Airbnb Invests Heavily in New Businesses to Diversify Revenue

Airbnb is gearing up for a major expansion beyond its core home-sharing business, with plans to launch new revenue streams in May, the Wall Street Journal reports, citing a company presentation.

The San Francisco-based company announced that it will invest between $200 million and $250 million this year to establish these new businesses, aiming to generate $1 billion in revenue from them. This comes as Airbnb reported $11.1 billion in revenue last year, a 12% increase, but saw its net income drop 45% to $2.65 billion.

Airbnb has not yet disclosed the specific nature of these new businesses, but it has confirmed that it plans to relaunch its "experiences" offering, expanding its travel activities beyond accommodations.

"Part of reimagined experiences is bringing more things on the platform, things that you can do when you are in-market, traveling," said Airbnb Chief Financial Officer Ellie Mertz, who joined the company last year. "Ultimately, the goal would be things that you can do in your home city because they’re compelling, interesting and differentiated from other things that you might be doing."

Airbnb's investment will primarily focus on programmatic marketing, utilizing automated technology for media buying, and hiring additional product marketers, designers, and engineers to raise awareness and develop these new offerings. The company is also expanding its workforce under Chief Business Officer Dave Stephenson, who oversees international expansion and the development of these new businesses.

Airbnb aims to increase its headcount by approximately 10% this year, compared to a roughly 6% increase to 7,300 employees in 2024.

The company's foray into experiences aims to compete with established players like TripAdvisor's Viator brand and GetYourGuide, with analysts predicting that Airbnb could achieve $10 billion in bookings from experiences by the end of the decade.

Following the initial investment phase, Airbnb plans to expand these businesses over the next two to three years, while also focusing on improving efficiencies in the third year.

"The fixed upfront expense won’t go away. But it will minimize over time because you’ve begun scaling the top line, which covers any ongoing fixed and variable expense," Mertz explained.

Airbnb is also committed to maintaining strong profitability in its home-rental business and identifying new efficiencies, particularly through automation, to fund these new investments.

The $1 billion revenue target for the new businesses is intended to highlight their strategic importance, but not to serve as official guidance for investors.

"It gives you a sense of the ambition and the opportunity," Mertz said. "I’m not putting out a three-year guide on these businesses until they’ve launched."

Airbnb's expansion strategy could potentially include a marketplace for services during users' stays, such as personal chefs and trainers, as well as transportation options, potentially involving ride-sharing partners. These services could eventually be offered to non-Airbnb users as well.

"This initiative is going to weigh on margins for probably a couple years, but the dollar amount that they’re spending is relatively contained and they’re investing in businesses that, if successful, could have high margins," said Kevin Kopelman, a senior analyst at investment bank TD Cowen.

When asked about potential expansion into concierge services or fine dining, Mertz responded, "We haven’t done much on either of those to date. So, no update."