Addressing some of the major issues that have slowed its roll through the pandemic and after, Airbnb is focusing on affordability and guest confidence in booking stays as it moves to meaningfully expand into overseas markets.
During its first quarter 2023 earnings call Tuesday (May 9), Airbnb co-founder and CEO Brian Chesky reiterated much of what was announced the prior week as part of its 2023 Summer Release, with comments centering on the new Airbnb Rooms product and Host Passport service designed to attract younger travelers with lower price points and provide more granular information to overcome reluctance about booking home shares over hotels.
Chesky said nights and experiences booked rose 19% in Q1 compared to the same 2022 period, with high-density urban nights booked up 20% year over year and long-term stays coming in at 18% of total gross nights booked in the quarter.
This all falls under three strategic priorities the company set out last year, including the push for “making hosting mainstream” by raising awareness around hosting, making it easier to get established as an Airbnb host, and providing improved tools for hosts to manage bookings.
Largely as a result of the focus on making hosting more attractive, Chesky said room supply grew 18% year over year in Q1 2023, up from 16% in Q4 2022.
Much of the Q1 earnings call was devoted to the company’s expansion into new geographies, with recent pilots in Brazil and Germany providing proof of concept for a major push.
“Airbnb is still underpenetrated in many markets around the world, so we’re increasing our focus on these less mature markets,” Chesky said, adding that Brazil and Germany are now “two of our fastest growing markets,” and that playbook of localizing the Airbnb product and working with social media influencers in-market is being widely rolled out.
Responding to an analyst’s question, Chesky stated, “We think there’s a huge opportunity in Asia. We are massively underpenetrated. This is going to be probably the fastest-growing market internationally over the next five years.”
He added that “Asia disproportionately has a lot of young travelers, and Airbnb … is very popular among young travelers. So, we think Japan, Korea, China, India, and Southeast Asia are going to be huge opportunities for growth. Next is Europe,” he said. That means pushing beyond mainstream markets like France and the U.K. to markets including Italy, Spain and Northern Europe. “I think there’s actually a lot of greenfield in Europe,” he said.
The Affordability Factor
On payments and pricing, Airbnb is provisioning hosts with tools to better price their properties by giving visibility into how other hosts in their area are pricing to be more competitive. Chesky added that as part of improving its longer stays initiative, “We’re reducing our fees after three months, US guests can now save money by paying with their bank account, and hosts can easily set monthly discounts and offer more flexible cancellations.”
Affordability was a recurring theme during the investor call, and it’s the driving force behind the Airbnb Rooms product, which he characterized as a return to “our founding ethos of sharing,” saying, “They’re one of the most affordable ways to travel with an average price of only $67 a night. In fact, over 80% of interview rooms are under $100 a night. And in the current macroeconomic environment, people want to travel affordably.”
With a major brand campaign set for this summer around Airbnb rooms, he said, “If we are successful, I think this is going to bring in a whole new cohort of younger travelers. People that maybe weren’t inclined to travel may now be able to travel,” providing lift for the marketplace.
He added, “I think what’s going to happen is all the supply coming on the market will keep prices from going up. My hope is that while the hotel CEOs have said they expect demand to drive prices up this summer, we want to actually have prices moderate. We think that’s going to bring in a whole new generation of travelers to Airbnb.”
Asked about its plans for Artificial Intelligence (AI) in operations, Chesky rattled off market moves by OpenAI, Google, and Microsoft as akin to “building a highway. It’s a major infrastructure project, and we’re not going to do that. We’re not an infrastructure company.”
He said the problem with large language model (LLM) AI interfaces is they know nothing about the preferences of individual travelers: “Instead of asking you questions like ‘where are you going and when are you going’ I want us to build a robust profile about you, learn more about you, and ask you two bigger and more fundamental questions: ‘who are you and what do you want?’ Think of us with AI as building the ultimate AI concierge that can understand you,” he said.
As that takes shape, Chesky said the near-term impact of AI on Airbnb will be in customer service. Noting that the platform has millions of guests nightly, he said, “We have agents that have to adjudicate between 70 different user policies. Some of these are as many as 100 pages long. What AI is going to do is be able to give a better service cheaper and faster by augmenting the agents, and I think this is going to be a huge transformation.”
Airbnb was lined up as a Chat GPT launch partner, but Chesky said he “pulled the plug” on that because a text-only AI tool lacks the images and rich media needed to convey its listings.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More