Airbnb Inc

NASDAQ:ABNB

Earnings Call Transcript 2021-Q3

[Operator]

Good afternoon, and thank you for joining Airbnb’s Earnings Conference Call for the Third Quarter of 2021. As a reminder, this conference call is being recorded, and will be available for replay from the Investor Relations section of Airbnb’s website following this call.

I will now hand the call over to Ellie Mertz, Vice President of Finance. Please go ahead.

[Ellie Mertz, Vice President of Finance]

Good afternoon, and welcome to Airbnb’s Third Quarter of 2021 Earnings Call. Thank you for joining us today. On the call today, we have Airbnb’s Co-Founder and CEO, Brian Chesky; and our Chief Financial Officer, Dave Stephenson.

Earlier today, we issued a shareholder letter with our financial results and commentary for our third quarter of 2021. These items were also posted on the Investor Relations section of Airbnb’s website. During the call, we’ll make brief opening remarks and spend the remainder of time on Q&A.

Before I turn it over to Brian, I would like to remind everyone that we’ll be making forward-looking statements on this call that involve a number of risks and uncertainties. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described under forward-looking statements in our shareholder letter and in our most recent filings with the Securities and Exchange Commission. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained on this call to reflect subsequent events or circumstances. You should be aware that these statements should be considered estimates only and are not a guarantee of future performance.

Also, during this call, we will discuss some non-GAAP financial measures. We’ve provided reconciliations to the most directly comparable GAAP financial measures in the shareholder letter posted to our Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results.

And with that, I’ll pass the call to Brian.

[Brian Chesky, Co-Founder and Chief Executive Officer]

All right. Thank you, Ellie, and good afternoon, everyone. Thanks for joining us today. I’m really excited to share our results with you. The travel rebound that began earlier this year accelerated in the third quarter. Q3 was Airbnb’s best quarter yet. Revenue of $2.2 billion with our highest ever, surpassing 2019 by 36%. Net income of $834 million was our highest ever, nearly 4x larger than a year ago.

Adjusted EBITDA exceeded $1 billion, also our best ever. Our EBITDA margin was 49%, an increase of 30%, or 3,000 basis points compared to Q3 2019. Over the summer, we also reached a major milestone with one billion cumulative guest arrivals. This means that Airbnb has been used more than one billion times since we started.

Now finally, I’m delighted to report that our hosts earned a record $12.8 billion in the quarter. Our results show that the growing strength of the travel rebound is here despite the continued pandemic. We saw continued strength in North America and EMEA and an acceleration in Latin America despite sequential increase of cancellations.

Now excluding APAC, our total global Nights and Experiences Booked exceeded 2019 levels. Gross booking value of $11.9 billion shot above 2019’s levels by 23%, driven by the strength of ADR. But something bigger than a travel rebound that’s happening. The world is undergoing a revolution in how we live and work. The pandemic has suddenly untethered tens of millions of people from the need to go into an office.

Technologies like Zoom make it possible to work from home. Airbnb makes it possible to work from any home. And this new found flexibility is bringing about a revolution in how we travel, because for the first time ever, millions of people can now travel anytime, anywhere for any length and even live anywhere on Airbnb. And we believe that this trend towards more flexibility will only accelerate.

In recent months, some of the world’s largest companies Procter & Gamble, Amazon, Ford, PricewaterhouseCoopers have announced increased flexibility for employees to work remotely and we expect many more companies follow this. And so what we’re seeing our several trends as a result of this travel revolution.

First, people can travel anytime, because many people don’t have to be in the office at specific times, they have more flexibility and when they can travel. So families are increasingly travelling traveling outside the traditional week, weekend trip. And in fact, Mondays and Tuesdays are currently our highest growing days of the week to travel. This is really interesting.

The second trend we’re seeing is that people are traveling everywhere, literally everywhere. During the pandemic, over 100,000 cities have had at least one booking on Airbnb. And that includes 6,000 towns and cities that received their first booking ever on Airbnb.

The third trend we’re seeing is people aren’t just traveling in Airbnb, they’re now living on Airbnb. Long-term stays, up 28 days or more, remained our fastest-growing category by trip

length. People are traveling Airbnb for extended vacations, relocation, temporary housing, student housing and many other reasons.

Now finally, more people were also interested in hosting than ever before. We ended Q3 with the most active listings ever, and there are two reasons for this. First, our demand is driving more supply. In fact, our highest supply growth is in our highest demand destinations, particularly in North America and EMEA. And second our marketing and product initiatives to attract new hosts are working.

Now we’re constantly improving our service to meet this new way of traveling and the wave of guests it will bring. On May 24, we introduced the Airbnb 2021 release, which included more than 100 upgrades across every aspect of Airbnb service. On November 9, which is next Tuesday we’ll be announcing the Airbnb 2021 Winter Release and this release will include another 50 upgrades and innovations that make it easier to host and support the changing needs of guests, and you can watch it right at our home page next Tuesday at 8:00 AM Pacific Standard Time. So, I hope you can tune in and to see I’m really excited about what we have to share.

So, now let’s turn to our progress on our 2021 plan. Now as a reminder, our single priority in 2021 has been to prepare for the travel rebound. To do this, we’ve been perfecting the end-to-end experience of our core service. And this includes educating the world about hosting, recruiting more hosts, simplifying the guest experience and delivering world-class service. So, let me give you an update on each of these.

First, we are educating the world about what makes Airbnb different, and that is hosting. Earlier this year, we launched our first large-scale marketing campaign in five years, made possible by hosts. We’re educating guests about the benefits of being hosted, and we’re also inspiring more people to become hosts, and we continue to be encouraged by the results of this campaign.

Second, we’re recruiting more hosts and setting them up for success. On May 24, we launched a completely redesigned host onboarding flow that makes it simpler for anyone to start hosting. Throughout the process, potential hosts can now be paired with Superhosts to answer their questions or concerns. We began Ask a Superhost in nine countries, and we’ve since expanded the program to over 30 languages in 196 countries.

Third, we’re simplifying every part of the guest experience. Earlier this year, we introduced I’m Flexible, a whole new way to search on Airbnb when guests are flexible about where or when they’re traveling. Now since launch, guests have used I’m Flexible more than 500 million times. Now due to the popularity of this feature, we’re soon making it even more flexible by expanding the date range of this feature as well as adding more categories of unique space. We’re really excited about the progress of this feature.

And finally, fourth, whenever a host or guest need us, we must deliver world-class service. In September, we launched dedicated Superhost support in North America, giving our most experienced hosts priority access to our most experienced support agents. We’re expanding the support to all Superhosts globally by the end of the year. So that is our plan for 2021.

Now, before I go to questions, I have one update that bittersweet. Three years ago, Ann Mather became the second independent director to join our Board after Ken Chenault. Since then, our team has benefited from her guidance. Now Ann recently made the decision to reduce the number of Board she sits on, and sadly for us that means she’ll be departing our Board of Directors on December 15. Now Ann has been a critical member of our team as we transition from a private to a public company, and we appreciate everything she’s done. We look forward to adding another independent director as soon as possible. I know that being on the Airbnb born in the midst of a global pandemic is no easy task. And I want to once again thank you, Ann, for everything you’ve done.

So to recap, Q3 was Airbnb’s best quarter ever. Revenue, adjusted EBITDA and net income were our highest ever. Travel is undergoing a revolution. People are now taking longer trips traveling to more locations and even living on Airbnb. As the world changes, we continue to innovate. We’ve made more than 150 upgrades innovations this year alone.

So with that, Dave and I look forward to answering your questions.

[Operator]

Thank you. [Operator Instructions] Our first question comes from Eric Sheridan from Goldman Sachs. Eric, please go ahead.

[Eric Sheridan, Goldman Sachs]

Thanks so much for taking the questions. It’s been a big year in terms of innovation and investing behind supply. Brian, would love to get a little bit more color on what you see as the key learnings from rolling some of those investments out into the marketplace. And how they can inform the way investors should be thinking about supply growth and innovation in the years ahead. Thanks.

[Brian Chesky, Co-Founder and Chief Executive Officer]

Yes. Thank you very much, Eric. So yes, this has been a really great year for supply growth. We have more active listings on Airbnb today than we ever have. And it’s important to just share a few thoughts on supply.

Number one, we are quite different than our competitors. Airbnb, we have four million hosts, and 90% of our hosts are individual. That means they could never have posted, if not for the tools that we provide. And the vast majority are only listed on Airbnb. And we found that if we make hosting easier and as more people know about hosting and we give host more support, more people will become hosts. And so our strategy is a full life cycle. It starts with making sure more people know about hosting. You see the Airbnb brand is very mainstream. Our brand is now – use all over the world, but hosting is not as mainstream. And so the first thing we’re doing is we’re raising awareness about hosting.

This year, we did our first brand campaign in five years, made possible by hosts. It uses real photos from real trips to highlight what makes Airbnb different in that host. The great thing about that ad is that also is able to track more host to Airbnb as well. So once we’re able to increase awareness of hosting, then the name of the game is making it easier to host. And on May 24, we showed a simple 10-step process to become a host where we’ve radically reduced the number of steps and made it easier to host and conversion rate for people starting to leisure their space low is up.

Third, if a host needs help we’re going to give them support. So, we launched Ask a Superhost. Ask a Superhost pairs prospective host with our very best Superhost on Airbnb. And since we launched this feature in May, more than 50,000 prospective hosts have used this, and we’re now expanding this to 196 countries globally. And finally, we’re continually investing more tools to allow hosts to expand their business. And what all this means is that you’re going to see continued innovation from us. What we’ve seen is an increase in the trajectory of a number of people becoming a host.

The other point, though, Eric, I just want to make is the following. On [indiscernible], we ever supply constraint globally on Airbnb, the vast majority hosts only rent occasionally. And so the holy grail of travel is pointing demand to where we have supply. Before the pandemic, most people were very fixed in their search parameters. They had a destination of mine and they had dates in mind. But now because many people don’t have to go back to an office, they’re more flexible. And this means that we can point them to where we have supply. And this is the power of being flexible.

Over 500 million searches have used flexibility. More than 40% of our searches, guests are flexible on where or when they’re traveling. So this is what we’re doing. We’re focused on a full funnel approach to supply acquisition, and we’re pointing demand to where we have supply. And I expect that we’ll have plenty of supply years to come.

[Operator]

Our next question comes from Mario Lu from Barclays. Mario, please proceed.

[Mario Lu, Barclays]

Great. Thanks for taking the question. I have a couple on the long-term stays of 28 days and more. You guys mentioned that it was roughly 20% within 3Q. But I think in the first quarter, it was around 24%. Was this mostly due to seasonality that declined slightly since then. And then at a higher level, any updated views on how large the channel these larger stays could attract over time? Thanks.

[Brian Chesky, Co-Founder and Chief Executive Officer]

Yes, Mario, why don’t I give the mix shift to Dave and I spent to talk a little bit more broadly about the strategy. Dave?

[Dave Stephenson, Chief Financial Officer]

Yes. The majority of the decrease is simply the increase of short-term stays kind of coming back. It still remains to be – long-term stay has been one of the fastest-growing parts of our business, pre-COVID. That is a trend that we are seeing in the pre-COVID era it just continued to be strong during COVID, and it remains strong today. And so yes, the decrease is just the fact that short-term stays continue to come back. And in terms of the market opportunity of long-term state – market opportunity in long-term stays, we think this adds hundreds of billions of dollars to our overall long-term TAM opportunity with long-term space.

[Brian Chesky, Co-Founder and Chief Executive Officer]

And I’ll just share a few more thoughts, Mario. We’ve just seen a major paradigm shift in travel. Before the pandemic, short-term stays is really the primary business that we were in. What we actually saw was that long-term stays was our fastest-growing segment of business even before the pandemic. So, I think what the pandemic did is an accelerated inevitable trend. There was already this emerging category between classic traveling and really kind of permanent housing which was people seeking stays of weeks at a time or even months at a time. And I think what the pandemic has done has just accelerated this.

We’re going to see a lot more people going away as they have newfound flexibility. Even people with families who can’t go away during the year, they may be able to travel a little bit longer during summer as well. So this is really exciting. And the only other thing I’d just add is nearly half of our business is for more than a week as well. So these are really exciting categories. I think there’s a huge amount of growth going forward for these different segments.

[Mario Lu, Barclays]

Okay. Thanks.

[Operator]

Our next question comes from the line of Jen Shi from Bank of America. Jen, please go ahead.

[Jen Shi, Bank of America]

Thanks for taking the question. This is Jen on for Justin. Just wondering, so you guys mentioned that with the host initiatives, you’re gaining supply in very popular areas like North America and Europe. Just wondering, are you seeing supply opening up in urban areas? And as the mix shift kind of comes back to urban and cross-border travel, how should we think about the impact on ADRs, take rate and maybe margins in future years?

And then just one follow-up on marketing spend. Looking at marketing spend trends, obviously, this year has been super positive compared to pre-pandemic spending, you have a lot of leverage there. Just wondering, do you see a scenario where maybe you would have to be more aggressive on marketing if hotel travel was coming back? Thanks.

[Brian Chesky, Co-Founder and Chief Executive Officer]

All right. So thank you, Jen. I heard three questions. One is about supply growth in urban. The next is mix shift, it’s impacting at ADR and then marketing spend. Dave, do you want to take these? I think these would be great for you to take.

[Dave Stephenson, Chief Financial Officer]

Sure. In terms – again, one of the things to remember is – and the reason why we kind of highlighted on the call that the growth in our supply in the nonurban areas of on North America and Europe is that we get the supply when we have the demand, and that’s why it’s gone up 15% since the beginning of the year because that’s also where there’s biggest demand. Now, we’re obviously seeing greater demand pickup in our more urban areas. So the percentage of nights in the urban area has started to increase or now made 46% of our nights. We’re still down to maybe 60% of our nights kind of pre-COVID. And so we’ll continue to see listings growth in those more urban areas as the demand kind of keeps coming back.

So until I think we’re back to full demand, we actually don’t need incremental growth because we’re still below our nights that we had back in 2019. But again, the important part is that we get the supply when we need it because the supply will follow that demand and we’ll continue to make it easier for new supply to come on board.

In terms of forward-looking ADRs, the high average daily rate we’ve seen throughout this last year has been primarily driven by the mix of types of space and the location. So it’s a mix of Europe and North America have higher average daily rates. Non-urban whole home, larger homes, all those reasons have been driving up the rates overall. And the other thing we start seeing a little bit more in Q3 with some price appreciation in high demand areas. And so it was a combination in Q3 of both the mix of types of stays and some of the price appreciation. And what we do anticipate is as urban comes back, and more markets like Asia and Latin America, which have lower average daily rates. We anticipate the overall ADR to moderate some, but we also believe that some of the higher ADR will sustain for the future. So in terms of – and then what we did say also in our shareholder letter is that we anticipate that the ADRs in Q4 should be relatively consistent with the ADRs we had here in Q3.

In terms of marketing, we’re really happy with the adjusted marketing approach that we’ve taken. Now again, this was a pre-COVID change that we made, where we were – began to invest in our strength. And our strength is the brand of Airbnb. And we modified that marketing approach pre-COVID. We reduced our reliance on search-engine marketing. And then in COVID, we have shifted even just more significantly more quickly, and we’re really pleased with those results.

As Brian mentioned, this broader brand campaign, talking about made possible by hosts, it gets to talk to both sides of our marketplace. It both recruits new host to Airbnb, and talks to guests about why you’d want to stand Airbnb, and we’re really happy with those results and plan to continue the strength of that.

We’ve increased our relative marketing rate this year, just given the fact that our – the business has been going quite well. And so – but on a relative basis, our marketing expenses as a percentage of revenue are down from levels we had in 2019. And we should anticipate that this – it will be in this kind of range for the foreseeable future.

[Brian Chesky, Co-Founder and Chief Executive Officer]

And I can just share just to really recap briefly our marketing strategy. We take a really different approach than our competitors at the full funnel integrated marketing strategy. And it really starts with PR and word of mouth. And really word of mouth and PR’s how we build the brand for the vast majority of the years before you even have enough money to have a marketing budget. And because of that, Airbnb is a really well-known brand that’s a noun and a verb used all over the world. And because of this, more than 90% of our traffic was free or unpaid in Q3.

And so we think of marketing is really education. Brand marketing is really about educating people that are highly differentiated product. And then performance marketing for us isn’t really a way to buy customers. It’s the way the laser in on balancing supply and demand. So we think this is a really unique approach. And I think that it’s just really all about continually investing in our brand. And over time, we think the amount of the loyalty to the brand will only increase.

[Jen Shi, Bank of America]

Great. Super helpful. Thank you both.

[Operator]

Our next question comes from Kevin Kopelman from Canaccord. Kevin, your line is now open.

[Kevin Kopelman, Cowen]

Thanks a lot. It’s Kevin from Cowen. Can you give us a sense of the booking trends in the fourth quarter, quarter-to-date. You mentioned acceleration in the shareholder letter, are you seeing that back to Q2 levels yet in terms of growth as compared to the same quarter in 2019, just given kind of the Delta slowdown, that would be helpful.

[Brian Chesky, Co-Founder and Chief Executive Officer]

Hey, Kevin, thanks for the question. Dave, do you want to take this?

[Dave Stephenson, Chief Financial Officer]

Sure. what we’re seeing is continued strength in growing strength in the business as borders are starting to open up, people are more vaccinate more willing to kind of travel. We’re continuing to see bookings strength, and that’s why we’re going to be seeing gross booking rate of gross booking value growth increasing from Q3 to Q4. I don’t have a specific percentage that we’re sharing on the call today. There can be some variability on the overall growth, but it is accelerating. And that’s what’s included in our guidance estimate that we’ve shared.

[Kevin Kopelman, Cowen]

Thank you.

[Operator]

Our next question comes from Stephen Ju from Credit Suisse. Stephen, your line is now open.

[Stephen Ju, Credit Suisse]

Okay. Brian, I don’t know if you have data – this data, but I’ll go ahead and ask anyway. But are you able to say perhaps what percentage of your registered users perhaps have younger children who until now were not able to get vaccinated. I’m just trying to get a sense for how much incremental pent-up demand you may have waiting for U.S. parents start to feel better about traveling more with the younger kids? Thank you.

[Brian Chesky, Co-Founder and Chief Executive Officer]

Thanks for the question, Stephen. I don’t think we have that data specifically, but I can just share a couple of high-level thoughts with you. I think that we’re going to be entering a new golden age of travel. I tend to think that the last 18 months have been – the world has been turned on its head. And I think that many people yearned for what was taken away from them. Now not everything that was taken away from us. Do I think we all want that. But I think one of the things that’s taken away from a lot of people, they want back is the ability to travel and the ability to travel freely and the ability to travel freely or cross borders.

And just to give you one anecdote or one data point on October 15, I believe it was that date that President Biden announced the reopening of the borders for international travelers come to the United States. Within one week of that announcement, we saw a 44% spike in nights booked for stays, crossing borders coming into United States on Airbnb for stays November 9 and later, which is when the borders would open.

So, what we are seeing kind of across the board is evidence of pent-up demand. I think all the new emerging use cases that exist in Airbnb are here to stay, because I think flexibility is here to stay. So, I think a lot of the nearby destinations of people getting cars here to stay, I think the longer stays, people living in Airbnb Tuesday. But I think what I’m really excited about is the emergence of cross-border travel. Cross-border travel is now 80% of what it was at its peak in Airbnb. It used to be half of our business. It went down quite a bit. Now it’s about one-third of our business and growing again. So yes, we are seeing a lot of pent-up demand. And Dave, I don’t know if you want to add anything to this.

[Dave Stephenson, Chief Financial Officer]

No, I think that’s the key. Our cross-border travel, it’s 33% here in Q3, but we’re continuing to see strengthening here in October. More continued countries are reducing their travel restrictions and the travel trends continue to improve.

[Stephen Ju, Credit Suisse]

Thank you.

[Operator]

Our next question comes from the line of Brent Thill from Jefferies. Brent, please go ahead.

[Brent Thill, Jefferies]

Thanks. Just on the cross-border, and when you think of Europe and what you’re seeing there, can you drill in and give us a sense of what’s starting to happen inside the country there.

[Brian Chesky, Co-Founder and Chief Executive Officer]

Dave, do you want to take that?

[Dave Stephenson, Chief Financial Officer]

Sure. We’re continuing to see sequential improvement in the net nights booked in October relative to September. So travel restrictions as they come off. We’re continuing to see that sequential increase – We have more global net nights booked in October 21 that we did in 2019. So, I think that’s a really positive sign for Europe. And there are some week-to-week variations, but the trends continue to be up and to the right.

[Brent Thill, Jefferies]

And as just a follow on, has there been anything surprising to you due to this recovery in Europe that just anything that you’ve seen in underlying trends? Or is it just continued strengthening as you’ve been mentioning?

[Dave Stephenson, Chief Financial Officer]

Well, the reality it tends to vary by country, right? Different countries will have different levels of restrictions in opening. There’s obviously a lot of pent-up demand for kind of peak kind of travel. We saw that in Q3 is a big part of the strength of our results in Q3 or Europeans wanting to get into their traditional kind of summer holidays in Spain and Italy and other places. And so there can be some variation by country throughout, but the strengthening of the business in Europe just kind of continues. We’re seeing a nice uptick in bookings, especially even leading into 2022. So some of the bookings growth that we’re seeing now is going to obviously be for travel in early next year and throughout in 2022.

[Brent Thill, Jefferies]

Great. Thank you.

[Operator]

We now have a question from Doug Anmuth from JPMorgan. Doug, your line is now open.

[Dae Lee, JPMorgan]

This is Dae Lee on for Doug. Thanks for taking the question. The first one, so based on your conversation with your host, what do you think is the biggest friction point that prevented them from becoming a host for the first time? And along that line, among the initiatives that you’ve rollout for them this year was resonated in those? And as a follow-up, how are these newer host cohorts performing versus your historical cohorts but didn’t have the upgrade that now hosts have today.

[Brian Chesky, Co-Founder and Chief Executive Officer]

All right. Thank you for the question, Dave – Doug. Why don’t I take the first part of the question about what the biggest friction points for hosts are and then Dave can have the follow-on. Now a really, really great question. there’s really three parts of the funnel. Number one, do people know about hosting. Number two, is it easy? And number three, can they get help. To me, those are the three parts of the funnel.

So number one, do people even know about hosting Well, Airbnb’s brand is very much mainstream. So we’ve seen a huge opportunity in people being able to host. I don’t think most people realize that the average host can make $9,600, which is more than the stimulus check they’ve been getting the United States and the amount of effort is surprisingly easy. And so the first thing we have to do is continue to tell story of hosting, and we’ve been doing that, and that is working.

The next thing we have to do is make it easier to host. The easier we make something, the more people do it. Airbnb really innovated and built a lot of custom tools to make it easier to host than ever before. This was really the core innovation we have. We built a system of trust where we’re continually making it easier to host. We obviously simplified the number of steps to become a host to 10 really simple basic steps. You can do it now quite quickly from your phone or a desktop device. And we have more innovations that are going to make it even easier that we’re showing next Tuesday, November 9. So that’s the second part, making it easier as we do that conversion rate goes up.

And then finally, sometimes people like say, this is – some people want to talk to other hosts. They want to know what it’s like, what’s it like to let a stranger in your home. How much should I change? What are the local rules and regulations. And so having another host to talk to is really important. Now this is the power the Airbnb model.

One of the things that makes me so special is we’re a community. And we’re a community where host tell other hosts about Airbnb and they bring them on to the platform. And so what I’m really excited about is the Ask a Superhost program. We’ve had more than 50,000 prospective host sign up to use that. And we’re going to continue to scale that, and we’re announcing on November 9 that we’re going to be scaling the Ask a Superhost program.

So these are three parts of the journey. We continue to focus on these. We’re going to get a lot more host. Dave, you want to take the next part on the host retention.

[Dave Stephenson, Chief Financial Officer]

Sure. What we’re seeing – I can step back some of the new host acquisition that it makes it a little too early to tell exactly how the retention and things are going to work for all the new hosts. But let me step back and broadly share that overall, we’re seeing churn rate of our hosts or has improved. It’s lower than it had been historically that the actual success rate of new hosts is increasing. Like 50% of new listings receiving a booking in three days. 75% of new listings are receiving a booking within eight days. So they’re actually more successful, more quickly.

We’re seeing of the new hosts that are coming on, that they are – the traditional host that have been successful in Airbnb, individual host that are largely – have exclusive to Airbnb that may only have a property or two, it’s that core individual host. That’s still the majority of the host that we’re kind of bringing on. And the cross listing of our host is actually down from where it was in kind of pre-COVID times. So I think the overall health of our hosting community is quite strong, and the growth that we’re seeing in new host is very consistent with the historic types of host we’ve had in the past.

[Dae Lee, JPMorgan]

Got it. Thank you.

[Dave Stephenson, Chief Financial Officer]

Thank you.

[Operator]

Our next question comes from the line of Justin Patterson from KeyBanc Capital Markets. Justin, please go ahead.

[Justin Patterson, KeyBanc Capital Markets]

Great. Thank you. Brian, you’ve clearly had a lot of success with flexible stays. What have your learnings been around that, the marketing of that feature to consumers? And what do you think the next steps are to make this a broader consumer behavior? Is that more brand marketing? Or is that something within the app? That’s question one. And then for Dave’s question, two, how should I think about the pace of the urban recovery going forward? Thank you.

[Brian Chesky, Co-Founder and Chief Executive Officer]

All right. Yes. Thank you very much for the question, Justin. I’m really excited with I’m Flexible. So just to recap what this feature is – On May 24, we announced I’m Flexible, a new search tool that allows people to search on Airbnb, if they’re flexible about where or when they’re traveling. And so to go to Airbnb’s home page right now, actually, if you do it, you’ll see a really big button, it says I’m Flexible. If you click on that button, it now takes you to a whole new view of Airbnb, where you can completely browse.

Now this is a really special new product we built. We actually went through millions of listings, and we had to do this really extensive process of organizing our structured data, essentially getting an organized catalog of all of our inventory. If something says it’s a tree house, is it a tree house? We made sure every photo is the properly labeled. And this feature has been really, really successful.

We also have flexible dates allows people, if they’re flexible when they’re traveling to say, I’m looking for a place for a weekend for a week or a month any time over the next six months. Well, that – those features have been used more than 0.5 billion times. So what are our lessons?

Well, the first lesson, if conversion rates up, the more people use I’m Flexible, the more likely they’re going to book on Airbnb because they’re more likely to find a property. Number two, what it’s showing is we’re able to point demand to where we have supply. There’s a lot of really unique listings that are in locations that people wouldn’t have thought to type in, right? It might be in a small town you never heard of. With I’m Flexible, it really levels the playing field and allows many more properties to be discovered.

Maybe another way of thinking about it is on flexible turns the home into the destination, so you don’t have to type in the destination. And I’m really excited about this. So this tells us that we’re on to something. It also tells us that there’s a new paradigm in travel. And so I think that this flexibility is here to stay. I think one of the holy grails in travel is to answer a question for a guest of where should I go and when should I go. And by having this new flexible features, we’re able to really be able to do that.

So what’s next for us is that we’re going to continue to invest in this feature. On November 9, we’re announcing four new categories of I’m Flexible. There’s going to be some really cool features that we can show. So I hope you tune in. We’re also expanding the flexible date feature from six months to 12 months.

So now you can see when these really incredible properties available anytime in the next 12 months. And we’re going to continue to invest in this feature. And I think down the road, this will be a major way that people are searching on Airbnb, and it’s so important because, again, it allows us to balance supply and demand. Dave, do you want to take the second question?

[Dave Stephenson, Chief Financial Officer]

Yes. I think one thing to kind of step back and remember is that Airbnb strength has traditionally been cross-border and more urban. I mean, that’s traditionally where our business strength has been, right? Cross-border has been 50% of our business. The urban has been about 60% and yet our really strong Q3 results happened while even those two parts of the business are not yet returned to kind of pre-pandemic levels, right?

Cross-border still at 33%, the urban – high-density urbans at 46%. So it’s not quite back, but it’s growing nicely. So I think what you say about the pace of urban recovery is that, that will continue to be additive to our business and the strength that we’re seeing overall. I think what’s also interesting about the pace of the urban recovery is that the nature of it is even a little bit different. Historically, our top 10 cities in the world contributed approximately 11% of revenue and now the top 10 cities are comprising about 6%.

So it’s just getting more diverse, more spread in terms of where our distribution of travel is. So as urban comes back, I think it’s still going to be even a more broad spread version of the revenue across the world.

[Operator]

Our next question comes from the line of Jed Kelly from Oppenheimer. Jed, please go ahead.

[Jed Kelly, Oppenheimer]

Great. Thanks for taking my question. We’ve seen a couple of larger call them, property managers and urban accommodation providers start to scale up inventory that will probably use your platform for bookings. So Brian, can you just provide us an update on how you’re working with some of the larger property managers. And then in your opening remarks, you did call out some major companies on the work from anywhere trends. Is there any way for you to work closer to them and provide benefits to the workers?

[Brian Chesky, Co-Founder and Chief Executive Officer]

Yes. Thank you for the question, Jed. Yes, let me take both of these large property managers and work from anywhere trends and how opportunities to work with companies. So on the first one, though our platform is 90% of individuals, the 10% of our hosts or professionals are very important to Airbnb, and we continue to build new tools for them. And so this just past year alone, we’ve had 150 upgrades and innovations and around half of those happened for a host. And many of the upgrades we have also applied to the more professional host as well. And so we’re going to be showing off a number of features on November 9, and many of these are going to be innovations for professional hosts in addition to individual hosts.

So we’re still very focused in this area, and I continue to believe that we’re going to be growing really quickly. And just to give you an example, as Dave said, we’ve seen our fastest-growing areas of inventory in North America and Europe in nonurban areas. And certainly, professional hosts are a part of this. And I think they really love the amount of demand that we provide for them.

Now as far as the work from anywhere approach. Yes, I think this is a really exciting area. I mean, as we said, Amazon, Ford, PwC, Procter & Gamble are just the beginning of the number of companies that have offered a more remote policy. I think it’s safe to say that very few companies that have office workers are going to be asking those workers to come back to an office five days a week. And all you have to believe as that people don’t come back five days a week, maybe they come back four days a week, maybe they come back three days a week, maybe they had even more flexible policies. And all we have to do is believe that, to believe that Zoom is here to stay, to believe that work from anywhere is here to stay.

And so we’re starting to see a lot of companies certainly reach out to us. We don’t have anything to announce right now, but we are going to continually make it easier for people to be able to live anywhere and work anywhere on Airbnb and integrating with companies if that’s what it takes of course, would be something that we continue to do more of.

[Jed Kelly, Oppenheimer]

Thank you.

[Operator]

Our next question comes from the line of Colin Sebastian from Baird. Colin, your line is now open.

[Unidentified Analyst]

This is Reese on for Colin. I was just wondering if you could talk about kind of the trends you’re seeing between the growth in nights booked versus adoption of experiences? And is there any difference in the trajectory of recovery there? And then maybe just how your relationships with communities are doing? Thanks.

[Brian Chesky, Co-Founder and Chief Executive Officer]

Yes. I can take these. So obviously, the growth of our core business of homes has been very, very strong. With experiences, I really expected last year to be a breakout year for Airbnb experiences. And of course, the opposite happened. The pandemic put that product on pause.

That being said, it’s now been more than 1.5 years, and I feel like people can only stay home so many nights watching Netflix. And eventually, they want to get out of house. And I do think people want alternative things like restaurants, especially when they’re traveling. And Airbnb experiences are very popular amongst our guests. They actually love even more than homes statistically from a five star standpoint. In other words, more guests leave a five star review for experiences in the homes after they stay. So I’m very bullish on this product.

It’s been gradually ramping back up and reopening. We’ve seen strong growth over the last couple of quarters, and I’m expecting this to be a big area of growth over the coming five years or so. So that’s what we’re seeing with experiences. Now with regards to our relationship with communities, let me just start by saying this. Even before the pandemic, we worked with thousands of cities all over the world. You see we created this new category of travel, and we had to work with cities to educate them and work collaboratively with them to be able to really make sure everybody works best for these communities.

To give you a stat, we have today, collected $4 billion in hotel occupancy tax or transient occupancy tax. You can’t collect hotel tax without working with those cities and jurisdictions. So we’ve had really close relationships with them. And what I’ve seen in the last year is that the pandemic has actually been a bit of a reset for our relationship with cities. And reset probably in a good way because what we’re seeing is a lot of cities that we’re concerned with tourism in their markets are in a different concern now. Now over tourism the number of cities have to under tourism. The reduction of business travel, fewer international travelers crossing borders going into big cities means that many of these cities and destinations have revenue shortfalls and just general travel shortfalls.

And so what’s happened is we’ve had a lot of cities reaching out to us to collaborate. And in fact, we’ve done 100 partnerships with destination marketing organizations, around the world. And I think our new and flexible features where we can point demand to where we have supply also means we can point demand to cities that want it. And so I think this is a really exciting period for us to, really renew a great relationship with cities all over the world.

[Unidentified Analyst]

Great, thank you.

[Operator]

Our next question is from Brian Fitzgerald from Wells Fargo. Brian, please go ahead.

[Brian Fitzgerald, Wells Fargo]

Thanks guys. On the cross-border travel, I open up, we’re just wondering if you could comment on lengths of stay trends there. Our intuition is that people are going to get on a plane in the current environment, they probably want to amortize that across a longer stay. But just wondering what you’re seeing there. And then second thing on about the length of stay more generally. You spoke to 28-days plus, and just wondering if you could talk to what you’re seeing in terms of maybe a seven day stay becoming a 14-day and any trends there? And any thoughts on how the competitiveness of Airbnb increases versus hotels as one week stays, become two week stays.

[Brian Chesky, Co-Founder and Chief Executive Officer]

Yes. Why don’t I start with that very last question, Brian. And then, Dave, I can hand over to you. You can talk a little bit more about cross-border, its impact on length of stay and just the growth of maybe weekly stays is what I think Brian’s asking. But let me start with this question of the competitiveness of long-term stays.

It’s really quite interesting to think about how we started Airbnb. I started the company when I was 26 years old with two of my friends, and the category we entered was hotels. That was the incumbent industry. An industry that most people liked, and travelers have a lot of other options.

If you were to try to stay somewhere for two weeks, three weeks a month or multiple months, and let’s say you’re staying somewhere other than the city you live, what are your current options? There’s not a lot of players doing this. There’s a lot of friction. So we think essentially, the longer the length of stay, the more compelling it is to stay in a home. It gets very expensive to stay in a hotel for weeks at a time. And the longer you’re away from home, the more I think you want to be in a home. You want a kitchen, you might want a backyard, you want to be able to cook. You just want to feel like your home and you’re not like an outsider. And so I think that this is going to be a really big opportunity for us. And this is partly why I’m really excited about long-term stays or even stays that are for a week or longer. Dave, do you want to talk about some of the stats we’re seeing?

[Dave Stephenson, Chief Financial Officer]

Yes. We highlighted on the shareholder letter that 45% of our nights were from stays at least seven nights. And this is the trend that we’re seeing is that the length of stay continues to increase. The number of use cases that people find working with Airbnb in the same way that Brian just mentioned, it’s just a better way to travel for longer. You’re not going to want to stay in a hotel room for 28 nights, but those trends are continuing. And I don’t have anything specific to say about cross-border and the length of stay directly related to that. But just more broadly that the length of stay continues to increase. And to the extent that it does, it accretes to Airbnb.

[Brian Fitzgerald, Wells Fargo]

Great. Appreciated guys.

[Dave Stephenson, Chief Financial Officer]

Thank you.

[Operator]

Our next question comes from Naved Khan from Truist Securities. Your line is now open.

[Naved Khan, Truist Securities]

Great. Thank you. Two questions. Did you see any impact on the Apple iOS changes on your social ad campaigns? And then the second question I had is just around some news articles we saw that showed that you continue to work on technology to basically help onboard hotels. Maybe just talk about where it sits in your list of priorities.

[Brian Chesky, Co-Founder and Chief Executive Officer]

Yes. I can take both of those, Naved. Number one, just in Apple, their iOS changes. No, we’ve not seen any impact on Airbnb, and that’s not really the business we’re in. With regards to our efforts to invest in technology to onboard hotels. Let’s just talk a little bit about our strategy with hotels. Last year, we had to make some difficult decisions to put a number of initiatives on pause, like transportation and scale back some others. And one of the initiatives that we had to scale back a bit was our investment in hotels. That being said, hotels are still a very important part of Airbnb’s strategy. We believe that people come to Airbnb because we have something unique. We have unique host to offer something you can’t get anywhere else. And so we think that the majority of people come to Airbnb direct to book individual host.

That being said, we want to make sure that people come to Airbnb, they always find a place to stay. And sometimes we have network gaps. And we think that hotels are really great ways to fill a network gap. So when somebody comes to Airbnb, they can always find a place to stay. HotelTonight has been growing really steadily in the last couple of years. I’m very excited about the progress, and we’re continually investing in this area. Now it’s not as big a priority as our core business of supporting individual hosts, but we’re continually supporting them. We’re continually investing in this area.

[Naved Khan, Truist Securities]

Maybe just to follow up on that, Brian, would we be seeing hotels on the core Airbnb time in the future or anytime soon?

[Brian Chesky, Co-Founder and Chief Executive Officer]

Will we be seeing what?

[Naved Khan, Truist Securities]

Would we see hotels on core Airbnb at all?

[Brian Chesky, Co-Founder and Chief Executive Officer]

Yes. I mean, yes. And we have tens of thousands of other terms now on Airbnb, and I expect you to see more in the future for sure. And it’s just – it’s really just a matter of prioritization. Right now, we are focused on the most perishable opportunities the most perishable opportunities right now are scaling as quickly as possible to get as many hosts ready to host as many guests as possible. And so our big priorities are recruiting hosts, simplifying the guest experience, educating the world that would make certain be different, that’s hosting, and getting world-class service to getting our service to be at a world-class level. Those are our major priorities, but we are continually investing in hotels.

[Naved Khan, Truist Securities]

Thank you.

[Operator]

Our next question comes from the line of Deepak Mathivanan from Wolfe Research. Deepak, please go ahead.

[Zach Morrissey, Wolfe Research]

Thanks. This is Zach on from Deepak. Just first on ADRs, I know you kind of called out that the primary driver so far has been this kind of mix shift. But you also noted that you’re starting to see some price appreciation in certain high-demand areas. Just curious if you can kind of parse this out a little further. And is that trend kind of concerning to you in the context of Airbnb’s long-term growth?

And then second, just related to COVID, I know it’s very dynamic and hard to predict. But the restrictions seem to be generally easing, but we are seeing pockets of rising cases and some kind of impediments to travel demand. Do you see any kind of differences in the restrictions today and the impediment to demand behavior today versus six or 12 months ago? Thanks.

[Brian Chesky, Co-Founder and Chief Executive Officer]

Dave, do you want to take these?

[Dave Stephenson, Chief Financial Officer]

Sure. Let me start with the ADR. The trend that we saw in ADR late last year, the increase in ADR was almost exclusively driven by mix. And so that was the regional mix urban, nonurban mix, size of home. And then what we saw earlier in the year is some price appreciation as a larger portion of the ADR increase. And that increased a little bit further here in Q3, kind of the peak kind of summer travel season. And then what we’re seeing, as I said in Q4, is our ADRs are relatively stable with what they were in Q3.

Even with these elevated ADRs, again, the majority of the increase has been just on a relative basis due to mix. So there’s really no change in the price where there is some price appreciation. I think we still have a great value. We’re still able to give people, homes and stays that they find very valuable in terms of all the amenities they get. Maybe a larger place, more amenities, kitchen, more bedrooms, there’s more space to be. And so we think we continue to give a great value. And so we’ll continue to monitor it and be mindful of it. But I don’t think it’s an existential threat to us.

And then the second question is just rising cases, any differences versus the pandemic. I guess I think what we’ve seen is just a bit more resilience in guests being willing to travel around the world, right? There’s a little bit of – there could be pockets of variation depending on what governments frankly do in terms of opening up borders. And – but the general trend has continued to be more positive, more up into the right and more consistent. And I think people, even in the face of various strains of COVID continue to be wanting to travel, and they find that doing that on Airbnb is the best way to do it.

[Unidentified Analyst]

Great, thanks for the color.

[Brian Chesky, Co-Founder and Chief Executive Officer]

I’ll just add one last comment. We’re living in a really fast-changing world. And I don’t think we’ve seen the end of big existential changes in the world. And if you can’t predict the future, the best thing to do is adapt to it. And I think our business model is incredibly adaptable to whatever changes are to come.

[Operator]

Our next question comes from the line of Mark Mahaney from Evercore ISI. Mark, please go ahead.

[Mark Mahaney, Evercore ISI]

Thanks a lot. This is Ben on for Mark. So in the last 18 months, COVID has allowed Airbnb to really pivot their product priorities to refocus on the core business. As you look to next year, do you anticipate your investment priorities to change somewhat? Are you going to start focusing on stuff a little bit outside of your core business?

And then the second question, if I could. Just in the letter you talked about in relation to APAC, just the short-term rental restrictions as being somewhat of a drag on the recovery in that region. Are those new restrictions versus 2019? And how significant are they? Do you expect them to be a permanent drag? Thanks.

[Brian Chesky, Co-Founder and Chief Executive Officer]

Thanks for the question. Dave, do you want to take APAC and start with that and then I can be to talk about new investments.

[Dave Stephenson, Chief Financial Officer]

Yes. On APAC, we’re not anticipating that any short-term rental regulation changes as being a major negative drag on our business over time. We’re just mindful that there can be some variation in what governments are wanting to do, especially during this kind of COVID crisis time, and it varies by area. And we saw a little more restrictions in APAC than we did elsewhere.

[Brian Chesky, Co-Founder and Chief Executive Officer]

And then on your question of new investments. Here’s what I would say. I mean, we learned some very valuable lessons last year about focus. I remember once I was in college and my teachers told me, Brian, you can do everything you want in your life just not all at the same time. Yes, we certainly learned that less than last year. We had to scale back initiatives. But one of the benefits of all that, we took our very best people and we focused them only on a few problems, including recruiting more hosts, simplifying the guest journey, improving a world-class service and educating the world about Airbnb.

And as we’ve done that, we’ve not only reduced costs in the business, but we’ve actually been growing even faster. And so this year has been a year of a relentless innovation to perfect our core service nearly one innovation every 48 hours on our core service. That being said, we are going to do new things Airbnb. We created this category of travel. And I think there’s a lot more categories that we can create in Airbnb. And so we’ve done two releases this year. We did one in May and one in November, and we’re going to do a couple more again next year. And so November will not be the last time you hear from us. You’ll hear from us again in the spring, where we’ll introduce a summer release for the summer, and we’re going to have some really big new offerings as well.

And again, the really big areas I’m excited about that we’re currently doing, short-term stays. I think we’re realizing that we are just scratching the surface of this incredibly huge opportunity as home sharing continues to grow. Long-term stays is an entirely new category for Airbnb. And I think now that people are getting comfortable crossing borders, can get outside and getting gathering with other people, experience will be a big opportunity. But this is just the beginning. We have many more innovations in front of us, and we will continue to use our creativity to design new possibilities for people.

[Mark Mahaney, Evercore ISI]

Thanks, Brian. Thanks, Dave.

[Operator]

We currently have no further questions. So I will now hand back over to Brian Chesky for any closing remarks.

[Brian Chesky, Co-Founder and Chief Executive Officer]

All right. Well, thank you all for joining us today. Just to recap everything 2021 for Airbnb has been a year of relentless innovation. We launched more than 100 upgrades already this year. And next week, we’re going to announce 50 more. That’s 150 upgrade innovations this year. Our design-driven approach means that we’re constantly improving our service to adapt to this changing world. And the world will continue to change because for the first time ever, millions of people can now travel anytime, anywhere for any length and even live anywhere on Airbnb.

And this is a travel revolution. So we’re just getting started. We have many more innovations to share with you, starting with some exciting announcements next Tuesday. So thank you all for joining today and we’ll see you next week.

[Operator]

This concludes today’s call. Thank you for joining, and I hope you have a lovely rest of your day. You may now disconnect your lines.