Airbnb’s recently released Q3 2023 financial results reveal yet another chapter of triumph for the company with an impressive 113 million nights and experiences booked, generating $3.4 billion in revenue, an 18% increase year over year. In this article, we share highlights from the Airbnb Q3 2023 earnings call, along with our insights and commentary.
We look into the factors responsible for this stellar Q3, such as the company’s unwavering focus on international penetration. We also note Airbnb’s optimistic outlook on the ongoing supply surge, which the company considers a promising marker of marketplace health, and how it navigates these evolving regulatory challenges.
And finally, we explore the intriguing hints dropped by Airbnb CEO Brian Chesky, in anticipation of the highly awaited Winter Release on Wednesday, November 8, 2023.
Hunger for Travel Persists, and Airbnb is Reaping the Benefits
More first time-bookers, more app bookings, and more mid-term rentals but slower Q4
In Q3, Airbnb witnessed over 113 million nights and experiences booked, reflecting a substantial 14% year-over-year growth. This exceptional performance resulted in a revenue of $3.4 billion, representing an impressive 18% increase compared to the previous year. It’s worth highlighting the exceptional growth in the number of first-time bookers during this quarter, reinforcing the platform’s appeal to new users.
More nights were booked on the Airbnb app than ever before. A significant 53% of gross nights were booked via the app, marking an increase from the 48% recorded during the same period last year.
Cross-border nights booked saw an increase of 17% in Q3 compared to the previous year.
Stays spanning three months or longer are currently experiencing a robust year-over-year growth of nearly 20%, in line with Airbnb’s continued push to expand its offerings beyond short-term rentals to mid-and-long-term rentals.
Looking ahead to Q4, while continued growth is expected, Airbnb may see a slight dip compared to the impressive performance of Q3. While several factors contribute to this projection, Chesky notes that this expected decrease does not undermine the overall positive trajectory of Airbnb and the short-term rental industry.
Foremost, Airbnb Believes in Airbnb: Stock Buybacks
In Q3, Airbnb’s share repurchase was $500 million. When a company repurchases its own stock, it can increase the value for the remaining shares (those that are not repurchased) through a few mechanisms:
- When a company buys back its own shares, it decreases the number of outstanding shares in the market. With fewer shares available, each remaining share represents a larger piece of the company. This can lead to an increase in the earnings per share (EPS) for existing shareholders. Higher EPS often makes the stock more attractive to investors, potentially driving up its price.
- By buying back shares, the company is effectively returning capital to its shareholders. Shareholders who sell their shares back to the company receive cash in exchange.
A stock repurchase can be seen as a signal of confidence by the company in its future prospects. When a company is willing to use its cash to buy back shares, it suggests that they believe their stock is undervalued or that they have faith in their ability to generate future profits. This vote of confidence can attract more investors and increase demand for the remaining shares.
The Power of International Market Penetration
APAC Region Back to Pre-Pandemic Levels
One of the key drivers behind Airbnb’s extraordinary Q3 performance can be attributed to the company’s relentless focus on expanding its global footprint. Airbnb’s playbook for success, which involves a four-pronged approach, including product optimization, public relations, local marketing, and on-the-ground optimizations, has already yielded substantial results.
The Asia Pacific region particularly has made a remarkable recovery, bouncing back to pre-pandemic levels with a notable growth of 23% in gross nights booked during Q3 2023 compared to the same period in 2019.
Taiwan, Thailand, and Indonesia exhibited outstanding performance, with nights booked from these origins surpassing a notable 30% growth.
Building on the success achieved in Germany and Brazil in recent quarters, Airbnb has now set its sights on Korea. With gross nights booked in Korea soaring 54% higher than in Q3 2019, the country has become one of the fastest-growing markets for Airbnb.
Unlocking Opportunities in Japan, India, China, and Southeast Asia
As part of its ongoing international expansion, Airbnb is actively pursuing opportunities in key Asian markets such as Japan, India, China, and Southeast Asia. These regions offer immense potential for growth, and Airbnb is strategically optimizing its presence to cater to the unique demands of each market. Additionally, the company continues to experience steady growth in Mexico.
Accelerating International Penetration in the Next Two Years
With a clear focus on global expansion, Airbnb aims to accelerate its international penetration over the next two years. While the company enjoys significant penetration in the United States, there remains tremendous room for growth in many other countries worldwide by replicating successful strategies.
In Q3, Airbnb witnessed 19% year on year growth in supply, with nearly 1 million active listings added during the year. Urban and nonurban supply experienced nearly identical growth rates.
Earlier this year, the company also hit the milestone of 7 million total active listings. While the surge in supply has been cause for concern for short-term rental operators, lowering Average Daily Rates and making profits leaner, Airbnb views it as a testament to its health and resilience.
Generative AI: Airbnb’s Key to Becoming the ‘Ultimate Travel Agent’?
Brian Chesky envisions a future where generative AI serves as the driving force behind a personalized and seamless travel agent experience on the Airbnb platform. At first, it is difficult to see how this concept might be different from AI-powered features like HomeToGo’s AI mode, but Chesky believes that Airbnb has a distinct advantage.
Unlike many other travel companies, Airbnb requires 100% of both bookers and hosts to have verified IDs associated with their accounts. By continuing to invest in profiles and strengthening their system of trust, e.g Host Passports, Airbnb aims to gather more insights about guests and hosts. This wealth of information can be utilized to match users with a wider range of offerings on the platform, enhancing the overall booking experience.
The ultimate goal is to leverage generative AI to provide highly personalized recommendations and tailored travel options to users, creating a truly personalized and curated vacation planning process.
Is an Overhauled and AI-Boosted Customer Support System Imminent?
In the earnings call, Chesky hints at the integration of AI in its customer support system. The idea is to provide a faster and more efficient way of addressing issues, as AI technology will be able to conduct rapid and thorough reviews of problem cases against Airbnb’s numerous policies.
AI’s involvement will not replace human agents but rather complement their efforts. Agents will oversee the AI model, allowing it to swiftly analyze cases and provide well-informed solutions. This streamlined process is anticipated to offer front desk-level support, making it accessible to nearly every community around the world.
With the capability of AI, Airbnb envisions resolving issues with unprecedented speed and accuracy.
Co-Hosting Platform Launch Imminent
Airbnb has been quietly rolling out a pilot for its revamped Co-Hosting Platform, a service that matches hosts who have available space but lack the time to manage it with individuals who are willing to take on the hosting responsibilities. The platform has been active in France, Canada, Spain, and the UK since June 2022 and was extended to key markets in the United States, Canada, and Australia earlier this year.
Looking ahead, Airbnb’s CEO Brian Chesky strongly hinted at a formal launch soon, as predicted by us earlier this year, perhaps as early as next Wednesday as part of Airbnb’s Winter Release.
Why Regulatory Changes are not as Big of a Problem as They Initially Seem … Airbnb wants its shareholders to believe
Brian Chesky, CEO of Airbnb, acknowledged that while there may be headlines about places such as New York City imposing restrictions, these instances represent only a small percentage of the overall market concentration. In fact, approximately 80% of Airbnb’s top 200 markets already have regulation measures in place.
However, existing regulations aren’t immune to becoming more stringent. Take France, Airbnb’s second-largest market after the US, where there’s talk of halving the current 120-day cap to just 60 days. In Barcelona, there’s discussion among politicians about allowing current short-term rental licenses to expire without renewal. Airbnb’s foray into private rooms, mid-term rentals, and housing sectors can be seen as a strategic move to maintain its supply in markets facing restrictive regulations.
As Airbnb continues to navigate the complex landscape of regulations, it remains open to the idea of incorporating hotel inventory onto its platform, viewing it as an “inevitability.” In cities such as New York City, where short-term rentals have effectively been banned, Airbnb sees the potential to supplement its supply by partnering with boutique hotels.