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

Yes. I mean it's kind of crazy. It's actually -- I didn't know if AI would be good or bad for Airbnb. And a lot of people thought it would be bad for Airbnb. And it was a totally reasonable expectation that it would be bad for us because couldn't you just go to a chatbot and like search for every Airbnb and every hotel and then why do you need us? Are we just a data layer. And that was a real risk. And it was an existential risk to the company. But my thought experiment was the following: if AI is existential risk to Airbnb then isn't it kind of existence risk to everyone? And if it's existential risk to everyone, it means it's existential risk to our competitors and the business we haven't gone into. So therefore, it could be an opportunity. And the key other insight that we had was that ChatGPT and Anthropic and Google, we have access to the same technology they do because the models they develop, they sell. So we can use Astra, we can use Fable. We can use all their models. And so then the question is, can we be better at specializing in one area that gives us a reason for people to come directly to Airbnb. So we basically, last year, it got very like AI-pilled, I guess is the name of the term. Everyone got on Claude Code. And we now ship 80% more features than a year ago. It's nearly double the output. Now we don't really care about how much code is shipped by AI. I don't care how many tokens we're using. I just care how many features are developing. Pretty soon we're going to be shipping at twice the rate we used to. Customer service has been completely revolutionized. Customer service is really, really difficult. Imagine we have no SKUs. A guest and host speak different languages. It's all said and seen. They say they're locked out. They say, there's an odor in the house. No photo can prove it, and you've got these seasonal workers trying to adjudicate and they want the solution answered right now. AI can look at the last 10,000 times an exact situation like that happen and can recommend to the agent how to solve it. A human can never have done that before. From a search standpoint, Airbnb search is really difficult. If you search on Google, you want one answer. You search for a home in Paris, you don't want one answer. There's 100,000 homes what's the right home for you. And now let's add all the other permutation. Oh, by the way, let's add like 2 other opinions on the trip and all of the variables. There's literally billions of permutations for every type of trip, if you're completely open ended. No search algorithm can do that, you need AI. So we basically have like 20, 25 features. It's basically across the board. I basically think -- I did a talk a few years ago that Paul Graham wrote an essay, he called it, Founder Mode. It basically meant like acting like a founder, being in the details, being like a changemaker. I think in the age of AI, everyone has to be in Founder Mode, even professional managers because we have to reinvent our business on the ground up. And so it started with me. I basically said I have to be completely AI pilled, I basically downloaded a huge amount of context of my life on to Claude Code. I did it really securely, but I basically took like 1 million e-mails and 50,000 Google documents, 2,000 keynote slides, and I use it to train to provide me context. And one of the biggest challenges the CEO has is none of us know what the hell is going on in our company. We just don't. And so when we do these things called meetings to figure out what helps going on and all our executives, they're well-intentioned, but they manage up and they tell us what they want to -- what we want to hear, if we have really healthy cultures, they'll tell us bad news, but still, you're at the mercy of what they tell you. Now with AI, you have an intelligence layer. You can just know what's going on before people tell you anything. You can tell meetings, but those meetings, they're much more productive. So this thing has become like a superpower. I can have more information, 24/7, I can cut through the bulls***, it's a lot more fair. We know who the high performers are, who the low performers are. It's just been a total revolution how we operate, and it's -- AI is not distributed equally. I think the winners of AI aren't the people that are most advanced technically, they're most advanced culturally. I don't know if that makes sense. In other words, we all have access to the same technology. Like Airbnb and every one of our competitors and everyone is on stage, especially in consumer, we all have the same model. The question is who has the culture to adapt quickly. So AI becomes who -- which companies can move the speed of AI. That becomes a cultural thing. And that's probably the biggest thing is I can't point to any one feature. I can only point to the culture of Airbnb being a culture of being AI native.

Okay. Understood. And a lot of interesting stuff in there. Let me stick with the culture of Airbnb because I think one of the more unique things in the last couple of years, which you referenced is you're pushing beyond the core of the product. The analogy you've used on earnings calls is Amazon. When you think about growing the supply side of your market and moving into new areas, as a leader, what do you think about in terms of the market opportunity relative to the incremental friction to get into a new area, whether it's experiences or hotels or things like that, how does that get factored into your management process?

I think that we had a big debate years ago, should we stay focused on our core or should we do vertical expansion? And we ultimately realize that every time we add a category, it not only expands our business, but it makes the core stronger. That was the general thing we found. We took us 1.5 years to develop service and experiences. It took us like 8 months to develop car rentals. It took us a few months to develop like resort passes. So every new business, we're able to launch faster and faster because we can reuse components. I eventually want to be able to launch dozens and dozens of categories. So the supply acquisition is getting faster because every time we add a new supply type, we basically reuse the tools from a prior technology. So for example, services, if you want to like get a massage, there's like a platter of like 3 types of massages and that page we reuse for hotels because the hotel has multiple rooms. So like basically, what we wanted to do is we want to reuse components on the back end, and AI can essentially create listings really, really easily. You can even source leads for you. It can help the salespeople. The big challenge becomes discovery. If we add 50 categories and people think about us as one thing, how do you discover everything? And so that's the thing I think we're still trying to crack. How do you basically merchandise a lot of things in a very narrow amount of real estate. I think the answer to this becomes personalization. We have to know much more about people. We've been living in a 30-year paradigm of e-commerce, essentially eBay and Amazon. What is the paradigm of e-commerce? Anonymous customer, you don't know much about them. All you know is the last thing they click or bought. They go to a search box, they type something in, they get results, they see a page, they book it. I think we're starting to live in a world where the AI knows a lot more about you and everyone gets a very different experience. Some people will come to Airbnb to only see hotels. They'll never see a home because they don't like hotels, they don't like homes. Some people hate hotels, you're never going to see a hotel in Airbnb. Some people only want to use Airbnb for car rentals, we'll see that. So we need to really understand people. The more personalized we can be, the more the stronger the flywheel is going to be.

Okay. When you look at the scope for where the platform can go over the next 3, 5-plus years, are there any adjacencies you're intrigued by or areas that you're always interested in exploring as potential extensions of what you built?

I mean, yes. So like, for example, with travel, there's a lot of -- we can like, you imagine all the things we've done in travel, we launched car rentals. Car rental is a fast-growing category in our business. It's been like a huge boom and will probably be one of the biggest like sellers of car rentals in the world at one point. There's a lot of other verticals of travel that I could point to, a lot of types of verticals of services. But I think there's opportunity in housing. I think like longer-term rental is a huge opportunity for us. We're probably one of the biggest housing platforms in the world. It's not that hard to go from short-term rentals to longer-term stays. It doesn't take a lot of incremental exposure to be able to do that. And then I think there's a lot more around living. You can literally use Airbnb not to just travel, but to live. There's a lot of verticals around that. And then I think eventually, human connection. I think it's really hard for people to meet one another one day today. And I think that a lot of people are using Airbnb to meet one another. So I think traveling then living, then human connection, those are probably the 3 horizons. We're still mostly focused on travel. So I think that will be the big folks in the next 3 to 5 years, but you're going to start to see us moving into living.

Okay. Sticking with this idea of the supply side and lodging, as you get into short, long-term living, lodging broadly and you bring hotels on the platform, What have you learned about how to bring supply into your ecosystem like hotels, where there's both commoditized and noncommoditized inventory to also retain the uniqueness that Airbnb has as a platform because you're known for sort of unique offerings that people can't find. How do you merge supply like hotels into that ecosystem and retain your brand around in...

It's a really good point. So well, first of all, we're starting with the most unique hotels. And it turns out about half the hotels in the world are independents and boutiques, and we started really by going after them. Here's the interesting thing. The boutiques and independents are underserved. They pay a higher commission on Booking and Expedia than chains. So if you're a Marriott -- here's the dynamic to happen in the hotel industry. There's a lot of independent hotel owners. They want to stay independent. But Hilton and Marriott, in particular, are rolling up these independents. And a lot of these independents feel forced to sell because the Marriott and Hilton have loyalty programs. And also they can negotiate lower commission rates on Expedia booking. And so the independent hotels are having trouble competing. And so when we launched hotels, we had a huge number of independent hotels come to us. What is it, the enemy of my enemy is our friend? So they came to us because we had a lower commission. They weren't second-class citizens. They were unique not commoditized, and that's what our brand stands for. They wanted younger travelers. We have the -- our first-time bookers are the fastest, they've been in 4 years and 50% are Gen Z. So we're the brand, the new generation. The great thing about young people is more of them every year. So it's kind of a good trend to have on your side. So that's what we've learned, start unique, but also be personalized. So it doesn't mean we can't add commodity inventory. As long as Airbnb always has enough unique inventory to come to us direct, we can supplement with commodities. But our heart and soul will always be in unique inventory. But the great thing is the TAM, if you add commodities, is unlimited.

Okay. I wanted to ask about the World Cup this summer. It's obviously one of the biggest global events that's ever happened. What were some of the key learnings out of that event where there's a lot of people in the world coming to one country, and it's not just a lodging event, but it's also an experiential event that played out across social media and social influencers and things like that. What does a company like Airbnb learn from an event like the World Cup this past summer?

Well, I mean, let me just back up for a second, like events or how Airbnb started. I mean I was 26 years old, 25, turning 26. I was completely broke living in San Francisco, a design conference, an event was coming to San Francisco, all the hotels are sold out. And I said, what if we turned our house into a bed and breakfast for the conference. How many beds? We pulled out 3 airbeds, and we call it Air, bed and breakfast, hence the Airbnb. Then we launched a Democratic National Convention. Then we launched in inauguration in 2009. Then we -- here's the dynamic. Events built Airbnb. The reason why is many people, regular people put their home in Airbnb with the intention of only hosting for 1 week for an event. And nearly half the people continue hosting. That's the secret of Airbnb, events built Airbnb. And these people are regular people, they're not property managers. And so we realize that events shine Airbnb strengths. See, a lot of cities think every is a problem. But when events happen, we become a solution to their problem because the hotels are sold out, they're gouging customers, so they're driving up rates. And we basically allow a city to expand their supply inventory that improves our relations with cities. It attracts a lot more host. And it creates a very like cultural experience of people staying. For example, the mission of the World Cup is to bring the world together through football, soccer. Our mission is essentially trying to bring the world together through travel. They're very, very adjacent. And just like the Olympics, these events are really big. So we -- Paris, we had 600,000 people stay in Airbnbs for the Olympics. We had tens of thousands new supply types. Our relations in Paris were better after the Olympics. And we realized there's a lot of big events. There's also a lot of small events. What if we were to industrialize this event strategy and really use this as our supply acquisition strategy. So a big way we get homes in Airbnb is by promoting for events. A lot of people live on about half the people continue hosting.

Okay. Interesting. When you think about where the business stands today, how should investors think about where there's the biggest opportunity to monetize all of the utility and activity that you're seeing on this platform. When you think about building continuous varied streams of revenue in the years?

I mean it's -- so from a growth standpoint, I think category expansion is where it's at from a top line, but I think from a -- and international. But I think from a margin standpoint, it's probably seller services. If you think about Amazon, if you think about Alibaba, you think about Etsy, you think about many of these marketplaces, they take a huge margin on the supply side. And so I think there's a lot of different services we can sell to host. I mean the obvious one that everyone talks about is sponsor listings, essentially an ad-based platform. That is a pretty easy straight shot to $1 billion incremental high-margin revenue based on like what other brands have done. But I think even that is just part of a platter of host services. So that's probably the obvious one. I mean we have a very high-margin insurance product, travel insurance does quite well. So that's obviously also going to grow a lot as well.

Okay. So we only have a few minutes left. And I always like to end on -- and you've talked a lot about it as you always do and when we get an opportunity to speak. But talk a little bit about your vision for the company, leave investors with what are your key strategic priorities, and what are you most focused on executing on for the company in the years ahead?

There are 3 things that we're trying to do. The first thing we're trying to do, and I talked a lot about is go from providing homes for travelers, to everything you need, to travel and live and connect around the world. And so you're going to see a lot of vertical expansion. And every month, you'll see an acceleration in new verticals launching. That's number one, category expansion. Number two, I think we're going to invest a lot more in the customer and the community and building out profiles. We're going to have some major announcements next year. I can't share too much, except to say that I think I want to shift here from a marketplace, to much more of a community, a community where people feel like they're a part of the brand, we know more about them, we have a deeper relationship. Maybe the analogy is like kind of AmEx, right? AmEx is not just a credit card company. It feels like you have a membership. And in fact, the former CEO of AmEx, Ken Chenault is on our Board. So I think that's a real road map for where we can go. And the third is just using AI to be completely native. The one thing I'll just say before I go is somebody asked me recently, what's most surprised you about our company. What surprised me about our company is our mature business is not mature at all. Every time we keep thinking the growth is going to slow down and it reaccelerates. I mean our growth last year was 10%. Last quarter, I think it was like nearly double. And so almost every market is accelerating. Almost every country is accelerating. And it's hard to explain why. I mean, one explanation is we're just executing really well. The other explanation is maybe the market was so much bigger than we ever thought. Maybe that every time I raise money, the question was, how big can this market be. And I had no evidence, I'm like, well, the markets as big as we are. And it just kept growing and growing and growing. So I think our core business could probably be double the size. This is our core business before you enter into any other verticals. And then you have international expansion, you all different verticals. So I think the TLDR is just -- it's very, very early. And I was just entering before this and someone said, you were running at me for like 19 years, you're like an OG and I'm like, man, I guess, am I that old? In the age of AI actually I feel old, if you're a 45-year-old in this industry. But I still think it's really, really early. And I don't think Airbnb's a mature company. And I'd like to have this thought that like we're getting younger every year because the road in front of us is longer the road behind us. And I like to think that we are more fired up than we've ever been. That's what Founder Mode is really about. It's about like having the enthusiasm that you had the first day you started the company. It's about -- a lot of people say founders set the vision. I think more importantly, founders set the pace. We set the pace because the vision is just something you discover day to day, but I wake up every day with a sense of urgency every day with a sense of like we need to like seize this moment. We have this once-in-a-generation opportunity, and we are here to reinvent ourselves. So I'm just so excited. I don't think we've ever had more fun as a company. I think it's really early. And I think we went from the sixth inning back to the second inning, if that makes sense.

Great. Well, Brian, thank you so much for being part of the conference. Thank you for taking Airbnb.

Thank you.