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Airbnb reports first profitable calendar year as demand increases

Airbnb reported a$8.4B in revenue and $1.9B in profits in 2022. On Tuesday afternoon during a 1Y 4Q earnings call, executives reported a massive 40% surge from 2021.

Short-term rental platform Airbnb posted a profit of $1.9 billion for 2022, its first year in the black, after a loss of $352 million in 2021, according to an earnings call on Tuesday. The company’s revenue grew by 40% to $8.4 billion, as daily rates surged by 36% since 2019, driven by increasing demand and investors looking to rent out homes. Airbnb CEO, Brian Chesky, said that the company will focus on customer service and affordability for guests this year, predicting a slight decrease in average daily rates later this year. The focus on affordability has already caused an isolated dip in average daily rates from $156 to $153 between the third and fourth quarter, but Airbnb expects demand to continue to grow, along with supply. The company is working on new tools to help hosts set their rates appropriately and prioritize listings based on good value.

Airbnb had 6.6 million active listings worldwide, with over 900,000 more than it had at the beginning of the year, and it has $455 million in free cash flow. Rather than burning through this cash, the company plans to keep enough cash for potential merger and acquisition opportunities. While the company has yet to unveil major changes for 2023, it is committed to enhancing customer experience and continuing to benefit from the strong rebound in travel demand. Airbnb has also shifted from a platform for two- or three-day stays to one that includes month-long visits, with one in five trips booked on the platform in Q4 being for stays of 28 days or more. The company’s ability to rapidly increase revenue with only a slight increase in employee headcount, despite the challenges of COVID, has generated momentum within the company, Chesky said. Following the announcement of the earnings, Airbnb’s shares rose approximately 10% in after-hours trading.

Airbnb’s ability to weather the economic storm caused by the COVID-19 pandemic and come out profitable in 2022 has been attributed to the surge in demand that drove up daily rates by 36% since 2019. The company made $8.4 billion in revenue in 2022, a 40% increase from 2021, as more investors were drawn to the platform after the vaccine’s emergence. While the pandemic negatively affected the travel industry, Airbnb was able to pivot its business model to cater to travelers seeking alternative accommodation options that provided more privacy and security.

The company’s CEO, Brian Chesky, revealed that the company is focused on providing the very best of service for guests and improving affordability for them in 2023. Chesky has also mentioned that the company will prioritize customer service and affordability to ensure that guests have the best experience while using the platform. The company expects average daily rates to drop later in the year, which may impact its revenue, but it remains optimistic about its prospects and future growth.

Airbnb is making significant changes aimed at balancing the power dynamic between renters who stay in homes on the platform and the investors or homeowners who make their homes available to short-term renters. The company recently changed its algorithm to prioritize listings that provide good value for the price, and it is also developing new tools that allow hosts to see the total costs guests are paying for their rentals. This information will help hosts set their daily rates appropriately for the home they are providing.

The decline in average daily rates may negatively impact Airbnb’s revenue, but the company has reported $455 million in free cash flow and remains optimistic about its future prospects. The company is not looking to burn through its cash reserves but plans to keep enough for potential merger and acquisition opportunities that may arise.

As more people seek to make money by renting out their homes on Airbnb, the company is making changes aimed at increasing supply and making it easier to become a host. The company ended 2022 with 6.6 million active listings worldwide, over 900,000 more than it had at the beginning of the year, excluding the inventory it lost in China when it left the country in July.

In conclusion, despite the pandemic’s economic impact, Airbnb has managed to pivot its business model to provide alternative accommodation options and emerge profitable in 2022. The company plans to focus on customer service, affordability, and increasing supply to cater to travelers’ needs. While there may be a decline in average daily rates, the company remains optimistic about its future growth and potential merger and acquisition opportunities.

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