Airbnb stock price tanks on news of cheaper plans and bookings miss. Here’s what’s happening

Airbnb reported its Q1 earnings yesterday, and the news and comments from the company’s announcement sent the stock plummeting after the bell. As of the time of this writing, the home-sharing company’s stock was down over 14% in premarket trading, marking one of the stock’s worst hits in years. Here’s what you need to know.

• What happened? Airbnb announced its Q1 earning yesterday. Revenue was up 20% YOY to $1.8 billion and Airbnb’s important “Nights and Experiences Booked” metric reached 121.1 million in the first quarter—a record high. But still Airbnb stock (ticker: ABNB) fell after the results were announced. As of the time of this writing ABNB stock is down 14.3% to $108.79. That price is still up from its 2022 lows of around $85 per share.
• Why did investors react so negatively to Airbnb’s results? Though the Nights and Experiences Booked metric reached a record high, it came in lower than what some analysts were expecting. The company also forecast fewer bookings in Q2. Additionally, Airbnb revealed that it is seeking to make the platform more affordable—or to put it another way, make it cheaper for people to rent an Airbnb. Investors fear that could mean declining profits.
• Are cheaper Airbnb stays a good business decision? That depends on your perspective. Investors don’t seem to think so, but Airbnb users will no doubt embrace lower prices. For years, those users have complained of prices that have reached or exceeded those of hotels—and at a hotel, you don’t need to take out the trash or mow the lawn. Airbnb has also seen increased competition from the likes of Booking.com and similar rental platforms. Cheaper bookings could, Airbnb hopes, drive more bookings on the site, which would lead to more revenue overall, even if the average cost of a rental declined some.
• How is Airbnb planning to drive down prices? Airbnb plans to organically lower the cost of bookings in two primary ways. First, the company is rolling out new tools for hosts that allow them to see what similar rental properties in their area are going for. Airbnb seems to hope this will make hosts compete with each other more—thus lowering prices overall. Second, Airbnb plans to make changes it hopes will make long-term rentals more affordable. One way they will do this is by reducing fees after three months. Speaking to the new host tools, Airbnb said in its quarterly statement, “We expect these changes will drive greater affordability and value for guests, and support overall bookings growth.”
• Will it work? That remains to be seen. But what is clear is that Airbnb is trying to shake things up to bring more people to the platform at a time when the pandemic is in the rear-view mirror for most people and those people are ready to get out there and travel again.