ABNB Standing Out Among Travel Stocks

**SPEAKER_1** (0:00)
For more, let's welcome in our panel. Joining us, Ygal Arounian, Managing Director in Internet Equity Research at Wedbush, and Christopher Davis, Partner at Hudson Value Partners. Ygal, let's start with you. I mean, we're seeing a really nice pop from Airbnb. We're up 15 percent. I saw that you changed your rating and your price target today in the wake of this report. How are you looking at how the market is responding to these results, and what are your takeaways from the report?

**Ygal Arounian** (0:27)
Yeah, thanks. I thought it was a very strong report.
Probably one of the best that we've seen within the travel space, or I think maybe the best that we saw within the travel space this quarter. You're seeing room nights booked, accelerate. The guidance for 3Q was ahead of expectations, it raised the guidance for the full year. I think there's a number of product initiatives that are hitting. Some are hitting today like Reserve Now Pay Later. The Hotels Initiative is gaining traction really early, and that's a positive. Then we've got a number of other factors that are going to play out over time. It feels like we have this layered growth trajectory coming.
The CEO, Brian Chesky, talked a lot about AI, how that's improving product velocity. There was just a lot of good things in the report. I think Airbnb is positioned pretty well, and that led to our upgrade to AppReform today.

**SPEAKER_1** (1:17)
Christopher, as we look at the comparison that Ygal just hinted at there with the whole broader travel space, I'm looking at Airbnb, they've got revenue up 17 percent, booking was up about roughly 8 percent on the quarter. What is Airbnb doing differently that's allowing it to outperform the broader travel market?

**Christopher Davis** (1:35)
Well, I think it comes down to who the customer is and where that revenue growth is coming from.
Notably to me, the first time bookers at Airbnb grew 11 percent and those hotel booking guests that Ygal was mentioning, that's growing 35 percent more. So I think when you look at where that revenue is coming from, it's probably shorter haul domestic trips, maybe some intergenerational travel, taking the kids, the grandparents, out of something that might be a little bit more affordable. And especially with European travel being more expensive, some of the bigger players being affected by the Middle East, that's really not something that we see happening with Airbnb. The other thing that I thought was great about Airbnb right now is they've got this Reserve Now Pay Later tool. And in the recent earnings report, 20 percent of the bookings roughly utilize that, which allows people to book now but pay over time. And I think for customers that still need to put aside some money to travel but want to start locking in some plans, that helps to smooth out demand and line things up for Airbnb into future quarters.

**SPEAKER_1** (2:36)
And Ygal, as you look at this quarter, does it signal to you that Airbnb's growth is structural rather than it's simply benefiting from favorable travel trends?

**Ygal Arounian** (2:48)
Yeah, I do think it's a little bit of both. They do have less exposure to the Middle East and they barely called it out while the others are seeing a little bit more of an impact. Now, that impact has normalized to a large extent, but it just Airbnb is better positioned and they talked about being able to navigate these types of things a lot better.
Also, the core sort of underlying strength in travel really looks to still be there as well.
Airbnb, Expedia and Booking all talked about that. Yes, there are some macro issues that we're navigating, but at the same time, the consumer is willing to spend. So that's been beneficial too. Now, that's not the structural question you've been asking, but I think all of these things support that growth opportunity and the positioning for Airbnb. Structurally, if you think about where they are, so in the alternative bookings category around homes, they are the leader there, they are starting to push into hotels, it's a whole new addressable market for them. It's been pretty successful so far, they are only in 20 cities, so that's really early. And then on the call, Chesky talked about wanting to be this one-stop shop, right? Rental cars early have been a positive, that's going to roll out more services and they continue to do more. And if you look at the broader travel opportunity, Airbnb so far has just been at homes, and there's a lot out there that hasn't been part of their addressable market, and they're starting to move in to that now, and that's a big opportunity for them.