Airbnb, Inc. (ABNB) Earnings Call Transcript & Summary

Who's been enjoying remote work this past couple of years? I have. Yes? Very good, very good. So -- but some CEOs believe remote work is pretending to work. But the employee revolution is here, and workers are looking for more flexibility in it in now, not just how they work, but where they do it. But how are we going to capitalize on the momentum that's currently in place for those to live and work more freely? To tell us more, please welcome to the stage, the Mayor of Lisbon, Carlos Moedas; with Airbnb Co-Founder and Chief Strategy Officer, Nathan Blecharczyk. [Presentation]

Hi there.

Thank you for having us all in your beautiful city, Mr. Mayor.

Thank you. It's a great pleasure to have you all. It has been an amazing week for Lisbon, and it's a great pleasure to have you here.

Pleasure is all mine.

So I thought that we could start this conversation a little bit about what we're doing and what you've done because you have this amazing history, this amazing ability to transform a company in a unicorn. And I came here the other night to tell everybody that I've created this unicorn factory in Lisbon. And so because I think really innovation is at the center of everything. It's about creating jobs. And if you don't create companies, you don't have jobs. And I was wondering if you could tell us a little bit about the process. I'm a very process-driven person, and I think that innovation is a process. And what was the process in your mind when you created the company? And you went through difficult times. There's even a story that you had to sell some cereals at some point when you were starting the company. And so I was curious about the process of getting to be a unicorn because it's something that I think is so important for people to understand because it looks like it's easy. It looks like it's nice that you were successful, but I imagine it was very hard.

Yes. Well, I think it really starts with like-minded individuals, which is why I think this event this week is so important because we're surrounded by, I think, very many like-minded individuals. But in terms of my journey, I grew up in Boston. At that time, it's different now, but at that time, there wasn't a lot of tech entrepreneurship happening there. And a lot of my friends are going off to business school, law school, medical school. And that made me feel like I was doing something wrong because I wanted to quit my job and create things out of code, and none of my peers were doing that. I went to the Bay Area eventually to do that, and that's why I met Joe and Brian, my 2 co-founders, and we were just -- we started out being roommates. We're living together. We weren't trying to start a company. And the idea fell into our lap. Many of you have heard the story, but we started this company -- well, we started by just trying to pay our rent one weekend by renting out an extra bedroom. And that is what became a company, and we decided to try to make it just as easy to book someone's home as a hotel. So 2 parts there. One, like-minded individuals trying to solve their own problem, a problem that they uniquely understand, they have a different perspective on. And we didn't have backgrounds in hospitality, and so we did have a fresh perspective. And so that was really the beginning. And the story is a very interesting one in the long run. I think grit is really important. And nothing is easy when you're doing something new and when nobody believes you. And certainly, people thought we were crazy to allow strangers into your -- other people's homes. And we had to do a lot of things to get attention and to be relevant. And I think you referenced the breakfast cereals earlier. And so the quick story there is, this was 2008, Barack Obama had just received the nomination from his party to be the presidential candidate, a very historic event. We'd gotten a lot of press launching during that event, a time when a lot of people are coming to Denver, a big conference like this, I guess. And people needed a place to stay. And so that's how we launched our company. But then after that, nobody cared about us, we weren't relevant anymore. And yet, we had met all these reporters. And so we came up with this clever kind of PR hack to get the attention of the reporters, which was to make a presidentially themed breakfast cereal. Because the elections were coming up, there was a lot of interest in kind of political stories and interesting, quirky things that were happening. So we created this presidentially themed breakfast cereal. After all, our name was Air Bed and Breakfast at the time. So we created Obama O's, Hope in Every Bowl and Cap'n McCain's, a Maverick in Every Bite. And we created original packaging, and they actually look really beautiful and really engaging. We mailed the first 100 of each of these boxes to reporters. We knew if we e-mailed reporters, they would delete our e-mail, but if they receive these cereals, they would call us back. Well, sure enough, we end up on Good Morning America, we end up on CNN International on the home page. We sell a box of cereal, $40 box of cereal every 3 minutes until we sell out, we made $30,000 that week. So we get a lot of attention. That was part one of the story. The more important part of the story though is a couple of months later, we're applying to Y Combinator. It's an accelerator program, very well known, Paul Graham runs it. We go through the interviews, it's 5 minutes long. Interview goes terribly. Paul Graham hates our idea, and we're walking out of the room knowing that we've blown it. And as we're walking out, we hand him Obama O's. And he says, "What, you bought me a gift?" And we said, "No, we made this." And he said, "I don't understand. Come back and tell me how you made this." So we tell them the story about how we made the cereal, and it's a very scrappy story that demonstrated grit. And later on, he told us he accepted us into Y Combinator because of the cereal boxes and what it demonstrated about us, our scrappiness, our grit, and that's what he was looking for, especially in the midst of a recession. And so these are just some of the elements, I think, that are really important to succeed at building a wildly successful company, is a team of like mindset, this grit in solving your own problem or having a unique perspective on the problem.

It's so interesting, what you say, because I think that normally, when you think about innovation and you tend to think about as innovation of getting to a couple of friends and try to have an idea. And the fact that you said that you had no hospitality background, it's the example that I've seen so much when I was at the European level, that the ones that innovate in a sector are the ones that most of the times are not part of that sector. They don't know anything about it, but they have a different angle. And I think that's very important in life is that you have the courage to actually go into the intersection of what you know to what you don't know, to a sector that you've never been and look at in a different way. And there's so many stories at the European level, and let me be here, a European, as I was a former European Commissioner, of so many young people that succeeded because they looked it in a different way. I remember a fantastic woman from the Netherlands that came to me when I was a European Commissioner saying, "Look, I have this idea of using plants to produce electricity. But nobody wants to see me, nobody is financing me because they think that I'm just crazy. I'm not from -- an engineer. I'm not from the electricity sector or energy specialist, but I know I can do it." And we believed in her. And she really developed a great company in the Netherlands just out of looking at plants in agriculture to produce energy out of that experience of someone that had nothing to do with it. And so for me, the unicorn factory of Lisbon should be that place where people come with different ideas, but at the same time, they have the discipline of people like you that know it's not just looking at the other angle, is also the moment that you were with your friends looking, look, we don't have more money. What can we do? Let's sell cereals. Let's have an idea that it's totally outside of the box, big case in the box and do it and be agile and not be afraid. And I think that's something that I really want to have in Lisbon. And so in these 20 companies that we'll pick every year, these 20 start-ups, I really want those to be companies that look at problems with a different angle on different sectors. So this grit and energy of looking at things. And so that's very interesting what you say. And I also hope that you can help us with your experience and a lot of people like you. Just as you know, there's 8 unicorns this year that set offices in Lisbon. They come from all over the world, and I think this is a great place for all of you. But thank you. Thank you for...

Thank you. And the topic of innovation though, I think, doesn't just apply to starting new companies. I think it's super relevant to think of how we address kind of everything at scale, whether it's policy or climate or whatever. But I guess, in our case, think of how far we've come, Airbnb. More than 1 billion guests have stayed on Airbnb in other people's homes, hosts have made more than $180 billion through the Airbnb platform. So it's obviously a really big business. And when you're doing something new and you're achieving really great scale, you have to figure out how that intersects with the rest of society. And I know that's been a big topic. And I think there, we've tried to innovate as well and approach it with a kind of product mindset where you think -- you try to understand what are the products that we, the company, could create that would be valuable to our stakeholders, specifically government, for example. One of the first things we did early on was say that we want to help governments collect their tax revenue. Because in this new model where the host is the operator, they are, in theory, supposed to pay whatever it is, the VAT or the hotel tax and whatnot. But individuals aren't well positioned to do that, and government isn't well positioned to implement that either. And so we decided to build this into the platform, build an actual product to automatically collect and remit these taxes and do that through partnership with different governments. And so today, we've collected more than USD 6 billion taxes around the world. In Europe, it's EUR 511 million, and we've done that in Lisbon and Porto as well over the last several years since, I think, 2016. And so there's tax. And then there's also just compliance tools that we've built. We've built this product City Portal. It's meant to be the one-stop shop for government, all the things they might be interested in as it pertains to Airbnb wrapped into a product, instead of having to create bespoke capabilities one government at a time. As we did for our biggest markets in the early days, how do we just basically provision a log in and give a government rich access to data, permitting tools, how to handle noise and nuisance, things of that matter. So some examples of how we're still trying to innovate but at much greater scale and do it in partnership with government.

I think that what you're saying, and it is very important for the ones that are starting, is that there was this phase of the digital world where you can have your company and totally work independently of governments because you were doing things that had nothing to do with the state or the government. Now you are in a phase of the Internet that you are really developing companies in very regulated areas, being it health or energy or in your case, too. So you have to work with government. And I think there is a language and there's really a need for that dialogue to be every day because the government has to regulate, of course, but it has to regulate it in a smart way, it has to regulate it in a way that really creates value. And today, life goes so fast and your jobs go so fast, your companies are created, you create new products. And sometimes, the governments are regulating the past, they are regulating products that do not exist anymore because you're already in another company. And so these are -- really this contact, this dialogue, as you say, this innovation is also for the government, and in my case, at the local government. We need also to talk in your language, and you have to understand our language, and we have to work together. And that's extremely important because for a city, it's extremely important to have you, but at the same time, we have to protect people. We have to protect those that are poor. We have to take care of those that don't have housing. We have to work for them. But you have to create -- we have to create conditions for you to be a part of the economy because you create the jobs, you create value. And I think that this phase of the digital world that we are getting into, more than ever, needs to be really a partnership between the government and the private sector. And so when I look at the audience, I say, look, there should be more -- also more politicians here on the front row because they will need to be part of it because if not, you have a political world that is just physical and old and you have your world that is new and modern and horizontal and flat. And I think that it's also to people like you to help us on that at so many different levels.

And I think we should see that as an opportunity for both parties. And I think a great example of this, something we just shared yesterday, I think is the topic of tourism and how to make sure everyone benefits from tourism. As you kind of alluded to, there are certain neighborhoods and cities that get a lot of tourism and sometimes it's even overwhelming. And it's -- tourism is an important part of the economy, but if there's too much in too small a space, it's simply too much. And yet, how do we disperse that? And so a great thing that we've been able to work on together is dispersing tourism and building a, I think, really unique capability. Specifically 6 months ago, we reinvented travel search. It used to be that when you point to a travel site, first question was, where do you want to go, and you really had to type something in, in order to progress. We took that away, and furthermore, we created these categories, we call them 56 categories, representing a different type of experience you might be wanting to have. So maybe I'm here in Portugal and I want to check out a vineyard. I don't know where the vineyards are, but I can now hit the category of vineyards and see them all across Portugal or whatever part of the map I'm interested in. We've had this out there for 6 months, and we've seen the results now. And what we've seen is that we successfully -- for those who've used the feature, successfully redirected people's actual stays geographically away from the top 20 destinations. We've seen a 17.5% decrease in people staying in the top 20 destinations, and we saw a 35% increase in people staying outside the top 400 destinations. And so I think that's just a reminder of how powerful platforms are to shape consumer behavior. Sure, some people really know where they want to go and you're never going to convince them otherwise. But there's a lot of room to influence, and I think that can be done in partnership with government, as we have done, to, in this case, disperse tourism. And it can also be a good business opportunity, too, because from our perspective, we have a lot of hosts. Some hosts are fully booked. Others are not. If we can spread interest around more broadly and engage more people on the platform, more hosts, that's a business opportunity. And so I think these collaborations can create a lot of fruit and be pretty novel when you think about it. I can't think of another way in which this could be accomplished. The old way of doing this would be to run a huge marketing campaign and try to convince people to visit this region or that region. Suddenly, through a product change, this is rolled out globally and having global impact at scale.

Absolutely. And I think that if we work together, we can really create value because your business was really, during the crisis in Portugal, very important for people and very important for people that at the time were suffering. And I think one said -- one day you said about people in business and you have these people that they are business, they were creating their own business. And those really deserve that because it's a way that they could have their revenue and they could keep up with life at the time. But at the same time, you have to balance the city. You have to have a city where you have the Airbnbs, but you have to have the people that live in the city. And that's something it's socially very important. And it's very important also there for everybody, it contributes to that. But I think that innovation is exactly that. I mean a city has to push for innovation and has to protect people that today are fragile. And as you know, in Lisbon, we have really fought for that. This year, we will have from the 1st of January, we'll have a health plan for the older people, for 65 and plus for free because I think that if you invest in innovation and you create really value, you have to invest that value on protecting people. And we'll going to go through a very difficult phase with inflation, and we will have to protect people during these times of inflation. And so innovation is the link to that. I mean you are the ones that can create value to protect the people. And politicians, we are here to help to have a vision for that and a vision to help people going forward. And that's my -- really my call to you is that look also not just at your business but your social delivery. What can you deliver to society? And that's extremely important. I think you've done that in some ways in a lot in your life, and that you'll keep doing that.

Yes. Well, thank you. And I think recognizing that there's a diversity in terms of the population and making sure you think in terms of like the various kind of cohorts, whether it be age or socioeconomic, but what is your value prop? What are you doing to make sure that everyone's benefiting? We see that like 25% of our hosts are seniors, and that's really interesting. We do a lot to help make them successful on the platform. That's maybe not what you think of when you see Airbnb, seniors becoming entrepreneurs, but it is a big part, and it's something that we should collaborate on to make sure that there is more awareness of this opportunity for that segment.

Very good. So I think we got to the end of this conversation. Please come to Lisbon. We have this new unicorn factory. Be part of the dream, follow your passion, make the impossible possible, as Nate has done in his life, a very successful businessman, and you can do it too. So all the best for you.

And I think we're all rooting for you. So best of luck and look forward to seeing more of your success in the future. Mr. Mayor, thank you for hosting us. [Foreign Language]

Thank you. Thank you. Thank you very much.