Airbnb shares fall on muted Q4 bookings forecast

Shares of Airbnb Inc. fell after the company gave a disappointing outlook for fourth-quarter bookings, suggesting consumer preferences are shifting away from the higher-cost rentals that flourished during the pandemic and are returning to urban and cross-border destinations.

The San Francisco-based home-sharing platform said it expects the pace of nights and experiences booked to “moderate slightly” in the fourth quarter from the 25% gain in the third quarter. Airbnb reported 99.7 million nights and experiences booked in the three months ended September, below analysts’ estimates of 99.9 million.

The shares fell about 6% in premarket trading ahead of the opening of trading in New York. The stock rose 2% to close at US$109.05 in trading on Tuesday and was down 35% this year.

Airbnb also said it expects average daily rates to moderate this quarter due to a strong dollar and a shift of people returning to cities, which tend to have lower rates based in smaller accommodations. The company forecasts fourth-quarter revenue of $1.80 billion to $1.88 billion, with the low end of that range below Wall Street’s estimate of $1.86 billion.

The muted outlook comes after Airbnb posted its highest revenue and most profitable quarter yet over the summer. Revenue jumped 29% in the third quarter to $2.88 billion and the company posted net income of $1.2 billion, beating analysts’ estimates.

The third quarter was expected to be a blowout season, as Chief Executive Brian Chesky and other industry executives capitalized on pent-up demand for summer travel after two years of COVID-related restrictions. 19. Indeed, travelers seemed to be swarming popular tourist destinations despite airport disruptions and flight cancellations that have driven up ticket prices. Airlines from Deutsche Lufthansa to American Airlines and United have predicted a sustained rebound in travel after an early pandemic crisis.

Airbnb said the average daily rental rate rose 5% in the third quarter from a year earlier. The increase was entirely due to price appreciation, the company said, which more than offset the negative impact of a return to city destinations and other bookings.

But travelers can put an end to rising prices, and some hosts are already starting to see a drop in bookings for the rest of the year. This could be due to inflation, which is at its highest level in 40 years in the United States, pushing rental prices out of reach for some, as well as the fact that there are now many more hosts on the platform than there was before. pandemic, resulting in a glut of supply. And, in some very hot markets that have boomed as people took advantage of work-from-anywhere policies, hosts are starting to feel a lull. For example, demand and occupancy in Lake Tahoe fell 20% and 18% in the second quarter compared to a year ago, according to data compiled by AirDNA.

Airbnb could also begin to face renewed competition with hotels, which are now seeing more inventory come back online after the pandemic rout, Bloomberg Intelligence analysts Mandeep Singh and Damian Reimertz wrote in a note ahead of the release of the reports. results.

In a letter to shareholders, Chesky remained optimistic. “Regardless of the lingering macroeconomic uncertainties, we believe we are well positioned for the way forward,” he said. Guest demand remains strong, Chesky said, adding that long-stay and out-of-town travel, features that have helped Airbnb thrive during the pandemic, “are here to stay as millions of people have found a new home.” flexibility in where they live and work. Even with more businesses forcing employees back into the office, Airbnb said nights booked for long-term stays remained flat in the third quarter from a year earlier at 20% of the total.

After the pandemic years, when travelers tended to stay close to home, the number of raw cross-border nights booked rose 58% in the third quarter, while high-density city nights booked rose 27% from than the previous year, Airbnb said. .

Kevin Kopelman, an analyst at Cowen Inc., said a strong performance in the fourth quarter of last year, as the delta variant waned, puts Airbnb in a series of tough comparisons going forward.

Airbnb is the first of the major travel companies to report results this week, ahead of Booking Holdings Inc., which reports on Wednesday, and Expedia Group Inc., owner of Airbnb rival Vrbo, on Thursday.

Despite its strong performance over the summer, investors punished popular tech stocks as interest rates rose and Wall Street worried about a possible recession. Shares of Airbnb have fallen around 35% this year, compared to declines of around 47% and 22% for rivals Expedia and Booking.

The strong dollar also weighed on companies with international sales, from Alphabet Inc. to Inc. Airbnb is no different, as more than half of its revenue came from foreign currencies in the third quarter.

Airbnb rewarded its shareholders this summer by announcing a $2 billion buyout program, which also helped offset the dilution of an employee stock ownership program. By the end of September, the company had repurchased $1 billion in stock.

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