Airbnb falls as summer bookings boom undercut by high expectations

Airbnb Inc. reported record revenue in the second quarter and said the current period would produce another all-time high.

The home-rental company also swung to a profit in the three months ending in June as desperate travelers continued to book accommodations despite rising prices.

But that wasn’t good enough for Wall Street, which punished the company by sending shares down 6.1% in New York on Wednesday.

The market was disappointed by Airbnb’s forecast for nights and experiences booked in the third quarter, which the company expects to increase about 25% from a year earlier, a similar rate to the second quarter.

Airbnb Chief Executive Officer Brian Chesky and other travel executives have been trumpeting a historic summer season for months, expecting demand to surpass 2019 levels by overcoming strains from new Covid variants, rising prices and Russia’s invasion of Ukraine.

Airbnb fulfilled those expectations, reporting revenue that grew 58% from a year earlier to $2.1 billion, reflecting its strongest second quarter ever.

The company also recorded $379 million of net income in the second quarter, the highest ever for that period.

JPMorgan analyst Doug Anmuth said Airbnb’s results were “mostly solid,” and the “controversial” part of the release was the lighter-than-expected number of nights and experiences booked.

Consumers booked 103.7 million nights and experiences in the second quarter, the highest quarterly number ever and proving a willingness to travel despite rising prices.

But analysts had been looking for 106 million nights in the second quarter.

On Wednesday the average analyst forecast for nights and experiences in the third quarter was down to about 101 million, from earlier forecasts of 109 million in the third quarter, in line with Airbnb’s updated guidance.

Rising average daily rates are driving revenue and gross bookings, rather than an expanding number of nights and experiences.

Daily rates on Airbnb averaged $164 in the second quarter, a 40% increase compared with the same period in 2019, and a record.

Higher rates will offset the softness in bookings in the current quarter, but the risk of a further slowdown in demand amid a challenging economy could temper growth further over coming quarters, Truist Securities Inc. analyst Naved Khan wrote in a report Tuesday.

Airbnb has struggled this year to catch a break from the market.

The company ended 2021 with what Chesky called the company’s best year in its history, and said Airbnb was heading into this year even stronger than before the pandemic.

Initially the arrival of Covid-19 sent Airbnb’s prospects plunging as international travel was halted and cities imposed lockdowns.

Airbnb almost shelved its initial public offering in 2020.

But the pandemic wound up being a boon for the company as people sought refuge from crowded big cities by renting homes in rural towns and took advantage of flexible work policies to rent those homes for longer periods of time.

Even the outbreak of war in Ukraine didn’t seem to dent Airbnb’s expectations for a record summer.

“During the height of the pandemic, we made many difficult choices to reduce our spending, making us a leaner and more focused company,” Airbnb said in a letter to shareholders.

“We’ve kept this discipline ever since, allowing our hiring and investment plans to remain unchanged since the beginning of the year. Airbnb is well positioned for whatever lies ahead.”

Despite hitting several record results in recent quarters, the market has continued to punish Airbnb’s shares, which are down 30% this year.

Booking Holdings and Expedia Group have also suffered, with their shares down 18% and 43% respectively. Booking reports after the close of trading Wednesday and Expedia on Thursday.

The early summer optimism has also been tarnished by the chaos at airports, especially in Europe, and rising costs for tickets and lodging.

U.S. flight delays rose to the highest level on record in July as carriers struggle to hire and retrain employees.

British Airways was forced to halt ticket sales out of London’s Heathrow airport earlier this month to make room for passengers whose flights were scrapped after the airport placed caps on capacity.

Airbnb said it did see more cancellations than it expected in the second quarter, which the company attributed to airlines canceling flights.

JPMorgan’s Anmuth said demand “looks to be relatively resilient,” though analysts expect Airbnb and broader online travel to remain “controversial” given the overall state of health in the travel industry is still a key topic of debate.

“We do really feel good about these stable bookings in Q3,” Dave Stephenson, Airbnb’s chief financial officer, said on a call with analysts Tuesday.

“To see further quarter-over-quarter acceleration, we just need to see continued recovery in Europe” and the Asia Pacific region, “which remains significantly depressed.”