Airbnb Inc. (ABNB) Q1 2022 Earnings Call Transcript

Airbnb Inc.  (NASDAQ: ABNB) Q1 2022 earnings call dated May. 03, 2022

Corporate Participants:

Ellie Mertz — Vice President of Finance and Investor Relations

Brian Chesky — Co-founder and Chief Executive Officer

Dave Stephenson — Chief Financial Officer

Analysts:

Colin Sebastian — Baird — Analyst

Bernie McTernan — Needham and Company — Analyst

Mario Lu — Barclays — Analyst

Brian Nowak — Morgan Stanley — Analyst

Naved Khan — Truist — Analyst

Stephen Ju — Credit Suisse — Analyst

James Lee — Mizuho — Analyst

Jed Kelly — Oppenheimer — Analyst

Mark Mahaney — Evercore — Analyst

Justin Post — Bank of America — Analyst

Ron Josey — Citi — Analyst

Lee Horowitz — Deutsche Bank — Analyst

Presentation:

Operator

Good afternoon, and thank you for joining Airbnb’s Earnings Conference Call for the First Quarter of 2022. 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, VP of Finance. Please go ahead.

Ellie Mertz — Vice President of Finance and Investor Relations

Good afternoon, and welcome to Airbnb’s First Quarter of 2022 Earnings Call. Thank you for joining us today. On the call today, we have Airbnb’s Co-Founder and Chief Executive Officer, Brian Chesky; and our Chief Financial Officer, Dave Stephenson. Earlier today, we issued a shareholder letter with our financial results and commentary for our first quarter of 2022. These items were also posted on the Investor Relations section of Airbnb’s website.

During the call, we’ll make brief opening remarks and then spend the remainder of time on Q&A. Before I turn it over to Brian, I would like to remind everyone that we will be making forward-looking statements on 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 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 will pass the call to Brian.

Brian Chesky — Co-founder and Chief Executive Officer

All right. Thank you very much, Ellie, and good afternoon, everyone. Thanks for joining. I’m excited to share our Q1 results with you. Now despite the pandemic, the war in Ukraine and macroeconomic headwinds, Q1 was another incredible quarter. We exceeded 100 million Nights and Experiences Booked for the first time ever. GBV was $17 billion, which was 73% above Q1 2019. Revenue was $1.5 billion, exceeding Q1 2019 by 80%. Net loss was $19 million. Now this is a significant improvement in the same periods in 2018 and 2021.

Adjusted EBITDA was $229 million. Now this is our first positive adjusted EBITDA in Q1, and this represented adjusted EBITDA margin of a positive 15%. Now this is compared to a negative 7% a year ago and a negative 30% in Q1 2019. And finally, we generated $1.2 billion of free cash flow in the quarter. This was also an all-time high. And what these results show is that two years into the pandemic, Airbnb is stronger than ever before. Now why is this? Well, millions of people are now more flexible about where they live and they work.

And as a result, they’re spreading out to thousands of towns and cities, and they’re staying for weeks, months or even entire seasons at a time. Now through our adaptability innovation, we’ve been able to quickly respond to this changing role to travel, and these incredible results were driven by a number of positive business trends. First, guests are booking more than ever before. In Q1, gross nights booked grew 32% compared to Q1 2019. And this is despite the pandemic, the war in Ukraine and macroeconomic headwinds.

And people are also more confident booking travel further in advance, and we’re seeing strong demand for summer bookings and beyond. Second, guests are returning to cities and they’re crossing borders. So our guests continue to travel domestically and continue to go to rural destinations at Airbnb, we are also seeing guests return to cities and cross borders at or even above pre-pandemic rates. Third, guests are also staying longer, even living on Airbnb.

Now while short-term stays rebounded strongly in Q1 2022, stays of a month or longer continue to be our fastest-growing category by tripling compared to 2019. In nearly half of our nights booked in Q1 were for stays of a week or longer in one in five nights booked were for stays of a month or longer. So the world is clearly becoming more flexible about where people can work. And getting ahead of this trend, last week, we announced that Airbnb employees can live and work anywhere, and we’ve designed a way for them to live and work around the world while collaborating in a highly collaborative way and experiencing the in-person connection that makes Airbnb special.

Now fourth, our innovations are inspiring guests to discover thousands of new places. In 2021, we delivered more than 150 upgrades across every aspect of our service. And among these upgrades was the innovative I’m Flexible feature. Now the I’m Flexible feature has now been used more than two billion times, two billion. And guests who use I’m Flexible are more likely to book homes in less popular locations. This is really important because this allows us to point demand to where we have supply and it helps distribute guests more widely in communities all around the world.

But we’re not stopping there. On May 11, next Wednesday, we will be announcing the Airbnb 2022 summer release. This is a new Airbnb for a new world of travel. With a completely new way to search, guests will be able to discover millions of unique homes in Airbnb, they never thought to search for. And when they book, guests will have the confidence knowing that Airbnb has their back each step of the way. And so you can watch this announcement right on our home page, next Wednesday at 9:00 a.m. Eastern Standard Time, nine a.m. Eastern Standard Time, next Wednesday, right on our home page. I hope you can tune in because I’m really excited about what we have to share.

And then finally, our community — our host community continues to expand. We see destinations the strongest demand, showing this most supply growth with nonurban active listings actually growing 15% globally. And we’re also showing an increase in total urban supply as demand returns to cities. And we believe that the upgrades we announced last year, including our new Host onboarding flow and AirCover, are supporting this growth and enabling success for a new Host. So to recap. We had our best Q1 ever.

Nights and Experiences Booked and GBV were a highest ever. Revenue and adjusted EBITDA were records for Q1, and we generated more than $1 billion in free cash flow in the quarter. With these results, Airbnb is stronger than ever before. Now before I go to questions, I just want to talk for a minute about our efforts in Ukraine. Because over the past few months, millions of lives have been devastated by the war. And when the crisis broke out, we knew that our platform can help refugees fleeing the crisis.

And within four days of the invasion Ukraine, we announced that Airbnb.org would provide free housing for up to 100,000 refugees fleeing from Ukraine. And over 30,000 hosts have already signed up to open their homes to refugees for free or for a discount. But then something even more remarkable happened, people started booking homes for hosting Ukraine. Hosts, they never intend to stay with, just to provide relief aid. And soon, more than 170,000 people joined in, and they booked approximately 600,000 nights booked in Ukraine.

And because we waived our fees, $20 million were directly to host in Ukraine. And I think this speaks to the power of our community. And they are a reminder that in the world of darkness and in a world of destruction, kindness still exist. And so I’m really proud of our business results this quarter. I’m also proud of how helpful we’ve been able to be to thousands of people in need. And with all of that, Dave and I look forward to answer your questions.

Questions and Answers:

Operator

[Operator Instructions] The first question comes from Colin Sebastian with Baird. Please proceed.

Colin Sebastian — Baird — Analyst

Thanks and Good afternoon. Congrats on the strong quarter. A couple of questions for me. I guess, first off, Brian, drilling down a bit on some of the broader use cases that emerged through the pandemic. At a high level, the trends clearly sounds very good. I’m hoping you could unpack that a little bit more in terms of the sustainability of longer stays and other use cases in markets that are furthest along in the recovery where offices are reopening and lives are sort of getting back to normal, if you could able to break that down a bit more. And then secondly, on the plans for advertising and marketing, you’re keeping that, it looks like fixed as a percentage of revenues, so a little bit higher spend on marketing and advertising. Can you talk about that? Is that with all the product updates, the rebound in travel, maybe the competitive landscape? If you could talk about the strategy with respect to the advertising and marketing. Thank you.

Brian Chesky — Co-founder and Chief Executive Officer

Yes, excellent, Thanks. Colin. So why don’t I answer these at a high level? And Dave, feel free to jump in with some more specifics. So let’s start with the question of, Colin, some of the broader use cases you talked about. And let’s back up. So when we started Airbnb, it was really just a way for people to book a home for just a few days at a time. But even before the pandemic, actually, long-term stays of a month or longer were our fastest-growing category or segment of trip by tripling. Some of these were already growing very quickly before the pandemic. And I think what the pandemic did is, I think, it accelerated the adoption of longer-term stays in Airbnb by hard to say how many, but certainly by years. And I think it’s important to understand why this is happening. Right now, what’s happened is that for millions of people, they don’t need to go back to an office five days a week.

And the vast majority of companies are not requiring employees to come back to an office. Many have moved to a hybrid or entirely remote model. And I think that what we’re going to see going forward is we’re going to see more and more flexibility because I think companies ultimately want to retract the very best people and the best people are going to be everywhere. And so, so long as we believe that people don’t need to go back to an office five days a week, millions of people, then we believe in a world of more flexibility. So long as we believe in a world where people will continue to dial in on Zoom, we will, again, believe in a world of more flexibility. And so what we are going to continue to see, we think, over the coming years as continued and sustained growth for stays of longer than a month and stays of longer than a week. I don’t think this is a temporary phenomenon. I think that the genie’s out of the bottle and flexibility is here to stay. And I think flexibility after compensation will probably be the most important benefit that an employer can offer.

And just to give you a small anecdote, last week, last Thursday, we announced that Airbnb employees can live and work anywhere in the world. The response internally was great, but even more impressive with the response externally because our career page was visited 800,000 times after that announcement. And so I think that this just speaks to the durability of this use case, and I think that it’s going to continue. Now with regards to advertising, I think it’s just important that I share a little bit of a recap of how we think about marketing. And Dave, feel free to talk a little more detail. So we’ve, Colin, a little bit, obviously, different approach to marketing and advertising than our peers. We take a full funnel approach to marketing that combines PR, brand marketing and performance marketing. And we’re not really focused on buying customers. We’re focused primarily in investing in our brand and educating the world about what makes Airbnb unique. So we think of marketing primarily as education.

And I think this explains why 90% of our traffic or more is direct or unpaid. Airbnb is a noun or verb used all over the world, and it was really not advertising, but PR and word-of-mouth that built our brand. And just to give you an example, and — since the pandemic started, there have been more than one million articles written about Airbnb. 55% of articles that used to have the word travel in it, also have the word Airbnb in it. So it’s pretty — so advertising is really a form of supplemental education for us. It’s not the core driver of growth. We think the core driver of growth, Airbnb is innovation. It’s about building a product that people love. And the role of marketing isn’t to buy customers. The role of marketing for us is to educate people about our new features and our new offerings. Dave, do you want to — I don’ know if you want to go into a little more detail about advertising.

Dave Stephenson — Chief Financial Officer

I think you’ve covered it incredibly well. I mean we’re very proud of the approach to marketing. This — the full funnel approach is working probably well for us. As you said, we are actually increasing our marketing dollars. We’re just keeping the marketing expenses as a percent of revenue relatively consistent to the level we had in 2021, and we think it’s being really effective for us.

Colin Sebastian — Baird — Analyst

Thanks very much.

Brian Chesky — Co-founder and Chief Executive Officer

Thank you.

Operator

Thank you. The next question comes from Bernie McTernan with Needham & Company. Please proceed.

Bernie McTernan — Needham and Company — Analyst

Great. Thank you so much for taking my question. I guess, first, just wanted to get any insights on how supply and demand are growing relative to each other versus what was happening before the pandemic. So maybe even just utilization, how it’s trending, how it was trending before the pandemic and how it’s trending now? And then secondly, on capital allocation, with over $1 billion of free cash flow in the quarter, $9 billion of cash on the balance sheet. Can you remind us on just your thoughts on if there’s any sort of capital allocation, whether it’s returning it to shareholders, M&A, continuing to invest in the product, would love to hear your thoughts there.

Brian Chesky — Co-founder and Chief Executive Officer

Great, Bernie. So why don’t I do this? Well, let me just talk at a high level about the first question. And then, Dave, why don’t you take both questions at a more specific level. So let me just say at a high level around supply and demand. Number one, I think we’re going to have plenty of supply this summer for the demand. We’re expecting a lot of demand for the summer. But we are not supply constrained, any night of the year, not even close at a global level. The challenge of most travel companies is that a lot of people try to go to the same place, the same city on the same day and cities essentially like travel OTAs typically get sold out. So like a lot of people try to go to New York City on New Year’s Eve and there’s only so many places to stay in New York and so you tend to get sold out. Now key is Airbnb. We’re in 100,000 towns and cities all over the world. And we see a couple of phenomenon. I think it’s important to point out. The first thing we see is that fastest-growing supply markets are actually our fastest growing demand markets.

So as the market experiences more demand, more supply gets unlocked. And I think the reason why is primarily because the vast majority of host of Airbnb are individuals. The vast majority of new host get a booking within three days. And when a regular person gets a booking and the booking might be $300, $400, $500, they tend to tell their friends about it. And so as more people get booked, they create more word-of-mouth and this unlocks more supply. So we have a global network where demand in a sense stimulates more supply. Additionally, the I’m Flexible feature is critical because it allows us to point demand to where we have supply. So if somebody types in Paris on June one to five, we are limited to the properties in Paris on those dates. But if somebody says, we’re flexible, we can point them to other dates in Paris that are a little lower season or other towns around Paris that have available supply. So I think these are really important. But Dave, I don’t know if you want to go into a little more specifics about either utilization and also kind of the capital allocation theory.

Dave Stephenson — Chief Financial Officer

Yes. Just to double click on a couple of areas. I mean, one is we just have more supply than we’ve ever had in our history. And as Brian kind of mentioned on the call, the fact that we grow more supply in the areas that we have the greatest demand, like nonurban active listings grew 21% in North America and 15% globally, it’s the area where it’s kind of self-healing, where we have the demand is where we end up having the supply. And this redistribution is also incredibly important because we have listings in all types of markets. We’re not globally constrained at any given night which is different than if you only had supply in one type of market. And then when demand spikes in that particular more narrowing market type like vacation rentals, you don’t have anywhere else to distribute demand. But because we’re all around the world, in every kind of community, we end up with the benefit of being able to redistribute demand to other places.

So I think that’s been incredibly strong for us. Regarding the capital allocation, yes, we have $9.3 billion. I mean I think as a CFO and the continued pandemic having a strong balance sheet continues to allow us to sleep well at night. We have noted previously that we’re going to use about $1 billion of our cash to pay for employee tax obligations as they exercise their shares. And so that will be a use of cash this year. And beyond that, we’re continuing to be in growth mode. We will continue to have a balance sheet that enables us to be ready to invest, win and where we find it is appropriate. It does enable us to do M&A in the future if desired, although M&A is not our primary driver of growth, we still plan to grow organically as our primary means. But we’ll continue to evaluate our balance sheet use and make sure that we are deploying capital appropriately.

Bernie McTernan — Needham and Company — Analyst

Great, Thank you both.

Operator

Thank you, The next question comes from Mario Lu with Barclays. Please proceed.

Mario Lu — Barclays — Analyst

Great. Thanks for taking my question. The first one is for Brian. It’s a high-level strategic question. So now that the total room nights has fully recovered versus 2019, how do you decide when is the right time to extend the company’s focus to other potential growth areas such as experiences, hotels and flights versus continuing to hone in on the core product?

Brian Chesky — Co-founder and Chief Executive Officer

Great. Yes. So let me take that. So thanks, Mario. So basically, we learned some really important lessons during the pandemic. I started this company with my two friends when I was 26, I just turned 26 and I started this company. And we had this enormous amount of success. And one of the things that happens when you’re a first time in your enormous amount of success is you do something well, and you think you can kind of do everything well. And we pursued a lot of things before the pandemic. And I remember growing up at a teacher said, you can do everything you want in your life, not at the same time, though. And I think that when the pandemic happened, there was a silver lining to the crisis for us, which is we got really focused. We took all of our best people, we paused a lot of new initiatives. And we put our very best people on the most important problem for the company, which was stimulating core business.

But I think what we saw is not only did that happen, but the total addressable market for short-term stays is bigger than we ever imagined, and we are also able to extend it to long-term stays. Our general approach now going forward is to be incredibly focused. We’re going to absolutely be pursuing new opportunities, but we want to focus on the most perishable opportunities right now. And right now, the most perishable opportunity is this. Last year, we had what was probably the travel rebound in the century. Certainly, I’ve never seen travel rebound like last year since I started Airbnb. And I think this year is going to be even bigger than last year because last year, it was a little bit tempered by the Delta and other strains. And I think what you’re going to see this year is the true pickup of demand and cross-border travel. So we’re focused on this year is the perishable opportunity of trying to capture as much market share as possible and get as many people who haven’t traveled a couple of years to try Airbnb because for many people, Airbnb is no longer an alternative way to travel, it’s the default. With that being said, we are absolutely looking at new opportunities and new services.

Nothing we paused from the pandemic that is out of — is off the table to resume. And Airbnb experiences, for example, is a big area of investment in the coming years. And so we’re starting to ramp up that product this year, I think more — even more next year, you’re going to see some major new offerings around Airbnb experiences and a significant demand. And I think that some of our best ideas are ahead of us. I’m 40, and I don’t want to feel like the best ideas we had were in my 20s or 30s. So I think that there’s some really big opportunities going forward. But the name of game is focused, just a few things at a time, the most perishable opportunities get as much scale as possible to get that scale into an ecosystem and then you can do a variety of line extensions for guest and for host.

Mario Lu — Barclays — Analyst

Great. And then just one on the travel demand post the summer months. I know you guys talked about the fourth quarter being a little bit higher than historical, but how do we compare that versus the 30% figure that you provided in terms of the summer travel season? Is it higher or lower? Anything you can say in terms of the demand for the summer?

Brian Chesky — Co-founder and Chief Executive Officer

Yes, Dave, I’ll let you take that.

Dave Stephenson — Chief Financial Officer

I’d say that with the 30% in the summer periods, we’re seeing consistent — that strong or stronger on a relative basis in Q4. I think that’s the fact that people are willing to plan out into the fourth quarter that far in the higher rates than they’ve done in the past. It just shows the resilience that people have for traveling. So now the Q4 demand is as strong relative to the Q3 demand or stronger.

Mario Lu — Barclays — Analyst

Great, Thank you.

Operator

Thank you. The next question come from Brian Nowak with Morgan Stanley. Please proceed.

Brian Nowak — Morgan Stanley — Analyst

Great. Thanks for taking my question. Brian, I have a couple for you. The $2 billion — $2 billion — the two billion I’m Flexible searches, that’s up quite a bit from $800 million last time around. I guess I’d be curious to hear about what are you seeing when people use that I’m Flexible? Is that leading to higher conversion? Is that leading to higher utilization of some radius of the search? Sort of what are you seeing that sort of driving that quick inflection in that product? And then to go back to your earlier answers about your innovation in your 40s now, what are still the areas on the host front where you see sort of low-hanging fruit opportunities to improve it to drive more host growth?

Brian Chesky — Co-founder and Chief Executive Officer

Yes, those are great questions, Brian, and good to talk to you again. So yes, let me start with guests and let me then go to host. So you’re right. I think that — I do [Indecipherable] by saying that last year, we launched I’m Flexible. The reason we launched it is we saw more people were flexible. And the challenge is this for 25 years, travel search has basically been the same. There’s a search box. And the search box ask you where you’re going and it presumes that you know where you’re going. In fact, you have to come to these websites for intent. And then it ask you, when are you going? And so most the OTAs aren’t really in the business inspiration. They’re in business of converting traffic into bookings. And this is good, but we always thought this — the Holy Grail of like online travel was to inspire people about where to go.

Now the results of I’m Flexible has exceeded our expectations. It’s been used two billion times and for a travel product to be used two billion times and people only use the trial product typically a couple of times a year is pretty unusual. So what are we seeing the results? I think the primary thing we’re seeing with I’m Flexible is we’re seeing a very strong amount of engagement with I’m Flexible people see a lot more properties in a lot more markets. We’re seeing people book properties outside of a lot of the popular tourist destinations, and we’re seeing an ability to redistribute travel demand beyond the top popular hotspots like Rome, Paris, Las Vegas, New York, Los Angeles. So that’s really the most important thing that I’m Flexible can do. I’m Flexible can be in the inspiration game and point demands where you already have supply.

And so our measures of success are how often do people come back to the website, how many properties do they wish list, how frequently they are engaged in the product on the inspiration side and on the demand side, how well are you pointing demand to where we have available supply rather than just kind of being at the mercy of wherever they think they want to go and when they want to go when they come to Airbnb. And so I think that what you’re seeing in the Q1 results is that clearly, the product is working, because I think that I’m Flexible as a feature has helped drive a fair amount of that growth. Now with regards to the host front, you’re right, it’s very important that we continue to innovate on the host side. Last year, we made a number of improvements to the host side of our product.

Number one, our general principle is the easier you make something, the more people do it. That’s a really basic principle of the Internet. If you make something easy, you reduce friction where people do it. In hosting, the easier we make it, the more people become a host. So what we did last year is we reduced the number of steps to being a host to 10 easy steps. We added a new product called Ask a Superhost. I think 170,000 perspective hosts have used the products so where they have a question, they can ask one of our very best host. And then probably most importantly, Brian, last year, we launched AirCover for host. AirCover provides $1 million protection against property damage, $1 million personal liability coverage, and it’s free. We do not charge anything incremental to our transaction fee, and we’re the only company in travel that offers this for free, all these feature sets to our host.

Now going forward this year, we have a number of new innovations that I’m really excited about. I’m not going to go into all the details, I’d like to kind of save it until we announce it, but I’ll stay at a high level. We are looking at features that bring more people into hosting ecosystem. So we want to provide even more ways to make it easier for host to list. We want to provide more support for them to make it easier to host and we want to provide even more kind of control, so people can decide who sees their property, when it’s available, things like that. So we have some really exciting announcements on May 11. You’ll hear some interesting features that are going to be launching. And then we’re also going to have a product release later in the year in November as well. So we’ll have a couple of big updates on those two fronts. But again, it’s all about making hosting easier and making it even more appealing for people who aren’t host to become host. And if we can do that and make cost a mainstream, that will fulfill our growth for years to come.

Brian Nowak — Morgan Stanley — Analyst

Great, Thanks brian super helpful.

Brian Chesky — Co-founder and Chief Executive Officer

Thank you.

Operator

Thank you,The next question comes from Naved Khan with Truist. Please proceed.

Naved Khan — Truist — Analyst

Hi, Thanks for that. A question for Dave. So Dave, last time around you kind of set expectations for ADRs to be down for the year in aggregate. Is that still where you expect to be? And then what are you baking in, in terms of this new product release that’s coming up next week?

Dave Stephenson — Chief Financial Officer

Right. On ADR, what we’ve shown in the past is that ADRs are up substantially from where they were back in 2019. So they were up 37% year over three years. And what we saw throughout the time in 2021 was that by Q4, about half of that ADR increase was driven by just mix. So regional mix, like North America and Europe, and the type of home, so non-urban whole home. And so mix was driving about half of the price appreciation. And then the other half was driven by price appreciation itself. So about half and half on the drivers or ADR. Here in Q1, price appreciation has become a larger percentage overall of the driver of ADR, and mix has been a little bit less than half. So it shifted even a little bit more. So what we’re going to see, and we’ve shown this in the outlook is that Q2 of this year, ADRs will be relatively flat with Q2 of the prior year.

And so that will give you a sense that ADRs were remaining elevated, both due to mix and due to price appreciation. We think that they will likely moderate throughout the back half of the year as mix continues to adjust more towards cities, more cross border, which have lower average daily rates, but price appreciation has remained to be high and stickier. And so I think the level of decrease in ADR, I think, will be maybe lower than what we anticipated at the beginning of the year. And then I think — I don’t know, give me more on your question around new product introductions that we’ll be talking about next week? We’ll give you those details in May.

Naved Khan — Truist — Analyst

Just what are you making in terms of contribution? No, just the contribution — does your outlook can compare to any contribution from those products?

Dave Stephenson — Chief Financial Officer

Yes. I mean our outlook for Q2 clearly includes a lot of the results from the investments we’ve made to date, and we’re very bullish on these continued improvements to continue to drive the strong results that you’ve seen. So we’re not giving kind of guidance out beyond Q2 at this time.

Naved Khan — Truist — Analyst

Got it. Thank you.

Operator

Thank you, The next question comes from Stephen Ju with Credit Suisse. Please proceed.

Stephen Ju — Credit Suisse — Analyst

Okay. Thank you. So Brian, the rising consumer demand for longer-term stays has been something you’ve been highlighting in terms of a fundamental change in behavior for some time now. So — can you share with us how the reception from the host has been in terms of their willingness to accept longer-term stays versus the more traditional shorter burst because I guess what I’m trying to get at is whether there’s any sort of extra push you guys may need to do in order to enable that longer duration supply with the six million hosts you have now? Or is this just a matter of demand, as you say, lighting up the supply? And I guess, second, I get that things are pretty depressed right now. But going back to the world pre-pandemic, like what were some of the bigger corridors of travel in Asia so we can start thinking about what the shape of the recovery there can be?

Brian Chesky — Co-founder and Chief Executive Officer

Yes. Thank you very much, Stephen. Now yes, so let’s start with rising demand for long-term stays. What has been the reception of host? Now, this is actually one of the most interesting point, I would say, which is I think when we really started looking at this category, my assumption was it would be a different type of host, right? Some host wanted to list their place for short-term basis and other different host wanted to list their properties for a long-term basis. And this is what you say — see on Craigslist, right? There’s a short-term stay category, and there’s apartment categories and they’re not the same people. And Airbnb is totally different. The vast majority of host on Airbnb, who initially list their homes for a short-term basis have now included a monthly stay discount. And that’s critical. So we have a large percent of people to have a monthly stay discount or are available to host on a long-term basis. So I think that’s the most important thing, I would say, which is that they obviously are interested in it.

Now why are host interested in this? Well, there’s a number of reasons. One is seasonality. Some people live in highly seasonal areas. Where on high season, they want to rent by the night because they have a really great yield, but during low season, they held low occupancy, so they’ll move towards the month. In some markets, in urban markets, there are some restrictions on the number of nights you can rent on a short-term basis below 30 days, but they don’t have restrictions on 30-plus days. So for the most part, what hosts long-term stays as is a way to increase their annual occupancy, and they generally want to go nightly to get as many bookings as possible, but during low season or where there’s limits they go to monthly and they’re really the same host. Now there are some hosts that only do short term. There are some hosts that only do long term, but what we see as generally open-mindedness from most host to offer bulk. And the great thing about our product is you hardly had to do anything different to offer long-term stays. Having long-term discounts is key.

There’s some new amenities, having verified Wi-Fi is [Indecipherable] if you’re going to live someplace. So there’s a number of like tactical things. But I think, generally speaking, the product as it exists, work for short-term or long-term stays, the vast majority of hosts are open to it. So the answer is they’re very receptive. Now I think your second question was what were the biggest corridors in Asia? Well, yes, so let’s start. Asia is a highly cross-border market. Let’s kind of break it out, Asia Pacific or start actually with Australia, which is, of course, part of Asia Pacific. Australia is a primarily outbound market, and it’s very much a cross-border international market because obviously, Australia is very much in the kind of [Indecipherable]. And so we’re seeing a real rapid recovery in our Australian demand business. Japan has historically been an inbound business and a lot of our demand in Japan has come from other countries. That is starting to see some uptick, but that’s going to take a little bit of time.

China is primarily an outbound business. People go to China, but primarily, they travel in lead China and they go to other communities especially around Asia. And what we see in Southeast Asia, primarily is these are absolutely inbound and outbound markets. They’re very much cross-border. So I guess the high level is the vast majority of the markets in Asia Pacific are cross border. A lot of the travel is intra-Asia travel. There’s a fair amount of travel, though, where it’s inside and outside of Asia. And I’m very, very optimistic about the ability of our Asia business to more than fully recover because what we’ve seen is the longer people can travel, the more pent-up demand there is. I don’t think travel ever is going to go out of style. People are going to continue to travel. And so I think that we’re very, very optimistic that Asia is going to follow the recovery curves of Europe, North America and Latin America just on a little different time scale. And sorry, just to give you one step, just to give you a couple of steps on the first question, 87% of all available listings on Airbnb except long-term stays. 52% of host offer a monthly discount, and these discounts are 85% of our long-term stays.

Stephen Ju — Credit Suisse — Analyst

Thank you.

Operator

Thank you, The next question comes from James Lee with Mizuho. Please proceed.

James Lee — Mizuho — Analyst

Great, Thanks for taking my question. Two here. Just curious, is inflation having an impact on consumer behavior, maybe for example, consumer trading down from hotels to home accommodation? And also in terms of market share within home accommodation, as you see mix shift to urban markets, where you have strength in supply how that compared versus your peers who may be more nonurban focused? Thanks.

Brian Chesky — Co-founder and Chief Executive Officer

Yes. Maybe why don’t we do this, Dave, why don’t I answer a high level of the second question because I just wanted to share a point about our urban business. And then maybe you can go into the details about both the inflation, impact on consumer behavior and kind of how we’re comparing to our peers in urban markets. James, the thing I would just say about our business is I think that our business is uniquely resilient in a uniquely adaptable model. And the reason our model is adaptable is because we’re not just the U.S. business. We’re not just a European business. We’re a global business, and we’re strong in Europe, North America, Asia, Latin America, Africa, we’re global. We’re in 220 countries and regions, one of those global companies in the world. We’re not just a vacation rental business, more vacation rental markets. So our bread and butter is urban. Cross-border was really how we got our start.

So we’re very much a urban, a rural, a vacation rental and an off the grid. We even have homes totally off the grid. We have homes that are $20, $30 a night and tens of thousands of dollars a night. So we’re really at all price points. We had catered to families and individuals. So we have nearly every type of home at every price point in every type of space and nearly every type of community around the world, and so I think that we’ve been able to be uniquely resilient. And the other thing I would just say about our urban market business is we’re seeing record long-term stays. I’m doing this call, for example, from New York City and at Airbnb, where I have for a month. And we’re seeing in New York City, for example, a huge uptick in long-term stays because a lot of people have to come here working remotely for months at a time. So that’s just a little bit of how we think about it. But Dave, I’ll hand it over to you and go into a little bit more detail.

Dave Stephenson — Chief Financial Officer

Yes. I mean, we’re just not seeing price appreciation impact our business negatively. We had our strongest quarter ever. We have even stronger demand for Q3 and Q4 than we’ve ever had. And I think Brian hit right on the head, because we have every type of home and every type of community, everything from budget, each shared homes to luxury homes, people can make a choice about what kind of property gets their particular budget and their needs. And so I think it’s that strength of diversity of product that will continue to support our business going forward. And then I think you also hit on it, which is this mix shift to urban markets, which has traditionally been our strength at Airbnb. When you compare it to others, who don’t have the same amount of supply and capabilities built in those cities, it’s going to give us kind of a further tailwind. And really, what we’re seeing right now is continued strength of the domestic business that was up 65% versus 2019, strength in our nonurban business that was up 80% versus 2019, Q1 ’19, and that remains incredibly strong. And now we’re seeing the mix shift towards urban markets back towards 2019 and the cross-border back to 2019. And so I think that tailwind is going to continue to help our business going forward.

James Lee — Mizuho — Analyst

Great, Thank you.

Operator

Thank you, The next question comes from Jed Kelly with Oppenheimer. Please proceed.

Jed Kelly — Oppenheimer — Analyst

Hey, Great. Thanks for taking my question. Just thinking about on how higher interest rates in like a potential recession, how do you think that would impact your supply and then just thinking about the top line for the back half of the year, with APAC opening up and more cross-border, more urban, do you think revenue or, I guess, bookings will be driven more by volume or by ADRs? Thank you.

Brian Chesky — Co-founder and Chief Executive Officer

Yes. So why don’t I take the first question about higher interest rates or recession’s impact on supply, and Dave can take the second question. Jed, no way to know for sure on your question, but I’m pretty sure I have a sense of it, Airbnb, we launched on August 11, 2008. And so you’ll remember what the world was like in August 2008. And we really got going January, February, March of 2009 in the depths of the Great Recession. And the reason that Airbnb initially grew was that people were having trouble paying their rent, having trouble keeping their homes and people turned to Airbnb to list their homes. And what we generally see is in recession, people change their behavior. And they change their behavior based on kind of price considerations. And so we’ll generally expect in a recession, if that were to happen, is that probably more people would turn to hosting. That will be number one. So that we would expect. And number two, travelers would probably become more budget conscious and that would probably have a benefit to Airbnb as well. Now the downside, of course, the recession is often times fewer people travel. But again, I think we’re a pretty resistant business, whether its economy is good or bad, we’re a pretty adaptable model. So that’s what I would expect on the supply side. That the more difficult the economy is, the more people are going to need supplemental income and a handful of them will turn to hosting. Dave, I’ll hand it over to you.

Dave Stephenson — Chief Financial Officer

Yes. And just to double-click on that. I think in a recessionary environment, if people are more constrained on the dollars, they have to spend to travel, therefore will come back to Airbnb because we’re a better value in that travel. And going back to the earlier point, we have all types of price points, budget deluxe and consumers can figure out what meets their best budget needs. And so I think it actually — we are a better option than any other alternatives in recessionary environment. And then in terms of the back half of the year expectations, the revenue will be driven more by volume than ADRs. We give our outlook on ADRs for Q2 of being flat year-over-year. They may moderate a little bit in the back half depending on mix. But I think that the biggest driver of revenue may be outperforming current expectations would be maybe further strengthening of the European business or acceleration of that maybe normalization of cancellation rates across the globe could also be a tailwind. APAC coming back more strongly, more quickly will certainly help the results. But I don’t think it will be the major driver this year. North America and European travel is still just such the large percentage of our business at the moment. APAC will be super important over the long term, but less of an immediate driver here in 2022.

Jed Kelly — Oppenheimer — Analyst

Thank you.

Operator

Thank you, The next question comes from Mark Mahaney with Evercore. Please proceed.

Mark Mahaney — Evercore — Analyst

Hey, Brian, I want to applaud you, by the way, for your efforts with the Ukraine. You came up with a creative and direct way for people to help out. So I applaud you for that.

Brian Chesky — Co-founder and Chief Executive Officer

Thank you.

Mark Mahaney — Evercore — Analyst

And then I also want to give you some comfort in terms of your thoughts on innovation and age. I think most studies show that peak innovation occurs when people reach 50. So if you can just make it through the next 10 years, you’ll be good. And then finally, just because you touched on most of the questions I thought about where have already been asked, but let’s get back to experiences. So it sounded like maybe your — I know you got the core business, and that’s what you’re really focused on. But it sounds like you may start leaning in a little bit more to experiences. So just flesh that out a little bit. And I know relatively small versus the core opportunity now. But at some point, I assume you’re going to lean more aggressively into experiences, and I assume that there’ll be host demand to do that, because there’s probably a lot of win-wins all around that. So just talk about the timing of when you think you may want to lean more aggressively into experiences. Thank you.

Brian Chesky — Co-founder and Chief Executive Officer

All right. Well, thanks, Mark. It’s great to hear from you again. First of all, yes, I’m 40. I hope I got a good 10 years in me, and I think I’m a pretty late bloomer, so maybe give me even more than 10 years. And so what do I want to do at that time? Well, one of the things I want to do is experiences. I think that experiences is a massive, massive opportunity. When we started Airbnb, homes took off. And I remember saying at the time, Mark, while will we monetize people’s biggest asset already, which is their home, what do we do next? We go to the next largest asset. And it actually turns out your home is not your largest asset from a latency standpoint. I think it’s your time for most people. Your time ultimately can generate more revenue for the average person than their property can. And so that’s a bit of an insight of where experiences came.

It also came from the fact that a lot of people look at me not just to save money, but to have a local travel experience. And I think experience is a great way to do that. And so I was expecting 2020 to be the breakout year for experiences, and we prepared for that. And of course, the opposite happened, the pandemic occurred and we put the product on hold. In the last two years, when people aren’t really comfortable leaving their house, they have to have mask on. It’s not really been the right conditions to double down on experiences. But now the light is at the end of the tunnel of the pandemic, we think people’s first trips won’t be to meet strangers and go on experiences. We think the first trips we want to have are to reunite with family, reunite with friends, get a big home together. And so we think that this summer, though people will book experiences, I think the summer is still a little more about homes just because people are getting comfortable getting out of their house.

That being said, I think this summer, you’re going to start to see a ramp-up of experiences. And I think next year and beyond, it’s going to be a massive opportunity, and I am incredibly excited about it. And one of the reasons I’m so excited about it is that our guests actually from a customer satisfactory standpoint, like experience more than homes, they actually leave a significantly higher five-star rating as a percentage of the ratings for experiences at home, but people like homes. The retention is really good. So we think this is just scratching the surface. And so to answer your question definitively, we are going to be ramping up. We’re going to be getting more aggressive experiences. It will be a slower on-ramp in this year. But by next year, we’re going to be going full throttle and I’m really excited about this opportunity. And it’s a little hard. I don’t want to make too many predictions about how big it will become. But my general sense is it’s kind of probably bigger than most of us imagined just because I think people are looking for interesting things to do with people.

People are lonely. They want to meet one another. They want to do activities. They can only go to so many restaurants. They can only watch so many shows on Netflix and many physical communities are being digitized. And so people ultimately want to have real experience in the real world. I think travel is a great way to do that. And the final thing I’d say, Mark, is increasingly, people aren’t just booking homes in Paris. You go to Paris, you can see the Eiffel Tower, you can go to Louvre. But if you go to a small town in France, what do you do other than go to a restaurant, experience is a great way to do something interesting in nearly every community in the world, especially ones that don’t have the Eiffel Tower. So those are just some of the reasons why I’m incredibly bullish about this product, but it’s going to take some time to really ramp up.

Mark Mahaney — Evercore — Analyst

Ok, Thank you brian.

Operator

Thank you, The next question comes from Justin Post with Bank of America. Please proceed.

Justin Post — Bank of America — Analyst

Great, Thank you. Lot of my questions have been answered, but on the urban supply side, I imagine you had some churn on health issues and other factors. What are you seeing in urban markets? And could you see a big uptick there as demand comes back? How are you thinking about that? And then maybe one follow-up.

Brian Chesky — Co-founder and Chief Executive Officer

Yes, Dave, do you want to take this one?

Dave Stephenson — Chief Financial Officer

Sure. I think one of the key things to remember about our supply is that the vast majority of our hosts are individual hosts. And they don’t get rid of their home and they’re using their own home or maybe a second home to host. And so even in the midst of a pandemic or other kind of recessionary environment, they’re not getting rid of their own home or their second home, which means that they’re ready for hosts and they’ll be there when the demand is coming back. And that’s what we’re seeing now with our urban demand. So the urban demand is starting to come back. It’s now back towards 2019 levels and our hosts are ready for them. And our growth in hosts in the urban markets has also increased. So we’re seeing an increase in our listings for both our high-density and urban markets overall. And that’s where we kind of continue to see as the demand comes back, the supply is there to meet it.

Justin Post — Bank of America — Analyst

Great. And then a follow-up on ADRs. I think you’re saying around flat year-over-year. Can you just talk about the normal seasonality for ADRs? Why — is it mix could that cause them to down? And how does it — how do you think about the back half seasonality on ADRs?

Dave Stephenson — Chief Financial Officer

Yes, I think if you could — again, we’ve been up 5% year-over-year in Q1. It’s going to be flat relative on a year-over-year basis in Q2. You can kind of see a little bit of a decrease of seasonality for Q3 and Q4. You could maybe look at some of the seasonality back to ’19, which will show you that Q3 and Q4 have moderately lower ADRs, not substantially. I think you could use that as a little bit of a guide. And then just know that the mix change is being offset a lot by strong price appreciation that is continuing to prop up the ADR overall. So I think it is a bit of the unknown for exactly where ADR is going to land in the back half of the year. What I can see is very clearly what’s going to happen in Q2, which will be flat year-over-year.

Justin Post — Bank of America — Analyst

Great, Thank you.

Operator

Thank you. The next question comes from Ron Josey with Citi. Please proceed.

Ron Josey — Citi — Analyst

Great, Thanks for taking my question. I wanted to ask a little bit more about cross-border, just given the rebound that we saw this quarter and the rebound in fees, can you talk about the dynamics, maybe, Brian, on whether these cross-borders mostly, call it, North America users going overseas? Or are we seeing more EMEA users come into the U.S. or any sort of insights around there? And then, Dave, on just overall EBITDA understood more leverage and margin expansion in the first half. But it’s really impressive to see the continued, call it, leverage across most of your line items. Can you just remind us ops and support in gross margin, what’s driving that? Thank you.

Brian Chesky — Co-founder and Chief Executive Officer

Ron, I can just start. The cross-border is, I would say, North America, Europe, Australia, Latin America, pretty much everywhere but Asia and it’s really going in all directions. So people are coming into North America, people in North America are leaving. They’re absolutely going to Europe. There’s a lot of travel within Europe, and we’re now also seeing Europeans come to the United States and go kind of in other locations as well. So the great thing is the network effect is kind of moving in multiple directions, whereas, say, last year, it was much more domestic and kind of really limited, the corridors are really starting to open. So Dave, I’ll let you take the rest of the answer.

Dave Stephenson — Chief Financial Officer

Yes. On the EBITDA, I’m really pleased and proud of the work that we’ve done to improve our overall profitability. We made some really difficult choices in the midst of the pandemic to reduce our overall workforce and focus on the core of our business. We think that actually that focus is enabling us to deliver even more. Like I think we’ve actually delivered more innovation and productivity as a company by being very deliberate and focused in a more narrow area versus trying to do everything all at once, and that’s been really effective with us. We actually have 16% fewer people at the end of Q1 ’22 than we did at the end of Q1 2020 before we had our layoffs. And yet we think we’re being more productive than ever before. And then we’re getting nice — so on top of that fixed cost leverage, yes, we’re gaining nice improvement in our variable costs and our ops and support, it was 15% of revenue here in the first quarter and seeing nice improvement versus our ops and support in the prior quarters, right? Ops and support will include largely our community support operations and our trust and safety activities.

Those are the elements that are within ops and support. We’re going to continue to invest in those areas because we think those are differentiators for us and then doing those really well. Supports our individual host community, but we’re making nice strides and improvement in leverage so that we gain continued profitability. And one of the things we noted in the letter is that we’re expecting for the full year a modest expansion in our overall EBITDA margin rate. So that’s nice to see versus 2021. And I’m really excited that in 2022, we’ll have our first full year of net income profitability. So just on a full net income basis, to be profitable this year feels excellent.

Ron Josey — Citi — Analyst

That’s great, Thank you guys.

Operator

Thank you, The next question comes from Lee Horowitz with Deutsche Bank. Please proceed.

Lee Horowitz — Deutsche Bank — Analyst

Great. Thanks for taking my question. Two, if I could. High level, demand across the alternative accommodations industry has proved incredibly sticky through the front half of this recovery and your comments suggest even into the back half. So what do you kind of owe the stickiness in consumer patterns in terms of the way that they travel even as things open up and hotels perhaps gain a bit of share? And then maybe a bit on cost as well, wage inflation and the inability to kind of find talent has been cropping up across a lot of the names that we cover. You guys haven’t necessarily commented too much here, but how is it all are you seeing wage inflation potentially place in the model as we move through 2022. Thanks so much.

Brian Chesky — Co-founder and Chief Executive Officer

All right. Dave, do you want to take this? Sorry, I’m sorry. I’m sorry, can I — actually, can I ask a clarifying — I don’t quite understand the first question. Can you ask it again?

Lee Horowitz — Deutsche Bank — Analyst

Yes, In terms of the…

Brian Chesky — Co-founder and Chief Executive Officer

Can you clarify the first question?

Lee Horowitz — Deutsche Bank — Analyst

My first question is — the industry — Yes, for alternative combinations has proven incredibly sticky despite reopening more coming online, those sorts of things. I guess, to what do you owe this kind of stickiness in consumer travel patterns?

Brian Chesky — Co-founder and Chief Executive Officer

Why is it sticky? So sorry, I just want to make sure I understand. Are you saying why like it was obvious why people were booking homes last year because people weren’t traveling for business? They weren’t going to urban markets. They weren’t crossing borders, they were staying nearby, you’re asking why when the markets reopening that…

Lee Horowitz — Deutsche Bank — Analyst

They were traveling…

Brian Chesky — Co-founder and Chief Executive Officer

Why they’re still sticky. Okay. Got it. Yes. Okay. I got it. And then let me do that, and then Dave, you can take the second question. So — and I think it’s important to just note Lee, that like we were growing really fast before the pandemic. And the reason we’re growing fast is, number one, I think a lot of people want to have a local experience as they travel. Number two, they want to save money when they travel. Number three, Airbnb allows them to travel with groups and increasingly people are traveling in groups. Number four, Airbnb allows them to travel and stay nearly every community in the world, hotels or in limited markets around the world; and number five, the longer you’re away from home, the more you want to be in a home and length of stay is going up. So I think all those reasons explain the stickiness. Maybe said another way, here’s another way of saying it. Rural demand increased during the pandemic and people are still traveling to rural areas. People are still traveling domestically, which was a very popular demand use case during the pandemic. People don’t have to go back to the office five days a week. So people are still booking weekly stays and monthly stays.

So again, domestic, nonurban and longer stays were three use cases that weren’t really our original bread and butter. Our original bread and butter was urban cross-border short term. But these three trends are sustaining. They’re still sustaining. And the reason why is, I think, the genie’s out of the bottle, people have permanent flexibility and people now realize there’s a lot of great places to go beyond the top 100 tourist destinations. That being said, what we’re seeing is a recovery of cross-border in urban. It’s actually both above 2019 levels. So in short, the old ways of — the bread and butter of Airbnb, cross-border urban are back and the new use cases or the use cases that were accelerated a pandemic are here to stay. And the combination of those two things is why I think this business is so sticky. Maybe a more fundamental way of saying it is people love the experience they have. And so when people left them, they tend to do more of it. Dave, I’ll hand over to you.

Dave Stephenson — Chief Financial Officer

In terms of wage inflation, we did $1.5 billion of revenue in Q1 with just 6,200 people. And we don’t need — as I said, we actually have 16% fewer people than we did in Q1 of 2020. We don’t need to add incremental people to have this business grow dramatically. We’re significantly larger today as a business with significantly fewer people. So really, wage inflation is not a major driver of costs. We are investing in our employees in order to enable them to live anywhere, move anywhere within the country. If they move someplace else, we’re not going to alter their pay for being in a different part of the country. And we’re going to support them to work 90 days in other countries around the world. So we think that kind of investment will benefit us by having lower attrition and being able to attract the best talent in the world. So we think that’s going to be a great investment for the future to have the best talent to unlock all the innovation that Brian has talked about on the call today.

Lee Horowitz — Deutsche Bank — Analyst

Great, Incredibly helpful. Thank you.

Operator

Thank you. That concludes the Q&A session. I would like to pass the conference back to Brian Chesky for additional remarks.

Brian Chesky — Co-founder and Chief Executive Officer

All right. Well, thank you all for joining us today. I’m incredibly proud of what we accomplished this quarter. We hit new records with Nights and Experiences Booked and GBV. We had our first positive Q1 adjusted EBITDA and our highest free cash flow ever, $1.2 billion free cash flow. But we’re just getting started because we are going to be accelerating our pace of innovation. And I’m really excited to announce the biggest change to Airbnb in a decade. It’s going to be next Wednesday, May 11, at 9:00 a.m. Eastern Standard time. You can watch a special event right from our homepage. Until then, thank you all see you soon.

Operator

[Operator Closing Remarks]