Airbnb Revenues Benefit From Network Effects as 36% of Hosts Were Prior Guests

The resilient consumer wants to get away from it all — and keeps spending to do so.

And for Airbnb’s hosts, looking to make some income … well, they’ve been customers, too — testament to a platform and network effect that brings demand and supply into balance.

At a high level, Airbnb’s earnings show that global travel remains buoyant, and cross-border travel in particular has been on the rise — with travelers flocking to cities as COVID-19-related lockdowns in Asia eased.

Supplemental materials that accompanied earnings show that gross booking value was up 26% year on year, to $13.5 billion, excluding foreign exchange impacts.

The nights and experiences booked, the company said, were up 20% in the most recent quarter as measured against last year, to 88.2 million. The data show that supply growth was also strong as the company ended the year with 6.6 million global active listings, a tally that represented growth of more than 900,000 more listings, excluding China, since the beginning of the year.

Cross-border gross nights booked increased 49%, while high-density urban nights booked grew 22% compared to last year. During the most recent quarter, revenue earned in the U.S. increased over 19% from Q4 2021 and represented 47% of total global revenue, the company said. Average daily rates were up 5% year on year, excluding foreign exchange impacts.

Demand was particularly strong coming from the Asia-Pacific region, where nights booked as travelers took trips amid China’s lifting of travel restrictions. Nights booked as guests crossed borders from that region were up 40% in the most recent quarter.

The surge was enough to help Airbnb log $319 million in net income on sales of $1.9 billion, finishing its first profitable year (on a GAAP basis), and cheering investors, who bid the stock up 11% after hours.

More Trips and Longer Trips

During the conference call with analysts, CEO Brian Chesky said, “We had our highest number of active bookers ever in Q4, demonstrating guests excitement of the travel on Airbnb, despite evolving macroeconomic uncertainties during the quarter.”

Guests are continuing to book their trips out further in advance, which has given the company a strong backlog into the current quarter. Guests are also booking longer stays, he said, at 21% of total bookings, a percentage commensurate with last year’s levels. The growth in supply, he said is, indicative of the appeal of earning supplemental income, “which is critical during tough times,” said Chesky.

Supply Comes From Demand

Management noted on the call that one of the biggest sources of supply stems from prior users of the platform — where 36% of hosts in the fourth quarter were prior guests, which creates a network effect on the platform.

“This network is something that has kind of a ‘self-growing’ effect to it,” said Chesky, who added later in the call that the network effect is one “where guests become hosts and then hosts become guests.” Ninety percent of the company’s traffic is direct traffic, per stats given on the call.

The CEO also noted on the call that the company sees potential in new initiatives that, among other things, make it easier for hosts to rent out their apartments (Airbnb Friendly Apartments) to “unlock a large amount of inventory in multifamily homes in urban areas. … We are seeing a lot of traction on urban supply.”  CFO Dave Stephenson added that the urban component of the platform’s business is now above 2019 levels.

Asked on the call whether the company sees any pressure from a competitive environment that has seen peer search platforms (unnamed on the call) using loyalty programs to boost traffic, Chesky said there’s been no such pressure and said, “We’re an noun and a verb used all over the world. … We’re a global business. We’re not just vacation rentals. We’re also urban and cross border and off the grid.”

And in a nod of what’s to come, artificial intelligence remains an attractive technology to leverage in matching supply and demand, where Airbnb “will be a great” opportunity that will “benefit our long tail of data. … Stay tuned for developments there,” Chesky said.