As with guests, Airbnb’s shareholders do not always feel at home. The rental platform has just delivered its most profitable quarter ever. Despite headwinds from the stronger dollar, revenue grew 29 per cent year-on-year to $2.9bn, a new high. Net income — up 46 per cent at $1.2bn — stood in stark contrast to the steep earnings declines reported by tech darlings Meta, Alphabet and Amazon this season.
Still, Airbnb shares fell nearly 10 per cent on Wednesday, taking its year to date losses to 43 per cent.
Part of the problem is Airbnb remains a pricey stock. While its valuation multiple has descended from the heady 283 times forward earnings of a year ago to 43 times. But that is still almost twice what Apple and Microsoft are trading on. Airbnb’s caution that bookings would “moderate slightly” in the fourth quarter did not help.
“Revenge travelling”, following two years of Covid-19 restrictions, have delivered a bonanza to the travel industry. At Airbnb, bookings during the third quarter (which runs from July to September) rose by a quarter despite a 5 per cent rise in the average daily rental rate.
But tourists increasingly balk at the higher prices, and not just because inflation squeezes consumer wallets. Complaints about high cleaning fees and extensive to-do lists before checking out have also prompted some customers to return to hotels.
Then again, Airbnb can hope the strong dollar encourages more Americans to book trips abroad. Long-term stays — now a fifth of all nights booked and a way for Airbnb to differentiate itself from hotels — have held up. Plus, tighter cost control has helped the company deliver nearly $1bn in free cash flow during the quarter. Unlike clothing or home furnishing, travel is something consumers will be loath to give up. US credit card spending trends suggest as much.
But investors will need to get comfortable with tough comparisons against the growth surge of recent quarters. That suggests lower top line growth and more valuation compression to come.
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