After the market opened on Wednesday local time, while the US stock market rebounded collectively due to the "Bank of Japan softening", the US homestay platform Airbnb fell more than 14%, setting the largest intraday decline for the company since its listing in 2020.
(Airbnb daily chart, source: TradingView)
The sharp drop in stock prices of travel platforms is closely related to the gradual slowdown in consumer travel demand, which also provides new case support for the slowdown of the US economy and the Federal Reserve's interest rate cuts.
Weakening performance during peak travel season?
In its financial report released on Tuesday, the company revealed that bookings for homestay and travel experience services only increased by 8.7% to 125 million in the second quarter of this year, lower than analysts' expectations. What surprised analysts even more was that the company directly expected the booking volume in the third quarter of this year to continue to "slow down month on month", while analysts' expectations were that the summer travel peak season would drive an 11% increase in booking volume.
Abby is outspoken. The reasons for the continued pressure on performance include that more and more Americans are more cautious about travel spending because of their concerns about economic health. At the same time, another indicator of consumer sentiment - the time window for booking travel in advance - is also continuously shrinking. This also reflects the increasing uncertainty of consumers' travel expenses, who only book accommodation at the last minute.
According to statistics, this is the third consecutive quarter that Airbnb has provided investors with a pessimistic outlook. The latest data also means that the company is about to enter the slowest growth rate since the outbreak of the pandemic in 2020.
Coincidentally, last week another travel booking platform, Booking Holdings Group, also gave lower than expected guidance. The company attributed this to a "mild slowdown" in the European tourism market, as well as a decrease in consumer demand for low star hotels and short-term accommodations, and directly named "especially the United States region".
For the latest financial report, US financial services company Baird gave Airbnb a "neutral" rating, citing increasing evidence that consumers are tightening their belts or at least delaying their travel plans while traveling.
Brad Erickson, an Internet industry analyst at RBC Capital Market, pointed out in the latest research report that the prospect of Aby Ying "may only further exacerbate the argument of consumer weakness".
It is worth mentioning that Airbnb also emphasized that although the demand from American guests has slowed down, Latin America and the Asia Pacific region are still the fastest-growing areas for its business.
Faced with the nature of the tourism market that relies on consumers' wallets to eat, Airbnb will also take measures to increase revenue. The company will launch a new joint custody market in October this year, matching custodians to manage homestays for landlords who have properties but do not have time to manage them. The company will also restart experiential services such as study tours next year and increase the exposure of this feature in the app.
The company's Chief Business Officer, Dave Stephenson, has also revealed that the company may enter more service areas, such as private chefs, mid week cleaning, and home massages.
Traders need to be prepared
Although the economic slowdown depicted by Airbnb in the United States is not the kind of recession that could cause the stock market to plummet by 10% in a day, it is still a question that the investment market has been discussing in recent weeks: Is the Federal Reserve cutting interest rates too slowly, ultimately leading the world's largest consumer market into a recession?
Former New York Fed President William Dudley wrote on Wednesday that the longer the Fed waits, the greater the likelihood of harm. The current monetary policy of the Federal Reserve will become more stringent as inflation and wage growth slow down.
Dudley stated that the Federal Reserve needs to lower interest rates to a neutral position (a policy rate that neither stimulates nor suppresses the economy). Currently, members of the Federal Open Market Committee estimate the neutral rate to be between 2.4% and 3.8%, which means there is still a long way to go before the current federal funds rate of 5.25-5.5%. If an economic recession becomes a reality, the Federal Reserve will need to enter into loose policy, which is 3% or lower.
Dudley interpreted that according to the style of this Federal Reserve, they may have to cut interest rates by 25-50 basis points at the September meeting, but the path after that is unclear again. Therefore, the uncertainty of the trajectory of monetary policy may remain high for several months, and the stock and bond markets need to be prepared for more volatility.