Vacation rental booking company Airbnb Inc said on Tuesday 9 May that it expected fewer bookings and lower average daily rates in the second quarter versus a year earlier, sending shares down 11.5% in after-hours trading.
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US travel companies, which have benefited from higher prices and hybrid work, are moderating their outlook for 2023 as pre-pandemic travel patterns return and consumers seek cheaper accommodation amid high inflation and recession fears.
People are most price sensitive in North America, especially in the United States, Airbnb CEO Brian Chesky told investors on a call.
"In the United States, the lowest price listings have the highest occupancy," he added.
The company's gross booking value increased 19% to $20.4 billion in the first quarter from a year earlier, in line with a 19% increase in nights and experiences bookings to 121 million. Average daily rates were flat year-on-year at $168.
Nicholas Cauley, an analyst at Third Bridge, said pressure on household budgets was likely to result in consumers choosing more affordable accommodation, leading to a decline in average daily rates in future quarters.
"The company is now facing fierce competition from rivals like Booking.com and Expedia's Vrbo so its future looks less certain," he added.
Airbnb said to remain competitive, it was equipping hosts with new tools to normalize pricing and starting its marketing campaigns earlier in the year to attract cost-conscious travelers ahead of the peak summer season.
"Some of the pressures that we're seeing there on overall revenue growth has frankly just been some of the elevated (average daily) rates," Airbnb chief financial officer David Stephenson told investors.
The company said earlier this year that average daily rates would remain pressured as vacationers returned to lower-cost urban rentals.
It forecast second-quarter revenue between $2.35 billion and $2.45 billion, largely in line with analysts' expectations.
Airbnb Tumbles As Forecast Hints At Easing US Travel Demand
The above news was followed by news that Airbnb's shares slid 13% before the bell on Wednesday 10 May after the top vacation rental firm issued a gloomy second-quarter forecast and signaled that the high cost of travel may be finally catching up to budget-conscious US consumers.
Household savings and pent-up demand have largely insulated the US travel industry from inflationary pressures that have roiled other sectors.
Airbnb, however, said on Tuesday 9 May it expects fewer bookings and lower average daily rates, or accommodation prices, in the second quarter.
"What we're seeing is that people are most price-sensitive, at least currently, in North America, especially in United States," CEO Brian Chesky said in response to an analyst question during a post-earnings call.
Hilton Worldwide Holdings Inc last month indicated that pent-up travel demand that helped the hotel operator boost its annual profit outlook may run out of steam in the second half of 2023.
The resiliency of travel demand has been closely watched by investors amid fears that the recovery over the past year may hit a macro-economic speed bump.
Some airlines and hotel operators have resumed investor returns in the past few months, as higher prices boosted profits.
But average daily rates during Airbnb's first quarter was flat year-on-year at $168, after rising 5% a year earlier.
"We believe Airbnb's commentary will result in increased caution in the travel space, but more specifically around vacation and the U.S. with OTAs (online travel agencies) better insulated overall," JPMorgan analyst Doug Anmuth said.
Some analysts say accommodation prices may now need to go down further.
"While (Airbnb) believes it is supply constrained, it will have to compel hosts to cut prices in order to improve demand," RBC Capital Markets analyst Brad Erickson said in a note, while cutting price target by $30 to $105.
Airbnb shares were trading at $110.11 before the bell.
Read More: Airbnb Says Single-Room Listings Jump Amid Cost-Of-Living Crisis
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