Airbnb executives want average prices to come down after years of increases

Airbnb executives attempted to address those issues in December, providing new services to hosts to help their efforts as well as offering customers the ability to see the full prices for a stay upfront. In conjunction with Tuesday’s earnings report, they said the next move will be to reduce average prices while offering more information to hosts when they set prices.

For more: Airbnb hosts say bookings ‘fell off a cliff’ amid influx of new vacation rentals and rising prices

“Starting this year, we will provide new and improved pricing and discounting tools to help hosts understand the final price guests pay and how to set competitive prices,” executives wrote in a letter to shareholders. “We expect these changes will drive greater affordability and value for guests, support bookings growth and therefore also help hosts be more successful.”

Airbnb disclosed an average daily rate of $152.81 in the fourth quarter — historically one of the least busy and expensive quarters for the service — which is 35.7% higher than the average daily rate in the same quarter of 2019. Price increases were larger earlier in 2022: During the vacation-heavy second quarter of the year, for instance, prices increased 39.8% from the same period in 2019.

The average daily rate, or ADR, actually decreased year-over-year in the fourth quarter, though executives said that was because of the strengthening dollar, and that average daily rates were up across all regions in the quarter after adjusting for foreign-exchange rates. They expect it to decrease in the first quarter from the peak price of the past two years — $168.07 a night in the first quarter of 2022 — and continue to decline moving forward.

“For the remainder of the year, we expect ADR will face increasing downward pressure from mix shift, as well as new and improved pricing and discounting tools,” they wrote in the letter.

See also: Is that Airbnb too expensive? CEO plans ‘systematic update on pricing’ as travel recovers

On a conference call Tuesday afternoon, Chief Executive Brian Chesky said that the move to offer total prices upfront instead of a lower rate with fees added later in the reservation process had not caused Airbnb to lose business. In the next step, he wants to use the total price to determine how the listings appear to consumers instead of the base price before fees, as well as offer “pricing tools for hosts so that they understand the final price that they’re showing to guests.”

“One of the things we learned when we talked to hosts is they don’t always know the final price guests are paying, and if they did, they modulate some of the fees,” he told analysts.

Executives said on the call that they don’t expect “a significant decrease” in rates, instead using the term “modest” to describe the reduction in rates. They also said they expect to maintain adjusted-profit margins while reducing prices; when asked by analysts how that will happen, Chesky said that it “will be offset by our efficiencies that we kind of drive internally,” mentioning that he has kept head count 5% lower than it was before massive layoffs early in the pandemic while growing revenue 75%.

“We’re still in heavy growth mode, I am not in profit-maximization mode,” he said. “I have a long list of things that we can invest in to drive further profitability, but I know that I can also afford, with our head count, gross profitability improvements that can offset the ADR declines. And that’s what we’ll be investing in this year.”

Airbnb shares rose more than 9% in after-hours trading following the company’s earnings report, after closing with a 3.8% gain in the regular session to $120.87. Shares have declined 28.8% in the past year, as the S&P 500 index
SPX,
-0.03%
has gained 6%.

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