In late 2022, a rumor started circulating around the internet: Airbnb (ABNB 0.87%) was running into trouble. Complaints about cleaning fees, chore lists, and other onerous demands on guests were going viral, while others emphasized the relative comforts of staying in a hotel versus an Airbnb.
Meanwhile, hosts were complaining that bookings were suddenly falling off, and a Time headline declared, "Too Many Rich People Bought Airbnbs. Now They're Sitting Empty."
It was enough that some dubbed the phenomenon an "Airbnbust," implying a potential crash in the segment was imminent during which hosts would default on their mortgages or find long-term tenants as catering to short-term guests became less viable.
At the time, Airbnb stock was in the dumps as well, reeling in the post-pandemic bear market, but it has climbed more than 80% since then as the company has reported steady growth on the top and bottom lines and added new features to address some user complaints. And after the market closed on Tuesday, it delivered another round of strong results for the fourth quarter.
Image source: Airbnb.
Airbnb executes again in Q4
The travel industry giant beat estimates on the top and bottom lines and posted solid growth in nights booked, which was up 12% year over year to nearly 100 million. Gross booking value rose 15% to $15.5 billion, and revenue increased 17% to $2.2 billion.
Airbnb saw strong supply growth in the quarter, a key priority for management: Total listings rose 18% to about 7.7 million, and it topped more than 5 million hosts around the world. The company also drove strong margin expansion as its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin increased 6 percentage points to 33%, and adjusted EBITDA rose 46% to $738 million.
On the bottom line, the company reported adjusted net income of $489 million, up 53% year over year.
Management's first-quarter guidance calls for revenue growth to slow to a range of 12% to 14%, resulting in revenue of $2.03 billion to $2.07 billion, though that's still largely ahead of the consensus estimate of $2.03 billion. Management said it would get a 1% to 2% revenue benefit from the shift in the Easter holiday to the first quarter, and full-year adjusted EBITDA margin should be at least 35%, which compares to 37% in 2023.
Overall, the guidance looks solid as well, showing the business is executing. Management also teased some new products, saying it would soon expand beyond its core offerings and promised more information later in the year.
Why the Airbnbust was a delusion
It's common, especially with consumer-facing brands, for complaints to go viral and for the media to take notice -- even if those complaints are only a small part of a much bigger story. For instance, there have been several reports that visits to Disney World have been down due to higher ticket prices, but revenue from the company's theme parks has continued to grow.
It's easy to latch on to a few anecdotes from Airbnb hosts who are seeing fewer guests, but that overlooks the global reach and enormous market power of Airbnb, which continues to see a surge in new hosts joining its platform.
The company's business model also gives it a level of flexibility and resiliency that neither hotel chains nor conventional landlords can match -- an attribute it showed off during the pandemic when listings popped up whatever areas were needed to meet surging demand.
Finally, Airbnb showed that it's much larger than any single market. After a new law was passed in New York City restricting short-term rentals, listings in surrounding areas like New Jersey soared, and the overall impact on the company's results was negligible. Airbnb noted that NYC represented about 1% of global revenue before the law was passed, and no single city represents more than 2% of its revenue currently.
Airbnb is likely to remain controversial in public discourse, but it continues to provide a valuable service for both hosts and guests.
For investors, it's worth remembering this business is much stronger than the loudest complaints about it or the latest viral social media post.
