A gloomy forecast from vacation rental firm Airbnb weighed on travel-related stocks on Wednesday 10 May as an expected slowdown in bookings signalled an impending slump in travel demand with consumers seeking cheaper accommodation amid inflation and recession fears.
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Airbnb, which reported a 20% rise in quarterly revenue on Wednesday 10 May, said it anticipated fewer bookings and lower average daily rates mostly from price-sensitive travelers in the United States, its largest market. The company's shares sank by more than 10% after the announcement and with multiple analysts cutting their price target for the stock.
Airbnb's forecast will heighten caution in the travel sector, which encompasses hotels, airlines, and vacation rental firms, according to an investor note by JPMorgan analysts, led by Doug Anmuth.
"We also believe Airbnb's commentary will result in increased caution in the travel space, but more specifically around vacation and the U.S.," the analysts said.
The S&P 1500 Airlines index .SPCOMALI was down about 3% on Wednesday 10 May, with Delta Air Lines Inc, American Airlines Group Inc, and Southwest Airlines Co among the biggest losers.
Shares of hotel chains were also trading lower. Hilton Worldwide Holdings Inc fell 3.6%, Wynn Resorts lost 1.1%, and Hyatt Hotels shed nearly 4%.
Last month, Delta Airlines, the largest US airline by revenue and market value, offered an upbeat outlook for summer travel demand that it expects will result in higher-than-expected profit for the quarter through June.
But airlines are bracing up for higher operating costs and lower revenue as shifting travel patterns in a post-pandemic world, forces carriers to readjust schedules, cut flights, revamp networks and cram planes with as many passengers as possible, analysts and airline executives said.
Airbnb Tumbles As Forecast Hints At Easing US Travel Demand
The above news followed news that Airbnb's shares slid 12% 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 $111.22 in early trade on Wednesday 10 May.
Read More: Airbnb Forecasts Fewer Bookings, Lower Prices In Q2; Shares Slump
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