Airbnb Widened Marketing Edge Against Rivals in 2022

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In the perennial quest to turn bargaining-hunting travelers with little brand loyalty into customers making bookings and generating revenue through paid advertising, Airbnb widened its already substantial advantage in 2022 over rivals Booking Holdings and Expedia Group.

The first accompanying chart depicts each company’s sales and marketing spend as a percent of revenue in 2022. Airbnb spent just 18.04 percent, Booking Holdings allocated 45.7 percent, and Expedia Group shelled out 52.3 percent last year.

Sales and Marketing Spend as a Percent of Revenue 2022

Source: Skift, Financial filings

The second chart details these companies’ sales and marketing spend as a percentage of revenue in 2021. It’s thus clear that Airbnb in 2022 expanded the mammoth edge in sales and marketing as a percent of revenue that it already had in 2021.

Sales and Marketing Spend as a Percent of Revenue 2021

Source: Skift, Financial filings

For example, Booking Holdings’ sales and marketing spend as a percent of revenue was 4.75 percentage points higher than Airbnb’s in 2022 than the prior year; Expedia Group’s was 4.95 percentage points greater than Airbnb’s last year versus 2021.

These comparisons have their limitations; the three are very different companies, have strengths in different geographies, and have varied marketing goals. While Airbnb focuses on short-term rentals and does considerable marketing to attract new hosts, both Booking and Expedia market short-term rentals, but hotels and flights, as well.

Marketing spend as a percentage of revenue isn’t the holy grail in companies’ performance and there are disagreements on approach, but it speaks to online travel agencies’ efficiencies and deficiencies in attracting customers who may not find them through free Google search results or go directly to their websites and apps when looking to travel.

Still, Airbnb, which attracts customers through public relations, as well as brand and digital marketing on search engines, and elsewhere, repeatedly hammers home the point that it attracts around 90 percent of its traffic from unpaid search results and visitors who come direct. Hence the very small sales and marketing spend as a percent of revenue.

All three companies notched net income in 2022: Booking Holdings produced $3.1 billion, Airbnb generated its first full-year profit at $1.9 billion, and Expedia Group $352 million. Still, Airbnb had a higher adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) margin, a measure of profitability, in 2022: 34.6 percent for Airbnb versus 31 percent at Booking Holdings.

However, the adjusted EBITDA figures are not readily comparable. Airbnb excludes stock-based compensation, which was $899 million in 2022, from its adjusted EBITDA figures while Booking Holdings included around $404 million of stock-based compensation and other payments that were stock-based. So Booking Holdings on a like for like basis had a 31 percent adjusted EBITDA margin in 2022 compared with roughly 23 percent for Airbnb had it included the stock-based compensation it handed out.

In September 2022, which was prior to Airbnb reporting its 2022 net income, I asked Booking Holdings CEO Glenn Fogel whether the online travel agency business model was broken because of the relatively high marketing spend.

Schaal: OK. Let’s talk a little bit about your competition with Airbnb, on several levels. For example, in the second quarter, Airbnb spent 18 percent of its revenue on marketing. Booking Holdings, Expedia, Tripadvisor, MakeMyTrip, they all spent more than 50 percent of revenue on marketing. Is there something broken in the OTA business model? How do you look at that?

Fogel: Well, I look at the fact that… Let’s go for 2020, we made over a billion dollars EBITDA. I don’t remember everybody’s number, but I do believe it was a fairly negative number. Let’s go 2021. I think we made significantly … Did they [Airbnb] make money in 2021? I don’t think so.

Schaal: I don’t think so.

Fogel: I don’t think so either. We made a lot of money, and I think if you look at the quarter most … I mean, broken? I don’t know. We should all be so broken.

Expedia Group CEO Peter Kern inferred last month that company to company comparisons of sales and marketing spend as a percent of revenue can be misleading because of his company’s growing business-to-business partnerships, which come with a higher percentage of sales and marketing spend as a percent of revenue than consumer businesses.

Clarification: We updated this article to show that Booking Holdings would have had a higher adjusted EBITDA margin than Airbnb had Airbnb included stock-based compensation in this metric.

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