Airbnb Inc. shares plummeted by their largest margin ever following a disappointing outlook and warnings of declining demand from US vacationers.
Bookings grew by 8.7% in Q2 to 125.1 million, missing analysts’ forecasts. Airbnb anticipates “sequential moderation” in bookings growth for Q3, falling short of the 11% gain analysts had predicted for the peak summer season. This marks the third consecutive quarter of bleak forecasts from Airbnb, setting the stage for its slowest growth pace since 2020. The broader industry is also facing challenges, with Booking Holdings Inc. recently issuing weak guidance due to “mild moderation” in European travel and shifts towards lower-star hotels and shorter stays in the US.
Airbnb’s shares dropped as much as 15.4% on Wednesday, marking the steepest intraday decline since its IPO in December 2020.
Airbnb reported a revenue forecast of $3.67 billion to $3.73 billion for the current quarter, below the consensus estimate of $3.84 billion, partly due to foreign currency exchange rate issues. Despite beating revenue estimates for Q2 with a rise of 11% to $2.75 billion, the 8.7% increase in nights booked was lower than the 9.8% estimate.
The company observed a slight growth acceleration in North American nights booked during Q2 and noted that the week of July 4 was the “single highest week of revenue ever” in the region. It also saw strong growth in larger group bookings and international travel, with Paris seeing more than double the nights booked during the Olympics. However, this only had a minor impact on the company’s European, Middle Eastern, and African business.
Airbnb is investing heavily in less mature international markets, which is expected to pressure margins. Marketing expenses are projected to outpace revenue growth in Q3. Analysts are concerned that increased marketing spend amid softening demand may negatively impact the company’s margins.
CEO Brian Chesky acknowledged the sharp drop in share prices, suggesting it might be a good time to invest. The company is expanding beyond its core offerings, with plans to introduce a co-hosting marketplace and relaunch its Experiences business next year. Additionally, Airbnb aims to enhance its product reliability and affordability, attract more listings, and explore new guest-related services.
