Airbnb reports record revenue of $2.88B but warns of risks from inflation

Airbnb shares fell Tuesday after the company issued disappointing guidance for the holiday quarter, saying it expects bookings to decline after a stellar third quarter.

Shares of the vacation rental company fell a whopping 9 percent in after-hours trading even after the company reported record third-quarter revenue of $2.88 billion, up 29 percent from last year.

The travel industry has seen a phenomenal recovery this year as life returned to normal after the pandemic, but the industry now faces risks from the global rise in inflation.

San Francisco-based Airbnb recorded its highest-ever bookings from July to September, with nearly 100 million nights and experiences booked, but it said the number of bookings in the current quarter will “decrease slightly” from that level.

Airbnb expects fourth-quarter revenue between $1.8 billion and $1.88 billion, the midpoint of which exceeded analyst expectations of $1.85 billion, according to Refinitiv IBES.

Net income rose 45.6 percent to $1.21 billion, or $1.79 per share, while revenue rose 28.9 percent to $2.88 billion, beating estimates of $2.84 billion .

“As the impact of the pandemic wears off but macro conditions persist, we expect a continued, albeit choppy, recovery in cross-border travel to be a further tailwind for future results,” CEO Brian Chesky wrote in a letter. to shareholders.

Still, it is “well positioned for the future,” the company added, after surpassing quarterly revenue estimates.

However, Airbnb shares are down nearly a third this year, despite the rebound in travel, a very profitable first half of the year, and relentlessly optimistic commentary from Chesky and other business leaders.

Most of the price decline has taken place since early May, amid a broader market sell-off and concerns about the state of the economy.

Investors worry that rising prices for commodities, including housing, food and gas — plus fears of a recession — will cause consumers to cut back on discretionary spending like travel.

Airbnb shares fell a whopping 9 percent in after-hours trading even after the company reported record revenue of $2.88 billion for the third quarter

Investors worry that rising prices for commodities including housing, food and gas – plus fears of a recession – will cause consumers to cut back on discretionary spending like travel

However, Airbnb may face a more fundamental threat – a perception by many guests that bookings on the site are no longer a bargain due to high cleaning fees and misleading listings.

Chesky tweeted last month that “cleaning fees were never intentionally designed, so we’re catching up now. This is one of my top priorities – we’re redesigning how prices work on Airbnb.”

Tenants have posted photos of detailed lists of chores in demand. The dissatisfaction comes from two sides: hosts are increasingly complaining about problem tenants.

Airbnb is waging a protracted battle to crack down on unauthorized parties, some of which have ended with shootings. The company will also face increased efforts by local residents and governments to regulate the short-term rental market.

Many major cities in the US and abroad have added expensive licensing requirements to operate a short-term rental, and they are fining property owners who don’t follow the rules. The trend is extending to smaller cities.

In April, a shooting occurred at an Airbnb rental in Pittsburgh that was being used for a large party. Police say more than 200 people were in the Airbnb at the time, many of whom were minors, when multiple gunmen opened fire, killing two teenage boys and injuring eight others.

Airbnb is also battling the perception of many guests that bookings on the site are no longer a bargain due to high cleaning fees and misleading listings

Officials in the Dallas suburb of Plano are considering stricter rules after a prostitution raid on an Airbnb in a residential area.

The rising strength of the US dollar against other currencies also poses a threat to the travel industry.

Major US carriers have pointed to an increase in international travel, especially to Europe, as travelers benefited from a stronger dollar. But Airbnb said the majority of travelers in North America and Europe had booked domestic stays.

Average daily rates for Airbnb rose 5 percent year-on-year to $156 in the quarter as hybrid work fueled demand for its long-term vacation rentals, encouraging hosts to charge more.

The company, which generates half of its revenue from listings outside the United States, said prices were significantly higher without the impact of currency movements.