4 Airbnb Takeaways From the Third Quarter

Since late 2020 to its third quarter earnings report, Airbnb has consistently reported that it has four million hosts on the platform. Given all of the havoc that the pandemic engineered, have those ranks not budged one way or another?

We looked at that issue and three other takeaways from Airbnb’s third-quarter report, which saw the company proclaim its best quarter ever.

Curious Host Numbers and the Marketing Campaigns

During its third quarter earnings call last week, Airbnb CEO Brian Chesky was bullish about the company’s “Made Possible by Hosts” marketing campaign, its first major brand blitz in five years, that was aimed at attracting new customers and hosts.

Chesky said “now finally more people were interested in hosting than ever before” and the Airbnb is “inspiring more people to become hosts.” Referring to the marketing campaign and a slew of product initiatives, such as a streamlined onboarding process for hosts, Chesky said “we’re recruiting more hosts and setting them up for success.”

The company said in its shareholder letter last week that after running a digital campaign to recruit hosts earlier this year, traffic to Airbnb’s hosting landing page climbed 25 percent in the third quarter compared to the same period in pre-pandemic 2019.

However, on Friday, which was the latest update, and as part of other financial filings since the end of 2020, Airbnb has consistently reported to the Securities and Exchange Commission and investors that it has “4 million hosts.” (In its initial public offering registration statement on November 16, 2020, Airbnb said it had “more than 4 million hosts” as of September 30, 2020. But as of December 31, 2020, Airbnb dropped the “more than” in favor of just “4 million hosts.”)

In April, based on data from Transparent, Skift reported that the number of Airbnb’s individual hosts, its core host profile, declined nearly 10 percent although other categories were stable or even rebounding.

But if you believe its host number, four million, that Airbnb has consistently reported to financial regulators and investors over the last four quarters, then that means there has been absolutely no change to that figure along the way.

A potentially overlapping issue is that Airbnb has reported that Paris City Hall fined Airbnb Ireland $9.6 million on July 1 for its failure to “register or deactivate allegedly unregistered listings.” Airbnb is considering an appeal. Does retaining those listings artificially pump up the host numbers a bit?

That lack of change in Airbnb’s reporting on its host numbers has occurred despite the pandemic’s whipsaw, Vrbo’s marketshare gains in the U.S., and Chesky saying last week that he feels encouraged by the results of the marketing campaign.

Another curious aspect of Airbnb’s reported numbers is that despite all the changes that the pandemic has wrought, including lockdowns, travel restrictions, and a surge in Covid variants, as well as the Airbnb marketing campaign’s reported advantages, the company has consistently stated over the past four quarters, including as of last Thursday, that 90 percent of its hosts are individuals.

While that’s certainly possible, isn’t it also likely that perhaps the mix has changed a tad from the fourth quarter of 2020 through the third quarter of 2021? Was there no ebb and flow? Are we are to believe Airbnb has attracted a 90 percent mix of individual hosts and 10 percent for corporate hosts and others the entire time, and nothing has changed?

Asked why Airbnb’s four million host figure hasn’t budged over the last year, an Airbnb spokesperson said: “On hosts, we don’t have an additional update — we can confirm that we have more than four million. And again, we are seeing that our demand is driving more supply, and that the tools we launched in May — revamping the host onboarding process and providing hosts help with Ask a SuperHost — are reducing friction.” [Note that the spokesperson cites “more than 4 million” and Airbnb’s financial reporting Friday indicated that its ranks have “grown to 4 million hosts.”]

Downplaying the Need to Add Listings

In other issues, investors have been focused on the battle among short-term rental competitors to command enough supply to meet strong demand in U.S. beach or resort destinations, and as Europe opens up further, and Asia comes back. Expedia’s Vrbo, for instance, has been running a campaign in North America and several European countries to woo disaffected Airbnb superhosts. (Airbnb Chief Financial Officer David Stephenson said Thursday the company’s churn rate among hosts “has improved.”)

In its November 2020 registration statement, Airbnb said it had 5.6 million active listings as of September 30, 2020.

Airbnb didn’t precisely update that number for the third quarter of 2021, but said active listings have grown throughout 2021. The greatest growth compared with pre-Covid 2019 was Latin America (25 percent), North America (10 percent), and Europe, Middle East and Africa (9 percent), Airbnb said.

But Airbnb also stated that its “I’m Flexible” homepage search option for people unsure where to travel reduces the need to add listings because Airbnb can point travelers to destinations where hosts have empty homes or apartments.

During the earnings call Thursday, Chesky said “on no night are we ever supply-constrained globally on Airbnb.” In other words, if Myrtle Beach, South Carolina is sold out, then perhaps there is an Airbnb vacancy in Poughkeepsie, New York, and then it would be up to Airbnb to entice travelers to stay there. That’s a great thing in the battle against overtourism, but may not be the viable answer that investors are looking to see regarding supply constraints.

Will Travel Recovery Decelerate Growth in Long-Term Stays?

The pandemic accelerated the growth of long-term stays on Airbnb, but the rate of increase is slowing.

Stays of 28 days or longer were still the fastest-growing trip type, 20 percent of stays, during the third quarter on Airbnb, but that growth rate has declined from 24 percent in the first quarter.

“And so yes, the decrease is just the fact that short-term stays continue to come back,” Chief Financial Officer David Stephenson said Thursday in response to an analyst’s question. “And in terms of the market opportunity in long-term stays, we think this adds hundreds of billions of dollars to our overall long-term TAM (Total Addressable Market) opportunity with long-term stays.”

If the percentage of its long-term stays falls to 15 percent of bookings in 2022 or 2023, does it give less credence to Airbnb’s declaration of a “travel revolution” in terms of the way people will work and live in the future?

Marketing Spend

Airbnb spent nearly $1.37 billion on marketing in the third quarter, which was nearly double the spend of the year-ago period.

So far Airbnb is sticking to its pledge to reduce its reliance on performance marketing using Google.

“We’ve increased our relative marketing rate this year, just given the fact that the business has been going quite well,” Stephenson said. “And so, on a relative basis, our marketing expenses as a percentage of revenue are down from levels we had in 2019. And we should anticipate that it will be in this kind of range for the foreseeable future.”