Airbnb and Vrbo’s Hot Girl Summer Scorches Supply

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Results from Expedia and Airbnb this week show homestay might be too hot for the platforms to handle

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The divergence reflects investors’ preference for Airbnb as a homestay pure play, and not without reason: Expedia’s first-quarter stayed room nights were down 30% from the same period of 2019, while Airbnb posted a monster first quarter that included both record nights and experiences booked and revenue topping Wall Street’s forecast.

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So why aren’t Airbnb’s shares flying even higher? Heading into the big summer-travel months, demand may be too hot in the hottest areas even for the homestay giant to handle. And beyond that, it is unclear how much longer demand can hold up against a challenging economic backdrop.

It isn’t that overall supply is lacking. Data from AirDNA show Airbnb’s active listings, even excluding hotels, are up about 20% in April from the corresponding month of 2019. But the supply has to exist in the right places. AirDNA data show Vrbo’s ratio of booked to active listings as of April was nearly 85%, while Airbnb’s was about 60%. Vrbo has a fraction of the active listings Airbnb does, but that data suggest the listings it does have are almost exclusively where the market wants to be right now, namely outside of cities.

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Airbnb’s outlook implies it expects nights and experiences will grow around 26% in the second quarter from the second quarter of 2019. That should put second-quarter nights and experiences at around 105.
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7 million—for a new quarterly record but slightly below Wall Street’s forecast of nearly 107 million.

If that growth rate were to continue into the second half of the year, nights and experiences booked for the third quarter and fourth quarter will come in around 4% and 5% lower than analysts have modeled, respectively. Any deceleration in growth driven by macroeconomic pressures or another seasonal jump in Covid-19 cases would warrant further downside to current estimates.

Average daily rates are high across the lodging sector right now, with homestay showing exceptional pricing power. Hotel market data provider STR shows average daily rates up 7% globally and 11% in the US for hotels in March compared with the same period of 2019. Airbnb said its own ADRs were up 5% from the same period in 2021, and a whopping 37% versus the same period of 2019.

A lot of this has to do with a shift in destinations to more remote areas rather than dense urban cities. These areas have bigger properties and typically go for higher rates.

The company seems to be expecting these dynamics to largely persist—Airbnb’s revenue guidance for the second quarter is slightly above even Wall Street’s bullish forecast at the midpoint. Thus far this year, prices are defying earlier industry forecasts: AirDNA predicted late last year that ADRs for short-term rentals would decline by 4% this year in part due to changing seasonality patterns.

Flexibility remains key to the Airbnb growth story. The company suggested it will lean into flexible bookings in a major product update next week. Then again, it also said long-term stays, generally predicated upon a consumers’ flexible schedule, are decreasing as a percentage of gross nights booked amid a strong rebound in short-term stays.

Investors may want to shorten their own stay.

Write to Laura Forman at [email protected]


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