Tariff Sledgehammer Pummels Travel & Hospitality – Is Airbnb Doomed Without Growth or Profit?

On May 1st, Beijing time, after the US stock market closed, Airbnb$Airbnb(ABNB.US) announced its Q1 financial report for the fiscal year 2025, with the following key points:

1. Core operating indicators have slowed down significantly: This quarter, Airbnb's Gross Booking Value (GBV) was $24.5 billion, a year-on-year increase of only 7%, marking the first time since the pandemic that it fell below 10%, and it directly dropped to only single-digit growth, with a very noticeable slowdown. Even excluding the adverse impact of exchange rates, the growth rate was only 9%, also showing a quarter-on-quarter decline of about 3 percentage points.

In terms of price and volume drivers, this quarter's total nights booked increased by only 7.9% year-on-year, with a quarter-on-quarter decline of a full 6.4 percentage points. As a typical discretionary expenditure, the travel and hospitality sector is considered one of the industries most affected by recent tariffs and macroeconomic weakness, leading to a generally pessimistic market outlook for the travel and hospitality industry, including Airbnb, and the actual performance was indeed weak.

Adding to the woes, the Average Daily Rate (ADR) also decreased by about 0.9% year-on-year, marking the first decline in average transaction price since Q4 2022. According to the company, this was mainly due to the drag from exchange rates.

2. Weakness in North America and Europe, while South America and Asia-Pacific remain strong: By region, North America experienced the most severe demand weakness, with nights booked growing by only low single digits this quarter. Excluding North America, the overall night growth rate this quarter could reach 11%. The night volume in Europe also grew by only low single digits year-on-year, which is similarly weak.

The growth rates for nights booked in South America and Asia-Pacific were over 20% and around 15%, respectively, with significant contributions from Mexico and Japan. It is evident that in the context of weakening core mature markets, how much incremental growth emerging markets can provide to offset the impact is one of the key factors determining whether the company's overall growth can remain resilient.

3. Revenue growth lags behind GBV, monetization rate encounters bottlenecks: In terms of revenue, this quarter's confirmed revenue was $2.27 billion, a year-on-year increase of 6.1%, with a quarter-on-quarter decline of 5.7%. Excluding the impact of exchange rates, the growth rate was only 8%. Accompanied by the slowdown in GBV, revenue growth also significantly declined, and the revenue growth rate lagged behind the GBV growth rate.

Specifically, this quarter's monetization rate slightly decreased by 8 basis points year-on-year, marking the fourth consecutive quarter of year-on-year decline in take rate. According to the company, although the company has increased service fees for currency exchange bookings, this was offset by the timing mismatch with Easter. We speculate that the change in the regional structure of revenue (tilting towards Latin America and Asia-Pacific) may also have had a certain drag on the take rate.

Although the company has been providing reasons for the decline in take rate over the past few quarters, it ultimately reflects that the company's monetization ability has encountered a bottleneck.

4. Despite increased investment, profits continue to shrink: In addition to the slowdown in growth, another concern in the market is that the investment in new businesses has led to a contraction in profit margins.

Excluding equity incentives, marketing and product development expenses increased by 8% and 17% year-on-year, respectively, exceeding the revenue growth rate during the same period. The significant increase in product development expenses indeed reflects the company's investment in new businesses. Furthermore, the company claims it will still invest $200 to $250 million in promoting new businesses as originally planned by 2025.

Due to these investments in new businesses, the expense-to-revenue ratio expanded by 1.2 percentage points year-on-year, causing the adj. EBITDA profit margin to decline by approximately 1.4 percentage points to 18.4%. Although this is better than the market's more pessimistic expectation of 16%, the continuous narrowing of profits for four consecutive quarters is clearly a bad trend.

5. For the second quarter of 2025, the company guides a revenue midpoint of $3.02 billion, which is basically in line with the market expectation of $3.03 billion, implying a year-on-year revenue growth of about 10%. This seems better than the current quarter, but it includes about 2 percentage points of tailwind from the timing of Easter.

On more critical operational metrics, the company expects the number of nights booked in Q2 2025 to continue to slightly slow compared to this quarter, while the average revenue per customer will remain roughly flat year-on-year.

On the profit side, the company also expects adj. EBITDA to be flat or slightly down compared to the same period last year, indicating that the trend of shrinking profit margins is likely to continue. For the full year of 2025, the company maintains its annual target of 34.5%, implying a contraction of 1.9 percentage points compared to last year.

Dolphin Research's Viewpoint:

Overall, Airbnb's performance this quarter can be categorized as disappointing but within expectations. Although there are generally no significant misses on core metrics from an expectation perspective, the trend of performance changes undoubtedly shows a comprehensive weakening.

Firstly, as the market is concerned, against the backdrop of macroeconomic weakening affecting entertainment consumption and trade disputes impacting international business travel, Airbnb's growth rate in nights booked has indeed plummeted, and the guidance for the next quarter indicates that demand will further weaken.

In the face of macro headwinds and increasingly weak revenue growth, the company is "forced" to seek a second growth curve to stimulate growth acceleration. Unfortunately, the current environment is not conducive to expansion and investment, and the company's insistence on increasing investment in new businesses has led to a continuous decline in profit margins.

With both growth and profitability showing a deteriorating trend, the company is caught in a vicious performance cycle of downward resonance. Therefore, until macro negative factors are reversed or the company validates the success of its new businesses, Dolphin Research maintains a cautious and observant attitude towards Airbnb Due to the current expectations, Airbnb's profit in 2025 has almost no growth, and the current market value corresponds to an estimated valuation multiple of about 18x the adjusted EBITDA for 2025. However, based on the expected net profit under GAAP, the valuation reaches 28x PE. Before the profit growth expectations significantly accelerate, it is not considered a cost-effective valuation.

The following are key charts:

1. Core Operating Indicators