Airbnb, Inc. Q4 FY2021 Earnings Call

Good afternoon, and thank you for joining Airbnb’s Earnings Conference Call for the Fourth Quarter of 2021. As a reminder, this conference call is being recorded and will be available for replay from the Investor Relations section of Airbnb’s website following this call. I’ll now hand over to Ellie Mertz, Vice President of Finance. Please go ahead.

Good afternoon, and welcome to Airbnb’s fourth quarter of 2021 earnings call. Thank you for joining us today. On the call today, we have Airbnb’s Co-Founder and CEO, Brian Chesky; and our Chief Financial Officer, Dave Stephenson. Earlier today, we issued a shareholder letter with our financial results and commentary for our fourth quarter and full year of 2021. These items were also posted on the Investor Relations section of Airbnb’s website. During the call, we’ll make brief opening remarks and then spend the remainder of time on Q&A. Before I turn it over to Brian, I would like to remind everyone that we’ll be making forward-looking statements on this call that involve a number of risks and uncertainties. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described under forward-looking statements in our shareholder letter and in our most recent filings with the Securities and Exchange Commission. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained on this call to reflect subsequent events or circumstances. You should be aware that these statements should be considered estimates only and are not a guarantee of future performance. Also, during this call, we will discuss some non-GAAP financial measures. We’ve provided reconciliations to the most directly comparable GAAP financial measures in the shareholder letter posted to our Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. With that, I’ll pass the call to Brian.

All right. Thank you very much, Ellie, and good afternoon, everyone. Thanks for joining. I’m excited to share our Q4 results with you. Q4 was another record quarter, and 2021 was the best year in Airbnb’s history. In Q4, revenue was $1.5 billion, our best fourth quarter ever and exceeded 2019 by 38%. Net income was $55 million, our best Q4 ever compared to a loss in 2019. And adjusted EBITDA was $333 million, also our best Q4 ever. Our adjusted EBITDA margin was a positive 22% compared to a negative 25% in Q4 of 2019, this is a huge improvement obviously. Now, in Q4, GBV was $11 billion, which surpassed 2019 levels by 32% and was driven by strong ADR. Now, even with Omicron, Q4 Nights and Experiences Booked were only down 3% compared to 2019. And when you exclude APAC, it was actually up 8%. What our results show is that we’ve been able to respond to this changing world of travel. Nearly two years into the pandemic, it’s clear that we are undergoing the biggest change to travel since the advent of commercial flying. Remote work has untethered many people from the need to be in an office. And as a result, people are spreading out to thousands of towns and cities, staying for weeks, months, or even entire seasons at a time. For the first time ever, millions of people can now live anywhere. And we’ve been able to respond to these changes because our model is inherently adaptable. Our millions of hosts offer nearly every type of home in nearly every community around the world. But it’s not just a model. It’s also our culture of relentless innovation. In the last year alone, we made more than 150 upgrades and innovations across every aspect of the Airbnb service. This explains why we had our best year in our company’s history, despite still being in the midst of a pandemic. Now, there are a number of business trends that have been driving the strong performance. First, guests are staying in thousands of small towns and rural communities on Airbnb. Throughout the pandemic, we’ve seen growing demand for domestic and nonurban travels. In Q4, gross nights booked in non-urban markets was up nearly 45% from Q4 2019. And in the past year alone, Airbnb guests stayed in nearly 100,000 towns and cities all around the world. Second, guests are also returning to cities. Q4 nights booked at urban destinations have recovered to nearly recovered to Q4 2019 levels. And cross-border travel also continues to recover and improved each quarter in 2021. Guests are planning to travel despite variants and surges. Despite the impact of Omicron, in December, gross nights booked were up 40% and the cancellation rate was lower than a year ago. In Q1, we’re already seeing strong demand for the summer travel season compared to 2019. And finally, guests are not just traveling on Airbnb; they’re now living on Airbnb. Nearly half of our nights booked in Q4 were for stays of a week or longer. One in five nights were for stays of a month or longer. And in the past year alone, nearly 175,000 guests stayed for three months or longer. So, I’m going to follow on the footsteps of our community. Recently, I shared that I too am going to live on Airbnb. Right now, I’m doing this call from Airbnb in Miami. And I’ll be staying in a different town or city every couple of weeks. I’ve always wanted to do this, but before the pandemic, I had to be in the office every day. Now, I have the flexibility that millions of other guests do on Airbnb. And I also think it’s important that as CEO, I deeply understand the nuances and unique opportunities that this use case on Airbnb will provide. So now, I want to recap how we did on last year’s priorities. As you recall, for 2021, our single priority last year was to prepare for the incoming travel rebound. And to do this, we focused on perfecting the end-to-end experience of all of our core services. This meant educating the world about hosting, recruiting more hosts and setting them up for success, simplifying the guest journey, and delivering world-class service. Let me just give you a really quick update on each. First, we’ve been educating the world of what makes Airbnb different, and that is hosting. In 2021, we launched our first large-scale marketing campaign in five years to educate guests about the benefits of being hosted and inspire more guests to become hosts. It worked. We’ve seen an increase in traffic to our platform in countries we ran the campaign, and this was significantly ahead of non-campaign countries where we didn’t run the campaign. Second, we’ve been recruiting more hosts and setting them up for success. Last year, we redesigned the host onboarding flow, making it easier for new hosts to get started. We also introduced our Ask a Superhost program, pairing potential hosts with Superhosts to answer their questions. And finally, we created AirCover, top-to-bottom protection, free for every Airbnb host and only offered on Airbnb. Third, we’ve been simplifying every part of the guest experience. Last year, we introduced I’m Flexible, a whole new way to search on Airbnb when guests are flexible about where and when they’re traveling. And guests, since we’ve launched these features, have used I’m Flexible nearly 800 million times. We’ve also shipped dozens of other product features to improve the guest experience. And finally, we’ve been focused on delivering world-class service to our guests and our hosts. Now, in addition to providing protection for our hosts through AirCover, we launched dedicated Superhost support. Now, dedicated Superhost support provides our most experienced hosts priority access to our most experienced support agents. And as a result, we’ve seen fewer escalations and faster resolution times, increasing overall Superhost satisfaction. Now, I’m incredibly proud of everything we delivered to our guests and hosts in 2021. But it’s important to note we are not stopping here. Because in 2022 and beyond, what we’re going to do is accelerate our pace of innovation. And we’re going to focus on three key priorities: Live anywhere on Airbnb; unlock the next generation of hosts; and Airbnb becoming the ultimate host to our community. Let me just give you a quick preview of each. First, live anywhere on Airbnb. As a result of the pandemic, millions of people are now living anywhere. They’re now using Airbnb to travel to thousands of towns and cities, staying for weeks, months or even entire seasons at a time. Some people without families, like me, I can kind of live a bit nomadically, staying in different Airbnbs every week or every month. Now, people who have families probably can’t do that. But we’re seeing people who have families going to have a lot more flexibility over the summer, and I think this is why bookings in January for this summer by nights booked are up 25% from this time in 2019. Other people are just going to take more extended weekends. The key point is that every length of stay on Airbnb is going up, whether it’s two nights, three nights, a week, a month or a season, all lengths of stay except for single nights are up on Airbnb. And we want to design for this new world by making it even easier for guests to live on Airbnb. The second priority is we will unlock the next generation of hosts. With 4 million hosts on Airbnb, we believe we’ve just scratched the surface in growing our host community. So, what we’ve done is we have listened to thousands of people who think about hosting to understand what obstacles there are for them to become a host. And what we’re going to do is systematically address each of these obstacles in order to attract the next generation of hosts on Airbnb. Finally, Airbnb will become the ultimate host. We believe that Airbnb can be much more than a marketplace that merely connects guests and hosts. Our goal is to provide the ultimate service to our guests, anticipating their needs and going above and beyond just like a good host. Now, by offering a more personalized service, we can dramatically improve the experience for millions of guests around the world. So that’s it. Just to summarize. Q4 was Airbnb’s best quarter ever. Revenues, adjusted EBITDA, and net income were all records. We’re in the midst of a revolution in travel because people have newfound flexibility in how they live and work. Our adaptable model and relentless innovation have allowed us to respond to this moment. And in 2022, we’re going to accelerate our pace of innovation and continue to support this new world of travel. So, with that, Dave and I look forward to answering your questions.

Our first question comes from Colin Sebastian from Baird.

I have two questions. First, Brian, I noticed you recently shared on Twitter the most popular requests for new features or services on the platform this year. Crypto payments seems to have been a significant request. When you mention increasing the pace of innovation, what should we focus on regarding the key areas and how that influences your spending? Secondly, I would like some clarification on the EBITDA outlook for the full year. I recall there was a mention of flat margins. Does this relate to a seasonal trend or a return to seasonal booking patterns and normalization of ADRs? If that's not the case, could you provide some additional context? Thank you.

Yes. Thanks very much, Colin. So, why don’t I take the first question and obviously, Dave, I think you could take the second question on EBITDA. So, Colin, with regards to the pace of innovation, just to kind of create a contrast, last year, we created 150 upgrades in innovation. So, it was the most innovation we’ve ever delivered in any year of our history. And I think this explains why it was probably the best year in our company’s history. But this year, we intend to create even bigger leads with our product. Just to give you a sense of how we’re thinking about it, going back to our priorities. We’re seeing that millions of people are not tethered to have to go back to an office five days a week. And what this means is guests are spreading out to thousands of communities all over the world, and they’re also staying longer. So, we want to design for this world, both for people just living on Airbnb or just traveling and having more extended vacations. We also launched I’m Flexible last year, and that product has been used 800 million times. This is a really key feature, because since the advent of the Internet, almost every travel website has asked you two questions: Where are you going? And when are you traveling? Suddenly, I’m Flexible gets us further up the funnel. This allows us to be in the inspiration business. And it’s ultimately strategic for Airbnb because if you’re flexible about where and when you can travel, we can point demand to where we have supply. So, we’re going to continue to upgrade our product. And we’re going to continue to be a better host to our guests in those communities by providing even better world-class service for them each step of the way. So, we’re going to continue to invest in the guest experience to adapt to these new behaviors, provide world-class service for them, and then once again, we want to unlock the next generation of hosts. We have a whole roadmap where we understand each of the obstacles for people to host, and we’re going to launch products and features this year that will unlock those obstacles. I’m sure that’s going to create a huge plethora of new supply in Airbnb. Dave, do you want to get the second question on EBITDA?

Sure. Yes. We’re very proud of the progress we’ve made in our margins in 2021. I mean, we increased them from minus 5% back in 2019 to 27% in 2021. It’s obviously a huge improvement and very proud of the work that we’ve done across the board. But also remember that we’re managing for profitability while investing for growth. We’re still very much in the growth mode investing for the future, and that’s key for us. What we saw in 2021 was that we had a step change in our marketing expenses and achieved a new level of overall marketing investment as a percentage of revenue. We’ve already achieved that new baseline and are likely not to achieve substantial improvement in marketing expenses as a percentage of revenue this year. We also made a step change in our fixed costs and continue to improve our variable costs. We’ll continue to do that. We’ll get more leverage on fixed and keep improving our variable costs. But last year, we saw the tailwind of average daily rate which definitely helped our margins. As ADRs may moderate this year and as a mix of our business changes, that will be an offset to some of the further improvements in our fixed cost leverage and variable costs. So if ADRs moderate a little bit less, there’s room for some upside in EBITDA, so. But that’s why we’ve given the guidance we have.

Our next question comes from Naved Khan from Truist Securities.

Yes. Thanks a lot. Two questions. One for Brian, one for Dave. So, Brian, how are you thinking about growth in Experiences for 2022 as travel comes back and people engage in more activities and Experiences? And Dave, on the margin question, again, how should we think about the growth in other expenses outside of marketing and available costs, namely operations support and product development. Is there supposed to be a significant ramp up or is ADR the primary explanation for why margins can be flat year-on-year?

Yes. Hey Naved. So, I will take the first question and Dave, you can take the second question on expenses. With regards to Experiences, we are very bullish on this product. It should be noted, for example, that the percentage of people that leave 5-star reviews for Experiences is even higher as a percentage of people who leave 5-star reviews for homes. What guests have told us is they love Experiences, and I think hosts really depend on the economic income that it offers. Now, in 2020, before the pandemic, we thought that year was going to be a breakout year for Experiences. Instead, we had to pause the product. But now, we are going to be ramping the product back up. It’s going to be a multiyear journey, but I’m really excited about the potential for this product. I think the reason is really simple. I think you can only play so many video games and stay home and watch so many shows on Netflix before you want to get out of the house and do an activity with other people, whether it’s traveling or even in your own area. We think this is going to be a great way to meet other people and also connect with people you care about over an activity. Dave, do you want to talk about expenses?

We reached a new baseline in our marketing expenses as a percentage of revenue, similar to what we achieved in 2021. Moving forward, there is not much room for improvement in this area. In terms of operational support, we are continuing to invest in community growth to support our guests and hosts. We are making improvements in our operational support rate, but additional investments are needed to drive further enhancements. Therefore, this aspect is expected to remain relatively flat this year. For product development expenses, we are increasing these costs at a slower rate than our revenue growth, which will allow us to maintain leverage and discipline in our focused product development efforts. However, this improvement will be less significant than what you saw in 2021. Forecasting average daily rates (ADR) presents a challenge. If ADRs remain strong, that will benefit our EBITDA. On the other hand, if the business rebounds in more urban areas with lower ADRs and those rates moderate, it could pose a headwind for our margins.

Our next question comes from Stephen Ju from Credit Suisse.

Okay. So, Brian, I think you rightly called out the longer-term stays as your fastest-growing category, and you’re going to be in the roster as well. So, thinking about the other side of the equation and I guess, the supply side of the equation. So, how are your hosts responding to the rise in this type of demand? And are there any sort of supply and demand imbalance considerations we should be thinking about or worrying about? Because it seems like the pandemic has definitely taught the consumer that they can work and stay anywhere. Thanks.

Hey Stephen. That's a great question. You're right that there's a significant acceleration in this new category of travel, where people are less tied to an office and can now live virtually anywhere, at least for many. We're really optimistic about the rebound of cross-border and urban travel. The original Airbnb use cases from before the pandemic are likely to return even stronger due to pent-up demand. However, we need to ensure we have enough supply to meet this demand. One of the advantages of our business is our global network. A significant source of our hosts are prior guests; in fact, 33% of hosts in Q4 were previously guests, and that number is increasing. Interestingly, the markets with the fastest supply growth also show stable demand growth. We believe this is due to the fact that most of our community consists of regular people—teachers, healthcare workers, students—who, as they earn and get bookings, are telling friends, leading to more listings and growth in other businesses. Next, we have a comprehensive approach to recruiting hosts. We aim to make more people aware of hosting, and we want the concept of hosting to be as recognized as the Airbnb brand itself. Last year, we launched two major host branding campaigns, which successfully attracted more traffic and potential hosts to Airbnb. We also made it easier to become a host by reducing the process to just ten straightforward steps. We’ve learned that minimizing friction significantly improves the conversion funnel. The easier it is, the more people are inclined to take action. We understand that potential hosts often have questions, so we’re matching them with Superhosts for guidance, which has improved conversion rates. Additionally, we are addressing common concerns, such as fears of property damage when renting out a home. We introduced AirCover, a comprehensive protection plan that offers $1 million in damage protection and liability insurance, provided at no cost to hosts. Finally, alongside our global network and supply strategy, there's an important aspect regarding the flexibility of travelers. With more people open to varying travel times and locations, we are seeing a significant number of searches using our I’m Flexible feature. This allows us to direct demand towards available supply, as we're not constrained by supply on any given night. The key challenge is that too many people often want to visit the same limited destinations simultaneously. As travel becomes more flexible, we can better balance supply and demand with our other strategies. So, to sum it up, we rely on our global network, a robust host recruitment strategy, and effectively directing demand to meet supply.

We now turn to Bernie McTernan from Needham & Company.

Maybe just a follow-up on that with the supply and demand imbalance in the marketplace. Do you see the price appreciation as a problem for demand or an opportunity for the hosts?

Dave, do you want to take this one?

I think you would see a bit of both. I mean, if you go back to what we’ve seen for the average daily rate throughout 2021, early in the year, it was almost exclusively driven by mix. It was the rebound of U.S. and European travel. It’s been a rebound in non-urban, whole home larger homes. So, the ADR was almost entirely driven by mix. In the year, especially around the peak travel season, around the summer, we started seeing some price appreciation in high-demand locations, think mid-summer. There was more price appreciation in those areas. It was about equal price appreciation to mix in Q3, and that stabilized relatively in Q4. With the amount of demand for travel, the ADRs, we’ve not seen it take a significant temper down on demand for people who travel. There’s a lot of pent-up demand for people to get out of their homes to travel and live, and they’re just constantly looking for the opportunity to travel. In terms of the opportunity for hosts to earn more money, there could be challenges in inflation driving up costs for individuals. They can certainly be empowered to become hosts as a source of earning additional income. Airbnb hosts have earned $150 billion, and I think they continue to use us as a great way to earn additional income going forward.

Our next question comes from Deepak Mathivanan from Wolfe.

Two quick ones, one for Brian and one for Dave. Brian, you noted that Airbnb would want to become the ultimate host and offer a more personalized service for guests. Can you elaborate on some of those efforts? And what type of incremental opportunities do you envision kind of unlocking from this in the next few years? And then, Dave, I just wanted to ask on the marketing spend. It seems like you noted that you found a new baseline. But as some of these volumes scale in the next few years, a lot of it is driven by a macro recovery of the travel spend incrementally and then also in some of these use cases like long-term stays remaining strong. Why shouldn’t we expect additional leverage on marketing, or is this an effort by you to sort of step up investments so you can keep marketing spend relatively flat as a percent of revenues and bookings? Thank you.

All right. Awesome. Well, thanks, Deepak. Obviously, I’ll take the first question, Dave, and then I’ll let you take the second. So, Airbnb becoming the ultimate host. What I would say, let me point you to two things that we’re seeing, just to give you a sense of where we’re going. Let me start by saying Airbnb is really a design-driven company at the very beginning. We have a unique design-driven approach, and I think that is a source of much of our innovation. That’s allowed us to create this new category of travel, and it’s allowed us to make over 150 upgrades innovations in the last year. We have some really huge things that we’re going to be launching in the coming months that I’m really excited about. A couple of schemes that we’re thinking about. More and more guests are coming to Airbnb with flexibility, right? So typically, the way it used to work is people would come to Airbnb, and you’d ask them where you’re traveling, and most people knew where they were traveling. You’d asked them when they’re traveling, and they’d say, 'I know where I’m traveling.' So, maybe I’m going to Miami this week. The more guests are flexible, the more you want to start learning more about why they’re traveling and what they’re interested in, so you can point demand where you have supply. The first thing we want to do is provide a more personalized shopping experience. I think we can go beyond the classic e-commerce paradigm where an anonymous customer comes to a website, they type something into search, they get a list of search results and then they book something. We think that we can provide an even more personalized service. Because we have a huge amount of repeat guests and we’re a community and we know quite a lot about our guests, I think we can provide a deeply personal service. That will increase conversion and unlock a lot more opportunities for guests. That’s just one example. One other example I’m going to give to you is on customer service. One of the things we noticed is when we offer dedicated Superhost support for a Superhost and then AirCover, which is the industry-first protection for hosts, it has massively increased host sentiment. We think this is critical. We think we can do quite similar things for guests. We think we can provide just the ultimate customer service to our guests and be there with them and go above and beyond each step of the way, just like a good host. As far as does this offer an opportunity for incremental new offerings and services, the answer is absolutely yes. The more we know about our guests, the better service we provide, the more opportunities we have to promote new offerings to them as well. Dave, do you want to take marketing?

Sure. To recap, back in 2019, prior to the pandemic, we changed our marketing strategy to focus more on brand-driven initiatives rather than relying heavily on search engine marketing. This decision proved to be effective not only in 2019, but also in 2020 and 2021. Currently, about 90% of our traffic continues to come from direct and unpaid sources. We are prioritizing our spending on brand marketing over search engine marketing. It's true that brand marketing tends to be more of a fixed investment. We've seen significant success from our brand marketing efforts last year, and we plan to extend these initiatives to more countries. As we enter new markets, there will be some additional brand marketing expenses this year. However, once we are well established in most countries, we anticipate greater efficiency because it will become more of a fixed cost. As revenue grows, we expect to generate even more revenue relative to marketing costs. Although we do not foresee this additional leverage in 2022, we could see it in 2023 and beyond.

We now turn to Mario Lu from Barclays.

The first one is on one of your top priorities for ‘22 and beyond. You mentioned unlocking the next generation of hosts. So, it’s been pretty clear that your hosts have been growing in regions that are seeing the largest demand. Just curious if there’s a certain demographic or host that you feel you’re currently under-indexing and look to unlock? And then, secondly, on service fees or take rate. I understand this is not reported, but with half of the elevated ADRs due to pent-up demand, does that give you confidence that you could potentially increase the service fee at some point in the future? Thanks.

Yes. Hey Mario, I can take both and then Dave, you can feel free to elaborate on anything I didn’t get to. But, I’ll do both of these. All right. So let’s talk about unlocking the next generation of hosts. And the question is, is there any area that we’re under-indexing in? I don’t know if I’d say there’s an area we’re under-indexing in, but I can tell you where I see the biggest opportunity. Airbnb, we started because my roommate and I were living in San Francisco, and we couldn’t afford to pay rent. We weren’t a small business. We weren’t a vacation rental owner. We were just kind of everyday people. We weren’t a property management company. We started Airbnb. The real innovation was we created tools to allow everyday people to become hosts for the first time. Because of that, nearly 90% of our hosts are individuals. They’re school teachers, healthcare workers, students. Our hosts have earned over $150 billion since we started, and 55% of them are women. What we’re going to do is continue to focus on individuals. We will continue to support property managers. We will continue to invest in them. We also have hotels, but we think probably the biggest growth area is going to be individuals. The reason why is that things like inflation are providing more pressure on families all over the world, and they’re going to require economic opportunity to make it through this difficult time. We saw that we started Airbnb during the 2008 recession, and many people were turning to Airbnb because of the economic empowerment it provided. Most people don’t realize that they can make an incremental $9,000, $10,000 a year by hosting occasionally. There are a number of people that are incredibly successful. We see people renting unique properties making tens of thousands, even hundreds of thousands dollars a year. We think just getting the message out to everyday people, they can become hosts, making it easier and systematically addressing the obstacles is the key opportunity. This is true in geographies all over the world, from North America, Europe, Latin America, Africa, and APAC. Regarding service fees and take rate, let me just say this. There is no question that we have the opportunity to increase take rate on the guest side and the host side. We don’t want to just increase the tax for the service. We want to ensure that if we’re going to increase our prices or fees, that’s going to be because we’re offering services that our guests or hosts want to pay for. We want to make sure that every single year, the value listing is increased. The opportunities to increase monetization efforts are not the most perishable opportunities right now. The reason why is we think this is a once-in-a-generation opportunity for this huge travel rebound. We have these new use cases. People are living anywhere all over the world. We also have a return of cross-border travel and the return of urban travel. We are totally focused on responding to this travel market share as much as possible. The bigger we get and the more scale we get, the more services we could potentially offer to guests and hosts. What we’ve seen is there’s a lot of services that you can offer to hosts. I think Alibaba, Amazon, Etsy, Shopify, and others have proven that there’s a huge opportunity in this area. It’s just not the most perishable opportunity right now, so we’re focused on market share.

We now turn to Jed Kelly from Oppenheimer.

Two, if I may. You said your listings were up 20% in non-urban North America. Is that coming from primarily individuals or property managers? And then, as we think out to 2022 as more people return to urban destinations, how should we think about competition, specifically from hotels and more commoditized inventory? Thank you.

Great. Thanks, Jed. Why don’t Dave, you take the first question, growth of individuals versus property managers in nonurban areas?

Yes. Broadly, what we’re seeing is that our growth in new supply has been relatively consistent with the distribution of individual versus professional hosts that we’ve historically seen. The majority of our listings are unique to Airbnb and from our individual host community. We’re continuing to see growth in our overall number of listings to be consistent with the relative distribution that we’ve historically seen. We don’t specifically break out the individual versus professional host by geography. I’ll just tell you that broadly, we are continuing to see that we focus on the unique needs of the individual hosts, individual host community. That’s what we’re focused on, and that’s where we’re continuing to see the growth.

Jed, I'll address the question regarding competition, hotels, and commodity offerings. It's important to note that the longer someone is away from home, the more they tend to want to be in a home. If you examine Airbnb's growth by length of stay, you'll see that every segment, except for one, has shown growth since Q4 2019. For instance, stays of one month, one week, three nights, and five nights all increased, with only one-night stays not experiencing growth, which are typically related to business travel. I don't expect business travel to return to its pre-pandemic levels, but that doesn't mean it won't return; it will just be different due to changes in our work patterns. The requirements for traveling by airplane for meetings are likely to be stricter than before. However, the travel market is vast, and there is ample opportunity for both Airbnb and hotels. Many hotels regard Airbnb as a critical distribution platform. As we grow, our significance to them increases. Hotels will have ample chances with group travel, conferences, large events, and offsites where they can excel, and we will have our unique space as well. I don't foresee significant overlap; there are distinct scenarios that suit Airbnb and others that are better for hotels, and hotels can still thrive on our platform.

We now turn to Brian Nowak from Morgan Stanley.

I have two on the bookers. You guys have had incredible bookings growth the last couple of years. I’d be curious to hear about what you’ve learned about the demographics of your bookers and how it’s changed, age and income? What does the base of your bookers look like now as opposed to pre-pandemic? How has that sort of changed your view of the world? Then secondly, about all the new bookers that came to the platform in 2020 and 2021, what can you tell us about their user behavior from a frequency or booking perspective at this point versus earlier cohorts, just so we get sort of an idea of how these users may or may not be different from what you’ve added historically? Thanks.

All right. Thank you very much, Brian. And Dave, why don’t you take these? So, the first question is bookings growth, what are the demographics of bookers, especially new bookers and then new user behavior compared to earlier cohorts?

The positive news is that we’re not observing a significant change overall. The demographics have remained fairly stable during this recovery, and while it's still early, our new groups of users are aging similarly to previous booking groups. The repeat booking rates are also encouraging. This presents a valuable opportunity for us to introduce Airbnb to millions of new guests, and it's reassuring that these new guests are showing rebooking rates comparable to what we have seen historically.

I’d like to add one more point. What makes Airbnb truly unique is that we appeal to a wide range of travelers, not limited to just young or old, budget or luxury. We cater to everyone from budget-conscious travelers to those seeking luxury, including both young people and retirees. Our presence spans the U.S. and Europe, as well as every continent around the globe. We are present in both urban and non-urban areas. The versatility of our model and the diverse range of options we offer truly bring the world to Airbnb. I anticipate that all demographics will continue to engage with us, making our brand quite distinctive in its ability to adapt. This flexibility is one of the key strengths of our global network.

We now turn to Brian Fitzgerald from Wells Fargo.

A couple of questions on the length of stay. As you continue to see the strong growth in longer stay. Just wondering if you could walk us through some of the take rate dynamics of that. And when you talk about addressing the key pain points of hosts, just wondering if you could share what some of the ongoing points of friction are there and preventing people from hosting on the platform?

Sure. On the take rates, the long-term stays have a moderately lower take rate because the guest needs are a little bit lower. The ADRs or average daily rates are just staying for longer because hosts often offer a discount. Those lower take rates and ADRs are offset by the fact that they’re longer than short-term stays and the costs actually support them. Lower customer support costs and a more nights booked lead to benefits that become a tailwind and we generate similar contribution margins from a long-term stay booking relative to short-term stay bookings. The dynamic is a little bit different on the top, but the bottom line contribution is more similar.

And as far as addressing the obstacles, Brian, what we’ve seen is we’ve listened to thousands of hosts, and we took a very systematic approach to the journey from people learning about Airbnb hosting to listing to going through the entire process. The first thing we want to make sure is people know the benefits of hosting. Most people don’t realize the economic opportunity hosting provides. They don’t realize that you can host in 10 easy steps. They don’t realize that the vast majority of people get their first booking within three days. We want to make sure that if they have any problems they can get help they need, so we’re going to continue to expand the Ask a Superhost program. We have some ideas to reduce the effort to hosting even further, and we want to continue to provide more protection, like AirCover, to get even more people peace of mind. The thing about Airbnb hosting that’s unique compared to other marketplaces is almost any type of person can be a host. Most of the people listening to this call could be a host. You could be renting your second home. People rent their primary home. People can rent their homes when they’re gone. There’s something about hosting that can apply to people of all walks of life. That’s what we’re going to be focused on.

We now turn to Doug Anmuth from JP Morgan.

I was just hoping you could talk a little bit more about ADRs and just what you’re seeing so far for bookings in ‘22? And just curious, your view of the degree of decline for this year has changed at all. Then, Dave, just on capital allocation, just curious if there’s any changes or anything different to call out now just given obviously, a lot more discipline in the business and a very different degree of profitability versus a couple of years ago. Thanks.

Yes. Obviously, Dave, why don’t you take both of these, ADR in 2022 and capital allocation.

Sure. Yes. Like I said earlier in the call, the average daily rate early in 2021 was almost exclusively driven by mix, country mix, urban versus non-urban and whole homes or whole home non-urban, Europe and the U.S., just has a higher daily rate. Towards the back half of the year, both in Q3 and Q4, we saw some price appreciation in high-demand markets and peak periods. What we’ve seen kind of coming in, we expect that as urban comes back, and we are continuing to see urban accelerate every quarter and some of our lower ADR markets start coming back; we have seen places like Latin America now well above 2019 rates. We would see some moderation in ADRs. What we’re seeing early in 2022, included in this letter, is we anticipate about a 4% increase still year-over-year in ADR. We’re still seeing strong ADR rates and anticipate that will be the case here early in the year. What’s tougher to forecast is the rate of return of those lower ADR segments and then how much of the price appreciation kind of steps. We would anticipate some moderation of ADRs through the back half of the year. We just don’t know exactly how much. On the capital allocation, I do tell you that I sleep better at night now that we have $8 billion of cash in the bank relative to the position we were in prior to COVID or in the midst of COVID. It enables us to have the flexibility to continue to invest in growth because that’s what we’re focused on. We can continue to use some of that cash in case we wanted to use it for any acquisitions, although acquisition is not our primary growth driver. One change we did announce in the letter of this quarter is that we are planning to pay for our RSU tax obligations for employees with cash rather than selling to cover. We will be net settling those shares, and that will be a use of about a little more than $1 billion of cash during the year. I’m very proud about our investments.

We now turn to Lloyd Walmsley from UBS.

Thanks. I had a couple. First, just on the host supply, it sounds like you’re seeing good traffic gains in regions where you’re advertising, but the aggregate listings number is only up something like 7% from the last disclosure, despite a pretty good environment. Just wondering what gives you the confidence that you can continue to grow supply to meet demand on kind of a multiyear basis? And do you have visibility into the backlog of hosts just going through that process that gives you that confidence it can accelerate? Then, a second one on kind of ADRs. The shareholder letter mentioned having over 25% more nights booked for the summer than this time in 2019. Can you talk about what that looks like on a gross bookings basis? As we think about ADRs, if you put aside the geographical format mix shift, where do you think like-for-like pricing is moving up for this year as it seems like some folks are pushing price?

Yes. Thanks very much, Lloyd. So, Dave, I think you can take both of them, and I’m happy to round up the answers. The first one is obviously on host supply, how we’re feeling about the environment on a multiyear basis and the backlog of hosts. The second, obviously, summer demand, what that means for GBV ADR.

Sure. As we mentioned earlier, the key is that on the supply side, remember that we have 4 million hosts. The vast majority of those are individual hosts, 90% of those are individual hosts. What we found during the pandemic is people don’t get rid of their own or their second home just because there’s a global pandemic and they’re not hosting. When people are ready to travel, they’re ready to travel again. We’ve been quite proud of the fact we’re pleased that our actual supply has remained as stable as it has throughout this pandemic. That’s what you’re seeing in regions outside of where we’re seeing a lot of rebounds, U.S. and Europe, while there could be softness or not as much growth there. That growth would be there when the demand comes back. That’s why we’re highlighting the growth we saw in the high-demand areas. We did grow 20% in the U.S. non-urban, because that’s where we’re seeing a greater amount of demand. Airbnb is amazing at self-healing dynamics with the approach to how we add supply to our environment. We think as the market comes back, we’ll continue to do it. And then go ahead, Brian.

And again, maybe I’ll just, Lloyd, round out a little bit of this answer. I wanted to underline this. We designed Airbnb in the very beginning so that guests attract hosts and hosts attract guests. This is 14 years later, more than 1 billion guest arrivals later. It’s working obviously pretty well. A couple of reasons: guests become hosts. As we get more hosts, a percentage of them, as we get more guests, a percentage of them become hosts. We want to continue to focus on converting as many guests to hosts as possible. This is a really interesting flywheel. Number two, the way we grow primarily is word of mouth. As regular people get more bookings, they tend to tell other regular people about it. If a hotel gets a lot of bookings, they’re not going to tell the next hotel who’s a competitor. Most regular people don’t think of themselves that way, so word of mouth starts to spread. The other thing is, once again, I want to underline the Holy Grail of supply is also being able to point demand where you have supply. We are not even close to supply constraints on any night of the year if you take a global average of every city, all 100,000 cities around the world. We want to do as people are more flexible, and we are moving top of the funnel, continue to point demand where you have supply, and all of that is in addition to our very specific efforts to continue to recruit hosts, which we’re focused on. So, I think Dave nailed it. It’s all about the global network. And Dave, why don’t you take the second question about summer demand?

Yes, summer demand and ADRs. I mean, what we’re seeing is strong demand for travel. People are ready to travel this summer. We have 25% more nights booked for the summer travel season than we did in 2019. They’re ready to get out and do that travel. We are seeing that ADRs are higher. As I mentioned earlier in the call, both in Q3 and Q4, a portion of that was mix and about an equal portion was due to price appreciation. That has stayed relatively stable. In other words, we didn’t see price appreciation go up higher as a driver in Q4; it was fairly stable. That’s kind of what we have currently forecasted for what we’ve shared in our guide here in Q1.

We now turn to Andrew Boone from JMP Securities.

Two please. First, can you just talk about your progress with hotels on the platform? Brian, I think you mentioned that briefly earlier. Then, secondly, going back to marketing, do we start to think about brand marketing as being more connected to the supply side of the equation, meaning that there’s going to be continued pressure as you guys grow the network more broadly, but rather than focus on the demand side, focusing more on the listing side and thinking about that as it is connected to marketing?

Thanks, Andrew. Why don’t we do this? Why don’t I, Dave, take marketing? I’ll start there because I wanted to just recap how we’re thinking about marketing over the coming years. Then you can take our progress with hotels and the platform. Let me just back up and talk about marketing, Andrew. We have a pretty different marketing approach than our competitors because we take a full funnel approach to marketing. It combines PR with brand marketing and performance marketing, and PR is actually probably the most important channel to build the brand of Airbnb. Because of that, people are deeply passionate about it, and they tell one another; Airbnb has become a noun and a verb used all over the world. We got more than 0.5 million articles on Airbnb just last year alone. It’s been a very important part of our marketing strategy. This explains why nearly 90% of our traffic remains direct or on pace. We take brand marketing as an investment in educating the world about Airbnb. It’s not really about buying customers but educating people on what makes Airbnb special. We think of performance marketing as a laser-in on balancing supply and demand. Regarding brand marketing going forward, it’s a great question. We think the area that needs a little more investment is the brand of hosting. The brand of Airbnb is a noun and verb used all over the world. Very few people who travel regularly and book travel on the internet don’t know about Airbnb. But we don’t think enough people know about the incredible economic benefits of hosting and the incredible way it can enrich lives. The other area we will invest in is the big innovations that we will be launching this year. We will put some of our brand marketing dollars behind our exciting new product innovations. Again, we think of marketing as education, educating the world about hosting and educating the world about our innovations this year. With that, why don’t I hand it over to Dave? Maybe the only other thing I’d say about hotels is, again, the core of our community are individual hosts. The great thing about our platform is that property managers and hotels are great ways to fill the network gap. We think most people come to Airbnb to book something unique, a one-of-a-kind stay from an everyday host. We always want to make sure we never have any network gaps; we never want somebody to come to Airbnb and leave having not found a place to stay. Hotels and property managers continue to be a very important part of our strategy. The more demand we give them, the more they will continue to come on our platform.

We noticed that in 2020 and 2021 we did scale back our investment in those areas. It’s key to have hotels fill the network gaps. As cities start to return, and urban comes back, that’s when we will need to fill those network gaps with hotels. What we’ve seen in Q4 is that the nights remain depressed here over two years, and they’re slightly down quarter-over-quarter due to Omicron. Our revenues are a little bit stronger relative to that due to higher ADRs, which we’re seeing in hotels, similar to what we’re seeing in other parts of the business. We’ll invest in hotels over the long term. It’s just not our immediate focus.

We now turn to Mark Mahaney from Evercore ISI.

Okay. Thanks. I just wanted to clarify something on marketing. It does sound like you’ve run a few campaigns towards hosts and towards I think you called them shaggy strangers that you were pretty happy about. Do you want to lean more into marketing you talked about expenses leveraging or not leveraging in ‘22? Should we expect sales and marketing to show some deleverage as you kind of lean more into those marketing plans? Could you also talk a little bit more about ADRs and I forget what the impact of the longer-term stays, what impact that’s had on ADR? Forget about the urban, forget about the pricing, just that impact itself of longer-term stays. Is that accretive or dilutive to ADRs? What kind of impact does that have? Thank you.

All right. Thanks very much, Mark, for both questions. Dave, I’ll hand it over to you.

On the marketing campaign, as I said earlier, we anticipate our marketing expense as a percentage of revenue in 2022 to be relatively consistent with that in 2021. So I’m not anticipating further deleverage and also not anticipating a lot of incremental leverage. As we’re growing this year, we will be expanding the investment to more countries. As you noted, our brand marketing is in support of hosts. One of the powers to remember about our marketing is that we can speak to both sides of the marketplace. Anytime we market Airbnb, we can actually talk to both guests and hosts. As Brian mentioned earlier, one of our single largest sources of new hosts are our formal guests. On the ADR, long-term stays are dilutive on the ADR as a percentage goes up. It’s offset by some other factors we talked about on the call today, both mix shift and price appreciation continue to buoy the ADR rates overall.

We’ve come to the end of our Q&A. I will now hand back to Brian Chesky for his closing remarks.

All right. Well, thanks for joining us today, everyone. Just to summarize what we shared today. 2021 was a record year for Airbnb. We hit new highs of gross booking value, revenue, net income, and adjusted EBITDA. We made more than 150 upgrades and innovations across every aspect of our service. But we’re not stopping there. In 2022 and beyond, the world will continue to change as millions of people choose to live anywhere. Airbnb will relentlessly innovate to support this new world. We’ve now been a public company for more than a year. I want to end today by thanking our employees who worked tirelessly to make all of this innovation possible. To our millions of guests and hosts around the world, I want to thank you for trusting us in helping build Airbnb into what it is today. Thank you all. I’m going to speak to you again soon from a number Airbnb somewhere around the world. See you.

This concludes today’s call. We thank you for joining. You may now disconnect your lines.