Airbnb slides as muted Outlook shows cracks in travel search

(Bloomberg) — Shares of Airbnb Inc. slumped after the vacation home rental company gave a cautious second-quarter earnings forecast, suggesting rising prices and a bleak economic outlook are starting to weigh on consumer appetite for travel.

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The San Francisco-based home-sharing company expects revenue of $2.35 billion to $2.45 billion in the three months ending in June, an increase of 12 percent to 16 percent from a year earlier and its slowest growth rate on record. Analysts had forecast $2.4 billion, according to a Bloomberg survey. Airbnb said it expects earnings before interest, taxes, depreciation and amortization, excluding some costs, to be similar to last year’s second quarter.

Over the past few years, Airbnb has benefited from changes in work and lifestyle due to the pandemic. But the post-Covid travel rush is waning and some consumers are tightening their leisure budgets amid continued inflation and a shaky economy. Airbnb said the number of nights and experiences booked in the current period will look unfavorable compared to a year ago, when there was a surge in demand following the outbreak of the Covid-19 Omicron variant. As a result, the company expects year-over-year growth in nights booked and experiences to grow at a slower pace in the second quarter than revenue.

Shares fell 10% to $114.25. They had gained almost 50% so far this year by the end of trading.

The forecast came after a quarter that set records in several metrics. Revenue in the three months ended March 31 rose 20% to $1.82 billion, Airbnb’s highest for the period. That compared to analysts’ estimates of $1.79 billion. Adjusted earnings before interest, taxes, depreciation and amortization were $262 million, beating Wall Street estimates and also a record first quarter. Earnings per share were 18 cents, while analysts expected 17 cents.

Companies from airlines to hotels are raising prices as consumers so far show a willingness to pay. Personal consumer spending rose 3.7 percent in the first three months of this year, the most in nearly two years. But people may be starting to draw the line. Bank failures, rising inflation, high mortgage payments and a softening labor market, especially in high-income sectors like tech, may cause tourists to start pulling back on spending.

Airbnb said that in the first quarter, average daily rates were $168, roughly the same “sustainably elevated” level from a year ago. The price increase was offset by the impact of foreign exchange, people’s willingness to pay and a shift in bookings to urban and other types of rentals. But Airbnb is seeing “slightly lower” daily rates in the second quarter, due in part to new host pricing tools introduced last week and a shift to more urban rentals.

Chief Executive Officer Brian Chesky said in an interview last week that the strong demand he expects for this summer could have been even better if not for economic uncertainty. Airline prices are still expensive, he noted, and “when the cost of flights goes up, it affects our business.”

Airbnb’s results follow solid results and upbeat comments from online travel partners. Booking Holdings Inc. and Expedia Group Inc. reported a double-digit increase in gross bookings in the first quarter. Booking, whose properties include restaurant reservation platform OpenTable and discount flight website Priceline, said bookings reached their “highest quarterly levels ever.” Expedia chief executive Peter Kern said there had been “a structural shift in the way consumers think about spending and travel is at the top of the list”.

On a call with investors to discuss the results, Chesky said affordability is a top priority for Airbnb. He said the hope is that significant rig supply will help ease pricing pressure.

Airbnb is taking steps to prevent rental prices from exploding. The company released more than 50 new features and upgrades, in part to increase pricing transparency and affordability. In an effort to ensure the platform has reasonably priced accommodations, the company launched Airbnb Rooms with an average price of $67 per night. Guests stay in homes with hosts and share common spaces such as living rooms, kitchens and backyards. Airbnb is also implementing a series of changes, including lower fees, adding the ability to pay in installments through a new partnership with Klarna Bank AB, and a new discount tool for hosts to offer the best deals.

The company also announced Tuesday that it has authorized a new stock buyback program worth up to $2.5 billion.

(Updates with comments from CEO in tenth paragraph)

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