Great. Well, good afternoon, everybody, and thanks for joining us here for the 2:30 P.M. session. For those who don't know me, I'm Richard Clarke. I'm the analyst that covers the global hotel and leisure sector, and absolutely delighted to be joined by Airbnb's CFO, Ellie Mertz. So thanks for joining us. For anyone who hasn't managed to sit in on one of these sessions by this stage of the conference, just a reminder that any questions you'd like me to include into my questions, please put them in the pigeonhole, and I'll include them, as long as they're not kind of customer feedback on an Airbnb property. I can probably include them into my, into my listings. Some of you probably were there yesterday, but I pitched Airbnb as my, as my best idea, at the Best Idea Day on, on Tuesday. Apologies.
You know, what I said is that this is a company that everyone should love, right? You know, it just put up an 18% revenue growth quarter. Margins are in the mid-30s, converting more than 100% of that EBITDA into free cash flow, and then beginning to talk about, you know, optionality that could grow, you know, faster than that. So why do you think that not everyone does sort of love, maybe, Airbnb, on the investment side? What do you think is maybe misunderstood at this point?
Everyone doesn't love us.
I do.
Okay.
Don't look at me.
Well, first, thanks for having me. I think there's a couple of components about our core business that people probably don't fully appreciate. I think it's, hopefully obvious that we have a very strong brand. You know, we like to say that Airbnb is a noun and a verb. We have extremely high customer awareness. And I think some investors take from that that, you know, everybody who's going to try Airbnb has already done so. And I think what's, you know, interesting in the underlying data that we look at is that, you know, across the world, there is relatively strong brand awareness, but there continues to be a gap around consideration, meaning a lot of people have heard about Airbnb, but they haven't yet tried it, or they've tried us once, but they don't try us for every travel experience that we have.
What this tells us is that there's a huge opportunity, both globally as well as in our core markets, to, you know, continue to explain why Airbnb is actually much better for various types of travel and to convert some of that awareness into incremental consideration and incremental bookings. I think we'll talk about it, you know, throughout this session, but there's various aspects of our roadmap that are specifically focused on bridging that consideration gap, in particular making sure that Airbnb is increasingly reliable, it's increasingly affordable, and that the product is, you know, extremely easy to use. We view each of these as really nice growth levers, in terms of driving the core business.
I think a second component about the business that exists today that investors don't always have an appreciation for is that, you know, for the past decade, Airbnb has indeed been a global brand, meaning we have a presence in over 220 countries and regions across the globe. I think when people hear that, they assume that, you know, we have covered the globe and there's nowhere else to go. Yet when we look at the data internally, what we see is that we have varied levels of penetration across the globe. And in fact, today, our top five core markets, you know, continue to be the vast majority of our business, whereas the level of penetration that we've been able to achieve in those core markets is, in many cases, an order of magnitude higher than it is in the rest of the markets.
That's what, you know, gives us the encouragement to continue to focus on new markets, to really, you know, focus on and deploy our full-funnel global marketing approach and to localize because the opportunity set across, you know, a vast array of markets continues to be quite large.
Fantastic. So maybe just moving on to some more kind of granular points. But the demand environment at the moment, I mean, are we in a normal world? I mean, of all of the sort of as the return back to urban and international travel, or are there still some normalization trends to come? And are those would you see those as being positive or negative for Airbnb?
I mean, I think the question of are we in a normal world is a, is a big one. I think I'll, I'll try to tackle it just from the travel perspective.
Yeah.
You know, when we look at the last couple of years, I think every year post the beginning of the pandemic, the question was, are we finally back to normal? And I think that, kind of COVID tail was, frankly, much longer than any of us would have anticipated, creating a lot of volatility across, obviously, 2020, but continuing into 2021, 2022, and 2023. And I think what we have seen so far in 2024 is that, you know, I hate to call this now, but I do think 2024 is probably the first normal year in that we're seeing a level of stability on leisure travel that stands, I would say, in quite contrast to the volatility we saw in the preceding three years. So I would say, generally speaking, yes, travel has, quote-unquote, returned to normal.
That being said, I would say for our business I, I won't speak more broadly to travel, but for our business, the new normal is maybe a little bit different than it would have been in the counterfactual. Specifically, what I'm talking about is that I think there's some certain segments on our platform that, you know, frankly, did get a COVID boost that has sustained. So in particular, you know, we've seen that non-urban markets continue to be more popular today than they were in 2019. And I think that's something that's here to stay on our platform. I think the same is true in terms of long-term stays. It's a it's a bigger portion of our business than it was in 2019, and that will continue to be the case.
And then I think when you, when you look around the globe, you know, the recovery from COVID for travel has been, you know, frankly, not consistent around the world. I think for us, what we've seen is that, you know, LATAM probably got a nice boost in terms of the, the COVID recovery relative to the counterfactual, whereas APAC has, has lagged. And, you know, I think while APAC lagging has been a bit of a disappointment over the last couple of years, on the upside, it's a huge opportunity for us in terms of future year growth and, and gaining penetration in that market that remains relatively small for us.
Great. Maybe one of the recent trends we've seen is the increase in group travel. Maybe you can talk to what's driven that. Has it been and do you see that as an incremental opportunity, or are you just seeing people that would have traveled in smaller groups now traveling in larger groups?
Yes. So, something that we shared in our most recent earnings report is that we're actually seeing the strongest growth in larger group size. I think there's, I mean, there's a couple of factors here. I think first and foremost, Airbnb is frankly just really good for group travel. You know, we, as part of our most recent marketing campaigns, have been highlighting the use cases where it's actually better to travel through Airbnb than through a hotel. You know, those cases are, you know, when you're traveling with your small children and, you're stuck. I see some people nodding. Thank you. You know, you're stuck in a single hotel room, and your two-year-old needs to go to bed at 7:00 P.M., and all of a sudden, your new bedtime is 7:00 P.M.
That's a use case where it's better to be in an Airbnb where you have a home, and you can put your child to bed and still stay up like a normal adult. You know, also traveling with a group of adults to get away from children. You know, we go to hotel, and there's other people's children. You've kind of defeated the purpose. There's a whole series of use cases around group travel where we feel like we offer a really differentiated offering, and I think we're seeing it in the numbers with regard to the popularity of using Airbnb for group travel. Another component that I just highlight is we've also most recently made it, you know, easier and, frankly, you know, better to travel as a group on Airbnb. We've recently upgraded all of our group travel features.
In particular, our Wish list. You know, one way that consumers find the perfect listing for them is to create a Wish list of places that they are considering for a specific trip. And what we've recently done is make that an interactive tool where, you know, group members of the traveling trip can collaborate online to choose that perfect listing for them. And they can also now communicate directly with the host, even if you are not the primary booker. You'll see us continuing to lean into that segment of the market because, again, we think it's a, you know, Airbnb does offer differentiated offering for group travel.
I guess beyond that, I guess when you talk about group travel, you're talking about one group going to one property. I mean, is there an opportunity to go to sell multiple properties all at once to very large groups? Could you get into, you know, a wedding booking where you could book 20 properties in one particular town?
Absolutely. We see people do that quite frequently, in terms of choosing a destination market and, you know, funneling all of their guests through our platform. I think there's opportunities for us to better tool that, and to better capture those larger events.
I guess the counterpoint to that is you then particularly if you look at the U.S., where you've talked I think you were flattish in terms of year-on-year growth. The larger groups were growing strongly. The smaller groups must have been negative.
We are growing in the United States. I should dis-.
Sorry.
Disabuse you of that. We are growing in the United States. It continues to be a growth market. Absolutely.
But the smaller groups, I suppose, are beginning to, you know, maybe not down, but not posting strong growth. Do you still see that as a growth opportunity? Is the U.S. still a growth market for the sort of core smaller group market?
I, I would say, generally speaking, the U.S. continues to be a growth market for us. I think a, a couple of factors. First is when we look at the U.S. at large, what we find is that it is one of our largest-scaled markets in terms of overall guest penetration. And yet, we see that the relative penetration by different segments, there's a pretty big divide. One thing that we were focused on last year was looking at state-level penetration. And not shockingly, what you see is that Airbnb has higher levels of guest usage on the coasts and less so across the center of the country. And so we've been focused on targeting our marketing efforts towards those heartland states, and we've seen nice results from those efforts.
We've also recently focused on Spanish-language media and marketing to focus on the Latinx population, as that's another key demo in the U.S. that we know we are underpenetrated in.
This growth in larger groups.
You keep wanting to go back there. Sorry. Yes.
No. I guess one of my points I've been trying to make is that that's resulted in a little bit of a disconnect maybe between the night.
Nights.
Numbers you're reporting and I guess the kind of inflation-adjusted gross booking number. Is this a message you can maybe get across? Is there anything you can do to sort of help with the customer numbers, like the true volume that you're delivering?
Yeah. I mean, I think the question is, is nights booked the best.
Yeah.
Metric for us? I would say, it is certainly, you know, it's a regular disclosure item for us. We know it is extremely helpful in terms of just modeling the overall business. We, we do encourage people to look more directly at revenue, and also gross booking value in the sense that revenue is obviously what pays the bills, and gives you a sense of, of the scale of, of the value we are delivering.
And then in terms of GBV, which partially accounts for the larger group size, the larger listings, etc., I mean, it gives you a better sense of just the dollars flowing through our platform, where, you know, a dollar is a dollar, whereas a night is not necessarily a comparable night depending on what kind of listing or the type of the party size that is seen in that listing.
Makes sense. So maybe shifting onto pricing. I give up on the groups for a moment. But looking to, I guess, two ways of looking at pricing. They're flattish in like-for-like terms, whereas I guess inflation's still positive this year. You know, hotel group pricing's still expected to be positive this year. You talked about affordability. I mean, how far do you need to go? How long does this sort of affordability drive need to run for? And can you eventually sort of start seeing those prices ticking back up again in like-for-like terms?
Yeah. So just a step back. About 18 months ago, we looked across, you know, opportunities and identified pricing as a really important part of the roadmap. And why it was important and why it continues to be important is that overall hospitality prices are obviously materially higher than they were pre-COVID. And, you know, consumers are obviously price-sensitive.
And so, we began reinvesting in some of our pricing tools to ensure that our hosts have the right information such that they can price their listings appropriately and that we could help our hosts who oftentimes, you know, our individual hosts who don't have a sense of the overall market dynamics. We could give them information to make sure that, you know, they knew how they were pricing relative to comparable listings in their neighborhoods and in doing so could adjust price to, you know, drive incremental demands. I would say those efforts have been successful in terms of, you know, our goals of, you know, driving into elasticity and driving incremental demand by lowering prices where it makes sense. At the same time, what you've seen in terms of what we disclose is that prices are not going nominally down, right?
So it's not to say that you give people better pricing tools, and all of a sudden, prices actually start to decline. Instead, what we think is important is how are our prices trending relative to the rest of the industry and in particular relative to any guest alternative that, you know, the guest has in terms of looking to make a booking. And on that comparison, I would say we feel like we feel quite good. In particular, what we've disclosed is that if you look at our inventory that is comparable to a hotel, so in particular urban listings where it's a studio or one-bedroom, what you see is that for that comparable inventory, our pricing has been coming down a couple of points on a year-over-year basis where hotel prices have continued to rise.
And so, you know, it's not a perfect comparison across all of our inventory, but it gives us a sense of, are our prices moving in a direction that delivers more value to the guest and offers more price competitiveness? And on that measure, we feel really good about the tools that we've put in place and their impact on overall pricing.
So now with these tools in place, I mean, can we talk about sort of properly dynamic pricing within the properties? I guess a lot of properties are still the same price pretty much every night of the year. So are you able to sort of take a bit more control of that or provide a bit more dynamic pricing? And I guess most hotel groups would say that's upside to revenue.
Yes. So I think, in terms of long-term opportunities, we have a whole roadmap of improving pricing. I think the things that you've seen from us over the last year are part of a, a much longer roadmap. I think, you know, what is key for us upfront is we have to recognize that the majority of our inventory continues to be individual hosts who are not necessarily looking at the market dynamics to understand, "Is this a peak night? Is this not a peak night?" And part of getting to a point where we could be more prescriptive is making sure they trust the pricing tools that they are using from us.
We see it as a journey as opposed to an overnight, you know, you see us implement something like surge pricing to all of our hosts because, for the vast majority of them, they want to continue to have control over their pricing. And so our opportunity is to provide them the tools and the suggestions, not necessarily take over pricing immediately, which is not what most of them are looking for.
I'm just gonna include an audience question here. What do you see as the ceiling to vacation rental share? You know, could it eventually overtake hotels as the dominant form of lodging, or is there some natural ceiling?
Yes. It doesn't mean so, so I've been at Airbnb for 11 years. And in all of the early years, you know, the number of analyses both we did and investors did to say, "What is the natural ceiling for this market opportunity, for this company, for even at a city level? Where does this cap out?" And I can say over that 11 years, every time, you know, the analysis has been wrong in terms of how big this market could be. So when I put that out there, I think, you know, a recent data point to help, you know, color that in is, Paris has been one of our top markets for years. It is now our top market. And obviously, we've been getting ready for the Olympics there.
And I think a couple of years ago, people looked at our inventory in Paris and said, "You couldn't possibly get larger. You know, it'll be bigger than the, the hotel inventory." And yet, in the lead-up to the Olympics, we've been able to increase supply in that market by 40% year-over-year. There is a, I believe, huge untapped opportunity in terms of people staying in homes and, and living in new places across the world that, you know, we've, we've been able to achieve great scale to this point. But I think the, the journey is, is, is very much in the early games.
Maybe just one more question on pricing we've got to hear. There is continued to be an increase in the various costs of the user, cleaning, service, etc. Is that hurting your value or the relative value proposition? And what are you doing to address that?
Yeah. So cleaning fees, nobody needs to stop me afterwards. I'm highly aware people don't like them. We have been very focused as part of our broader pricing efforts to increase our overall price transparency to the consumer. So, back in December of 2022, we introduced Upfront Pricing, which is a toggle for the consumer to choose how they want to see our prices displayed. Do they wanna see a nightly rate before fees, or do they wanna see, "What's this whole trip going to cost me?" and through that tool, number one, I think we've responded to a lot of negative feedback that people don't wanna be surprised at the end of a checkout flow. That's kind of the first-order impact in terms of giving the consumer what they want.
The second is it's introduced a nice incentive for our hosts to better understand that the guest is not necessarily paying the price that you think you set. They're if you add a cleaning fee, it can be substantially more expensive. And what we recognize is our hosts don't necessarily understand what the guest view looks like. So we've done more in terms of helping the hosts understand. But also through the total price display, we created this nice feedback loop for hosts to say, "Oh, wow. My price is quite high with all the fees in. Maybe I don't need a cleaning fee, or maybe I can reduce it." And we've seen a nice reduction in both the number of listings that have cleaning fees as well as the absolute level of the cleaning fee. So that's something that we're very focused on.
We wanna be both transparent to the user in terms of the overall price, and we wanna be price competitive.
So one of the messages you sort of talked about driving more peer usage is improving the reliability. I can we read in sort of you wanna improve the average quality of the project or product as well? I know you've been throwing some products out of the system. And what's sort of driving that? Are you trying to move your sort of demographics up, or is this more about sort of persuading people to come back again?
Yeah. So, one of the things I said at the start of this chat that people don't understand is that we have this pretty large consideration gap between people who are aware of Airbnb and people that have either tried it or use it regularly. And we understand that one of the reasons for that consideration gap is people aren't always sure what they're going to get, right? They might know you know, they'll have reasonable expectations of what they will get when they come to the Hilton, whether they like it or not. But on Airbnb, often, people, you know, ask the question of, like, "Will it be as I expected to be?
And, you know, what happens if something goes wrong?" And so we know that that reliability is something that, you know, prevents people from either trying us or, or for using us more frequently. And so what we've tried to do and, and this is part of a, a broad roadmap is both increase the, transparency to the user in terms of what they are going to get and also raise the overall quality on the platform. So two things that we've done, in the last six months, back as part of our Winter Release in November, we introduced something called Guest Favorites.
It's effectively a badge for 2 million of our top listings where we've curated the inventory to identify that top approximately 20% of listings where based on the ratings data, based on review, contextual text data, and then also any information we have on the platform in terms of incidents at those, even just customer service contacts at those listings. It allows us to effectively rank inventory by quality and highlight to users those listings based on everything we know, highly likely you're gonna have great experience. Part of that is to, one, just educate the consumer and help them get to a great listing quickly and make the discovery easier and higher confidence. It's also to encourage people to stay at the listings that are indeed great and reward those hosts that provide high quality.
If you think about that, that overall track, it's intended, you know, over the short term to provide incremental better Experiences, you know, for the individuals booking today. It's also intended over a longer time horizon to increase overall reliability on the platform, increase booking confidence as a result, be a medium to long-term driver of incremental growth.
So this, I just wanna ask about Germany. So I guess it's always sometimes a bit surprising that when Germany.
Germany.
The fourth largest economy in the world for a, you know, a company that's been around for 16, 17 years, you know, hasn't grown in size. Yeah. What's held you back? Has it been other players have been more dominant there, or is it that the category as a whole hasn't grown there? And, you know, what are the actual initiatives you're doing to try and tackle that market?
Yeah. So I think I think a lot of people were surprised, and this goes to your first, first question of, like, what people don't understand about Airbnb. I think a lot of people were surprised when we said, "Oh, one of our international expansion markets is Germany." That's not a good product. How are you, you know, how are you not bigger in Germany, today? And, and what we see internally is that in EMEA or in Europe, I should say, we have delivered or achieved significant scale at a regional level. But there's, you know, huge differences between our level of both scale and penetration in markets like the U.K. and France relative to every other market in, in Europe. And so the, the kind of first obvious place to go in terms of our expansion efforts within Europe was, was obviously Germany.
So the question becomes, you know, why would a country like Germany lag the other large markets in Europe? You know, I can talk specifically about Germany, but I think more broadly, the conclusion is that there are different market nuances that we haven't always, you know, taken into account with either our marketing or with our product localization, which presents opportunities for us to double down in specific markets to drive differential growth beyond the level that we have achieved to date. I think in Germany, there's, you know, a handful of nuances that are important for that market. I think one is Germans like to book very early, much earlier than, certainly Americans but also other Europeans.
And so, you know, in Germany, it's really important that we have a Pay Less U pfront, payment offering such that we can get that trip booked early, but they don't have to outlay all of the cash. There's a handful of things that I could go through in terms of each market where, you know, they're not necessarily huge lifts, but we need to take a more nuanced approach to make sure that we're meeting the market where it is. We are affecting kind of local needs in the product, and we are speaking to those specific guest demographics in a way that is local and relevant. And so you'll see us continue to do that across, you know, a variety of markets around the world.
You'll see us do it in a systematic fashion of focusing on a handful of incremental markets every year.
I guess I can feed that into a you know, one of the client questions here. I guess when you kinda go into EMEA, there's an incumbent in many ways in Booking.com.
Oh, yes.
What is your right to win when you kinda go into these markets where maybe they've got the first mover advantage? You know, what is your right to kinda beat Booking in those markets?
Well, I think if we just look at Europe, I think we've done extremely well in the U.K. and France.
Yeah.
Period. I think we have a track record of doing as well or better than them in various markets. We just have not focused at a country level to figure out what is the unlock for incremental growth. So, you know, I think the opportunity remains quite large even in EMEA. And then if you zoom out and look at the opportunities across the other regions, I think even in the U.S., we do not see Booking in kind of scale fashion outside of their hotel business.
What about the Vrbo then in the US? I mean, I guess they've been having some of their own issues. Has that been a tailwind to your performance in the US, or has that been sort of idiosyncratic to their performance?
I think, you know, if you if you look at the overlap of our business with Vrbo, you know, where Vrbo's historic strength has been is U.S. vacation rental markets. And, I think both of us saw a really nice, you know, boon to that segment in the early days of COVID. We both benefited from, you know, the demand that shifted to those markets in the early days of COVID. Fast forward to where we are today, that is, you know, an important segment of the broader U.S. market, but it's only one. And so I think as the as the, you know, travel market has normalized and gone back to cities, independent of their in-house specific issues, I don't think they've had the benefit of having broad-based supply that can capture demand where, wherever it goes.
So you know, when I look at that business, I would say, you know, the relative overlap in terms of specific geos, it's just a subsegment of our geos because it's relatively small in scale.
So if you kinda just hone in on markets where you are going head-to-head with Vrbo or Booking, why would an incremental host or an incremental customer choose Airbnb over one of those alternatives?
Yeah. Absolutely. So I think, you know, it when you look at the numbers, I think there's some presumption that there's 100% overlap, meaning, "Oh, what you find at Airbnb, you can find somewhere else." And so it raises your question of, like, then why do you focus on that? I think the fact of the matter is if you look at our inventory relative to Vrbo or Booking, what you'll find is that we continue to have the majority of our listings come from what we call individual hosts, most of which have only one listing, whereas the minority is coming from property managers.
Why this is important is that the individual hosts tend to be de facto exclusive to Airbnb, which means that if you look at our inventory writ large in any region, you know, we are going to have the broadest base of differentiated inventory relative to the other two parties. We recognize that that is one of the brand assets, knowing that if you come to Airbnb, you are going to see, you know, kind of everything under the rainbow in terms of type of listing. And that is a real differentiated offering that guests appreciate. On the host side, I think there's a couple of things. I think one, on the individual host side, we built the platform to support individual hosts, and that continues to be something that brings those hosts in.
I think from a professional perspective on the pro-host side, you know, they're looking for demand, and so they will indeed, you know, go where the demand is, which, in large part, is on Airbnb. I think on the flip side to what I just said about our inventory, what we see in the inventory of others is predominantly professionally managed, and as a result, it's predominantly cross-listed.
And so if we think about increasing the reliability, does that necessarily mean you need to increase the professional mix? Would you not see those two things as similar? And does that mean you need to sort of create something that is you need to compete more for those sort of professional hosts over time and be maybe friendlier to them?
Yeah. On the professional host side, I think there is a presumption that professional hosts provide better quality than individual hosts. It's actually not entirely proven out by the data. We actually see that individual hosts tend to have, on average, higher ratings than professional hosts. I think it was kind of a misunderstanding of kind of hospitality and what an individual host can offer. I, I don't think focus on quality necessarily means that there's any big swing in favor of professional hosts. I think more broadly to your question of, you know, are we can we be friendlier with professional hosts? I would say they are an important part of our overall network. They, you know, is a significant portion, albeit a minority, of our business. It provides nice supply.
It fills in some nice supply network gaps in particular in markets where they are dominated by professional hosts. Our focus with that segment is to ensure, you know, are we providing them the right tools so that they can, you know, maximize their business on Airbnb? Are we capturing as much calendar share as we can of those listings? So, we're. It's a great segment that we, you know, continue to focus on, even though it's a minority of our business.
So we've got a couple of questions here on Google. You know, what is the sort of disintermediation risk that you see from Google? I know you've sort of stepped up a little bit of performance marketing at the most recent quarter. Is that with Google? And is that a sign that Google's maybe becoming a bigger part of the funnel and a bigger disintermediation threat, I suppose?
Yeah. So, since we went public back in 2020, there actually has not been any meaningful shift in terms of our traffic sources. So to this day, even when we've modestly increased performance marketing, we continue to get approximately 90% of our traffic from direct and unpaid sources. The strengths of the brand, you know, continues to deliver that, that very strong booking and the or so the traffic and, the booking distribution is, is generally equivalent. So that is a nice inoculation in terms of Google being a, a disintermediator.
Okay. Great. So maybe move on to some of the opportunities, you know, ahead of you apart from Germany. I guess one that gets asked a lot is take rates. You know, you've had a little bit of tinkering with the take rate recently with the phase of three months of the effects of the. I mean, what's been the response to these? Have these been accreted to revenues, trying these two initiatives?
Yeah. So, historically, I would say our take rates have been relatively simple. They're not they're not dynamic or overly nuanced. And, you know, over the last couple of years, we have not been focused on optimizing the take rate. The focus instead has been driving incremental growth and therefore incremental market share. That being said, we do see opportunities in terms of being a bit more nuanced and surgical, I should say, with how we apply take rates. Two things that we have done over the last year that you referenced.
A year ago, we, I know investors would like to say that like me to say that we increased take rates, but we looked at the long-term phase of our business and identified that if you are staying in a located Airbnb for more than 3 months, you know, by the fourth or fifth month, we're taking the same take rate, and we're not really delivering a ton of value, which obviously, you know, gives guests and hosts incentives to go off-platform. And so what we decided to do was lower take rates for that long duration over 3 months, and not shockingly, as intended, we see a nice volume increase in that business because people, you know, price goes down, and they stay on the platform more frequently, and it commensurate.
More recently, what we've shared is, we are one of the only travel platforms where if there's an FX fee, we absorb it. And so what we've been testing, recently this quarter is adding a small FX fee for those transactions where they are cross-currency, meaning the guest is booking in a different currency than the host is getting the payout. We have not decided whether we will move forward on that, but I think what you can take from that in addition to the long-term stay fee reduction is we are looking to be more nuanced over time to identify opportunities where, you know, changes in the fee rate can either drive incremental volume or incremental monetization. So stay tuned. We'll be doing more things with that.
Is the natural end game of this some kind of paid placement in terms of listings-type product? Do you allow that sort of full revenue management from hosts at some point?
Yeah. So when we think about paid placement, which, you know, I think every investor asks me about, we think about it from the perspective of what is the suite of host services that we can offer over time, and where should we start? I think a lot of people have looked at paid placement as a kind of immediate juicer, if you will, to revenue. And what we'd like to do is really be more thoughtful about what is the suite of services that we could offer to our hosts that would make it easier and make them more successful, and therefore paid placement would lie there in terms of something that would help hosts versus just be a, you know, one-time revenue.
And then other opportunities, you know, beyond, beyond maybe take rate assumptions in Germany and other markets, you know, where, where are the most sort of exciting sort of revenue opportunities? Is it making more money from hosts? Could you sell more services to guests? Is it some kind of advertising you can cruise on the platform? What, what can we look forward to in terms of other opportunities?
Yeah. So broadly speaking, when we think about growth, it falls into three categories, and they are categorized really by duration or time horizon. First is to continue to invest in our core service. You know, as I've described throughout this Q&A, we feel like there's a huge amount of opportunity in terms of focusing on affordability, focusing on reliability, and just making the product better and easier to use. And we have a pretty robust roadmap across each of those surface areas to frankly drive more consideration and better conversion across the platform. So that's kind of near-term through long-term in terms of evergreen opportunities we have to improve the product. Second is the international markets that we talked about as well.
There's just a huge opportunity to bring the next set of markets up to the level of penetration that we've seen in our core markets, and we are very focused on that. I would categorize that as, you know, near- to medium-term opportunities. And then the third is to offer more than we offer today. You know, I think one of the incredible things about this business is that, you know, last year, we did $73 billion of booking value, and yet that was on one product. And so when you think of that scale and the opportunity to add more things on top of it, you know, the opportunity set for Airbnb is not just about accommodations. It's what can we incrementally offer to both guests and hosts on obviously, on both sides of the marketplace.
On the guest side, you know, what we'd like to do is not just offer where you stay but also things to do when you're in market and services that you might need in the listing while you're staying. On the host side, the opportunity is to fill out the ecosystem of, you know, services that hosts need to be successful in listing and hosting their property. So you'll see more from us on that to come, later this year and more specifically in 2025.
And if we focus on, you know, experiences, I guess experiences was an important part of what you put in the IPO document. You talked about trillion-dollar market opportunities, and experiences has been on the platform now since that time. And I guess it hasn't really driven the incremental growth so far. So, you know, maybe why that hasn't quite worked so far and why maybe having the other go in 2025 or some later point, why we should be confident that the next situation will be more successful?
Yeah. Great question. So first, I just I should, you know, contextualize. When the pandemic hit, we really pulled back quite dramatically in terms of a lot of the adjacent efforts that we had. So experiences was one of them. Hotels was another. We went on transportation incubation at the time. When the pandemic hit, we, we focused. We, you know, restructured the entire business, and our main and single priority was making it through the pandemic, making ourselves a, a stronger party when we when we emerged. I think, you know, on that measure, we've been arguably wildly successful in terms of restructuring and making this a much stronger business model than it was back in, in 2019. I think the, the EBITDA levels as well as the cash flow generation are, are pretty incredible in particular given where we were just four years ago.
So we have been successful in that effort. What we did during that time, though, was to pull back on some of these adjacencies and take them to 2024. You know, now is the time where we really begin reinvesting in them to make them scaled over time. So that's first. We did a bit of a pause in terms of those adjacency investments. I think in terms of, you know, how in particular experiences do we make it more successful, and scaled in the way that we need it to be going forward? I think there's a handful of learnings in terms of, you know, the small product that we have had historically. I think one is better understanding the traveler and its booking patterns.
I think broadly speaking, you know, everyone in travel wants to have the whole travel suite end to end. Everyone has a different name for it. And what makes that challenging is that outside of packaged travel like tour travel, consumers don't go to one site and book everything all at the same time. It's a very kind of delayed, staged, purchasing pattern, meaning, you know, you get your transportation. You get your accommodations. And then closer to the trip, you get activities, services, etc. And so part of, you know, making a built-out I don't wanna say Connected Trip 'cause someone else will use it that. But, part of, you know, increasing the offering is understanding how do you merchandise to the consumer at the right time to make it useful for them?
Another thing is pricing, making sure that the things on your platform are appropriately priced. And a third is personalization, knowing something about the consumer such that you are not just, you know, barraging them with anything that's available in a particular market but merchandising to them the things that they would actually enjoy and are relevant for both them personally but also the travel use case that they are about to go on. So, you know, those are just a handful of things that we've picked up over time and, you know, will apply as we, you know, restart those expansion opportunities.
GamePlanner business you bought last year. When as consumers and analysts, I suppose, will we start seeing what that brings to Airbnb? What's the timeframe on that? And what does it.
Do you want a date?
As close as possible.
So we're really excited about the GamePlanner.AI acquisition that we did back in November of last year. The intent on that acquisition was not necessarily to take their sales product and launch it on Airbnb. Instead, it was to take the capabilities of that team, to help us develop better user interfaces that leverage AI. I think one of our, you know, early observations on AI is that there has been a huge amount of, like, technological progress on the model but maybe less so in terms of the user interfaces. And so what we would like to, you know, put out into the world, or based on AI is not a new model but is, you know, new user interfaces that really aid in terms of driving, you know, magical trip planning.
So it'll take some time to get there, but you should think of that acquisition as a capabilities expansion.
Brian, in a recent interview with Skift, and I know I know you love clarifying everything he says in interviews, but talked about potentially being interested in a paid loyalty program. I mean, was this just a off-the-cuff comment, or is it something that sort of Airbnb is currently considering internally?
So we know we've had a lot of questions on loyalty, like, you know, why do you not have a loyalty program when, when every hotel does? And, you know, we I would say we continue to think about what would an Airbnb-appropriate loyalty program look like. I think it's safe to say that it will look differently than a kind of point program that is highly transactional and has, you know, frankly, economics that, that don't work for our business. One of those, kind of differentiated models might be a subscription where we would offer, you know, incremental services, not just points for, activity on the platform.
Okay. I'm gonna do a sort of quick-fire round of what I've got left, from the audience. So, I guess operational leverage. This year, you've obviously sort of suggested there's a bit of room for investment. But looking forward, you know, if you continue to deliver sort of similar levels of growth, you know, is there operational leverage within the system? Is there an algorithm where EBITDA continues to grow faster than revenue growth?
Yeah. I think, if you if you look at our core business, there are obviously incremental opportunities to drive higher margins over time in terms of incremental efficiencies of our variable costs as well as the variance of their relative to, to fixed costs. Absolutely. That being said, you know, hopefully, it is clear that we are reinvesting in growth, and that is the driver of the, the modest guide down in terms of, a modest amount of margin compression this year. I think, you know, contextually, what I what I hope people are aware of is that, you know, a little over three years ago, we went public, and we told investors at that time that, you know, we anticipated that someday we would get to 30% EBITDA margins. And lo and behold, three years later, we got to almost 37%.
So we a little bit overshot the mark in that regard. And you know, the question is that, well, how did we do that? Well, one, we executed on the financial discipline that we intended at the time. And we also got a nice tailwind from higher ADRs. I would say that the fast progression to those margins gives you one confidence that this is a very strong business. The fact that a portion of that margin expansion comes from higher ADR should also give you confidence that there are incremental efficiencies for us to drive in the core business that we have not yet delivered. Does that answer your question?
Yes. Yeah. I maybe didn't answer the question on Google quite right. What would make you start advertising on Google to drive incremental growth? Would there be could you drive marketing higher to drive even faster growth, or is there some kind of limit to that?
In terms of using Google for performance marketing?
Yeah. Yeah. That was one.
So we dial up and down our performance marketing on Google where we see great efficiency. And, and what I shared in terms of the Q1 results is, based on a variety of initiatives over the last year, we have been able to deliver greater efficiency through Google, more keywords, more targeted audiences. A variety of improvements on our end have allowed us to spend modestly more through that channel and maintain great efficiencies. And so that-that's why we've leaned in.
and then capital.
One thing I should just clarify in that, if performance marketing continues to be the minority of our overall marketing spend, so when we talk about, you know, marginally leaving it leaning in, this is not a big portion of either the overall marketing budget or a percent of revenue.
Well, I guess the question is, why don't you spend 10 times as much on performance marketing to drive an extra 5% extra revenue growth? Or would that just not be possible?
I think it's a couple things. Well, first and foremost, we don't depend on them.
Yep.
Very substantially. So as I said earlier, you know, 90% of our traffic is coming from direct and paid unpaid sources, which is, you know, a great thing in terms of the overall context of the P&L. We just do not require the same level of marketing intensity as, as really anyone else in travel, which means we are not dependent on Google. It also means we're not gonna double the spend there and get one-for-one the, the output.
Yep. Makes sense. And then, last, I think, capital allocation. You know, substantial cash still on the balance sheet. You know, what is this being kept for? Are there M&A opportunities? Is there scope for more shareholder returns? And someone's asked, would you consider a dividend? Now, they've kind of come a bit more into vogue for tech companies.
They have. Today, we are not yet considering a dividend. I would say just to reiterate our capital allocation strategy, it's one, you know, invest in the business. Two, have capital available for M&A and return capital to shareholders. Obviously, the strength of our balance sheet as well as the strength of our cash flows with, you know, over 40% free cash flow margin allow us to do all three. We have been, you know, having a kind of regular cadence of repurchasing activity. We also use cash to net settle the RSUs that we give to employees to also manage the dilution. And, you know, you should expect us to continue to do so.
Okay. I wanna squeeze one more in. How do you think about and this is quite a big one, but how do you think about your sort of relative cyclicality to the wider lodging industry? I guess, I mean, being born in a recession, you know, but how do you think about how you would perform if we did start to see travel slow down?
It's a good question. I think that question was asked, you know, pre-pandemic all the time. You know, I think we had the hope that if bad things happened, we would be more adaptable. I think when we thought about bad things happening, it certainly was not a global pandemic. But, we did have that test case, and I think the overall business model proved unbelievably adaptable. I do think when we think about macro impact, it is important that we have the right pricing tools such that our marketplace is dynamic relative to the broader market and in a downturn that we are priced appropriately to drive value to consumers.
Great. I think we can just about beat the flashing red light. So Ellie, thanks very much. Thanks, everyone, for joining today.