High average daily rates helped drive Airbnb’s earnings up in the third quarter. But the company is preparing to roll out changes to clarify its pricing and add competition between hosts.
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High average daily rates have helped Airbnb continue its rapid growth this year, but the leader in short-term rentals said this week it would look for ways to increase competition among hosts, which some say could lower prices.
Listings on Airbnb will soon show an “all-inclusive price” for a reservation, including the price of the home with all associated fees, CEO Brian Chesky said on an earnings call on Tuesday.
The changes would come as part of what Chesky said was an attempt to display the true costs of rent an Airbnbwhich could increase the likelihood of users completing a booking. The company has come under fire from the public over fees that drive up the price of a reservation on the platform.
“When you see prices, instead of seeing more of an overnight rate, you’re going to see a bit more of a fully loaded rate,” Chesky said.
Chesky shared updates on the same call as he unveiled another solid year for the platform he helped start in 2008.
Nights and Experience bookings on Airbnb increased 25% in the third quarter compared to a year earlier. Revenue rose 29% in those three months to $2.9 billion, and net revenue rose 46% to $1.2 billion. The company has $9.6 billion in cash, cash equivalents, marketable securities and restricted cash.
Part of that growth came as the average daily rate — or base price to book an Airbnb listing — rose 5% to $156, the company reported.
While the company hit the headlines in October Over a viral post that suggested demand was plummeting in a so-called “Airbnbust,” Airbnb officials reported that demand continued to grow despite two consecutive years of growing interest from travelers.
The company seems to be focusing on one of the biggest problems of recent times: travelers complaining about fees added to nights booked.
Airbnb will update its search ranking algorithm, which determines where listings appear on the site, Chesky said. The algorithm will start favoring listings that customers have indicated in reviews as offering good value for money, including fees.
“This will really help hosts understand what they’re charging, and then we’ll give them more tools so they can see and understand what their all-inclusive price per guest is,” Chesky said. “We’re going to provide more discount tools and other features to help hosts stay competitive.”
Some short-term rental investors saw the comments as an attempt to get hosts to compete with each other by lowering their prices.
“Airbnb’s revenue call is bad news for hosts,” Mark Jenney, a short-term rental investor, wrote on Twitter. “Airbnb wants hosts to have a race to the bottom with prices. This is good for Airbnb because conversions and bookings will increase.
Another short-term rental investor wrote on Twitter that the update would be negative for some hosts.
“As hosts, we focus on maximizing [revenue per available room]“, wrote the investor. “Airbnb is focused on maximizing bookings. As someone with some of the most expensive properties in my market, I’m not thrilled.
Chesky seemed to confirm this hypothesis.
“If we do all of this, I think the prices will become even more competitive,” he told investors during the the profit call. “As prices become more competitive, the conversion rate increases. If the conversion rate increases, bookings increase. »
In the coming months, the company will roll out new ways for hosts to offer discounts, Chesky said. This includes more discount options for peak season stays and long-term stays, he said.
Airbnb continues to attract interest from longer-staying travelers. A fifth of the nights booked by the company lasted longer than a month. Half lasts more than a week.
To meet continued strong demand, Chesky said Airbnb will remain focused on directing travelers to markets that have more available homes for rent. It will do this by continuing to rely on the category search function that it unveiled this summer.
He said the company is also preparing to roll out updates to make it easier for new hosts to join the platform. This would help add supply to meet high demand.
These updates will be announced on November 16, Chesky said.
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