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CTW 2021-16-Airbnb

<span style="font-weight: 400">Since Hurricane Sandy struck in 2012, Airbnb has helped organize temporary housing for refugees, asylum seekers, and people displaced by disaster; it has served 75,000 people so far. In August, as Afghanistan fell to the Taliban, Airbnb’s nonprofit arm said it would pay for hosts to house 20,000 Afghans. In September, Airbnb said that support from the host community had helped exceed that goal.</span>

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Airbnb operates a global platform that allows hosts to offer accommodations and experiences to guests. Its marketplace connects users via web and mobile apps to book stays, activities, and experiences. Founded in 2007 and originally named AirBed &amp; Breakfast, the company adopted the Airbnb name in 2010; it became a publicly traded company in 2020.

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Airbnb (ABNB): Company Profile, Stock Price, News, Rankings

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Airbnb

airbnb

Good afternoon, and thank you for joining Airbnb's Earnings Conference Call for the First Quarter of twenty twenty five. As a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section

Airbnb's website following this call. I will now hand the call over to Angela Yang, Director of Investor Relations. Please go ahead.

Good afternoon, and welcome to Airbnb's first quarter twenty twenty five earnings call. Thank you for joining us today. On the call today, we have Airbnb's Co Founder and CEO, Brian Chesky and our Chief Financial Officer, Ellie Mertz. Earlier today, we issued a shareholder letter with our financial results and commentary for our first quarter twenty twenty five. These items were also posted on the Investor Relations section of Airbnb's website.

During the call, we'll make brief opening remarks and then spend the remainder of time on Q and A. Before I turn it over to Brian, I would like to remind everyone that we will be making forward looking statements on this call that involve a number of risks and uncertainties. Actual results may differ materially from those expressed or implied in the forward looking statements due to a variety of factors. These factors are described under forward looking statements in our shareholder letter and in our most recent filings with the Securities and Exchange Commission. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained on this call to reflect subsequent events or circumstances.

You should be aware that these statements should be considered estimates only and are not a guarantee of future performance. Also during this call, we will discuss some non GAAP financial measures. We've provided reconciliations to the most directly comparable GAAP financial measures in the shareholder letter posted to the Investor Relations website. These non GAAP measures are not intended to be a substitute for our GAAP results. With that, I'll pass the call to Brian.

Well, good afternoon, everyone, and thanks for joining. We had a strong start to 2025. In q one, guests on Airbnb spent nearly $25,000,000,000. These results show that no matter what's happening in the world, people continue to choose Airbnb, and that's because our model is inherently adaptable. It's something we've proven time and time again.

We started Airbnb during the great recession of two thousand eight. People turned us for a more affordable way to travel, and they started hosting Airbnb to earn extra income. Then in 2020, when the pandemic hit, we provided a way for people to to travel close to home. And as a result, our business quickly rebounded. And by the end of that year, we went

things feel uncertain once again. But just as we've shown in the past, as the world changes, Airbnb will continue to adapt. And that's because we have millions of hosts offering nearly every type of home at nearly every price point from budget to luxury in neighborhoods and cities all over the world. And for host, Airbnb remains a great way to earn meaningful income. Now before we get into q one results, I wanna just talk for a moment about where we are as a company.

We've been focused on drawing drive driving long term growth as well as preparing for Airbnb's next chapter when we'll offer more than a place to stay. And we've been laying the groundwork to make this transformation for years, and there are two key things we've done to get ready. First, we want to make sure that people love our core service before we launched anything new. So we spent the last few years rolling out hundreds of upgrades to make our Meet better for guests and hosts. It's now easier to use, more affordable, and more reliable.

And just one example of this is the launch of guest favorites, which is a way for people to easily find the best place to stay on Airbnb. Since launch, over 350,000,000 nights booked have been booked at guest favorites listings. We've also worked hard to improve affordability and price transparency, which are especially top of mind for people today. When guests told us prices weren't transparent enough, we introduced the Choggle that let them see the total price upfront. Over 17,000,000 guests have used it over the past two years.

And last month, we rolled out total price display globally. So now the price you see upfront includes all fees. But perfecting our core service wasn't enough. To expand beyond homes, we needed an app that could support new offering. Now until now, our app has really done one thing, which is lets you book a home.

So we rebuilt the app from the ground up on a new tech technology stack, and now we can innovate faster and offer much more than homes. So we're ready for Urban Bee's next chapter. On Tuesday, May 13, we'll unveil the twenty twenty five summer release, and you can visit our website that day to watch the announcement and see all the details. So with that, I'm gonna turn the call over to Ellie for a financial update.

Thanks. Thanks, Brian, and good afternoon, everyone. I'll start with a review of our q one financial results, and then I'll walk through our outlook for q two. As Brian mentioned, we had a strong first quarter. We had a 43,000,000 nights and experiences booked, up 8% year over year.

Looking at this year over year growth by region, Latin America grew in the low twenties, Asia Pacific grew in the mid teens, Europe in the mid single digits, and North America in the low single digits. Revenue for the quarter was 2,300,000,000.0, up 6% year over year. If you exclude the impact of FX and calendar factors, revenue would have grown 11%. As a reminder, those calendar factors include Easter falling in q one twenty twenty four and the extra day from Leap Day last year. We generated 417,000,000 of adjusted EBITDA, which represents an 18% margin.

Next, I'll turn to our balance sheet and cash flow. We continue to generate significant cash in q one, delivering $1,800,000,000 of free cash flow. Over the past twelve months, we've generated 4,400,000,000.0, representing a free cash flow margin of 39%. At the end of q one, we had 11,500,000,000.0 of corporate cash and investments as well as 9,200,000,000.0 of funds held on behalf of guests. Our strong balance sheet allowed us to repurchase $807,000,000 of our common stock during the quarter.

And at the end of q one, we had 2,500,000,000.0 remaining on our repurchase authorization. Now let's shift to our q two and full year 2025 outlook. Despite the recent volatility in the global economy, we believe we're positioned to to deliver strong results in q two. We expect to deliver revenue between 2,990,000,000.00 to 3,050,000,000.00, representing nine to 11% year over year growth. This include includes a benefit of approximately two percentage points due to the timing of Easter.

For nights and experiences booked, we expect year over year growth in q two to moderate relative to q one. So far in q two, we saw strong guest demand for Easter travel in Europe and continued momentum in Latin America, which remains our fastest growing region. In The US, we've seen relatively softer trends, which we believe is largely driven by broader economic uncertainty. On profitability, we expect adjusted EBITDA to increase year over year with adjusted EBITDA margin expected to be flat to slightly down compared to q two twenty twenty four. Marketing expense will grow faster than revenue in q two, mostly due to our upcoming summer release and investments in growth initiatives.

For the full year, we continue to expect an adjusted EBITDA margin of at least 34.5%, in line with what we shared in February. Now that includes 200 to $250,000,000 of investment to launch and scale new businesses in 2025. These investments will have the biggest impact on our margins in the second half of the year since our new offerings go live on May 13. Now as these new businesses scale over the coming years, we expect them to be significant drivers of future revenue growth. Now looking ahead, our priorities remain consistent with last quarter.

As a reminder, we're continuing to drive long term growth and deliver market share gains through three key growth levers. First, we are perfecting our core service. As Brian mentioned, we've made significant we've made Airbnb significantly better for both guests and hosts. We've been driving growth from product improvements, like enhanced search and better merchandising. One example is a newly redesigned Rare Finds feature that better highlights popular high quality listings.

We also simplified our checkout page to make booking easier. These are just a few examples of the product optimizations that are contributing to our top line, but we know there's still more work to do. Second, we are accelerating growth in global markets. We're taking a much more localized approach to product and marketing in underpenetrated markets around the world. This is a multiyear strategy, but we've already seen encouraging results.

For the first fifth quarter in a row, growth in these expansion markets significantly outperformed our core markets. In fact, the average growth rate in q one in expansion markets was more than double that of our core markets. Brazil continues to lead the way. In q one, origin nights in Brazil grew 27%, and first time bookers grew over 30%, both accelerating from q four. Third, we are launching and scaling new offering.

This begins on May 13, so expect more on that soon. Now to wrap up before we go to questions, we're staying close to geopolitical and macroeconomic uncertainty and monitoring any short term impact they could have. As Ryan mentioned in his remarks, we have an adaptable and diversified business that has been resilient during periods of uncertainty, most recently as COVID. Despite signs of near term volatility, we remain focused on the long long term opportunity to both grow our core business and expand into new ones. We believe that our efficient operating model, financial strength and significant liquidity give us the ability to pursue these multiyear initiatives in the current environment.

And with that, I will open it up to q and a.

Thank you. We will now begin the question and answer Your first question comes from the line of Justin Post from Bank of America. Your line is open.

Great. Thank you. Wonder if you could expand a little bit on the letter on travel corridor changes. Are you seeing any differences in like total volumes of bookings from quarter changes like in Europe? And I know you already mentioned Canada.

Is that driving any change for you? And then do you think there's any market share impact in The U. S? Or do you think you're holding in your share, it's just the whole kind of country is a little depressed? Thank you.

Great. Brian, why why don't I take this? Let me let me first talk a little bit about, travel corridors. And in particular, you mentioned Canada. We we called it out in the letter.

Let me tell tell you a little bit about what we are seeing in particular with regard to the inbound quarter to The US. We absolutely have seen, a decline in popularity of foreign travelers coming to The US. What we have seen is that, number one, you know, it's less popular to come to The US from a year ago, also relative to the beginning of the year. And what we're seeing in that segment is is two things. One is that that segment is a very small portion of our overall business.

As a reminder, US travel is predominantly domestic. And as a result, that corridor of foreign travelers coming to The US is approximately two to 3% of our overall business. So it's it's it's frankly not quite material. At the same time, what we're seeing is within that corridor, guess who would have, in a prior year, come to The US are simply choosing a different location. So I think Canada is is the most obvious example where we see Canadians are traveling at a much lower rate to The US, but they're traveling more domestically.

They are traveling to Mexico. They are going to Brazil. They're going to France. They're going to Japan. And I think what you tell the what that tells you about the distribution is that in this moment, it's not necessarily that people don't want to travel.

They are just choosing different, destinations. And Airbnb as a platform, given our distributed supply, it provides an adaptable way for them to find a new a new location. So that that's the comment I would say on the on the corridors. In terms of market share in The US, I would say that we continue to have very strong market share in The US. We are not seeing, any any losses in market share, much to the contrary.

We continue to gain market share in The US, but we do see generally that as a market. North America for the last several quarters has been, the slowest grower across the industry.

Your next question comes from the line of Richard Clark from Bernstein. Your line is open.

Hi there. Thanks for taking my question. Just wanted to delve a little bit into what is the behavior you're actually seeing from The U. S. Guests' slowdown?

Is it delayed booking windows? Is it higher cancellation rates, shorter trips trading some nature of what you're actually seeing? And I guess we've heard from maybe a few travel companies that things got a little bit better towards the April. Are you seeing that? Is there any sort of light at the end of the tunnel there with regard to bookings picking up in the last few days or weeks?

Yes. Thanks for the question, Richard. So let me double click. I just talked about the quarter that is inbound to The U. S.

Let me talk now what we're seeing with regard to US domestic travel, which, again, is a lion's share of overall US destination. A a couple things to comment on. One is we are seeing the higher income traveler somewhat unimpacted by the current macro conditions. We see, in particular, the higher ADRs of our bookings, the growth is very stable and and and very healthy for The US traveler. In terms of lead times, we're seeing something else.

We're seeing that the short lead times, so that would be bookings that are, you know, just around the quarter. They could be in two days or a week or two weeks. We're seeing relatively strong growth there. Whereas in the longer lead times, and in particular, those bookings that are for more than, say, a month out, that is where we're seeing the relative softness. And so I think what you what you take from that double click in terms of the lead times is that we do have some US consumers that are, you know, waiting and seeing before they book their their summer travel.

And I think the the one thing that gives us some amount of comfort in terms of seeing the weakness at those longer lead times is that we have seen movements in terms of lead time shift many times in the past. I think the most recent to call out was last summer where we saw in June and July a truncation of lead times, somewhat similar to what we're seeing today. And what we saw then is that people waited for a while, but they did end up booking that trip. It was just closer to the check-in day. So that's something that we're obviously monitoring quite closely, both globally, but also in particular to The US as we believe The US is obviously the most impacted by a lot of the headline noise currently.

The one thing I would also add is we haven't particularly seen consumers trade down in terms of choose a lower ADR bar booking or a shorter trip. That that has not been any behavior that we've seen.

Your next question comes from the line of Mark Mahaney from Evercore ISI. Your line is open.

I wanted to ask about what you think are the best chances for reaccelerating your units, your Knights and Experiences. If we just leave aside experiences for now, like what in terms of the core accommodations unit growth, I think you're investing to get back to double digit unit growth. And of the different things you're rolling out, co hosting, is it really leaning into the expansion markets? Is there something else maybe marketing? What are those do you are you counting on to be most impactful in order to get that recovery back to double digit nights growth?

Yeah. Hey, Mark. I don't if you take this. So, yeah, I I guess I would just say we think we're just scratching the surface of how much bigger our core business could be. You know?

And there's no reason to think it could not be double the size that it is today. And then the question is, well, what would you have to believe? I think the first thing we want to do is to continue to perfect the core service. To do that, we really have to do three things. We gotta make everything easy to use.

We gotta make it more affordable, and we gotta make it more reliable. So just, for example, starting with reliability, you know, for every person who books an Airbnb, we estimate about nine people are booking hotels. So if we could just get one of those nine people to book an Airbnb, that essentially would double the size of our business. And the number one reason people say they don't use an Airbnb is they don't find it historically as reliable as a hotel. That's why we're really trying to elevate the best homes in Airbnb and and remove the worst.

So we now guest favorites, 350,000,000 nights have been booked in guest favorites. We've also removed 450,000 listings. This has created, you know, a lot higher customer satisfaction, reduced customer service tickets, and we think over time, more and more people are gonna come to Airbnb. So we're gonna do a lot more, Mark, on making Airbnb more reliable. On affordability, we know that that's a big driver of growth.

You know, Airbnb started as affordable alternative to hotels. We lost, I think, a little ground versus hotels during the pandemic, but I think in the last couple of years, hotel prices have gone up more than Airbnb. I wanna call out that as of last month, we have rolled out total price display globally. So now the price you see before taxes in The United States and, you know, really inclusive taxes, say, Europe include all fees. So and and I think this is really important because it drives customers to the best value Airbnb, which we rank higher and incentivize the best behavior for hosts.

You know, on the usability standpoint, you know, the vast majority of our people come to Airbnb don't find a booking. Airbnb last year was accessed by, you know, over 1,500,000,000 devices. So think about, like, how many people come here and maybe they don't find a place to stay. Part of this is having the right homes for them, but also having the right tools. So we think perfecting the core is a huge driver to grow, but that is really gonna be a big driver in our core markets.

Our core markets are US, Australia, Canada, UK, and France, the four English speaking countries plus France, which makes about 70% of our growth or our business. But the the, you know, more, you know, growth markets, emerging markets would be Spain, Italy, Germany, Mexico, Brazil, and then the big four countries in Asia are China, India, Korea, and Japan. And these markets are actually growing twice as fast as the aforementioned five core markets, and we're gonna step on the gas. And I think that international will be one of the biggest growth drivers that will get us back to double digit growth on Airbnb. So that's just a little bit.

It's really through horizons. Horizon one, the biggest near term opportunity is continue to increase conversion rate by making everything be, you know, easier to use, more affordable, more reliable. Horizon two really is international growth. And then, of course, the longest horizon will be expanding our core business to, you know, offerings beyond the place today.

Your next question comes from the line of Jed Kelly from Oppenheimer. Your line is open.

Hey, great. Thanks for taking my question. Just circling back on The U. S, I think I've asked this before, but just in some of these urban markets, do you think about leaning more into hotels? And then just on the full year guidance, you reiterated your margin guidance.

But any reason, given the macro uncertainty for not widening the margin range? Thanks.

Yeah. I can take hotels, and I'll let Antalya take this any part, Jed. So, yeah, we I we think hotels is a massive opportunity for Airbnb. You know, in 02/2019, we acquired Hotel Tonight, and that was basically under the philosophy that while people came to Airbnb looking for a unique place of stay, typically a home, the vast majority of people come to Airbnb, don't end up booking. And one of the reasons is they're window shopping and they're not ready to book.

But sometimes, especially in popular markets, urban areas, when, a lot of people are traveling, Airbnb homes are booked and we have a fairly high occupancy and we need other places to stay, and hotels are a great way to fill in network gaps. You know, during the pandemic, we had to pause some of our efforts and some of our progress because we really want to focus on getting back to the basics. But now that we've made a huge amount of progress on our core business, making over 500 improvements and upgrades over the last three years, we are prepared to expand beyond our core. And, actually, one of those expansions is hotel. One of the things you saw was we just did a promotional hotel tonight.

So now if you book a hotel and hotel tonight, we're offering 10% credit towards an Airbnb booking. This, of course, increases, conversion rate on hotel tonight, but also introduces the number of hotel travelers to Airbnb. Over the coming years, we're gonna be doing a lot more though on Airbnb's application to bring more great hotels onto Airbnb. We think, you know, almost all the hoteliers in the world would love to have Airbnb as a distribution channel, and so we think there's a lot of opportunity, over the coming years. So absolutely gonna be part of our strategy.

Again, on the second question with regard to the margin guidance, you know, we reiterated the plan that we had shared in February. We believe it gives us, you know, considerable room to continue to focus on strengthening the core business while investing in growth initiatives and no material change in terms of that investment profile for the year.

Your next question comes from the line of John Calentone from Jefferies. Your line is open.

I wanted to start with sort of momentum in the business. With growth in 2024 peaking in December and strength continuing in early twenty twenty five, I'm curious how growth has trended throughout the quarter and into April. Is growth sort of at a low point right now for the year? Or did it sort of dip a little bit earlier in the quarter and it's since improved from there? And second question, just sort of looking specifically at the expansion markets, curious if you could just sort of characterize how growth has progressed there specifically this quarter compared to last quarter when you called it out as key contributor to the strength that you saw?

Thanks, John. Let me let me start with the first question in terms of how growth has trended effectively year to date. So I think it's actually interesting to understand the path that both we and, I think, the industry went through in q one. If you recall, January was a very strong month followed by softness in February. You'll recall, you know, there was a bunch of revisions to guidance in terms of the airlines.

And I think what they saw, but, we saw a slightly less degree of it was there was a step down from January to February that coincided with a pretty meaningful decline in consumer sentiment over that sequential month to month period. And yet when we look at our our full quarter results for q one, that softness that we saw in February, effectively rebounded and recovered in March, such that the full quarter was was generally in line with our expectations. So I think when we fast forward today, and the headlines are, you know, quite volatile, I think we do have to recall that since the beginning of the year, there has been some temporal shifts, in terms of when people are booking. But, you know, from that q one period, what you what you gauge is that people may pause on the booking, but but what we've seen today is that they come back and do it. So I wouldn't say that April is necessarily below.

There has been some week to week and month to month volatility since the the beginning of the year. On the expansion markets, what would I say? I would say, generally speaking, we see nice nice momentum in those markets. I think, in particular, what I would say is that Latin America accelerated over the course of full year 2024. And if you look at Latin America's growth in q one, it's actually above where we were in q one of last year, which I think gives you a sense of, you know, if we're able to achieve momentum in a particular market based on our products and marketing localization, we can maintain it and accelerate it over time.

Obviously, the the the nuance of every country is is slightly different, but I think, you know, anchoring on the performance that we've had across Latin America, but in Brazil, in particular, gives you a sense of of the ability to build momentum in these relatively underpenetrated markets.

Your next question comes from the line of Lee Horowitz from Deutsche Bank. Your line is open.

Hey, thanks for taking the question. Two, if I could. Last quarter, you guys talked about the ability to leverage marketing expense in some of your core markets, which gives you the ability to invest in the growth markets. I guess as things perhaps slow a little bit, how do you think about perhaps leaning into that slowness to take some more share, to take advantage of a weaker market to pick up share, particularly relative to, say, some of your competitors that have talked to trying to be more aggressive as things slow. Do do you still think you can leverage, marketing in your core markets under those assumptions?

Yeah. I would say absolutely. You know, obviously, we we start the year with a a full year marketing plan, and yet every month, we're looking at the relative efficiencies by channel, by market, and adjusting accordingly. So I would say, broadly speaking for the year, we retain quite a bit of flexibility to, you know, put more money into channels that are working and markets that are working and to, you know, cut where where we see, you know, less desirable results. And so so far this year, we've been doing that on a regular basis as we would in prior years.

Your next question comes from the line of Ron Josey from Citi. Your line is open.

Hi. Thanks for taking the question. Two, I want to ask just on the new product launch on May 13 and experiences or something else. Talk to us a little bit more about the plans, integration plans across the site and how you think or whether any contribution from these new products are included in guidance. And then on the affordability or just the volatile headline, Sally, that we've been talking about, would love your thoughts on just how Airbnb's affordability initiatives could drive greater bookings.

We saw the summer travel data where I think U. S. Guests are prioritizing staycations and more plan to drive. Maybe that's an opportunity for the team. Talk talk to us about that,

Okay. So on the on the first question, I believe it was what's the impact of the new business launches, with regard to our guidance? So I would say, the launch date is m thirteen, and we're extremely excited in terms of what is to come and what is to start on that day, but it is it is just the beginning. And so the impact from a top line in the current quarter will be relatively modest. Whereas as we scale those offerings, they will obviously increasingly contribute to the top line.

In terms of the expense and the investments associated with that launch, they are building over the course of the beginning of the year. And as we said in the in the guidance language, you will see them more meaningfully hit EBITDA in terms of compression in the the back half of the year as we scale the investments behind the the launch. In terms of affordability, I think your thesis here is, you know, exactly right. What we saw and it's not a it's not a purple perfect comp, but I do think it is instructive here. What we saw, five years ago in terms of the pandemic was when, you know, certain, portions of travel were inaccessible, people found other things to do on our platform.

You know, as Brian and I shared in terms of the opening, just to remind everyone, this business model has a huge amount of diversity in its offering, which allows us to be, you know, extremely resilient and adaptable as consumer behavior changes. And so as I think about the current environment that we are in, you can think about, for example, The US guest. There's an opportunity for us to merchandise the lower cost listing or the the more proximate listing where the guest doesn't need to travel for the doesn't need to take a flight for the summer, but they can drive. There's there's a huge amount of optionality with regard to the diversity of our offering that can allow us to better merchandise what is applicable to the guests in the current moment.

Your next question comes from the line of Justin Patterson from KeyBanc. Your line is open.

Great. Thank you. Could you talk more about the behavior of the guests who are booking primarily in app versus those who are rising, through the web? Are you just saying greater frequency rates, repeat rates, so on and so forth? Thank you.

So, broadly, I would say, the demo is slightly different in terms of the app relative to, the web. I would say the the broader thing to take away in terms of the movements we've made in terms of booking share moving to the app is that we know the app is a much better experience for the consumer. You know, we see this most notably just in terms of of conversion rates, getting people to use our apps, you know, as compared to, in particular, MoWeb. It's a much better experience that we have have designed, and so we wanna migrate people to that experience. You can see the the booking share has gone up quite dramatically over the last couple of years as we've encouraged people to use our app.

And as a result, it's additive in terms of the consolidated conversion level.

Your next question comes from the line of Doug Enmuth from JPMorgan. Your line is open.

Great. Thanks for taking my questions. Is Dave on for Doug. I have two. So first one, Brian, you've been pretty vocal about user experience and travel.

So curious to hear how you experience on Airbnb to change as you move beyond places to stay and new choices introducing new frictions. And then secondly, how do you guys think about the long term sustainability of your margins as your efforts to move beyond the core scales over time? Thank you.

Hey, Doug. I let me just start by saying, you know, I think one of the superpowers of Airbnb is our design team and our ability to make something incredibly easy to use. You know, when we started Airbnb, we we didn't really invent the idea of vacation rentals. They existed before us, but what was what was true is that they were very hard to book. You know, before Airbnb, you couldn't actually book a vacation rental online.

The messaging platforms really were nonexistent or very rudimentary. Very few people actually left reviews. People didn't really have an account. And so kinda one of things we really tried to do when we created Airbnb was design the system of trust, and as something is easier, more people do it. So what we're noticing, for example, is many of the new business we're going into, they also have similar frictions as our core business did or vacation house did before we basically created a category, which is what we've now call Airbnb.

And so that's one of the things because we're gonna try to you know, the things we're gonna offer want to be instant book. We wanna be, like, really easy. We wanna have that great Airbnb design. But the other thing is a couple other things with user experience. You know, I think a lot of companies have tried to, like, design, you know, an end to end travel.

I think designing end to end travel is very, very hard. It's funny. You know, there's this funny thing. One of the most common startup ideas for entrepreneurs is to do a travel planning app, and yet travel planning apps almost always fail. So it's almost like a riddle.

Why do travel planning apps fail and every everyone really tries to do it? And the reason why is because to plan travel, it's very complicated. In fact, it's so complicated. Many people have assistance, and a big part of the job is to plan travel for them. And yet you use it infrequently.

So it's a very difficult thing to do, and you do it infrequently. And so, therefore, a lot of companies have failed to design, you know, like, a so called connected trip. So I think, you know, to do this, a lot of it is to design a really good user experience. And I think that's one of the things that we're gonna try to do, to really design a great end to end experience, be able to book your entire trip and much more. I think user interface will be important.

I think AI will be important way to do this as well. You know, AI is I I think, as I said before, we're really we're really focused on customer service and solving the most difficult problems for customers and working backwards towards travel inspiration. Just one thing I'll say about AI, which is definitely making the customer experience easier, is we just rolled out our AI customer service agent this past month. 50% of US users are now using the agent, and we'll roll it out to a hundred percent of US users this month. We believe this is the best AI supported customer's travel agent in travel.

It's already led to a 15% reduction in people, needing to contact, live human agents, and it's gonna get significantly more personalized and agentic over the years to come. So, essentially, that's what we're focused on. We're focused on making everything instant book and easy to use. We're trying to make sure that the end to end travel experience is really, really wonderful with, great Airbnb design, and we're gonna bring more AI into the application so that Airbnb, you can really solve your own problems with great self solve through AI customer service agents.

Great. Let me talk a little bit let let me talk a little bit about long term margins. I think just starting with our core business, obviously, our core business has extremely strong EBITDA margins and cash flow generation abilities. I think you've seen us, you know, bring that up over time in particular subsequent to the pandemic. And where we sit today, we see incremental efficiencies that we can continue to drive across that core business.

And every year, we're seeking to do is strengthen and make more efficient that core business so that we have incremental room to invest in growth. From year to year, we may, you know, choose to invest more in growth relative to the efficiencies that we generate. I think you're seeing that in in the current year. But the intent both with the core and the new businesses is to invest in growth upfront and to optimize the margins over time. I think that the portfolio over time, we expect to have quite compelling margins.

Your next question comes from the line of Nick Jones from Citizens. Your line is open. Your next question comes from the line of Ken Gorelski from Wells Fargo. Your line is open.

Thank you very much. Appreciate the question. Brian, a question for you on how do you think about the ADRs and the opportunity? The balance, if you go back over the last couple of years, you've talked about making, Airbnb's more affordable, and there's been various initiatives, including the rooms initiative to make, Airbnb's more affordable. Do you you expect maybe more flexibility in ADRs and room night prices, on Airbnb's relative to hotels a period of weaker consumer spending, especially in The U.

S, maybe in urban areas? I'm just curious as how you think about the balance between potential ADRs versus room nights in North America. Thank you.

Sorry. I'm not clear what the question is.

I'm sorry. Let me rephrase. Do you as you think about the opportunity if you just think about the balance between pricing ADRs, average daily room nights relative to total room nights volume, do you think that there's an opportunity to to have more for your host to have more flexibility on ADRs and to see more affordability drive better room nights and and ultimately greater share over the long term in a in a period where there's maybe more consumer, consumer weakness or or, some pressure on on the consumer wallet?

Airbnb (ABNB) Q1 2025 Earnings Call Transcript

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