Airbnb Management's Outlook on Second Half Strategy (2Q22 Conference Call Minutes)

Below is the minutes of the Airbnb 2Q22 conference call. For financial report analysis, please see "Is Overvaluation the Original Sin? Airbnb Can't Benefit from Good Performance Either".

Management Report:

1. The company announced a share buyback of up to $2 billion.

2. Business and cross-border travel are recovering rapidly. In the second quarter, the proportion of orders in the city area was as high as 47%, exceeding the pre-pandemic level. Cross-border travel orders have also surpassed the same period in 2019.

3. The growth rate of active properties on the company's platform is consistent with demand. In non-urban areas, the number of properties registered on the company's platform has increased by 50% compared to 2019. Overall, the company's booking volume has increased by 24% compared to the same period in 2019, while the number of listings has increased by 23%. Even after completely delisting properties in China, the company still has over 600 million active listings.

Q&A with Dolphin Analyst:

Q: Has the demand for accommodation shifted to a broader area?

A: Tourists' destinations and travel dates are more flexible than before. Through the flexible search function ("I'm flexible"), tourists can browse more properties, and all properties on the platform can increase their exposure.

Q: The third-quarter booking volume guidance is not optimistic. Does this mean that Airbnb will change its expansion strategy for new businesses?

A: No, our strategy is continuous. The focus of the strategy is to develop the next generation of owners and properties, increase the supply of accommodation; secondly, our AirCover will continue to provide better protection for travelers. We are still focused on core business and investing in long-term accommodation and quality service.

Q: What is the impact of closing the business in China? How many Chinese tourists will opt for outbound travel?

A: The business in China is only a small part of the overall business, accounting for no more than 1% of total revenue. We will focus more on outbound travel for Chinese tourists. Although this part of the business will continue to be sluggish before new environmental control policies are introduced in China, in the long run, focusing on outbound travel will benefit us in expanding the Asia-Pacific region.

Q: The company's booking volume declined in May and June but rebounded in July. Are the rebounding orders mainly for summer travel or for booking in advance for autumn and winter travel?

A: Both cases are true. We have seen bookings for Q4 travel and the booking volume is significantly higher than the same period last year. The demand in Q4 is quite strong.

Q: How to reduce the difficulties of new hosts when joining the platform?

A: Match existing successful hosts with potential new hosts to help new hosts with training and better adaptation to the Airbnb platform. At the same time, the company will also try to simplify the onboarding process and provide more protection measures such as insurance for hosts. One of the biggest sources of new hosts for the company is Airbnb's old guests, with 36% of new hosts last quarter being old guests. Airbnb was founded in 2008 during the economic recession when people were worried about not being able to pay their bills. So, they started renting out their homes. We believe that many people may choose to rent out their homes again at present.

Q: Can you talk about the macro environment and what you have seen in terms of consumer activity or travel booking types, as well as your views on long-term stays?

A: Although the macro environment is relatively poor, we are very satisfied with the situation of Airbnb. As I said, night experience volume in the second quarter increased by 25% year-on-year, and the growth in the third quarter was similar. The booking demand in the fourth quarter was also very strong.

So far, we have found that North America and Europe are our advantageous markets, and we have also seen growth in cross-border and urban bookings, which are our historical strengths.

Long-term stays of more than 28 days are the company's fastest-growing business, which has doubled and accounts for about 20% of total orders. More specifically, orders of nearly 7 days or longer account for more than 50% of the company's total orders.

Q: Can you introduce the latest situation of the I'm Flexible option and how it works, and what kind of experience can it provide in low-density markets?

A: The I'm Flexible product launched last year has two components. One is flexible travel dates, which allows users to not input specific travel time and duration.

The second is a flexible destination. Since May 11, the recommended listings in each destination category on Airbnb have been viewed more than 180 million times.

We will continue to invest in this product, as we see it as a paradigm shift in the way people travel. As work schedules become more flexible, we believe that flexible search functions will be more widely used.

Q: Previously, city landlords who left the platform have started to return. How did the company make landlords aware of the increased demand in the city and help them become active again?

A: We continue to see strong supply growth. Since 2019, the company's nightly booking volume has grown by 24%, and active listings have grown by 23%. We now have over 6 million active listings.

As accommodation demand returns to the city, landlords will naturally return to Airbnb. The majority of individual landlords will not be too concerned with renting out their properties. When urban accommodation demand recovers, supply will naturally return.

Q: With the recent epidemics in the past few years, there are many new users who register for Airbnb for the first time. Are there any differences in user behavior between 2020 and 2021?

A: In recent years, new users joining Airbnb are more inclined to leisure travel than old users. Second, in terms of the repeat rate of guests before 2022, there is an obvious upward trend compared to 2021, but it may still be slightly lower than that in 2019.

Q: When will the company reimplement the strategic priority of developing the experience business?

A: The experience business will return to the company's development strategy priority, and the company is pouring in some funds for this product. We believe that the experience business will be the core story in 2023 and the next five years. Q: I'm surprised by the sustained strength of the North American and US markets. Is the EMEA region still dragging the company down? Or have EMEA demand rebounded rapidly in the second quarter?

A: The recovery rate in EMEA still lags behind that of North America. Therefore, the recovery of the European market will be the driving factor for overall business growth. Firstly, the Ukraine war is definitely an influencer, and the depreciation of the euro and pound against the US dollar will also have an impact on the economy. These are the reasons why the European business recovery has been lagging behind.

Q: Will the company increase advertising investment, or will it maintain its current level?

A: Our overall marketing expenditure will see a very modest increase in the second half of this year. One of Airbnb's biggest advantages is that we can simultaneously market to both guests and hosts while ensuring 90% of traffic is direct or free.

Q: At the beginning of the epidemic, the company stated that it would focus on the most likely opportunities to be lost. But now that the company has achieved stable profits and cash flow, what new opportunities does the company see, and which ones are worth exploring?

A: The company will continue to invest heavily in promoting growth. The $10 billion cash we have on hand is far more than what we need for investment. While investing in expanding its scale, the company can also ensure its overall profitability.

Q: The supply of non-urban listings is continuing to grow. Where do these listings come from?

A: The main source of landlords is previous tenants, and the vast majority of listings are owned by individuals, but there are also property management companies continuing to list on this platform.

Q: How does exchange rate fluctuations affect customer behavior?

A: I think the biggest impact of foreign exchange is obviously on cross-border travel. The strengthening of the US dollar enables Americans to travel abroad, while the weakening of the euro and pound makes it difficult for these people to travel to the United States. However, people will adjust their travel plans according to their overall budget. As we saw during the epidemic, if the budget does not allow cross-border travel, then people will choose to travel domestically.

As for the impact of exchange rates on the company's overall performance, the impact was most significant in the first quarter, causing revenue growth to decline by 600 basis points. I expect the negative impact of exchange rates in the third quarter to be smaller.

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