Number one, I think that AI is going to affect — this is an obvious statement, I think, digital business is more than brick-and-mortar businesses. So Airbnb and OTAs are probably going to benefit more quickly from AI than, say, a hotel will just because Airbnb and OTAs are more digital. And so the transformation will happen at the digital surface sooner. One of the areas that we’re specifically going to benefit is customer service. Right now, customer service in Airbnb is really, really hard, especially compared to hotels. The problem is, imagine you have a Japanese host booking with — hosting a German guest and there’s a problem and you have these 2 people speaking different languages calling customer service, there’s a myriad of issues, there’s no front desk, we can’t go on-premise.
We don’t understand the inventory and we need to try to adjudicate an issue based on 70 different policies that can be up to 100 pages long. AI can literally start to solve these problems where agents can supervise a model that can — in second, come up with a better resolution and provide front desk level support in nearly every community in the world. But probably more importantly, Kevin, is what we can do by reimagining the search experience. Travel search has not really changed much in 25 years since really Expedia, Hotels.com, it’s pretty much the same as it’s been. And Airbnb, we fit that paradigm. There’s a search box, you enter a date location, you refine your results and you book something. And it really hasn’t changed much for a couple of decades.
I think now with AI, there can be entirely different booking models. And I think this is like a Cambrian moment for like the Internet or mobile for travel where suddenly an app could actually learn more about you. They could ask you questions and they could offer you a significantly greater personalized service. Before the Internet, there were travel agents and they actually used to learn about you. And then travel got unbundled, it became self-service and it became all about price. But we do think that there’s a way that travel could change and AI could lead the way with that. So these are some of the things we’re thinking about and I think it’s really, really exciting. And we’re just at the beginning of this.
Operator: We’ll move next to Justin Post at Bank of America.
Justin Post: Supply is up 19%. How do you think about that as a leading indicator for room night growth? And how do you maybe accelerate night growth to capture that? And then the second question is on ADRs. Is that supply coming in higher or lower, similar ADRs? And I don’t know, Dave, if you can give us any thoughts on positive and negative drivers for ADRs next year.
David Stephenson: Sure. Yes, I’ll start with ADR and I’ll go back to growth. I mean on the ADR side, it varies a little bit by market. We have seen, depending on the market, the ADRs of new listings coming in a little bit higher than they were in the average current ones. But what actually ends up happening is people are booking lower ADR places. And so that’s kind of the offset. It depends on what’s available and versus what’s booked. And it does vary a little bit by region between North America and Europe on what the prices are. In North America, we’re seeing more of the prices come down. And I think that’s been a good indicator of strength for us going forward. And in Europe, the ADRs have been a little bit more elevated and we’re hoping that with some more of the work that we’ve done to improve post tools and give greater visibility to host on how they’re pricing, we’ll continue to be able to kind of moderate ADRs in Europe going forward, too.
So that’s on the leading indicator. I do think that the strength of 19% listings growth is a great leading indicator of what we’re capable of growing over time. As I said earlier, the overall growth of Airbnb since 2019, nights growth has been actually relatively in line with the total growth of supply. And I’m really bullish that we can get more supply coming on which will have more quality supply coming in which will also can drive down actually the prices because the more supply that comes on board, maybe back to your first question, the more likelihood that we can actually bring prices down in the market or at least moderate them so they don’t grow as fast as competing supply. So, I’m really bullish on our overall growth. It’s been great to see the strength of our listings growth this year.
Brian Chesky: And maybe, Justin, I’ll just say that like this is my intuition having done this for almost 16 years of my life. I think that supply is even more important than it seems on the surface. Ultimately, when you’re tiny and no one ever hears about you, one of the big levers is awareness. But once you’re a brand like Airbnb that’s known as really [indiscernible] used all over the world, so supply growth becomes a very important like long-term leading indicator. And so long as we make sure we have healthy supply growth and then we continue to improve reliability and promote Airbnb globally around the world, then that is a very, very healthy long-term indicator. And we love for that number to be a bit higher.
Operator: We’ll go next to James Lee at Mizuho.
James Lee: Great. Two questions here, Dave. I remember at the beginning of the year when you were guiding ADR down about mid-single digits. You were talking about leverage and like variable expenses like payment and cloud. I was just wondering where you are in that process, how much up to unlock going forward? And secondarily, on sales and marketing, it looks like supply is creating demand right now. Is it fair to assume we’re shifting more demand-side advertising going forward? And can you talk about the implications there?
David Stephenson: I’ll start with sales and marketing. We’re not actually shifting more to demand-side marketing. I think what we’re seeing is exactly the success that Brian talked about earlier on the call. We — the vast majority of our traffic is direct or unpaid. The first reason why people come to Airbnb is they’re referred to us by family and friends. They come directly to us. The brand marketing certainly kind of helps talk about all the features and benefits of Airbnb and we use our search engine marketing as kind of a laser to focus on areas where maybe we have less demand than we have supply or in specific countries where we want to focus and kind of grow the overall kind of pie for us. So it is not the primary driver of it but this overall strategy of leading with brands and then following with surgical on our search engine marketing continues to work really well for us.
And then in terms of the ADR, I think that the unlock of the variable expense improvements we’ve been making has just continued to enable us to drive profitable growth, right? We have — our fixed cost growth discipline has been excellent, probably grow our fixed — headcount this year, approximately 4%. So we’re growing our head count and fixed expenses less than revenue. We continue to make great strides of improvement in our operations and support and Brian talked about a lot of the opportunities we have going forward in customer service. And then we’re continuing to make good strides in cost of payments, our infrastructure costs, etcetera. That’s not our primary driver. Like our primary focus is still on growth. Growth of the business, making hosting mainstream, perfecting the core service and expanding down the core and the fact that I can do all those things and do it while still doing it profitably and actually expanding our overall margins this year, it is something that I’m just very proud of.
