Airbnb's view for Q3 is not very picturesque, but longer-term outlook is still welcoming
1:16 PM ET, 08/13/2021 - Briefing.com
A rising tide in leisure travel activity, combined with Airbnb's (ABNB) favorable alignment with emerging travel trends, produced impressive Q2 results for the home rental pioneer. The company's better-than-expected EPS and revenue numbers immediately stand out, but the true strength of the performance is seen across other key metrics, especially when compared against 2Q19. Perhaps most notably, Gross Booking Value (GBV) was up a healthy 37% on a two-year comparable basis, partly driven by increasing Average Daily Rates (ADR). Hanging over ABNB's strong results is the company's cautious outlook and commentary regarding the global spread of COVID variants.
Specifically, for Q3, ABNB expects Nights and Experiences Booked to decelerate from Q2 and to remain below 3Q19 levels. Furthermore, the company anticipates a moderation in ADR in 2H21, blunting a key catalyst underlying its strengthening results.
ABNB's guidance also had some bright spots. Despite the expected slowdown in Nights and Experiences, the company still projects record Q3 revenue with GBV remaining well above 2019 levels. Consequently, ABNB believes it will deliver its highest quarterly Adjusted EBITDA in its history, demonstrating its growing scale and its enhanced cost structure.
It's understandable that the focal point would land on ABNB's more guarded forecasts as concerns about the Delta variant mount. In the company's shareholder letter, it acknowledges that new variants could affect cancellation rates, and that visibility for Q4 travel demand is limited.
However, ABNB is well-positioned to withstand these strengthening headwinds, especially relative to its competitors in the hotel industry. One metric that stands out from ABNB's Q2 report is that nearly 50% of gross nights booked were from stays of at least seven days. Also, longer-term stays of 28 days or more remained its fastest growing category in terms of trip length. These two data points highlight the premise that people are increasingly combining work with travel, buoyed by the work-from-anywhere (WFA) shift.
Going hand-in-hand with that trend, people are also seeking larger accommodations in uncrowded, rural destinations. ABNB's ability to provide a variety of accommodation options in these more remote areas provides it with a distinct advantage over hotel operators. From a financial perspective, the combination of longer stays and larger accommodations have positive implications, as illustrated by the 41% jump in Q2 ADR to $161.
We believe the benefits of these attributes should be durable, even if travel activity takes a hit. The company's improved cost structure, which helped push Q2 adjusted EBITDA to $217 mln from ($397) in 2Q20, offers another cushion. Cut backs in variable costs, such as marketing expenses, and improved fixed cost management, are keys to the swing to profitability on an adjusted EBITDA basis.
To conclude, ABNB's results not only reflect the improving travel environment in Q2, but they also highlight the company's unique competitive advantages. While it seems like a slowdown in Q3 is inevitable, the big picture is still bullish in our view since ABNB is ideally positioned to capitalize on major behavioral shifts occurring in the travel industry.
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