Earnings Call Transcript - ABNB Q2 2025

Operator, Operator

Good afternoon, and thank you for joining Airbnb's earnings conference call for the second quarter of 2025. 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 will now hand the call over to Angela Yang, Director of Investor Relations. Please go ahead.

Angela Yang, Director of Investor Relations

Good afternoon, and welcome to Airbnb's Second Quarter of 2025 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, Ellie Mertz. Earlier today, we issued a shareholder letter with our financial results and commentary for our second quarter of 2025. 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 will be making forward-looking statements on the 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 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.

Brian Chesky, CEO

All right. Thanks, Angela, and good afternoon, everyone. Thanks for joining. Airbnb had a strong Q2. We exceeded expectations across key metrics, including bookings, revenue, and margin. And while the quarter started with some global economic uncertainty, travel demand picked up, and nights booked in Airbnb accelerated from April to July. We also made meaningful progress across our three strategic priorities. First, we continue to perfect our core service. In Q2, we made improvements to checkout, messaging, merchandising, and more flexible payment options, all of which helped us increase revenue. We also expanded our new AI customer service agent in the U.S., reducing the percentage of hosting guests who need to contact a human agent by 15%. Second, we accelerated growth in global markets. Nights booked on an origin basis in our expansion markets have now grown at twice the rate of our core markets for six consecutive quarters. And what this shows is that we're achieving product market fit, increasing brand awareness, and driving traffic in key countries outside the United States. So take Japan, for example. Late last year, we launched a brand campaign to raise awareness among Japanese travelers who might want to take a trip within Japan. And the early results are really encouraging. In Q2, Japanese travelers booked more nights on Airbnb than they did in Q1, driven by more domestic travel and a 15% year-over-year increase in first-time bookers. We also announced several major partnerships to help accelerate growth in key markets, including a three-year partnership with the Tour de France, a global live music partnership with Lollapalooza, and our continued partnership with the IOC for the upcoming Winter Olympics in Milan. And we just announced a three-year partnership with FIFA and the World Cup, which is the largest event in the world. Large events have been a part of Airbnb's story from the very beginning. They help us build brand awareness and grow supply in key markets. And while many of these partnerships are high-profile, the events themselves are often very local, and that's what makes them so powerful. They highlight our ability to disperse travel beyond popular city centers and help strengthen relationships with local governments and communities. Finally, our third strategic priority is to expand our business beyond stays. And in Q2, we did that in a big way. As part of our 2025 summer release in May, we launched Airbnb services and completely reimagined Airbnb experiences. We also introduced an all-new app, making it easier to book homes, services, and experiences all in one place. Now this was our biggest launch to date, and it generated more than 13,000 press stories and nearly 660 million social media impressions. After the launch, I traveled around the world to amplify the news in key markets. And over the next three weeks, I visited six countries and met with over 600 members of the press, policymakers, Airbnb partners, and Airbnb hosts. And so far, the response to our summer release has been great. Guests say it's easier to discover new offerings on our homepage and find what they're looking for. And when they book a service or experience, the feedback has been incredibly positive. The average guest rating for services and experiences since launch is 4.93 stars out of 5 stars. Now for context, this outperforms the already impressive 4.8 average rating for homes during the same period. And we're also seeing strong interest from potential hosts. Since launch, over 60,000 people have submitted applications to host a service or experience. We are really excited by the momentum. It's still early, but we believe that services and experiences could become sizable businesses for Airbnb. Now with that, I'll turn it over to Ellie for a financial update.

Elinor B. Mertz, CFO

Thanks, Brian, and good afternoon, everyone. I'll start with a review of our Q2 financial results, and then I'll walk through our outlook for Q3. As Brian mentioned, Q2 marked another strong quarter for us. We had 134 million nights and seats booked, up 7% year-over-year. We also saw an acceleration in year-over-year nights and seats booked with growth rates for May and June both outpacing Q1. Looking at the growth rates by region, Latin America grew in the high teens. Asia Pacific grew in the mid-teens, EMEA in the middle single digits, and North America in the low single digits. It is worth highlighting that nights and seats booked is a new metric that now includes the number of nights booked for stays as well as the total number of seats booked for both services and experiences. Now turning to our Q2 financials. Revenue for the quarter was $3.1 billion, up 13% year-over-year. In terms of profitability, we generated $1 billion of adjusted EBITDA, representing a 34% margin, up from 32.5% last year. And finally, net income of $642 million and EPS of $1.03 grew 16% and 20%, respectively. Next, I'll turn to our balance sheet and cash flow. We continue to generate significant cash in Q2, delivering $1 billion of free cash flow. Over the past 12 months, we've generated $4.3 billion, representing a free cash flow margin of 37%. At the end of Q2, we had $11.4 billion of corporate cash and investments as well as $11.1 billion of funds held on behalf of guests. Our strong balance sheet allowed us to repurchase $1 billion of our common stock during the quarter, and we ended Q2 with $1.5 billion remaining on our repurchase authorization. And today, we're announcing a new share repurchase program with authorization to purchase up to an additional $6 billion of our Class A common stock. Now since introducing our share repurchase program in 2022, we've reduced our fully diluted share count by 8%. Now let me shift to our Q3 and full year 2025 outlook. As we look to Q3, we're encouraged by current demand trends, specifically the acceleration of nights booked from April through July. We've seen this momentum globally with especially strong growth in the U.S. That said, we do expect year-over-year comparisons to get tougher towards the end of the quarter and that this dynamic will continue into Q4, putting pressure on growth rates later in the year. Specifically for Q3, we expect to generate $4.02 billion to $4.1 billion, representing year-over-year growth of 8% to 10%. This includes minimal impact from foreign exchange after factoring in our hedges. We expect nights and seats booked to grow at a similar rate to Q2 2025 and for ADR to increase modestly year-over-year, primarily driven by foreign exchange. On profitability, we expect adjusted EBITDA in Q3 to exceed $2 billion, and we anticipate that the adjusted EBITDA margin will be lower than in Q3 2024, primarily due to investments in new growth and policy initiatives. And we expect a similar year-over-year decline of adjusted EBITDA margin in Q4 '25 due to growth investments and a tougher year-over-year top line comparison. For the full year, we continue to expect an adjusted EBITDA margin of at least 34.5%. This includes approximately $200 million of investment towards new businesses in 2025. While we don't expect meaningful revenue from our new businesses in the near term, we believe the opportunity is significant and are building with a multi-year view. To wrap up, our Q2 results reflect strong execution across our strategic priorities, perfecting the core, accelerating growth in global markets, and expanding beyond the core. We are acting with urgency and focus to drive growth of our core business and to scale services and experiences. And with our strong financial position, we are well equipped to invest in the future in order to create long-term value for our investors. With that, I will open it up to Q&A.

Operator, Operator

Our first question will come from Mark Mahaney with Evercore ISI.

Mark Stephen F. Mahaney, Analyst

I would like to ask about Airbnb Experiences. Brian, what insights do you have so far? What do you consider a successful attach rate? Are there benchmarks from other companies or industries regarding the attach rate to a core offering that you believe Airbnb should aim for? It seems like a natural cross-sell or add-on, but what is the ultimate goal? How long do you think it will take to reach that goal?

Brian Chesky, CEO

Mark, maybe I'll just zoom out and just talk about experiences and what we've seen so far. We're very, very impressed and satisfied, first of all, with the awareness of Airbnb experiences. The biggest problem we've had historically, even with attach rates, is that people didn't know we even had Airbnb experiences. The launch generated over 13,000 articles and 660 million social media impressions. We've also seen increased visibility of our product through our newly redesigned homepage. Guests really love Airbnb experiences. We talked about, obviously, that they're significantly rated more highly than homes on Airbnb. There's a few things. I mean, attach rate, we're absolutely looking at. We don't have any numbers to share as far as what we see for potential attach rate. But we think that attach rate could be significantly higher for the completely reimagined Airbnb experiences than the prior iteration of the product. And the way we're going to do that is, number one, we need to make sure that we have resident supply, supply that people really, really like. So we're making sure that we have great listings. This includes Airbnb originals that are the very best experiences on Airbnb. The next thing we want to do is make sure we have significantly greater entry points for the product. So we've really integrated experiences into the core flow. And the third thing is we're raising awareness of Airbnb experiences, and we think this not only sells experiences but also sells more bookings. A couple of other things I’ll just share about Airbnb experiences. We've had a huge amount of people wanting to list experiences on Airbnb submit applications. And the other thing I'll just point out is that Airbnb Originals, 40% of bookings for Airbnb Originals are from locals or people in the kind of local area where the booking occurs. So what we're seeing with Airbnb experiences is even though they're designed for travelers, we also do expect to start to see more local demand. So I think what we're going to see is over the next year, you're going to see us really focusing on honing in on the attach rate in key cities. Right now, like one of the cities we're really focused on is Paris. It's a really popular corridor for the United States. And we're really trying to see what we can do on attach rate in Paris and a few other cities like that. Once we get that attach rate up, that will give us a better indication of what's possible globally, but I'm very, very bullish. I think a large percentage of travelers on Airbnb would love to use Airbnb experiences.

Operator, Operator

Our next question comes from the line of Richard Clarke with Bernstein.

Richard J. Clarke, Analyst

Just want to unpick maybe a little bit of the guidance. What is the size of the headwind you're expecting in Q3, maybe from the events, the Paris Olympics? And you talked about that maybe continuing to Q4. So should we expect Q4 to be slower than Q3? And maybe in addition to that, you've called out three of your growth markets are now alive and kicking, sort of Brazil, Japan, and Germany. Any thoughts on what you think the sort of right midterm growth rate is now for Airbnb, given this sort of success in these newer geographies?

Elinor B. Mertz, CFO

Sure, Richard. Let me talk a little bit about the trends for both Q3 and Q4, and then we can turn to Global Markets. Just to remind you, the comps that we're referring to from last year, you'll probably recall that at this time last year, we and others were seeing quite depressed bookings in July. And so right now, we're kind of comping a softer period from 2024. But over the course of Q3 last year, we saw a nice acceleration and exited Q3 at a much stronger rate than we entered. And so that's the pattern that we are comping directly right now. It was a couple of point acceleration over the course of the quarter. What I'll also call your attention to is the acceleration that we saw beyond Q3 through the end of Q4. So for our business last year, in Q3, we grew approximately 8% in terms of nights booked. That accelerated over 4 points to over 12% in Q4. And so that's the acceleration that we're referring to in terms of the hard year-over-year comp. So when we look at kind of the history of our data and seasonality on the platform, what we're seeing right now is that 2023 is a bit more of a normalized comp for '25. And so when we look at that year-over-two-year comp specifically to '23, what it implies is that the hard comp that we will face on a year-over-year basis in Q4 could result in a bit of deceleration from Q3 to Q4 on a year-over-year basis, and we just wanted to highlight that heading into the back half of the year. Your second question was around expansion markets. Obviously, we called out the real success we're having in Brazil, in Japan, in Germany. Other places that I would call out that we didn't note in the letter, India is doing quite well. The rest of Latin America is also doing quite well. What we've called out for some time with regard to the expansion market strategy is that the composition of our business historically has been so concentrated in the core markets that it will take a period of aggregated business mix shift for the elevated level of growth in the expansion markets to be a meaningful contributor to the overall consolidated totals. I think the good news is that the success that we have had in these expansion markets has already started to move the needle in terms of diversifying our global business away from North America. I would say if you look on a year-over-year basis, the acceleration or the strength of growth that we've seen in Latin America has allowed Latin America to take about 200 basis points of business share within Airbnb from North America and therefore, contribute more meaningfully to growth.

Operator, Operator

Our next question will come from the line of Eric Sheridan with Goldman Sachs.

Eric James Sheridan, Analyst

I'm curious about from a marketing perspective, as you continue to sort of reposition or position Airbnb as a brand globally and move into these areas, such as services and experience as a new growth market. What are some of the key learnings about the intensity of marketing spend that's needed to put these dynamics into the market and grow and scale them? And how might sort of the channels of those marketing investments continue to evolve when you think about looking out just beyond 2025 and more of a medium- to longer-term view about how you bring the platform closer to consumers?

Brian Chesky, CEO

Yes, Eric, I can begin. We believe that moving forward, the most effective way to promote our services and experiences is to market the complete Airbnb offering. Immediately after our launch, we introduced ads specific to Airbnb experiences. However, this fall, we plan to launch ads that promote both home services and experiences as a bundled offering. We consider this a crucial principle that only Airbnb can provide all of this through one app. We don’t think the need for increased marketing intensity is necessary because we believe we get much more value by marketing all our offerings together. It makes logical sense, as these are interconnected services. If you book a home, you are likely to be interested in a service or experience, allowing us to market all three effectively. Regarding channels, this is our strategy. We observe that the channels for services, experiences, and homes are shifting more towards social media. This change is evident as more travel searches are moving from desktop to mobile and from Google to social platforms. People are spending more time on social media, which is increasingly replacing Google as the top destination for travel searches. Travel is becoming more about inspiration rather than a direct search for specific destinations. We believe Airbnb is well-positioned for social media, appealing significantly to young American travelers who are central to the social media audience. You'll notice an increase in social media native advertising from us. We are reallocating much of our advertising budget from television to social media. The advantage of social media is our ability to target specific audiences. We have extensive knowledge about our customers and can link ads directly to inventory, guiding them straight to the app. Therefore, we anticipate this approach to be highly effective. This is the direction we will take in our marketing efforts.

Elinor B. Mertz, CFO

And Brian, if I could just add one comment to that. In terms of overall marketing intensity, the $200 million that we have highlighted in terms of investments behind experiences and services for 2025, it is not an increase in programmatic marketing. Our overall programmatic marketing for the year is relatively stable from a percent of revenue basis. Instead, the increase in sales and marketing that you see associated with services and experiences is focused, in particular, on our field operations, our go-to-market activities, and supply acquisition. It is not spending more to effectively advertise multiple brands. Instead, to Brian's point, we are spending behind a single brand.

Operator, Operator

Our next question comes from the line of John Colantuoni with Jefferies.

John Robert Colantuoni, Analyst

I wanted to ask one about experiences. I'm curious to get your perspective on the approach you're taking to building inventory and experiences. There's a lot of variability in the quality across the experiences industry. So I'm curious how you're approaching balancing building supply that's consistent with the differentiation of Airbnb's accommodations offering versus building more commoditized supply that's maybe easier to build, scale around.

Brian Chesky, CEO

Yes, John, we are focusing on managing the quality of experiences even more than the quality of homes. We ensure that every single experience on Airbnb is vetted before it is listed on the platform, which is not the case for every home. As a result, the average home receives a rating of 4.8, while the average experience has a rating greater than 4.93, indicating that this strategy is effective. Regarding scalability, we believe we can implement this efficiently by collaborating with various third-party vendors and establishing a robust operation for vetting. Our process includes verifying profiles to ensure everyone has a verified identity and checking credentials through multiple third-party sites. We also confirm that they hold the necessary certifications and licenses, which is crucial considering the emerging nature of these industries. We are confident that this vetting approach will enhance market effectiveness, as quality is essential for customer satisfaction and fostering trust in trying new offerings on Airbnb.

Operator, Operator

Our next question comes from the line of Jed Kelly with Oppenheimer.

Jed Kelly, Analyst

Just on overall company strategy, how do you think about potentially implementing a strategy or acquiring a company that could potentially reaccelerate your revenue or accelerate your nights versus building organically?

Brian Chesky, CEO

Jed, we're always open to buying companies. We purchased a few companies in the past. Our hotel tonight has been a successful application that we acquired a number of years ago before the pandemic. We've historically primarily focused on building organically, but we absolutely are open to acquisitions, and we are going to be looking at it. And I think that we are now in a better place to consider acquisitions now that we've rebuilt our tech platform from the ground up, and we have this new expanded strategy where we're focused not just on all aspects of traveling, but also living. So I think there's absolutely acquisitions on the table that we could be looking at. We always want to make sure that if we do an acquisition, it is one of the most perishable opportunities that the integration costs don't outweigh the benefit of the revenue that we get. But we are absolutely opportunistic when it comes to acquisitions. I think we're more prepared to do them now than before.

Operator, Operator

The next question comes from the line of Colin Sebastian with Baird.

Colin Alan Sebastian, Analyst

Brian, you touched on this a little bit, but curious if you have any more color on the impact or observations on the way homes or nights are booked from the app following the redesign. And just one point of clarification from the release, it sounds like booking lead times are now back to a normal level versus what you were seeing earlier in the quarter, if you can just confirm that.

Brian Chesky, CEO

Colin, what we're seeing with homes is some pretty exciting patterns. We're seeing a giant uptick in the number of people that are booking a home from the homepage on Airbnb. So this has been a major behavioral change from basically the last 17 years of Airbnb's history. So if you go to most apps, especially OTAs, you open the app and every single person essentially goes to the search box. They type in something in the search box and they enter dates and then they get a bunch of search results. And this is how everyone searches for travel over the last 20, 25 years. The holy grail is to get more and more people to be in browse and discovery mode, almost like on Netflix or say DoorDash. DoorDash was very search-driven. They're now more of a browse and discovery application. And it's been a really hard nut to crack within travel, but we think we've done it because what we've seen is that increasingly more and more guests are engaging not just the service experience from a homepage, but with homes. Now this is very strategic. Why is this strategic for us? The reason why is if people can engage with our homepage rather than typing in a destination, then we can divert travel more broadly to where we have available supply, thereby increasing the conversion rate of our traffic, if this makes sense. So the more intent-based our traffic is, people have a very specific destination, very specific dates. And if they're only going based on high intent, you're going to lose people that are either lower intent or people where you might have a home, but it's a little bit outside their search radius or a little bit outside their date that they're looking for. So this is one of the things that we've seen. We've also seen a lot more people engage with the new Trips tab. Our Trips tab is essentially our itinerary. And we're seeing a lot more engagement on the itinerary. And this itinerary is really important because this is the application that you use when you're on your trip. This is critical because if we can get people to use the application on Trip and we can get co-travelers to use it on Trip, then what we're really saying is we have this point of sale during the trip to cross-sell other things. So for example, one of the things we've seen with experiences and services is a lot of people like to book service experiences last minute, including people often like to book service experiences when they're on a trip. And so if we can get more people to open our app during a trip and go to the homepage and browse and discover, then this goes to one of the kind of questions I asked earlier about how we cross-sell for Mark and get more people to book services experiences. So there have been many other things that I could call out about the launch, but that would be the key thing. People are engaged in their app while on trip, and they're engaged with their homepage. This is really, really critical to booking more homes, but also to cross-selling services experiences. And I just want to wrap by saying these are two things I don't think OTAs have cracked. I don't think OTAs have cracked how to get anyone to scroll on their homepage. I don't think OTAs have cracked how to get people to use their app during the trip. So I think that these are distinctly things that Airbnb has started to open the door for.

Elinor B. Mertz, CFO

Colin, just your second question was about lead times? The question having normalized compared to earlier in Q2? The answer is yes. As you'll recall, back in April, lead times were heavily compressed; they were down about 7% year-over-year. Over the course of the quarter as booking confidence rose, bookings accelerated, we saw lead times normalize, and then heading into Q3, they've actually lengthened a little bit compared to last year, which is a great sign in terms of booking confidence in overall guest demand.

Operator, Operator

Our next question will come from the line of Justin Post with BofA.

Justin Post, Analyst

Great. A couple of questions. Brian, I'm sure you would say there's still a lot of room to grow in the U.S. So maybe help us understand why the growth rate is in the single digits, how supply is growing, and how you might be able to accelerate that. And then on events and experiences, any thoughts on what you're hoping for or targeting for long-term attach rates on a per-trip basis?

Brian Chesky, CEO

Yes, Ellie, do you want to take this?

Elinor B. Mertz, CFO

Brian, take the acceleration. Yes. So when we think about the U.S., it is our largest market, but it actually has, we believe, a huge amount of room to grow. In particular, when we look at the U.S., it remains a heavily hotel-dominated market. So when we referenced that one in ten nights that are stayed outside the home are in an Airbnb, that is actually directionally true for the U.S. and is actually a lower percentage penetration in terms of short-term rentals than we see in other markets. So I think structurally, the U.S. has a huge area to grow. How are we going to drive incremental growth in the U.S. is really consistent with the strategies that we've laid out, in particular, around perfecting the core. We know that there are some user gaps in terms of converting more hotel users to Airbnb guests, and those are the gaps that we're working to close. I think one is obviously pricing affordability. We've made some, I would say, great progress there in terms of total price display, better pricing tips, but there's, I would say, a lot more work to do to make sure that we are always the greatest value and are attracting a wide variety of U.S. demographics. Second, another strategy that we've talked about for some time that we are seeing good results from is targeting specific demographics that we are underpenetrated in. The two that we've called out and have made progress against are one, the U.S. Hispanic population; and second, what we call the Heartland states, states in the middle of the country where we have historically had lower levels of penetration. And then I would say, more broadly, there are a series of things coming in terms of increasing usability and exploring more diversity of payment options that we think will be also incrementally accretive to the U.S.

Brian Chesky, CEO

Yes. I'd like to elaborate a bit. We believe we are merely beginning to tap into the potential of home sharing on Airbnb. This is evident when we consider both supply and demand. On the supply side, we currently have around 10 million homes listed, but we believe there is potential for tens of millions more. When we ask people why they haven't listed their homes on Airbnb, the two most common responses are that it seems too labor-intensive or that they are hesitant to host strangers. To address the work concern, our co-hosting feature has been quite effective. Co-hosting is a marketplace that pairs experienced hosts with homeowners who want to share their space but may not have the time to manage it themselves. We currently have 100,000 co-hosted listings, which have collectively seen 10 million nights booked. We believe this could facilitate the addition of millions more homes to our platform, and we are ready to expand this initiative in the future, unlocking additional supply. As for the hesitation regarding hosting guests, we offer a $3 million guarantee called AirCover that safeguards against theft and property damage. We are also making significant investments in trust and safety, having verified over 200 million identities on Airbnb—more than almost any other online platform. This commitment will enhance guest transparency. Unlike many other platforms, which may feature guests without identity verification, our users have comprehensive profiles offering greater insight. If we prioritize increasing the number of homes in our key markets where we face supply limitations, while also focusing on quality, reliability, and affordability, we believe we will see substantial growth in our core business in the U.S. Regarding overall growth, we aim to accelerate Airbnb’s expansion. We are not content with a growth rate of about 10% year-over-year; we want to see reaccelerated growth. Our strategic goals include refining our core offerings, broadening global market presence, and launching new products and services. Though these initiatives start from a small base, we expect them to scale and yield returns at different intervals. We see growth potential across various areas, including services, experiences, and hotels listed on Airbnb. We are witnessing significant success in Brazil, and similarly, we have begun making strides in Japan since late November and December, leading to notable growth there as well. I believe many of these segments will contribute to our growth synchronously, which reinforces my confidence that we can reaccelerate. I also don't think we've come close to saturating any home sharing market. There remain numerous unlisted homes that could be added if we make hosting simpler and more secure. Currently, approximately one in ten people use Airbnb; if that number were to rise to two in ten, it would effectively double our business.

Operator, Operator

Our next question comes from the line of Doug Anmuth with JPMorgan.

Douglas Till Anmuth, Analyst

Brian, I have two. There's been a lot of discussion on experiences. I was just hoping you could talk a little bit about the launch of services and just where you're most focused there across supply and building demand or just overall product. And then you talked about the opportunities in partnerships around major events. How do these help in terms of incremental bookings, but then also on brand and product awareness?

Brian Chesky, CEO

Yes, services were introduced before experiences since experiences were already established. We launched experiences in 2016 and completely reimagined them. We have essentially created ten different categories of services, each akin to a distinct business. For instance, photography differs from chefs and masseuses. We rolled out these services globally and are currently focusing on a few key markets. Los Angeles is a primary focus for us, as we believe it's an excellent market for testing these services. Our objective is to expand the catalog of services and enhance the attach rate. One aspect I'm particularly enthusiastic about is that approximately 10% of service bookings come from locals or individuals in the vicinity, which indicates substantial potential for demand among locals seeking these services. Many people would welcome a chef or a masseuse to their homes without traveling. Therefore, we see significant potential here and will closely monitor attach rates and local bookings in key markets. Notably, the satisfaction rates for services are comparable to those for experiences and exceed those for homes, with services scoring around 4.93 compared to 4.8 for homes. We're observing promising growth, but it's still very early for the services segment, which has lagged behind experiences. We anticipate this investment will unfold over a longer period. I believe services present a much larger opportunity than experiences because these ten categories represent just the start, with countless more services conceivable for booking. Imagine an Airbnb with a comprehensive catalog of services available. We aim to ensure these initial ten categories succeed in select markets first.

Operator, Operator

Our next question comes from the line of Trevor Young with Barclays.

Trevor Vincent Young, Analyst

Great. First one on the $200 million investment baked into the full year EBITDA guide. Was there a change in expected spend there? I think last quarter, you said it was $200 million to $250 million for the new 25 business launches. And now you're saying $200 million just for services and experiences. So just wondering, should we interpret that to mean there are no other launches this year? Or is there $50 million earmarked for something maybe to be announced? And then second question, just on the change in definition on nights and seats booked, can you just level set how much of that today is actually like experiences and seats versus stays? Is it 1%? Is it essentially 0? Investors always ask what's kind of the breakout of that mix?

Elinor B. Mertz, CFO

Yes. So let me comment on the $200 million investment. So at the beginning of the year, we gave a range of $200 million to $250 million for our new businesses. We have launched those new businesses; it was the reimagined experiences and services. We're obviously more than halfway through the year. And so we've just refined the estimate in terms of the total investment. There's no change to strategy or an incremental business that is truly focused on experiences and services. We wanted to give you an updated number now that we have more visibility. In terms of nights and seats booked, we have not historically broken out nights booked versus experiences booked; we were not going to do that today. What I can tell you is that the seats booked today are indeed immaterial. The intent, obviously, with the launch and our investments here is to scale those businesses such that they are a material contributor to the total.

Operator, Operator

Our next question comes from the line of Brian Nowak with Morgan Stanley.

Brian Thomas Nowak, Analyst

I wanted to come back to the U.S. room night growth, and also up to a little bit. So I guess if we look at the U.S. growth on room nights, excluding services and experiences, Brian, can you just sort of talk us through the one or two key priorities in your mind to sort of accelerate that growth into '26? And the same question on EMEA. I think you're growing slower than even your more scaled competitor in EMEA at this point. How do you think about sort of the keys to driving faster growth in EMEA as you go into 2026?

Brian Chesky, CEO

All right. So sorry, the question was about the U.S. or core market?

Brian Thomas Nowak, Analyst

That's right. Yes.

Brian Chesky, CEO

Yes. I think that there are really a few pillars. The one that we've seen a lot of traction on is making Airbnb easier to use. We've made hundreds of improvements. We highlighted a bunch of them on the most recent release, and that has led to hundreds of millions of dollars of incremental revenue. So we've made a lot of traction, a lot of progress around making it easier to use. I think pricing and affordability is the next one. We are seeing a huge opportunity around increasing competitiveness of pricing on Airbnb. You might notice that we moved to total price display. That's been very successful. We're now exploring different ways to present pricing, moving towards a host-only fee. We're doing a lot around giving hosts more tools to make their listings more competitive. We announced a new calendar on the May launch that has better price suggestions. We're seeing hosts adopt that. When hosts adopt that, they have more competitiveness, and they earn more money. That's accretive to our business. So I think pricing is going to be a huge opportunity for us. And then I think increasing supply. And the way we're going to increase supply is we're not going to be looking at just the overall top line supply globally. We're focusing on our most supply-constrained markets and really targeting adding supply in those markets. Additionally, people looking for homes, if we don't get that home, we want to be able to have a place for them to stay. So we're also going to be increasing the onboarding of hotels, especially in supply-constrained top markets as well. So I think these are some of the things you're going to see that are going to absolutely be able to help accelerate growth in the United States.

Operator, Operator

Our next question comes from the line of Justin Patterson with KeyBanc.

Justin Tyler Patterson, Analyst

Great. Going back to some of the $200 million investment you were talking about, some of that sounded like people costs for this year. As we head into 2026, how should we think about that cost potentially scaling up? Do you feel like you have the right number of people in place right now to keep doing experiences in services? Or is that something that's going to kind of keep adding to bring on more supply? And then just from the marketing standpoint, I would love to hear about how you're thinking about using performance marketing a bit more perhaps search to augment some of the broader brand campaigns for the overall business?

Elinor B. Mertz, CFO

Yes, Justin, regarding the $200 million, a significant portion is allocated to headcount across both product development and our field operations team, along with investments in vendors to help us curate and onboard new supply. While I won't specify a figure for next year, you can expect that we will continue to invest in 2026 to support scaling these businesses. Some investments from this year will roll into next year as fixed headcount to support these initiatives. As for your second question, Brian, let me know if you have anything to add here. We still utilize performance marketing as a targeted complement, with most of our spending focused on brand. Our marketing channel strategy differs from others since we leverage the strength and uniqueness of our brand, allowing us to allocate a larger share of our marketing budget to brand instead of performance. However, we do continue to apply performance marketing selectively around the globe to achieve good returns on those additional nights. Overall, our marketing intensity remains relatively low compared to competitors, as we've mentioned, with 90% of our traffic coming from direct and unpaid sources, which enables us to spend significantly less on performance marketing than others.

Operator, Operator

Our next question comes from the line of Ron Josey with Citi.

Ronald Victor Josey, Analyst

I wanted to follow back up on the experiences side, Brian, and ask about the merchandising, given Airbnb knows who's traveling, when you're traveling, the age of the people traveling, et cetera. You talked a little bit about the test and learn of experiences in cities like Paris. So help us understand as you see just applications continue to balloon for experiences, how you can scale the learnings in Paris to better merchandise overall? And then just as a follow-up, we've been talking about loyalty programs for some time and how the goal is for Airbnb to launch one that's differentiated, not just a points program. Any updated thoughts on this would be helpful.

Brian Chesky, CEO

Yes, we are doing a lot with testing carousels in the Experiences section. If you look at the app now and go to the Experiences tab, you’ll notice we are merchandising differently with smaller cards and various carousels, which will become increasingly personalized. As we learn more about users, such as their location, home price preferences, and recent views, the goal is to present a dense array of experiences that they might be interested in booking. We are also increasing touchpoints, so the homepage will be more prominent whether you're on the Trip page or post-booking. We’ll introduce more entry points through the Trips tab where we will be merchandising and highlighting options. We're committed to improving how we present the right experiences on Airbnb, and our strategy allows us to quickly apply successful ideas from one city to others globally. We currently have a team in Paris focused on gathering feedback and assessing supply demand. Additionally, we are working on refining our ranking system to ensure that the right users see the right offerings. Regarding loyalty, I believe that a loyalty or membership program is very appealing for Airbnb. One of our strengths is our loyal customer base; most of our traffic is direct due to repeat bookings, which account for a large percentage of our business. However, we face a competitive disadvantage compared to OTAs and hotels that have established loyalty programs. Therefore, there is great potential if we implement our own. If we do launch a program, I envision it being more innovative than traditional points systems. You can expect updates from us down the line, but not in the immediate future.

Operator, Operator

Our next question comes from the line of Stephen Ju with UBS.

Stephen D. Ju, Analyst

So Brian, I wanted to follow up on your commentary on the Trips tab because, I mean, from a design perspective, since it is an itinerary, the optimist in me wants to believe that Airbnb will be and should be taking a greater role in the aggregated door-to-door travel experience. So are we wrong to think that the expanded travel agent opportunity here? I mean, I realize that you just launched experiences, so asking you what's next probably sounds a little bit demanding, but sort of the bigger picture of what the itinerary can evolve into will be interesting. And secondarily, there was commentary in the letter regarding the new payment methods in Brazil. Do you think the experience that you've picked up from doing this initial batch of expansion countries will help you speed up the product development and the cadence of updates for what must surely be the next batch of new markets?

Brian Chesky, CEO

Yes, I believe I can address both points. I'll start with the second one since it’s more tactical. We are significantly accelerating our product development at Airbnb. We typically have biannual releases, but now we are iterating much more rapidly even between these releases. You'll see examples of this, particularly in Brazil, where our "Pay Zero Upfront" program has been extremely successful. We’re also rolling out an updated cancellation policy that we believe will contribute positively to our growth. There's a lot of momentum around various optimizations, and we have a strong flywheel effect. Regarding the Trips tab and itinerary development, this is a chance to discuss our long-term product vision, which is closely tied to our approach to artificial intelligence. While I haven't been asked specifically about AI, it's essential to mention because the future of travel planning relies on it. Many companies focus on the less critical aspects of travel like planning and inspiration, but we are tackling the more challenging issue of customer service. This is crucial because it's high-stakes, requiring quick responses, and we cannot afford errors. When customers need assistance, such as cancelling a reservation, accuracy is vital. To address this, we’ve developed a custom AI model using 13 different models that have been refined through thousands of conversations. We’ve rolled this out in the U.S. in English, and it’s led to a 15% reduction in the need for human agents during customer interactions. This year, we will expand this to more languages and enhance its personalization and functionality. In the future, when customers reach out, the AI agent will know which reservation to cancel and will manage the cancellation process itself, and it will also help them search for and book their next trip. Next year, we plan to integrate AI into travel searches. This relates back to your question about travel planning. In the coming years, I believe Airbnb will evolve into an AI-first application. If you look at the top 50 apps in the App Store, very few are AI-focused. Currently, ChatGPT is the top app, and aside from one or two others, most are not AI-native. I anticipate that within a couple of years, all top 50 apps will be AI applications, whether they’re new entrants or established companies transforming into AI-native ones. At Airbnb, we are in the midst of this transformation, moving from a pre-generative AI platform to an AI-native application, starting with customer service and expanding into travel planning. This is establishing a foundation for our future.

Operator, Operator

Our next question comes from the line of Kevin Kopelman with TD Cowen.

Kevin Campbell Kopelman, Analyst

I wanted to ask if you could share your initial thoughts on the major product launches you're considering for 2026, particularly whether the AI travel search you mentioned is one of those. Additionally, how do you plan to manage company margins next year?

Elinor B. Mertz, CFO

We've had some audio issues. Sorry.

Brian Chesky, CEO

Sorry. Yes, we just got dropped on the call. So I don't think I was able to finish my answer, but should we just go right to the next question?

Elinor B. Mertz, CFO

Sure.

Brian Chesky, CEO

Okay. Sorry. So can you ask the question again? We're really sorry; we both got dropped.

Kevin Campbell Kopelman, Analyst

Yes. No worries. Can you hear me okay?

Elinor B. Mertz, CFO

Now we can.

Kevin Campbell Kopelman, Analyst

Yes. So I wanted to ask and maybe a follow-up to what you were just talking about. But your first thinking on the 1 to 2 major product launches for 2026, key focus areas, is the AI travel search you just mentioned one of those major product launches? And how are you planning to manage overall company margins next year, taking into account the new launches and also the continued investment in experiences and services?

Brian Chesky, CEO

Well, generally, we don't discuss or preview our upcoming launches. However, we will be integrating more AI into the app next year, which we can confirm. We won't be able to preview what will be launched, so I'll let Ellie discuss the second part.

Elinor B. Mertz, CFO

Yes. On margins, I'm not going to guide right now to '26. What you can assume is that we are, one, continuing to invest in our new businesses; and two, continuing to drive efficiencies across the core business. We'll give you color in upcoming quarters in terms of how that nets out with regard to sequential margins.

Kevin Campbell Kopelman, Analyst

Okay. Understood. And maybe just a quick follow-up. When you talked about accelerated development pace, is the new tech stack that you rolled out in May playing a part in that? And are you seeing also benefits to customer conversion rates from what this new tech stack has enabled?

Elinor B. Mertz, CFO

I would say, yes, absolutely, the new tech stack, we are seeing benefits from that. I would say more broadly, the investments we've made across our infrastructure over the last couple of years have really improved the development environment for our team, allowing them to do more and to do more quickly. Obviously, that is increasingly aided by AI as well. And so we hope to see an increased velocity across our product development roadmap in coming quarters.

Operator, Operator

Our next question comes from the line of Ken Gawrelski with Wells Fargo.

Kenneth James Gawrelski, Analyst

If I may add two points. First, Brian, regarding AI, do you foresee a decision needing to be made about whether to allow agent interactions and who will control that relationship, or to maintain a more closed platform? Given that most of your traffic is direct and you have a significant amount of exclusive supply, you likely have the flexibility to choose. I would appreciate your insights on this. Secondly, looking at the broader strategy, you're competing in a $90 billion booking market, and as you expand into experiences and services, it appears challenging to make significant progress. So, why not focus more on accommodations in the hotel sector, especially in your primary five markets where around 70% of your bookings occur?

Brian Chesky, CEO

Yes, I believe we can pursue both accommodations and hotels simultaneously. We are committed to expanding our presence in the hotel sector significantly. After thorough analysis, we find the hotel business highly appealing, and we anticipate substantial opportunities for growth in this area on Airbnb. Our take rate remains very competitive, and we've engaged with hotels worldwide, particularly independent boutiques and bed and breakfasts, which make up a large part of the hotel landscape in Europe. Many of these hotels are eager to attract additional travelers and recognize Airbnb as a valuable booking alternative to reach affluent young American tourists. We consider ourselves one of the leading travel brands in the U.S., making this an attractive proposition. Although homes and accommodations will always be central to Airbnb, we’ve noticed that in our primary markets, especially during peak seasons, finding a home isn't always feasible for travelers. We see hotels as a beneficial addition to our offerings. There is significant growth potential in long-term stays, with a considerable portion of our bookings exceeding 30 days. Furthermore, we believe there is a vast market for service experiences, which could easily develop into a multibillion-dollar segment. The ultimate goal for services is to capture local demand effectively, transforming those offerings into standalone services rather than auxiliary options. Currently, there isn’t a dominant player like Amazon in the service sector, presenting a significant opportunity for us. Therefore, our strategy encompasses building an expansive platform that integrates homes, services, experiences, hotels, and more. We aim to continuously expand this platform and introduce new business ventures. I apologize, could you remind me what the other question was?

Operator, Operator

Yes. I'll turn it back to you, Brian, for closing remarks.

Brian Chesky, CEO

All right. Well, thank you, everyone, very much for joining us today. I'm incredibly proud of the results and the momentum we've built. The launch of services and experiences really marks just the beginning of a new chapter for Airbnb, and what excites me most is that we are just getting started. Thank you, and see you next quarter.