also accelerating growth

From a revenue perspective, due to the unexpectedly strong growth in underlying operating data, Airbnb confirmed revenue of $2.48 billion this season, a year-on-year increase of 11.8%, also accelerating growth compared to the previous quarter, and significantly better than the expected growth rate of 9.2%.

However, the monetization rate this season slightly decreased by 19 basis points year-on-year, marking a decline in the take rate for three consecutive quarters. The decline in the take rate caused revenue growth to lag behind GBV. The company explained that the slight decline in the monetization rate was due to a one-time recognition of unused gift cards as revenue in the same period last year. We speculate that the change in the regional structure of revenue (tilting towards Latin America and the Asia-Pacific region) may also have had a certain drag on the take rate.

However, this season the gross margin was 82.8%, slightly up from 82.7% in the same period last year (the market expectation was also this figure). It did not decline under the negative impact on the take rate mentioned above, suggesting that the company should have achieved some efficiency in internal cost control.

3. Although the profit margin has indeed narrowed under high investment, it is much better than the market's concerns

One of the most concerned issues for the market regarding Airbnb is that the company's management has repeatedly indicated that there will be a significant increase in investment in new businesses, which will lead to a continued contraction in profit margins.

In reality, excluding equity incentives, the expenditures on marketing and product development have increased by 28% and 21% year-on-year, respectively, far exceeding the revenue growth during the same period. It is indeed evident that the company is investing heavily in new products and new markets. The proportion of these two expenses relative to revenue has increased by more than 3 percentage points compared to the same period last year.

However, although the profit margin is indeed declining, the adjusted EBITDA profit margin has decreased by about 2.4 percentage points year-on-year to 30.8%. The market's original expectations were much more pessimistic, at only 26.9%. In other words, the actual contraction in profit is much smaller than the market's concerns.

Dolphin Research's past research on [Airbnb]:

Financial Report Commentary

November 8, 2024 Financial Report Commentary 《 Growth Slowdown & Profit Contraction, Airbnb is Still Going Through Trials 》

November 8, 2024 Conference Call 《 Airbnb 3Q24 Conference Call Minutes: How Much Contribution Can New Businesses Bring? 》

August 7, 2024 Financial Report Commentary 《 Airbnb: The "A-Dou" That Even the Olympics Can't Support? 》

August 7, 2024 Conference Call 《 Airbnb: Is There a Consumption Downgrade in Travel Spending? 》 May 9, 2024 Conference Call 《 Airbnb: Increasing Investment in 2Q, Focusing on Overseas Markets and New Businesses 》

May 9, 2024 Earnings Report Commentary 《 Airbnb: Is Another Weak Guidance to Blame? 》

February 14, 2024 Earnings Report Commentary 《 Slowing Growth, Profit "Hidden Risks," Will Airbnb's Turning Point Come? 》

November 2, 2023 Conference Call 《 Airbnb: Pricing Power & Emerging Markets are the Current Growth Drivers 》

November 2, 2023 Earnings Report Commentary 《 Airbnb: Is "Little Sweetheart" Also Getting "Old"?**》

August 10, 2023 Conference Call 《 Airbnb Minutes: Strengthening Cost Performance, Optimistic About Continued Growth in Homestays 》

August 4, 2023 Earnings Report Commentary 《 Airbnb: The Performance of Little Happiness Can No Longer Capture the Market's Heart 》

May 10, 2023 Earnings Report Commentary 《 Airbnb: Winter is Coming, Is the Collapse of Global Travel Consumption About to Begin? 》

In-depth

February 28, 2023 《 Microsoft and Amazon Fall, Is It Time for Airbnb & Uber to Reign? 》

April 6, 2022 《 Airbnb: An Alternative During the Pandemic, Why Can It Turn the Tables When Others Can't? 》

April 7, 2022 《 Airbnb: The Crown is Too Heavy, Valuation is Running Too Fast **》Risk Disclosure and Disclaimer for this Article: Dolphin Research Disclaimer and General Disclosure