Long-Term Rentals: Growth Opportunities for Airbnb

Current market trends in long-term rentals

Current market trends indicate a shift towards short-term rentals outpacing long-term rentals, with significant growth opportunities in underpenetrated markets like APAC. Additionally, increased lease income and heightened demand in unique markets highlight the evolving landscape for long-term rentals on platforms like Airbnb.

"And then in terms of shorter trips, the average from playing has gone down, but that is really a function of the mix shift between short-term rentals growing more quickly than long-term rentals." --- (ABNB, earning call, 2024/Q2)

"Three months ended March 31, 2024 vs. Three months ended March 31, 2023 Lease income increased $54.5 million, due to an increase in fixed lease income of $55.2 million primarily due to an increase in fixed minimum lease consideration and higher occupancy, partially offset by a decrease in variable lease income based on tenant sales of $0.7 million." --- (SPG, sec filing, 2024/Q1)

"We've gotten bigger than either of those companies just selling short-term rentals." --- (ABNB, earning call, 2024/Q2)

"And I think while APAC lagging has been a bit of a disappointment over the last couple of years, On the upside, it's a huge opportunity for us in terms of future year growth and gaining penetration in that market that remains relatively small for us." --- (ABNB, conference, 2024/05/30)

"And I think over the last four years has been a broadening awareness of the variety of markets that Airbnb is available that hotels simply don't exist and we continue to see great demand for those markets." --- (ABNB, earning call, 2024/Q2)

Competitive landscape and customer preferences

The competitive landscape for long-term rentals is characterized by a focus on transparency, price competitiveness, and enhanced customer service. Companies like Airbnb emphasize these factors to attract customers, while others like Booking Holdings and Tripadvisor are investing in growth and flexibility to meet evolving customer preferences.

"Winning a traveler's business is never easy because of the high level of competition in our industry, but we are pleased to see that by providing a better way to do it, less friction, better value and our broader selection and great customer service, we're building a customer base that is more likely to choose us." --- (BKNG, event transcript, 2024/06/04)

"Given the competitive positioning of our businesses relative to the attractive growth prospects in these categories, we expect to continue to invest in these categories across the Tripadvisor Group and, in particular, within the Viator and TheFork segments, to continue accelerating revenue growth, operating scale, and market share gains for the long-term. Recent Developments" --- (TRIP, sec filing, 2024/Q1)

"So that's something that we're very focused on. We want to be both transparent to the user in terms of the overall price and we want to be price competitive." --- (ABNB, conference, 2024/05/30)

"This year, we’re continuing our commitment to lean into Customer preferences by giving them extra flexibility to make points go further by offering new ways to use their points. Business Travel Counts, Too!" --- (BKNG, press release, 2024/05/06)

"That higher quality clicker should push through higher pricing. And we have seen consistently, and we've been talking about this for some time, while we've had pressure on volumes clicks, we've had very nice price increases year-over-year, and we continue to see that even in Q1." --- (TRIP, earning call, 2024/Q1)

Financial performance and future outlook

Airbnb's financial performance shows strong growth, with Q1 2024 revenue up 18% to $2.1 billion, driven by increased bookings. The overall travel industry outlook remains positive, with companies like Marriott and Booking Holdings raising earnings guidance, indicating robust demand that could benefit long-term rentals.

"With our long term positive outlook, solid financial performance and strong balance sheet, we returned over 10 $1,000,000,000 to shareholders during 2023 by repurchasing our shares." --- (BKNG, event transcript, 2024/06/04)

"First Quarter Financial Highlights For the three months ended March 31, 2024, revenue grew by 18% to $2.1 billion, compared to the same period in the prior year, primarily due to a 9.5% increase in Nights and Experiences Booked of 11.5 million driving a 12% increase in Gross Booking Value (“GBV”) of $2.5 billion, a modest increase in Average Daily Rate (“ADR”), and the shift in timing of Easter from the second quarter of 2023 to the first quarter of 2024." --- (ABNB, sec filing, 2024/Q1)

"As Leeny will now discuss further as part of her financial review, we are raising our full year 2024 earnings and capital returns guidance on the back of the strength of our diverse global portfolio, the continued resilient and steady demand for travel, our strong international performance, and our continued rooms growth. Leeny?" --- (MAR, earning call, 2024/Q1)

"We remain confident in our long-term outlook for the travel industry, we are positive about our future and we believe we are well positioned to deliver attractive growth across our key metrics in the coming years. I will now turn the call over to our CFO, Ewout Steenbergen." --- (BKNG, earning call, 2024/Q2)

"We intend to make long-term decisions considering all of our stakeholders because their collective success is key for our business to thrive. Second Quarter Financial Highlights" --- (ABNB, sec filing, 2024/Q2)

Strategic initiatives for long-term rental growth

Airbnb's strategic initiatives for long-term rental growth focus on making hosting mainstream, enhancing core services, and expanding beyond traditional offerings. Additionally, improved marketing efficiencies and a favorable long-term travel outlook support their growth potential in this sector.

"About Stay:Stay is an online marketplace (stayapp.co) that currently facilitates short-term rentals (STR) and will be expanding into the mid and long-term rental markets." --- (BKNG, press release, 2024/04/18)

"Now, during Q1, we made significant progress across our three strategic initiatives, which are making hosting mainstream, perfecting our core service, and expanding beyond the core." --- (ABNB, earning call, 2024/Q1)

"I say that's an opportunity. Look at the numbers. In the last 12 quarters, 11 of them, we've grown faster than the leader in that space in terms of growth alternative accommodations." --- (BKNG, conference, 2024/05/20)

"And what I shared in terms of the Q1 results is based on a variety of initiatives over the last year, we have been able to deliver greater efficiency through Google, more keywords, more targeted audiences, a variety of reasons on our end have allowed us to spend modestly more through that channel and maintain great efficiencies." --- (ABNB, conference, 2024/05/30)

"I tell everybody, look to the long term though. The long term is travel will continue to grow and slightly better than GDP." --- (BKNG, conference, 2024/05/20)

Impact of technology on long-term rentals

Technology is rapidly evolving and is poised to significantly impact long-term rentals. Companies like Amazon and Google highlight the potential for growth through advancements such as generative AI, while partnerships in the travel sector, like that of Booking Holdings, emphasize technology's role in enhancing rental experiences.

"short-term rentals (STR) and will be expanding into the mid and long-term rental markets." --- (BKNG, press release, 2024/04/18)

"The underlying technology is evolving rapidly. And I see it as a long term journey for everyone across the field." --- (GOOG, event transcript, 2024/06/07)

"And if you believe that equation is going to flip, which we do, it means we have a lot of growth in front of us, and that's before the generative AI opportunity, which I don't know if any of us have seen a possibility like this in technology in a really long time, for sure, since the cloud, perhaps since the Internet." --- (AMZN, earning call, 2024/Q1)

"And so one of the things to just ground ourselves is that so while we all know that AI computing is more resource intensive, the advances in AI technologies not only have the potential to accelerate sustainability progress, but are actually critical to achieving not only Microsoft's carbon negative goals by 2,030, but frankly the world's goals to be a net zero economy by 2,050." --- (MSFT, event transcript, 2024/08/05)

""Our partnership with Cover Genius reinforces our commitment to revolutionize travel through pioneering technology," said Lucy Bueti, Vice President, Rental Car and Ancillary Products at Priceline." --- (BKNG, press release, 2024/07/17)

Risks and challenges in long-term rental investments

Long-term rental investments face several risks and challenges, including fluctuating demand influenced by economic conditions, financing difficulties, and a smaller market base compared to entire home rentals. Companies must navigate these dynamics while leveraging appropriate pricing strategies to maintain profitability.

"We expand or redevelop properties to enhance profitability and market share of existing assets when we believe the investment of our capital meets our risk-reward criteria." --- (SPG, sec filing, 2024/Q1)

"Please go ahead. Bill Crow: Hey. Good morning. Two-parter here, Chris. First, how much risk do you think exists, or are you seeing any signs that the weaker demand we are seeing at the low end of the chain scale could migrate upward as the Feds hire for longer stance persists?" --- (HLT, earning call, 2024/Q1)

"So I do think it's still a big long term opportunity for us. But it's often but smaller base and it's never going to be as big as entire home and everything." --- (ABNB, earning call, 2024/Q2)

"And so we’re getting enough done to keep momentum, but it’s still a little bit tough out there in terms of financing. Smedes Rose: Thank you." --- (HLT, earning call, 2024/Q1)

"I do think when we think about macro impact, it is we know we have the right pricing tools such that our marketplace is dynamic relative to the broader market and in a downturn that we are pricing appropriately to drive value to consumers." --- (ABNB, conference, 2024/05/30)